Document:

<PAGE>

                                                                     EXHIBIT 4.1

                                                                  EXECUTION COPY

                     MERRILL LYNCH MORTGAGE INVESTORS, INC.
                                    Depositor

                              TERWIN ADVISORS LLC,
                                     Seller

                      CHASE MANHATTAN MORTGAGE CORPORATION,
                                 Master Servicer

                              JPMORGAN CHASE BANK,
                  Securities Administrator and Backup Servicer

                      COUNTRYWIDE HOME LOANS SERVICING LP,
                                    Servicer

                        GREENPOINT MORTGAGE FUNDING INC.,
                                    Servicer

                        SPECIALIZED LOAN SERVICING, LLC,
                                    Servicer

                                       and

                         U.S. BANK NATIONAL ASSOCIATION,
                                     Trustee

                         POOLING AND SERVICING AGREEMENT
                            Dated as of June 1, 2004

                              TERWIN MORTGAGE TRUST
                 ASSET-BACKED CERTIFICATES, SERIES TMTS 2004-5HE

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          PAGE
<S>                                                                                                       <C>
ARTICLE I      DEFINITIONS...........................................................................       2

ARTICLE II     CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES..........................      49

     SECTION 2.01.   Conveyance of Mortgage Loans....................................................      49

     SECTION 2.02.   Acceptance by the Trustee of the Mortgage Loans and the Cap Contract............      51

     SECTION 2.03.   Representations, Warranties and Covenants of the Depositor......................      54

     SECTION 2.04.   Representations and Warranties of the Master Servicer; Representations
                     and Warranties of the Servicers; Representations and Warranties of the
                     Securities Administrator; Representations and Warranties of the Backup
                     Servicer........................................................................      57

     SECTION 2.05.   Substitutions and Repurchases of Mortgage Loans which are not "Qualified
                     Mortgages"......................................................................      62

     SECTION 2.06.   Authentication and Delivery of Certificates.....................................      62

     SECTION 2.07.   REMIC Elections.................................................................      63

     SECTION 2.08.   Covenants of the Master Servicer................................................      67

     SECTION 2.09.   Covenants of the Servicers......................................................      68

     SECTION 2.10.   Related Agreements..............................................................      68

     SECTION 2.11.   Conveyance of Subsequent Mortgage Loans.........................................      68

     SECTION 2.12.   Permitted Activities of the Trust...............................................      70

     SECTION 2.13.   Qualifying Special Purpose Entity...............................................      70

ARTICLE III    ADMINISTRATION AND SERVICING OF MORTGAGE LOANS........................................      71

     SECTION 3.01.   Servicers to Service Mortgage Loans.............................................      71

     SECTION 3.02.   Servicing and Subservicing; Enforcement of the Obligations of the
                     Servicers.......................................................................      72

     SECTION 3.03.   Rights of the Depositor, the Securities Administrator, the Backup
                     Servicer and the Trustee in Respect of any Servicer.............................      73

     SECTION 3.04.   The Master Servicer or Backup Servicer to Act as Servicer.......................      73

     SECTION 3.05.   Collection of Mortgage Loan Payments; Collection Account; Master Servicer
                     Collection Account; Certificate Account.........................................      74

     SECTION 3.06.   Collection of Taxes, Assessments and Similar Items; Escrow Accounts.............      78

     SECTION 3.07.   Access to Certain Documentation and Information Regarding the Mortgage
                     Loans...........................................................................      78

     SECTION 3.08.   Withdrawals from a Collection Account, Master Servicer Collection Account
                     and Certificate Account.........................................................      78
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                                   (continued)

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     SECTION 3.09.   [RESERVED]......................................................................      81

     SECTION 3.10.   [RESERVED]......................................................................      81

     SECTION 3.11.   Enforcement of Due-On-Sale Clauses; Assumption Agreements.......................      81

     SECTION 3.12.   Realization Upon Defaulted Mortgage Loans; Determination of Excess
                     Proceeds........................................................................      82

     SECTION 3.13.   Trustee to Cooperate; Release of Mortgage Files.................................      84

     SECTION 3.14.   Documents, Records and Funds in Possession of the Servicers to be Held
                     for the Trustee.................................................................      85

     SECTION 3.15.   Servicing Compensation..........................................................      86

     SECTION 3.16.   Access to Certain Documentation.................................................      86

     SECTION 3.17.   Annual Statement as to Compliance...............................................      87

     SECTION 3.18.   Annual Independent Public Accountants' Servicing Statement; Financial
                     Statements......................................................................      87

     SECTION 3.19.   Duties and Removal of the Credit Risk Manager...................................      87

     SECTION 3.20.   Periodic Filings................................................................      87

     SECTION 3.21.   Annual Certificate by Securities Administrator..................................      88

     SECTION 3.22.   Annual Certificate by Countrywide and GreenPoint................................      89

     SECTION 3.23.   Prepayment Penalty Reporting Requirements.......................................      89

     SECTION 3.24.   Servicer Reports................................................................      90

     SECTION 3.25.   Indemnification.................................................................      90

     SECTION 3.26.   Nonsolicitation.................................................................      91

     SECTION 3.27.   SLS as Servicer.................................................................      91

     SECTION 3.28.   Quarterly Audit.................................................................      91

     SECTION 3.29.   Maintenance of LPMI Policy......................................................      92

     SECTION 3.30.   SLS Servicing Tape; Storage and Access to Servicing Tape........................      92

ARTICLE IV     ADMINISTRATION, MASTER SERVICING AND BACKUP SERVICING OF THE MORTGAGE LOANS...........      92

     SECTION 4.01.   Master Servicer.................................................................      92

     SECTION 4.02.   REMIC Related Covenants.........................................................      93

     SECTION 4.03.   Fidelity Bond...................................................................      93

     SECTION 4.04.   Powers to Act; Procedures.......................................................      94

     SECTION 4.05.   Due-on-Sale Clauses; Assumption Agreements......................................      94

     SECTION 4.06.   Documents, Records and Funds in Possession of Master Servicer to be Held
                     for Trustee.....................................................................      95
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                                          PAGE
<S>                                                                                                       <C>
     SECTION 4.07.   Monitoring of the Servicers.....................................................      95

     SECTION 4.08.   [RESERVED]......................................................................      96

     SECTION 4.09.   [RESERVED]......................................................................      96

     SECTION 4.10.   Presentment of Claims and Collection of Proceeds................................      96

     SECTION 4.11.   Trustee or Custodian to Retain Possession of Certain Insurance Policies
                     and Documents...................................................................      96

     SECTION 4.12.   Realization Upon Defaulted Loans................................................      96

     SECTION 4.13.   REO Property....................................................................      96

     SECTION 4.14.   Annual Statement as to Compliance...............................................      97

     SECTION 4.15.   Annual Independent Public Accountants' Servicing Statement; Financial
                     Statements......................................................................      97

     SECTION 4.16.   Annual Certificate by Master Servicer...........................................      98

     SECTION 4.17.   Obligation of the Master Servicer in Respect of Prepayment Interest
                     Shortfalls......................................................................      98

     SECTION 4.18.   Obligation of the Master Servicer in Respect of Collection Account..............      98

     SECTION 4.19.   Backup Servicer.................................................................      98

ARTICLE V      DISTRIBUTIONS.........................................................................      99

     SECTION 5.01.   Advances by the Master Servicer and the Servicers...............................      99

     SECTION 5.02.   Advance Facility................................................................     100

     SECTION 5.03.   Reduction of Servicing Compensation in Connection with Prepayment
                     Interest Shortfalls.............................................................     102

     SECTION 5.04.   Distributions on the REMIC Interests............................................     102

     SECTION 5.05.   Distributions...................................................................     102

     SECTION 5.06.   Monthly Statements to Certificateholders........................................     108

     SECTION 5.07.   Pre-Funding Account.............................................................     111

     SECTION 5.08.   Capitalized Interest Account....................................................     112

ARTICLE VI     THE CERTIFICATES......................................................................     112

     SECTION 6.01.   The Certificates................................................................     112

     SECTION 6.02.   Appointment of Certificate Registrar; Certificate Register; Registration
                     of Transfer and Exchange of Certificates........................................     114

     SECTION 6.03.   Mutilated, Destroyed, Lost or Stolen Certificates...............................     118

     SECTION 6.04.   Persons Deemed Owners...........................................................     118

     SECTION 6.05.   Access to List of Certificateholders' Names and Addresses.......................     118

     SECTION 6.06.   Book-Entry Certificates.........................................................     118
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                                   (continued)

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<S>                                                                                                       <C>
     SECTION 6.07.   Notices to Depository...........................................................     119

     SECTION 6.08.   Definitive Certificates.........................................................     119

     SECTION 6.09.   Maintenance of Office or Agency.................................................     120

     SECTION 6.10.   Authenticating Agents...........................................................     120

ARTICLE VII    THE DEPOSITOR, THE MASTER SERVICER, THE SERVICER AND THE SECURITIES ADMINISTRATOR.....     121

     SECTION 7.01.   Respective Liabilities of the Depositor, the Master Servicer, each
                     Servicer and the Securities Administrator.......................................     121

     SECTION 7.02.   Merger or Consolidation of the Depositor, the Master Servicer, each
                     Servicer or the Securities Administrator........................................     121

     SECTION 7.03.   Limitation on Liability of the Depositor, Master Servicer, each Servicer,
                     the Backup Servicer, the Trustee, the Securities Administrator and Others.......     122

     SECTION 7.04.   Limitation on Resignation of the Servicers......................................     123

     SECTION 7.05.   Errors and Omissions Insurance; Fidelity Bonds..................................     123

     SECTION 7.06.   Limitation on Resignation of the Master Servicer and the Backup Servicer........     123

     SECTION 7.07.   Assignment of Master Servicing..................................................     124

     SECTION 7.08.   Limitation Upon Liability of the Credit Risk Manager............................     124

ARTICLE VIII   DEFAULT; TERMINATION OF SERVICER......................................................     125

     SECTION 8.01.   Events of Default...............................................................     125

     SECTION 8.02.   Securities Administrator to Act; Master Servicer and Backup Servicer to
                     Act; Appointment of Successor...................................................     126

     SECTION 8.03.   Notification to Certificateholders..............................................     128

     SECTION 8.04.   Waiver of Servicer Events of Default............................................     128

     SECTION 8.05.   SLS Events of Default...........................................................     128

ARTICLE IX     CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR...............................     129

     SECTION 9.01.   Duties of the Trustee...........................................................     129

     SECTION 9.02.   Certain Matters Affecting the Trustee...........................................     130

     SECTION 9.03.   The Trustee Not Liable for Certificates or Mortgage Loans.......................     132

     SECTION 9.04.   The Trustee May Own Certificates................................................     132

     SECTION 9.05.   Trustee's Fees and Expenses.....................................................     132

     SECTION 9.06.   [RESERVED]......................................................................     133

     SECTION 9.07.   Eligibility Requirements for the Trustee........................................     133

     SECTION 9.08.   Resignation and Removal of the Trustee..........................................     133
</TABLE>

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                                TABLE OF CONTENTS
                                   (continued)

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<CAPTION>
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<S>                                                                                                       <C>
     SECTION 9.09.   [RESERVED]......................................................................     134

     SECTION 9.10.   Successor Trustee...............................................................     134

     SECTION 9.11.   Merger or Consolidation of the Trustee..........................................     134

     SECTION 9.12.   Appointment of Co-Trustee or Separate Trustee...................................     134

     SECTION 9.13.   Tax Matters.....................................................................     136

     SECTION 9.14.   Duties of Securities Administrator..............................................     139

     SECTION 9.15.   Certain Matters Affecting the Securities Administrator..........................     140

     SECTION 9.16.   Securities Administrator Not Liable for Certificates or Mortgage Loans..........     142

     SECTION 9.17.   Securities Administrator May Own Certificates...................................     142

     SECTION 9.18.   Fees and Expenses of the Securities Administrator...............................     142

     SECTION 9.19.   Eligibility Requirements for the Securities Administrator.......................     142

     SECTION 9.20.   Resignation and Removal of the Securities Administrator.........................     143

     SECTION 9.21.   Successor Securities Administrator..............................................     143

     SECTION 9.22.   Merger or Consolidation of Securities Administrator.............................     144

ARTICLE X      TERMINATION...........................................................................     144

     SECTION 10.01.  Termination upon Liquidation or Repurchase of all Mortgage Loans................     144

     SECTION 10.02.  Final Distribution on the Certificates..........................................     145

     SECTION 10.03.  Additional Termination Requirements.............................................     146

ARTICLE XI     MISCELLANEOUS PROVISIONS..............................................................     147

     SECTION 11.01.  Amendment.......................................................................     147

     SECTION 11.02.  Counterparts....................................................................     148

     SECTION 11.03.  Governing Law...................................................................     148

     SECTION 11.04.  Intention of Parties............................................................     148

     SECTION 11.05.  Notices.........................................................................     149

     SECTION 11.06.  Severability of Provisions......................................................     150

     SECTION 11.07.  Assignment......................................................................     150

     SECTION 11.08.  Limitation on Rights of Certificateholders......................................     151

     SECTION 11.09.  Inspection and Audit Rights.....................................................     151

     SECTION 11.10.  Certificates Nonassessable and Fully Paid.......................................     151
</TABLE>

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
<S>                                                                             <C>
EXHIBIT A      FORMS OF CERTIFICATES
EXHIBIT B      MORTGAGE LOAN SCHEDULE
EXHIBIT C      [RESERVED]
EXHIBIT D      FORM OF TRUSTEE CERTIFICATION
EXHIBIT E-1    FORM OF TRANSFEREE'S LETTER AND AFFIDAVIT
EXHIBIT E-2    FORM OF TRANSFEROR'S AFFIDAVIT
EXHIBIT F      FORM OF TRANSFEROR CERTIFICATE
EXHIBIT G      FORM OF INVESTMENT LETTER
EXHIBIT H      FORM OF RULE 144A LETTER
EXHIBIT I      REQUEST FOR RELEASE
EXHIBIT J      [RESERVED]
EXHIBIT K      FORM OF OFFICER'S CERTIFICATE OF SECURITIES ADMINISTRATOR
EXHIBIT L      FORM OF OFFICER'S CERTIFICATE OF SERVICER
EXHIBIT M      FORM OF SUBSEQUENT TRANSFER INSTRUMENT
EXHIBIT N      FORM OF ADDITION NOTICE
EXHIBIT O      FORM OF CAP CONTRACT
EXHIBIT P      FORM OF CERTIFICATE OF MASTER SERVICER
EXHIBIT Q      FORM OF CUSTODIAL AGREEMENT
EXHIBIT R      FORM OF SERVICER REPORT
</TABLE>

                                       vi

<PAGE>

      POOLING AND SERVICING AGREEMENT, dated as of June 1, 2004, among MERRILL
LYNCH MORTGAGE INVESTORS, INC., a Delaware corporation, as depositor (the
"Depositor"), TERWIN ADVISORS LLC, a Delaware limited liability company, as
seller (the "Seller"), CHASE MANHATTAN MORTGAGE CORPORATION, a New Jersey
corporation, as master servicer (the "Master Servicer"), JPMORGAN CHASE BANK, a
New York banking corporation, as securities administrator (the "Securities
Administrator") and backup servicer (the "Backup Servicer"), COUNTRYWIDE HOME
LOANS SERVICING LP, a Texas limited partnership ("Countrywide" or a "Servicer"),
GREENPOINT MORTGAGE FUNDING INC., a New York corporation ("GreenPoint" or a
"servicer"), SPECIALIZED LOAN SERVICING, LLC, a Delaware limited liability
company, as servicer ("SLS" or a "Servicer," and together with Countrywide and
GreenPoint, the "Servicers") and U.S. BANK NATIONAL ASSOCIATION, a national
banking association, as trustee (the "Trustee").

      The Depositor is the owner of the Trust Fund that is hereby conveyed to
the Trustee in return for the Certificates. It is intended that for federal
income tax purposes the Trust Fund will include (i) four real estate mortgage
investment conduits ("REMIC 1", "REMIC 2", "REMIC 3" and "REMIC 4") in a tiered
REMIC structure, (ii) the rights to receive Prepayment Penalties amounts paid by
the Servicer, the Seller or any Transferor in respect of Prepayment Penalties,
pursuant to this Agreement or the Transfer Agreement, as applicable and amounts
received in respect of any indemnification paid as a result of a Prepayment
Penalty being unenforceable in breach of the representations and warranties set
forth in a Transfer Agreement, (iii) the Cap Contract and the Cap Contract
Account, (iv) the grantor trusts and partnership described in Section 2.07 and
(v) the Pre-Funding Account and Capitalized Interest Account. REMIC 1 will
consist of all of the assets constituting the Trust Fund (other than assets
described in clauses (ii), (iii), (iv) or (v) above and other than the interests
in any of the REMICs provided for herein) and will be evidenced by the REMIC 1
Regular Interests (which will be uncertificated and will represent the "regular
interests" in REMIC 1) and the Class LT1-R Interest as the single "residual
interest" in REMIC 1. The Trustee will hold the REMIC 1 Regular Interests. REMIC
2 will consist of the REMIC 1 Regular Interests and will be evidenced by the
REMIC 2 Regular Interests (which will be uncertificated and will represent the
"regular interests" in REMIC 2) and the Class LT2-R Interest as the single
"residual interest" in REMIC 2. The Trustee will hold the REMIC 2 Regular
Interests. REMIC 3 will consist of the REMIC 2 Regular Interests (other than the
REMIC 2 IO Interests) and will be evidenced by the REMIC 3 Regular Interests
(which will be uncertificated and will represent the "regular interests" in
REMIC 3) and the Class LT3-R Interest as the single "residual interest" in REMIC
3. The Trustee will hold the REMIC 3 Regular Interests. REMIC 4 will consist of
the REMIC 3 Regular Interests and the REMIC 2 IO Interests and will be evidenced
by the REMIC 4 Regular Interests (which will, except in the case of the Interest
Only Certificates, be uncertificated and which will represent the "regular
interests" in REMIC 4) and the REMIC 4 Residual Interest as the single "residual
interest" in REMIC 4. The Class R Certificate will represent beneficial
ownership of the Class LT1-R Interest, the Class LT2-R Interest, the Class LT3-R
Interest and the REMIC 4 Residual Interest. The "latest possible maturity date"
for federal income tax purposes of all the interests created hereby will be the
Latest Possible Maturity Date.

      All covenants and agreements made by the Seller in the Sale Agreement and
by the Depositor and the Trustee herein with respect to the Mortgage Loans and
the other property constituting the Trust Fund are for the benefit of the
Holders from time to time of the Certificates.

      In consideration of the mutual agreements herein contained, the Depositor,
the Master Servicer, each Servicer, the Securities Administrator, the Backup
Servicer and the Trustee hereby agree as follows:

<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

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

      Accepted Master Servicing Practices: With respect to any Mortgage Loan, as
applicable, either (x) those customary mortgage master 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 Master
Servicer (except in its capacity as successor to each Servicer), or (y) as
provided in Section 5.01 hereof, but in no event below the standard set forth in
clause (x).

      Accepted Servicing Practices: With respect to any Mortgage Loan, the
customary servicing practices, which will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service for their own
account mortgage loans of the same type as the Mortgages Loans in the
jurisdictions in which the related Mortgaged Properties are located.

      Accrual Period: With respect to the Certificates (other than the Interest
Only Certificates) and any Distribution Date, the period commencing on the
immediately preceding Distribution Date (or, in the case of the first
Distribution Date, the Closing Date) and ending on the day immediately preceding
such Distribution Date. With respect to the Interest Only Certificates and any
Distribution Date, the calendar month immediately preceding the month in which
such Distribution Date occurs. All calculations of interest on the Certificates
(other than the Interest Only Certificates) will be made on the basis of the
actual number of days elapsed in the related Accrual Period and a 360 day year.
All calculations of interest on the Interest Only Certificates will be made on
the basis of a 360-day year consisting of twelve 30-day months. The Accrual
Period for each REMIC 3 Regular Interest for any Distribution Date will be the
period commencing on the immediately preceding Distribution Date (or, in the
case of the first Distribution Date, the Closing Date) and ending on the day
immediately preceding such Distribution Date. All calculations of interest on
the REMIC 3 Regular Interests will be made on the basis of the actual number of
days elapsed in the related Accrual Period and a 360-day year. The Accrual
Period for each REMIC 1 Regular Interest and REMIC 2 Regular Interest for any
Distribution Date will be the calendar month immediately preceding the month in
which such Distribution Date occurs. All calculations of interest on each REMIC
1 Regular Interest and each REMIC 2 Regular Interest will be made on the basis
of a 360-day year consisting of twelve 30-day months.

      Addition Notice: With respect to the transfer of Subsequent Mortgage Loans
to the Trust Fund pursuant to Section 2.11, a notice of the Seller's designation
of the Subsequent Mortgage Loans to be sold to the Trust Fund, the proposed
Subsequent Cut-off Date, the proposed Subsequent Transfer Date and the aggregate
Stated Principal Balance of such Subsequent Mortgage Loans as of the Subsequent
Cut-off Date. The Addition Notice shall be given to the Servicer, the Trustee
and the Securities Administrator not later than three Business Days prior to the
related Subsequent Transfer Date and shall be substantially in the form of
Exhibit N.

      Adjusted Net WAC: As of any Distribution Date, a per annum rate equal to
the product of (A) 12 times the quotient obtained by dividing (x) the excess of
(a) the sum of (I) the total scheduled interest on the Included Mortgage Loans
for the related Due Period and (II) for Distribution Dates prior to the
Distribution Date in October 2004, one-twelfth of the product of the Pre-Funded
Amount as of the close of the calendar month preceding the month in which such
Distribution Date occurs (or, if such date would be prior to the Closing Date,
the Original Pre-Funded Amount) and the Net WAC for such Distribution

                                      -2-
<PAGE>

Date over (b) the Administration Fee and the aggregate Current Interest for such
Distribution Date on the Interest Only Certificates, by (y) the sum of (i) the
Outstanding Principal Balances of the Included Mortgage Loans for such
Distribution Date and (ii) for Distribution Dates prior to the Distribution Date
in October 2004, the Pre-Funded Amount as of the close of the calendar month
preceding the month in which such Distribution Date occurs (or, if such date
would be prior to the Closing Date, the Original Pre-Funded Amount) and (B) a
fraction, the numerator of which is 30 and the denominator of which is the
actual number of days in the related Accrual Period; provided, however, that
where the aggregate Certificate Principal Balance of the Class A-1-A, Class
A-1-B and Class R Certificates immediately prior to a Distribution Date exceeds
the amount described in clause (y) for such Distribution Date, then (i) the
excess of (I) the product of (A) the aggregate Certificate Principal Balance of
the Class A-1-A, Class A-1-B and Class R Certificates immediately prior to such
Distribution Date and (B) one-twelfth of the Net WAC over (II) the aggregate
Current Interest for such Distribution Date on the Interest Only Certificates
shall be substituted for clause (x) above for such Distribution Date and (ii)
the aggregate Certificate Principal Balance of the Class A-1-A, Class A-1-B and
Class R Certificates immediately prior to such Distribution Date will be
substituted for clause (y) above.

      Administration Fee: the sum of the Servicing Fees, the Master Servicing
Fee, and the Credit Risk Manager Fee.

      Advance: The aggregate of the advances required to be made by a Servicer
with respect to any Distribution Date pursuant to Section 5.01.

      Advance Facility: A financing or other facility as described in Section
5.02(a).

      Advance Facility Notice: As defined in Section 5.02(b) hereof.

      Advance Financing Person: As defined in Section 5.02(a) hereof.

      Advance Reimbursement Amounts: As defined in Section 5.02(b) hereof.

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

      Aggregate Certificate Principal Balance: For any date of determination,
the sum of the Class A Certificate Principal Balance, the Class R Certificate
Principal Balance, the Class M-1 Certificate Principal Balance, the Class M-2
Certificate Principal Balance, the Class M-3 Certificate Principal Balance, the
Class B-1 Certificate Principal Balance, the Class B-2 Certificate Principal
Balance and the Class B-3 Certificate Principal Balance, in each case as of such
date of determination.

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

      Amounts For Future Distribution: As to any Distribution Date, the
aggregate amount held in the related Collection Account (with respect to a
Servicer) or the Master Servicer Collection Account (with respect to the Master
Servicer) at the close of business on the immediately preceding Determination
Date on account of (i) all Scheduled Payments or portions thereof received in
respect of the Mortgage Loans due after the related Due Period and (ii)
Principal Prepayments and Liquidation Proceeds received in respect of the
Mortgage Loans after the last day of the related Prepayment Period.

                                      -3-
<PAGE>

      Applied Realized Loss Amount: With respect to any Distribution Date, the
amount, if any, by which, the Aggregate Certificate Principal Balance after
distributions of principal on such Distribution Date exceeds the sum of the (x)
aggregate Stated Principal Balance of the Mortgage Loans as of such Distribution
Date and (y) the amount on deposit in the Pre-Funding Account as of such
Distribution Date.

      Appraised Value: With respect to a Mortgage Loan the proceeds of which
were used to purchase the related Mortgaged Property, the "Appraised Value" of a
Mortgaged Property is the lesser of (1) the appraised value based on an
appraisal made for the Seller by an independent fee appraiser at the time of the
origination of the related Mortgage Loan, and (2) the sales price of such
Mortgaged Property at such time of origination. With respect to a Mortgage Loan
the proceeds of which were used to refinance an existing mortgage loan, the
"Appraised Value" is the appraised value of the Mortgaged Property based upon
the appraisal obtained at the time of refinancing.

      Assignment of Mortgage: An assignment of the Mortgage, notice of transfer
or equivalent instrument, in recordable form, sufficient under the laws of the
jurisdiction where the related Mortgaged Property is located to reflect of
record the sale and assignment of the Mortgage Loan to the Trustee, which
assignment, notice of transfer or equivalent instrument may, if permitted by
law, be in the form of one or more blanket assignments covering Mortgages
secured by Mortgaged Properties located in the same county.

      Authenticating Agent: As defined in Section 6.10 hereof.

      Available Funds Cap: As of any Distribution Date, a per annum rate equal
to the product of (A) 12 times the quotient obtained by dividing (x) the excess
of (a) the sum of (I) the total scheduled interest on the Included Mortgage
Loans for the related Due Period and (II) for Distribution Dates prior to the
Distribution Date in October 2004, one-twelfth of the product of the Pre-Funded
Amount as of the close of the calendar month preceding the month in which such
Distribution Date occurs (or, if such date would be prior to the Closing Date,
the Original Pre-Funded Amount) and the Net WAC for such Distribution Date over
(b) the Administration Fee and the aggregate Current Interest for such
Distribution Date on the Interest Only Certificates by (y) the Aggregate
Certificate Principal Balance immediately prior to such Distribution Date and
(B) a fraction, the numerator of which is 30 and the denominator of which is the
actual number of days in the related Accrual Period.

      Backup Servicer: JPMorgan, or its permitted successor in interest or
assignee or any successor Backup Servicer appointed pursuant to the provisions
hereof.

      Balloon Loan: A Mortgage Loan having an original term to stated maturity
of generally up 15 years which provides for level monthly payments of principal
and interest generally based on a 30 year amortization schedule, with a balloon
payment of the remaining outstanding principal balance due on such Mortgage Loan
at its stated maturity.

      Book-Entry Certificates: Any of the Certificates that shall be registered
in the name of the Depository or its nominee, the ownership of which is
reflected on the books of the Depository or on the books of a Person maintaining
an account with the Depository (directly, as a "Depository Participant", or
indirectly, as an indirect participant in accordance with the rules of the
Depository and as described in Section 6.06). As of the Closing Date, each of
the Class A, Class M and Class B Certificates constitutes a Class of Book-Entry
Certificates.

      Book-Entry Regulation S Global Securities: As defined in Section 6.01
hereof.

                                      -4-
<PAGE>

      Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day
on which banking institutions in the City of New York, New York, or the city in
which the Corporate Trust Office of the Trustee or the Securities Administrator
is located, or financial and savings and loan institutions in the States of New
Jersey, California, Texas or Colorado are authorized or obligated by law or
executive order to be closed.

      Cap Contract: The amended confirmation and agreement and any related
confirmation thereto, between the Bear Stearns Financial Products Inc. and
Terwin Advisors LLC (in the form of Exhibit O hereto).

      Cap Contract Account: The separate Eligible Account created and maintained
by the Securities Administrator, on behalf of the Trustee, pursuant to Section
5.05(l) in the name of the Trustee for the benefit of the Trust Fund and
designated "U.S. Bank National Association, as Trustee, in trust for registered
holders of Terwin Mortgage Trust 2004-5HE, Asset-Backed Certificates, TMTS
Series 2004-5HE." Funds in the Cap Contract Account shall be held in trust for
the Trust Fund for the uses and purposes set forth in this Agreement.

      Cap Contract Counterparty: Bear Stearns Financial Products Inc.

      Cap Contract Notional Balance: With respect to any Distribution Date, the
Cap Contract Notional Balance set forth below for such Distribution Date:

                            ONE-MONTH LIBOR CAP TABLE

<TABLE>
<CAPTION>
BEGINNING      ENDING            NOTIONAL              LOWER         UPPER
 ACCRUAL      ACCRUAL           BALANCE($)           COLLAR(%)     COLLAR(%)
 -------      -------           ----------           ---------     ---------
<S>           <C>               <C>                  <C>           <C>
 6/25/04       7/25/04          318,665,000            6.364         9.600
 7/25/04       8/25/04          315,039,537            6.149         9.600
 8/25/04       9/25/04          310,745,911            6.153         9.600
 9/25/04      10/25/04          305,791,500            6.376         9.600
10/25/04      11/25/04          300,187,941            6.163         9.600
11/25/04      12/25/04          293,957,880            6.389         9.600
12/25/04       1/25/05          287,277,709            6.177         9.600
 1/25/05       2/25/05          280,246,971            6.184         9.600
 2/25/05       3/25/05          272,907,035            6.900         9.600
 3/25/05       4/25/05          265,697,791            6.202         9.600
 4/25/05       5/25/05          258,680,540            6.432         9.600
 5/25/05       6/25/05          251,850,023            6.221         9.600
 6/25/05       7/25/05          245,201,127            6.452         9.600
 7/25/05       8/25/05          238,728,882            6.241         9.600
 8/25/05       9/25/05          232,428,458            6.252         9.600
 9/25/05      10/25/05          226,295,158            6.485         9.600
10/25/05      11/25/05          220,316,136            6.274         9.600
11/25/05      12/25/05          214,493,950            6.508         9.600
12/25/05       1/25/06          208,677,068            6.297         9.600
 1/25/06       2/25/06          200,260,567            6.368         9.600
 2/25/06       3/25/06          191,823,868            8.241         9.600
 3/25/06       4/25/06          183,829,651            7.532         9.600
 4/25/06       5/25/06          176,225,109            7.797         9.600
 5/25/06       6/25/06          169,075,065            7.525         9.600
</TABLE>

                                      -5-
<PAGE>

<TABLE>
<CAPTION>
BEGINNING      ENDING            NOTIONAL              LOWER         UPPER
 ACCRUAL      ACCRUAL           BALANCE($)           COLLAR(%)     COLLAR(%)
 -------      -------           ----------           ---------     ---------
<S>           <C>               <C>                  <C>           <C>
 6/25/06       7/25/06          163,868,895            7.790         9.600
 7/25/06       8/25/06          159,081,013            7.543         9.600
 8/25/06       9/25/06          154,438,196            7.911         9.600
 9/25/06      10/25/06          149,940,330            8.228         9.600
10/25/06      11/25/06          145,577,985            7.948         9.600
11/25/06      12/25/06          141,346,671            8.225         9.600
12/25/06       1/25/07          137,242,202            7.946         9.600
 1/25/07       2/25/07          133,258,226            7.968         9.600
 2/25/07       3/25/07          129,393,340            9.524         9.600
 3/25/07       4/25/07          125,651,242            8.660         9.600
 4/25/07       5/25/07          122,019,880            8.957         9.600
 5/25/07       6/25/07          118,496,097            8.650         9.600
 6/25/07       7/25/07          115,076,495            8.948         9.600
 7/25/07       8/25/07          113,489,573            8.515         9.600
 8/25/07       9/25/07          110,393,954            8.907         9.600
 9/25/07      10/25/07          107,392,714            9.254         9.600
10/25/07      11/25/07          104,479,934            8.921         9.600
11/25/07      12/25/07          101,652,254            9.210         9.600
12/25/07       1/25/08           98,907,015            8.879         9.600
 1/25/08       2/25/08           96,241,646            8.859         9.600
 2/25/08       3/25/08           93,653,667            9.587         9.600
 3/25/08       4/25/08           91,141,439            8.945         9.600
 4/25/08       5/25/08           88,702,009            9.233         9.600
 5/25/08       6/25/08           86,332,912            8.900         9.600
 6/25/08       7/25/08           84,031,975            9.186         9.600
 7/25/08       8/25/08           81,797,094            8.856         9.600
 8/25/08       9/25/08           79,626,233            8.905         9.600
 9/25/08      10/25/08           77,517,841            9.210         9.600
10/25/08      11/25/08           75,469,680            8.876         9.600
11/25/08      12/25/08           73,479,788            9.166         9.600
12/25/08       1/25/09           71,546,436            8.835         9.600
 1/25/09       2/25/09           69,667,841            8.825         9.600
 2/25/09       3/25/09           67,842,230            9.829         9.600
 3/25/09       4/25/09           66,068,154            8.845         9.600
 4/25/09       5/25/09           64,344,225            9.128         9.600
 5/25/09       6/25/09           62,668,682            8.798         9.600
 6/25/09       7/25/09           61,040,063            9.080         9.600
 7/25/09       8/25/09           59,456,951            8.751         9.600
 8/25/09       9/25/09           57,917,975            8.728         9.600
 9/25/09      10/25/09           56,421,809            9.008         9.600
10/25/09      11/25/09           54,967,170            8.682         9.600
11/25/09      12/25/09           53,552,811            8.961         9.600
12/25/09       1/25/10           52,177,531            8.636         9.600
 1/25/10       2/25/10           50,840,162            8.613         9.600
 2/25/10       3/25/10           49,539,578            9.554         9.600
 3/25/10       4/25/10           48,274,683            8.568         9.600
 4/25/10       5/25/10           47,044,422            8.844         9.600
</TABLE>

                                      -6-
<PAGE>

<TABLE>
<CAPTION>
BEGINNING      ENDING            NOTIONAL              LOWER         UPPER
 ACCRUAL      ACCRUAL           BALANCE($)           COLLAR(%)     COLLAR(%)
 -------      -------           ----------           ---------     ---------
<S>           <C>               <C>                  <C>           <C>
 5/25/10       6/25/10           45,847,769            8.524         9.600
 6/25/10       7/25/10           44,683,731            8.799         9.600
 7/25/10       8/25/10           43,551,349            8.480         9.600
 8/25/10       9/25/10           42,449,690            8.458         9.600
 9/25/10      10/25/10           41,377,854            8.731         9.600
10/25/10      11/25/10           40,334,968            8.415         9.600
11/25/10      12/25/10           39,290,906            8.693         9.600
12/25/10       1/25/11           38,263,332            8.388         9.600
 1/25/11       2/25/11           37,263,324            8.376         9.600
 2/25/11       3/25/11           36,290,082            9.304         9.600
 3/25/11       4/25/11           35,342,812            8.354         9.600
 4/25/11       5/25/11           34,420,783            8.635         9.600
 5/25/11       6/25/11           33,523,265            8.334         9.600
 6/25/11       7/25/11           32,649,555            8.614         9.600
 7/25/11       8/25/11           31,798,968            8.314         9.600
 8/25/11       9/25/11                    0              N/A           N/A
</TABLE>

      Cap Contract Termination Date: The Distribution Date in August 2011.

      Capitalized Interest Account: The account defined in Section 5.08 herein.

      Capitalized Interest Amount: The amount paid by the Seller to the
Securities Administrator for deposit into the Capitalized Interest Account on
the Closing Date pursuant to Section 5.08, which amount is $163,398.00.

      Certificate: Any one of the certificates of any Class executed by the
Securities Administrator and authenticated by the Authenticating Agent in
substantially the forms attached hereto as Exhibits A.

      Certificate Account: The separate Eligible Account created and maintained
by the Securities Administrator pursuant to Section 3.05(f) in the name of the
Trustee for the benefit of the Certificateholders and designated "JPMorgan Chase
Bank, as securities administrator for U.S. Bank National Association, as
trustee, in trust for registered holders of Terwin Mortgage Trust, Asset-Backed
Certificates, Series TMTS 2004-5HE." Funds in the Certificate Account shall be
held in trust for the Certificateholders for the uses and purposes set forth in
this Agreement.

      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 an
Interest Only Certificate or a Class N or Class X Certificate) and as of any
Distribution Date, the Initial Certificate Principal Balance of such Certificate
less the sum of (1) all amounts distributed with respect to such Certificate in
reduction of the Certificate Principal Balance thereof on previous Distribution
Dates pursuant to Section 5.05, and (2) any Applied Realized Loss Amounts
allocated to such Certificate on previous Distribution Dates pursuant to Section
5.05(j). Notwithstanding the foregoing on any Distribution Date relating to a
Due Period in which a Subsequent Recovery has been received by a Servicer, the
Certificate Principal Balance of any Class of Certificates then outstanding for
which any Applied Realized Loss Amount has been allocated will be increased, in
order of seniority, by an amount equal to the lesser of (i) the Unpaid Realized
Loss Amount for such Class of Certificates and (ii) the total of any Subsequent
Recovery in respect of principal

                                      -7-
<PAGE>

distributed on such date to the Certificateholders (reduced by the amount of the
increase in the Certificate Principal Balance of any more senior Class of
Certificates pursuant to this sentence on such Distribution Date).

      Certificate Register: The register maintained pursuant to Section 6.02
hereof.

      Certificate Registrar: The Certificate Registrar appointed pursuant to
Section 6.02 hereof.

      Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register (initially, Cede & Co., as nominee for
the Depository) in the case of any Class of Regular Certificates or the Class R
Certificate, 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
Percentage Interest evidenced thereby shall not be taken into account in
determining whether the requisite amount of Percentage Interests necessary to
effect such consent has been obtained; provided, however, that if any such
Person (including the Depositor) owns 100% of the Percentage Interests evidenced
by a Class of Certificates, such Certificates shall be deemed to be Outstanding
for purposes of any provision hereof that requires the consent of the Holders of
Certificates of a particular Class as a condition to the taking of any action
hereunder. The Securities Administrator, the Trustee and the Certificate
Registrar are 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.

      Certification: As defined in Section 3.20 hereof.

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

      Class A Certificate Principal Balance: For any date of determination, the
sum of the Class A-1-A Certificate Principal Balance, Class A-1-B Certificate
Principal Balance and the Class R Certificate Principal Balance.

      Class A Certificates: The Class A-1-A Certificates and Class A-1-B
Certificates.

      Class A Principal Distribution Amount: With respect to any Distribution
Date (1) prior to the Stepdown Date or any Distribution Date on which a Trigger
Event exists, 100% of the Principal Distribution Amount for such Distribution
Date and (2) on or after the Stepdown Date where a Trigger Event does not exist,
the excess of (A) the Class A Certificate Principal Balance and the Class R
Certificate Principal Balance immediately prior to such Distribution Date over
(B) the lesser of (i) 62.10% of the Stated Principal Balance of the Mortgage
Loans as of the end of the immediately preceding Due Period and the amount on
deposit in the Pre-Funding Account and (ii) the excess of the Stated Principal
Balance of the Mortgage Loans as of the end of the immediately preceding Due
Period over the Minimum Required Overcollateralization Amount provided, however,
that in no event will the Class A Principal Distribution Amount with respect to
any Distribution Date exceed the aggregate Certificate Principal Balance of the
Class A and Class R Certificates

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

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

                                      -8-
<PAGE>

      Class A-1-A Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-1-A Pass-Through Rate
on the Class A-1-A Certificate Principal Balance as of the first day of such
Accrual Period (after giving effect to all distributions of principal made or
deemed to be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class A-1-A Certificates.

      Class A-1-A Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class A-1-A Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover for
the Class A Certificates) over (B) the amount actually distributed to the Class
A-1-A Certificates with respect to Class A-1-A Current Interest and Class A-1-A
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
A-1-A Pass-Through Rate for the related Accrual Period.

      Class A-1-A Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.130% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.260% per annum.

      Class A-1-A Pass-Through Rate: For the first Distribution Date, 1.430% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class A-1-A Margin, (2) the Maximum Rate Cap and (3) the Available
Funds Cap for such Distribution Date.

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

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

      Class A-1-B Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-1-B Pass-Through Rate
on the Class A-1-B Certificate Principal Balance as of the first day of such
Accrual Period (after giving effect to all distributions of principal made or
deemed to be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class A-1-B Certificates.

      Class A-1-B Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class A-1-B Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover for
the Class A-1-B Certificates) over (B) the amount actually distributed to the
Class A-1-B Certificates with respect to Class A-1-B Current Interest and Class
A-1-B Current Interest Carryforward Amounts on such prior Distribution Dates and
(2) interest on such excess (to the extent permitted by applicable law) at the
Class A-1-B Pass-Through Rate for the related Accrual Period.

      Class A-1-B Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.420% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.840% per annum.

                                      -9-
<PAGE>

      Class A-1-B Pass-Through Rate: For the first Distribution Date, 1.720% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class A-1-B Margin, (2) the Maximum Rate Cap and (3) the Available
Funds Cap for such Distribution Date.

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

      Class A-X-A Certificate Notional Amount: As of any Distribution Date, the
aggregate Certificate Principal Balance of the Class A-1-A Certificates
immediately prior to such Distribution Date.

      Class A-X-A Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-X-A Pass-Through Rate
on the Class A-X-A Certificate Notional Amount for such Distribution Date plus
the Current Interest and Interest Carryforward Amount portions of any previous
distributions on such Class that are recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class A-X-A Certificates.

      Class A-X-A Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class A-X-A Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
A-X-A Certificates with respect to Class A-X-A Current Interest and Class A-X-A
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
A-X-A Pass-Through Rate for the related Accrual Period.

      Class A-X-A Pass-Through Rate: As of any Distribution Date, 0.320% per
annum, subject to a cap equal to the Net WAC for such Distribution Date.

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

      Class A-X-B Certificate Notional Amount: As of any Distribution Date, the
aggregate Certificate Principal Balance of the Class A-1-B Certificates
immediately prior to such Distribution Date.

      Class A-X-B Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class A-X-B Pass-Through Rate
on the Class A-X-B Certificate Notional Amount for such Distribution Date plus
the Current Interest and Interest Carryforward Amount portions of any previous
distributions on such Class that are recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class A-X-B Certificates.

      Class A-X-B Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class A-X-B Current Interest with respect to
prior Distribution Dates (over (B) the amount actually distributed to the Class
A-X-B Certificates with respect to Class A-X-B Current Interest and Class A-X-B
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
A-X-B Pass-Through Rate for the related Accrual Period.

      Class A-X-B Pass-Through Rate: As of any Distribution Date, 0.030% per
annum, subject to a cap equal to the Net WAC for such Distribution Date.

                                      -10-
<PAGE>

      Class B Certificates: The Class B-1 Certificates, Class B-2 Certificates
and Class B-3 Certificates.

      Class B-1 Applied Realized Loss Amount: As of any Distribution Date, the
sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class B-1 Certificates.

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

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

      Class B-1 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class B-1 Pass-Through Rate on
the Class B-1 Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class B-1 Certificates.

      Class B-1 Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class B-1 Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover for
the Class B-1 Certificates) over (B) the amount actually distributed to the
Class B-1 Certificates with respect to Class B-1 Current Interest and Class B-1
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
B-1 Pass-Through Rate for the related Accrual Period.

      Class B-1 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 1.900% per annum and, as of any
Distribution Date after the Optional Termination Date, 2.850% per annum.

      Class B-1 Pass-Through Rate: For the first Distribution Date, 3.200% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class B-1 Margin, (2) the Maximum Rate Cap and (3) the Available Funds
Cap for such Distribution Date.

      Class B-1 Principal Distribution Amount: With respect to any Distribution
Date on or after the Stepdown Date, 100% of the Principal Distribution Amount
for such Distribution Date if the Class A Certificate Principal Balance, the
Class R Certificate Principal Balance, the Class M-1 Certificate Principal
Balance, the Class M-2 Certificate Principal Balance and the Class M-3
Certificate Principal Balance have been reduced to zero and a Trigger Event
exists, or as long as a Trigger Event does not exist, the excess of (1) the sum
of (A) the Class A Certificate Principal Balance and the Class R Certificate
Principal Balance (after taking into account distributions of the Class A
Principal Distribution Amount on such Distribution Date), (B) the Class M-1
Certificate Principal Balance (after taking into account distributions of the
Class M-1 Principal Distribution Amount on such Distribution Date), (C) the
Class M-2 Certificate Principal Balance (after taking into account distributions
of the Class M-2 Principal Distribution Amount on such Distribution Date), (D)
the Class M-3 Certificate Principal Balance (after taking into account
distributions of the Class M-3 Principal Distribution Amount on such
Distribution Date and (E) the Class B-1 Certificate Principal Balance
immediately prior to such Distribution Date over (2) the lesser of (A) 91.00% of
the Stated Principal Balance of the Mortgage

                                      -11-
<PAGE>

Loans as of the end of the immediately preceding Due Period and (B) the excess
of the Stated Principal Balance of the Mortgage Loans as of the end of the
immediately preceding Due Period over the Minimum Required Overcollateralization
Amount. Notwithstanding the foregoing, (I) on any Distribution Date prior to the
Stepdown Date on which the Certificate Principal Balance of each Class of Class
A, Class R and Class M Certificates has been reduced to zero, the Class B-1
Principal Distribution Amount will equal the lesser of (x) the outstanding
Certificate Principal Balance of the Class B-1 Certificates and (y) 100% of the
Principal Distribution Amount remaining after any distributions on such Class A,
Class R and Class M Certificates and (II) in no event will the Class B-1
Principal Distribution Amount with respect to any Distribution Date exceed the
Class B-1 Certificate Principal Balance.

      Class B-1 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class B-1 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class B-1 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class B-1 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

      Class B-2 Applied Realized Loss Amount: As of any Distribution Date, the
sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class B-2 Certificates.

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

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

      Class B-2 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class B-2 Pass-Through Rate on
the Class B-2 Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class B-2 Certificates.

      Class B-2 Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class B-2 Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover for
the Class B-2 Certificates) over (B) the amount actually distributed to the
Class B-2 Certificates with respect to Class B-2 Current Interest and Class B-2
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
B-2 Pass-Through Rate for the related Accrual Period.

      Class B-2 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 2.000% per annum and, as of any
Distribution Date after the Optional Termination Date, 3.000% per annum.

      Class B-2 Pass-Through Rate: For the first Distribution Date, 3.300% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class B-2 Margin, (2) the Maximum Rate Cap and (3) the Available Funds
Cap for such Distribution Date.

      Class B-2 Principal Distribution Amount: With respect to any Distribution
Date on or after the Stepdown Date, 100% of the Principal Distribution Amount
for such Distribution Date if the Class A Certificate Principal Balance, the
Class R Certificate Principal Balance, the Class M-1 Certificate

                                      -12-
<PAGE>

Principal Balance, the Class M-2 Certificate Principal Balance, the Class M-3
Certificate Principal Balance and the Class B-1 Certificate Principal Balance
have been reduced to zero and a Trigger Event exists, or as long as a Trigger
Event does not exist, the excess of (1) the sum of (A) the Class A Certificate
Principal Balance and the Class R Certificate Principal Balance (after taking
into account distributions of the Class A Principal Distribution Amount on such
Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distributions of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distributions of the Class M-2 Principal Distribution
Amount on such Distribution Date), (D) the Class M-3 Certificate Principal
Balance (after taking into account distributions of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class B-1 Certificate
Principal Balance (after taking into account distributions of the Class B-1
Principal Distribution Amount on such Distribution Date) and (F) the Class B-2
Certificate Principal Balance immediately prior to such Distribution Date over
(2) the lesser of (A) 93.70% of the Stated Principal Balance of the Mortgage
Loans as of the end of the immediately preceding Due Period and (B) the excess
of the Stated Principal Balance of the Mortgage Loans as of the end of the
immediately preceding Due Period over Minimum Required Overcollateralization
Amount. Notwithstanding the foregoing, (I) on any Distribution Date prior to the
Stepdown Date on which the Certificate Principal Balance of each Class of Class
A, Class R, Class M and Class B-1 Certificates has been reduced to zero, the
Class B-2 Principal Distribution Amount will equal the lesser of (x) the
outstanding Certificate Principal Balance of the Class B-2 Certificates and (y)
100% of the Principal Distribution Amount remaining after any distributions on
such Class A, Class R, Class M and Class B-1 Certificates and (II) in no event
will the Class B-2 Principal Distribution Amount with respect to any
Distribution Date exceed the Class B-2 Certificate Principal Balance.

      Class B-2 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class B-2 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class B-2 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class B-2 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

      Class B-3 Applied Realized Loss Amount: As of any Distribution Date, the
sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class B-3 Certificates.

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

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

      Class B-3 Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class B-3 Pass-Through Rate on
the Class B-3 Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class B-3 Certificates.

      Class B-3 Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class B-3 Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover
Class B-3 Certificates) over (B) the amount actually distributed to the Class
B-3 Certificates with respect to Class B-3 Current Interest and Class B-3
Current Interest Carryforward

                                      -13-
<PAGE>

Amounts on such prior Distribution Dates and (2) interest on such excess (to the
extent permitted by applicable law) at the Class B-3 Pass-Through Rate for the
related Accrual Period.

      Class B-3 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 3.000% per annum and, as of any
Distribution Date after the Optional Termination Date, 4.500% per annum.

      Class B-3 Pass-Through Rate: For the first Distribution Date, 4.300% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class B-3 Margin, (2) the Maximum Rate Cap and (3) the Available Funds
Cap for such Distribution Date.

      Class B-3 Principal Distribution Amount: With respect to any Distribution
Date on or after the Stepdown Date, 100% of the Principal Distribution Amount
for such Distribution Date if the Class A Certificate Principal Balance, the
Class R Certificate Principal Balance, the Class M-1 Certificate Principal
Balance, the Class M-2 Certificate Principal Balance, the Class M-3 Certificate
Principal Balance, the Class B-1 Certificate Principal Balance and the Class B-2
Certificate Principal Balance have been reduced to zero and a Trigger Event
exists, or as long as a Trigger Event does not exist, the excess of (1) the sum
of (A) the Class A Certificate Principal Balance and the Class R Certificate
Principal Balance (after taking into account distributions of the Class A
Principal Distribution Amount on such Distribution Date), (B) the Class M-1
Certificate Principal Balance (after taking into account distributions of the
Class M-1 Principal Distribution Amount on such Distribution Date), (C) the
Class M-2 Certificate Principal Balance (after taking into account distributions
of the Class M-2 Principal Distribution Amount on such Distribution Date), (D)
the Class M-3 Certificate Principal Balance (after taking into account
distributions of the Class M-3 Principal Distribution Amount on such
Distribution Date), (E) the Class B-1 Certificate Principal Balance (after
taking into account distributions of the Class B-1 Principal Distribution Amount
on such Distribution Date), (F) the Class B-2 Certificate Principal Balance
immediately prior to such Distribution Date and (G) the Class B-3 Certificate
Principal Balance (after taking into account distributions of the Class B-3
Principal Distribution Amount on such Distribution Date) over (2) the lesser of
(A) 96.10% of the Stated Principal Balance of the Mortgage Loans as of the end
of the immediately preceding Due Period and (B) the excess of the Stated
Principal Balance of the Mortgage Loans as of the end of the immediately
preceding Due Period over Minimum Required Overcollateralization Amount.
Notwithstanding the foregoing, (I) on any Distribution Date prior to the
Stepdown Date on which the Certificate Principal Balance of each Class of Class
A, Class R, Class M, Class B-1 and Class B-2 Certificates has been reduced to
zero, the Class B-3 Principal Distribution Amount will equal the lesser of (x)
the outstanding Certificate Principal Balance of the Class B-3 Certificates and
(y) 100% of the Principal Distribution Amount remaining after any distributions
on such Class A, Class R, Class M, Class B-1 and Class B-2 Certificates and (II)
in no event will the Class B-3 Principal Distribution Amount with respect to any
Distribution Date exceed the Class B-3 Certificate Principal Balance.

      Class B-3 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class B-3 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class B-3 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class B-1 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

      Class LT1-A1A Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $140,956,000 and an interest rate equal to
the Net WAC.

      Class LT1-A1B Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $122,457,000 and an interest rate equal to
the Net WAC.

                                      -14-
<PAGE>

      Class LT1-AR Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $100 and an interest rate equal to the Net
WAC.

      Class LT1-B1 Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $4,713,000 and an interest rate equal to
the Net WAC.

      Class LT1-B2 Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $4,388,000 and an interest rate equal to
the Net WAC.

      Class LT1-B3 Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $3,900,000 and an interest rate equal to
the Net WAC.

      Class LT1-C Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to the excess of (i) the sum of (x) the
Cut-off Date Principal Balance of the Initial Mortgage Loans and (y) the
Original Pre-Funded Amount over (ii) $318,665,100 and an interest rate equal to
the Net WAC.

      Class LT1-M1 Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $20,963,000 and an interest rate equal to
the Net WAC.

      Class LT1-M2 Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $16,738,000 and an interest rate equal to
the Net WAC.

      Class LT1-M3 Interest: An uncertificated regular interest in REMIC 1 with
an initial principal balance equal to $4,550,000 and an interest rate equal to
the Net WAC.

      Class LT1-R Interest: The sole class of "residual interest" in REMIC 1.

      Class LT2-A1A Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $140,956,000 and an interest rate equal to
the greater of (i) Net WAC minus 0.32% and (ii) 0.00%.

      Class LT2-A1AX Interest: An interest-only uncertificated regular interest
in REMIC 2 having a notional balance, as of any Distribution Date, equal to the
principal balance of the Class LT2-A1A Interest immediately prior to such
Distribution Date and having an interest rate, as of any Distribution Date,
equal to the lesser of (i) 0.32% and (ii) the Net WAC for such Distribution
Date.

      Class LT2-A1B Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $122,457,000 and an interest rate equal to
the greater of (i) Net WAC minus 0.03% and (ii) 0.00%.

      Class LT2-A1BX Interest: An interest-only uncertificated regular interest
in REMIC 2 having a notional balance, as of any Distribution Date, equal to the
principal balance of the Class LT2-A1B Interest immediately prior to such
Distribution Date and having an interest rate, as of any Distribution Date,
equal to the lesser of (i) 0.03% and (ii) the Net WAC for such Distribution
Date.

      Class LT2-AR Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $100 and an interest rate equal to the Net
WAC.

      Class LT2-B1 Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $4,713,000 and an interest rate equal to
the Net WAC.

                                      -15-
<PAGE>

      Class LT2-B2 Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $4,388,000 and an interest rate equal to
the Net WAC.

      Class LT2-B3 Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $3,900,000 and an interest rate equal to
the Net WAC.

      Class LT2-C Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to the excess of (i) the sum of (x) the
Cut-off Date Principal Balance of the Initial Mortgage Loans and (y) the
Original Pre-Funded Amount over (ii) $318,665,100 and an interest rate equal to
the Net WAC.

      Class LT2-M1 Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $20,963,000and an interest rate equal to
the greater of (i) Net WAC minus 0.06% and (ii) 0.00%.

      Class LT2-M1X Interest: An interest-only uncertificated regular interest
in REMIC 2 having a notional balance, as of any Distribution Date, equal to the
principal balance of the Class LT2-M1 Interest immediately prior to such
Distribution Date and having an interest rate, as of any Distribution Date,
equal to the lesser of (i) 0.06% and (ii) the Net WAC for such Distribution
Date.

      Class LT2-M2 Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $16,738,000 and an interest rate equal to
the greater of (i) Net WAC minus 0.05% and (ii) 0.00%.

      Class LT2-M2X Interest: An interest-only uncertificated regular interest
in REMIC 2 having a notional balance, as of any Distribution Date, equal to the
principal balance of the Class LT2-M2 Interest immediately prior to such
Distribution Date and having an interest rate, as of any Distribution Date,
equal to the lesser of (i) 0.05% and (ii) the Net WAC for such Distribution
Date.

      Class LT2-M3 Interest: An uncertificated regular interest in REMIC 2 with
an initial principal balance equal to $4,550,000 and an interest rate equal to
the Net WAC.

      Class LT2-R Interest: The sole class of "residual interest" in REMIC 2.

      Class LT3-A1A Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $70,478,000 and an interest rate
equal to the Adjusted Net WAC.

      Class LT3-A1B Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $61,228,500 and an interest rate
equal to the Adjusted Net WAC.

      Class LT3-AR Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $50 and an interest rate equal to
the Adjusted Net WAC.

      Class LT3-B1 Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $2,356,500 and an interest rate
equal to the Adjusted Net WAC.

      Class LT3-B2 Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $2,194,000 and an interest rate
equal to the Adjusted Net WAC.

      Class LT3-B3 Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $1,950,000 and an interest rate
equal to the Adjusted Net WAC.

                                      -16-
<PAGE>

      Class LT3-M1 Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $10,481,500 and an interest rate
equal to the Adjusted Net WAC.

      Class LT3-M2 Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $8,369,000 and an interest rate
equal to the Adjusted Net WAC.

      Class LT3-M3 Interest: An uncertificated regular interest in REMIC 3
having an initial principal balance equal to $2,275,000 and an interest rate
equal to the Adjusted Net WAC.

      Class LT3-R Interest: The sole class of "residual interest in REMIC 3.

      Class LT3-X Interest: An uncertificated regular interest in REMIC 3 having
an initial principal balance equal to the sum of (i) the excess of (x) the sum
of (I) the Cut-off Date Principal Balance of the Initial Mortgage Loans and (II)
the Original Pre-Funded Amount over (y) $318,665,100 and (ii) $159,332,550 and
an interest rate equal to the Adjusted Net WAC.

      Class M Certificates: The Class M-1 Certificates, Class M-2 Certificates
and Class M-3 Certificates.

      Class M-1 Applied Realized Loss Amount: As of any Distribution Date, the
sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class M-1 Certificates.

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

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

      Class M-1 Current Interest: As of 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 as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class M-1 Certificates.

      Class M-1 Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-1 Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover for
the Class M-1 Certificates) over (B) the amount actually distributed to the
Class M-1 Certificates with respect to Class M-1 Current Interest and Class M-1
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
M-1 Pass-Through Rate for the related Accrual Period.

      Class M-1 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.590% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.885% per annum.

      Class M-1 Pass-Through Rate: For the first Distribution Date, 1.890% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class M-1 Margin, (2) the Maximum Rate Cap and (3) the Available Funds
Cap for such Distribution Date.

                                      -17-
<PAGE>

      Class M-1 Principal Distribution Amount: With respect to any Distribution
Date on or after the Stepdown Date, 100% of the Principal Distribution Amount
for such Distribution Date if the Class A Certificate Principal Balance and the
Class R Certificate Principal Balance has been reduced to zero and a Trigger
Event exists, or as long as a Trigger Event does not exist, the excess of (1)
the sum of (A) the Class A Certificate Principal Balance and the Class R
Certificate Principal Balance (after taking into account distributions of the
Class A Principal Distribution Amount on such Distribution Date) and (B) the
Class M-1 Certificate Principal Balance immediately prior to such Distribution
Date over (2) the lesser of (A) 75.00% of the Stated Principal Balances of the
Mortgage Loans as of the end of the immediately preceding Due Period and (B) the
excess of the Stated Principal Balances for the Mortgage Loans as of the end of
the immediately preceding Due Period over the Minimum Required
Overcollateralization Amount. Notwithstanding the foregoing, (I) on any
Distribution Date prior to the Stepdown Date on which the Certificate Principal
Balance of each Class of Class A and Class R Certificates has been reduced to
zero, the Class M-1 Principal Distribution Amount will equal the lesser of (x)
the outstanding Certificate Principal Balance of the Class M-1 Certificates and
(y) 100% of the Principal Distribution Amount remaining after any distributions
on such Class A and Class R Certificates and (II) in no event will the Class M-1
Principal Distribution Amount with respect to any Distribution Date exceed the
Class M-1 Certificate Principal Balance.

      Class M-1 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-1 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class M-1 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class M-1 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

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

      Class M-1-X Certificate Notional Amount: As of any Distribution Date, the
aggregate Certificate Principal Balance of the Class M-1 Certificates
immediately prior to such Distribution Date.

      Class M-1-X Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-1-X Pass-Through Rate
on the Class M-1-X Certificate Notional Amount for such Distribution Date plus
the Current Interest and Interest Carryforward Amount portions of any previous
distributions on such Class that are recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class M-1-X Certificates.

      Class M-1-X Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-1-X Current Interest with respect to
prior Distribution Dates (over (B) the amount actually distributed to the Class
M-1-X Certificates with respect to Class M-1-X Current Interest and Class M-1-X
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
M-1-X Pass-Through Rate for the related Accrual Period.

      Class M-1-X Pass-Through Rate: As of any Distribution Date, 0.060% per
annum, subject to a cap equal to the Net WAC for such Distribution Date.

      Class M-2 Applied Realized Loss Amount: As of any Distribution Date, the
sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class M-2 Certificates.

                                      -18-
<PAGE>

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

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

      Class M-2 Current Interest: As of 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 as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class M-2 Certificates.

      Class M-2 Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-2 Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover for
the Class M-2 Certificates) over (B) the amount actually distributed to the
Class M-2 Certificates with respect to Class M-2 Current Interest and Class M-2
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
M-2 Pass-Through Rate for the related Accrual Period.

      Class M-2 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 1.250% per annum and, as of any
Distribution Date after the Optional Termination Date, 1.875% per annum.

      Class M-2 Pass-Through Rate: For the first Distribution Date, 2.550% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class M-2 Margin, (2) the Maximum Rate Cap and (3) the Available Funds
Cap for such Distribution Date.

      Class M-2 Principal Distribution Amount: With respect to any Distribution
Date on or after the Stepdown Date, 100% of the Principal Distribution Amount
for such Distribution Date if the Class A Certificate Principal Balance, the
Class R Certificate Principal Balance and the Class M-1 Certificate Principal
Balance have been reduced to zero and a Trigger Event exists, or as long as a
Trigger Event does not exist, the excess of (1) the sum of (A) the Class A
Certificate Principal Balance and the Class R Certificate Principal Balance
(after taking into account distributions of the Class A Principal Distribution
Amount on such Distribution Date), (B) the Class M-1 Certificate Principal
Balance (after taking into account distributions 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 (2) the
lesser of (A) 85.30% of the Stated Principal Balances of the Mortgage Loans as
of the end of the immediately preceding Due Period and (B) the excess of the
Stated Principal Balances of the Mortgage Loans as of the end of the immediately
preceding Due Period over the Minimum Required Overcollateralization Amount.
Notwithstanding the foregoing, (I) on any Distribution Date prior to the
Stepdown Date on which the Certificate Principal Balance of each Class of Class
A, Class R and Class M-1 Certificates has been reduced to zero, the Class M-2
Principal Distribution Amount will equal the lesser of (x) the outstanding
Certificate Principal Balance of the Class M-2 Certificates and (y) 100% of the
Principal Distribution Amount remaining after any distributions on such Class A,
Class R and Class M-1 Certificates and (II) in no event will the Class M-2
Principal Distribution Amount with respect to any Distribution Date exceed the
Class M-2 Certificate Principal Balance.

      Class M-2 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-2 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the

                                      -19-
<PAGE>

Class M-2 Unpaid Realized Loss Amounts on all previous Distribution Dates and
(y) all increases in the Certificate Principal Balance of such Class M-2
Certificates pursuant to the last sentence of the definition of "Certificate
Principal Balance."

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

      Class M-2-X Certificate Notional Amount: As of any Distribution Date, the
aggregate Certificate Principal Balance of the Class M-2 Certificates
immediately prior to such Distribution Date.

      Class M-2-X Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-2-X Pass-Through Rate
on the Class M-2-X Certificate Notional Amount on such Distribution Date plus
the Current Interest and Interest Carryforward Amount portions of any previous
distributions on such Class that are recovered as a voidable preference by a
trustee in bankruptcy, less any Non-Supported Interest Shortfall allocated on
such Distribution Date to the Class M-2-X Certificates.

      Class M-2-X Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-2-X Current Interest with respect to
prior Distribution Dates over (B) the amount actually distributed to the Class
M-2-X Certificates with respect to Class M-2-X Current Interest and Class M-2-X
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
M-2-X Pass-Through Rate for the related Accrual Period.

      Class M-2-X Pass-Through Rate: As of any Distribution Date, 0.050% per
annum, subject to a cap equal to the Net WAC for such Distribution Date.

      Class M-3 Applied Realized Loss Amount: As of any Distribution Date, the
sum of all Applied Realized Loss Amounts with respect to the Mortgage Loans
which have been applied to the reduction of the Certificate Principal Balance of
the Class M-3 Certificates.

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

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

      Class M-3 Current Interest: As of 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 as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class M-3 Certificates.

      Class M-3 Interest Carryforward Amount: As of any Distribution Date, the
sum of (1) the excess of (A) the Class M-3 Current Interest with respect to
prior Distribution Dates (excluding any Floating Rate Certificate Carryover for
the Class M-3 Certificates) over (B) the amount actually distributed to the
Class M-3 Certificates with respect to Class M-3 Current Interest and Class M-3
Current Interest Carryforward Amounts on such prior Distribution Dates and (2)
interest on such excess (to the extent permitted by applicable law) at the Class
M-3 Pass-Through Rate for the related Accrual Period.

                                      -20-
<PAGE>

      Class M-3 Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 1.500% per annum and, as of any
Distribution Date after the Optional Termination Date, 2.250% per annum.

      Class M-3 Pass-Through Rate: For the first Distribution Date, 2.800% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class M-3 Margin, (2) the Maximum Rate Cap and (3) the Available Funds
Cap for such Distribution Date.

      Class M-3 Principal Distribution Amount: With respect to any Distribution
Date on or after the Stepdown Date, 100% of the Principal Distribution Amount
for such Distribution Date if the Class A Certificate Principal Balance, the
Class R Certificate Principal Balance, the Class M-1 Certificate Principal
Balance and the Class M-2 Certificate Principal Balance has been reduced to zero
and a Trigger Event exists, or as long as a Trigger Event does not exist, the
excess of (1) the sum of (A) the Class A Certificate Principal Balance and the
Class R Certificate Principal Balance (after taking into account distributions
of the Class A Principal Distribution Amount on such Distribution Date), (B) the
Class M-1 Certificate Principal Balance (after taking into account distributions
of the Class M-1 Principal Distribution Amount on such Distribution Date), (C)
the Class M-2 Certificate Principal Balance (after taking into account
distributions 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 (2) the lesser of (A) 88.10% of
the Stated Principal Balances of the Mortgage Loans as of the end of the
immediately preceding Due Period and (B) the excess of the Stated Principal
Balances for the Mortgage Loans as of the end of the immediately preceding Due
Period over the Minimum Required Overcollateralization Amount. Notwithstanding
the foregoing, (I) on any Distribution Date prior to the Stepdown Date on which
the Certificate Principal Balance of each Class of Class A, Class R, Class M-1
and Class M-2 Certificates has been reduced to zero, the Class M-3 Principal
Distribution Amount will equal the lesser of (x) the outstanding Certificate
Principal Balance of the Class M-3 Certificates and (y) 100% of the Principal
Distribution Amount remaining after any distributions on such Class A, Class R,
Class M-1 and Class M-2 Certificates and (II) in no event will the Class M-3
Principal Distribution Amount with respect to any Distribution Date exceed the
Class M-3 Certificate Principal Balance.

      Class M-3 Unpaid Realized Loss Amount: As of any Distribution Date, the
excess of (1) the Class M-3 Applied Realized Loss Amount over (2) the sum of (x)
all distributions in reduction of the Class M-3 Unpaid Realized Loss Amounts on
all previous Distribution Dates and (y) all increases in the Certificate
Principal Balance of such Class M-3 Certificates pursuant to the last sentence
of the definition of "Certificate Principal Balance."

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

      Class N Certificate Notional Amount: As of any date of determination, the
Initial Certificate Notional Amount of the Class N Certificates as reduced by
amounts paid to the Class N Certificates in respect of the Class N Certificate
Notional Amount.

      Class N Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class N Interest Rate on the
Class N Certificate Notional Amount, plus the interest portion of any previous
distributions on such Class that is recovered as a voidable preference by a
trustee in bankruptcy.

      Class N Interest Rate: For any Distribution Date, 5.00% per annum.

                                      -21-
<PAGE>

      Class N Interest Carryforward Amount: As of any Distribution Date, the
excess of (A) the Class N Current Interest with respect to prior Distribution
Dates over (B) the amount actually distributed to the Class N Certificates with
respect to interest on such prior Distribution Dates.

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

      Class R Certificate Principal Balance: As of any date of determination,
the aggregate Certificate Principal Balance of the Class R Certificate.

      Class R Current Interest: As of any Distribution Date, the interest
accrued during the related Accrual Period at the Class R Pass-Through Rate on
the Class R Certificate Principal Balance as of the first day of such Accrual
Period (after giving effect to all distributions of principal made or deemed to
be made as of such first day) plus the Current Interest and Interest
Carryforward Amount portions of any previous distributions on such Class that
are recovered as a voidable preference by a trustee in bankruptcy, less any
Non-Supported Interest Shortfall allocated on such Distribution Date to the
Class R Certificate.

      Class R Interest Carryforward Amount: As of any Distribution Date, the sum
of (1) the excess of (A) the Class R Current Interest with respect to prior
Distribution Dates (excluding any Floating Rate Certificate Carryover for the
Class R Certificate) over (B) the amount actually distributed to the Class R
Certificate with respect to Class R Current Interest and Class R Interest
Carryforward Amounts on such prior Distribution Dates and (2) interest on such
excess (to the extent permitted by applicable law) at the Class R Pass-Through
Rate for the related Accrual Period.

      Class R Margin: As of any Distribution Date up to and including the
Optional Termination Date for the Certificates, 0.130% per annum and, as of any
Distribution Date after the Optional Termination Date, 0.260% per annum.

      Class R Pass-Through Rate: For the first Distribution Date, 1.430% per
annum. As of any Distribution Date thereafter, the least of (1) One-Month LIBOR
plus the Class R Margin, (2) the Available Funds Cap for such Distribution Date
and (3) the Maximum Rate Cap.

      Class X Certificates: The Class X Certificates executed by the Trustee and
authenticated by the Trustee in substantially the form set forth in Exhibit A.

      Class X Distributable Amount: The excess of (x) the sum of (i) the initial
Overcollateralization Amount and (ii) all interest payments accrued on the REMIC
4 XN Interest over (y) the sum of (i) all prior distributions to the Class X and
Class N Certificates pursuant to Section 5.05(g) and (ii) all payments treated
as distributed by REMIC 4 to the REMIC 4 XN Interest then paid to the holders of
Offered Certificates and the Class B-1, Class B-2 and Class B-3 Certificates
pursuant to an interest rate cap contract as described in Section 2.07(d).

      Closing Date: June 25, 2004.

      CMMC: Chase Manhattan Mortgage Corporation, a New Jersey corporation, or
its successor in interest.

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

      Collection Account: The separate Eligible Accounts created and initially
maintained by the Servicers pursuant to Section 3.05(d) in the name of the
Trustee for the benefit of the Certificateholders

                                      -22-
<PAGE>

and designated (i) in the case of Countrywide, "Countrywide Home Loans Servicing
LP, as servicer for U.S. Bank National Association, as trustee, in trust for
registered holders of Terwin Mortgage Trust, Asset-Backed Certificates, Series
TMTS 2004-5HE" (ii) in the case of GreenPoint, "GreenPoint Mortgage Funding
Inc., as servicer for U.S. Bank National Association, as trustee, in trust for
registered holders of Terwin Mortgage Trust, Asset-Backed Certificates, Series
TMTS 2004-5HE"and (iii) in the case of SLS, "Specialized Loan Servicing LLC, as
servicer for U.S. Bank National Association, as trustee, in trust for registered
holders of Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS
2004-5HE". Funds in the Collection Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

      Compensating Interest: For any Distribution Date and with respect to the
Mortgage Loans serviced by a Servicer, the lesser of (i) one-half of the
aggregate Servicing Fee payable to such Servicer on such Distribution Date and
(ii) the aggregate Prepayment Interest Shortfall allocable to Mortgage Loans
that prepay during the related Prepayment Period; provided, however, that any
Compensating Interest remitted by the Master Servicer shall not exceed the
Master Servicing Fee.

      Corporate Trust Office: With respect to (a) the Trustee, the principal
corporate trust office at which at any particular time its corporate trust
business in connection with this Agreement shall be administered, which office
at the date of the execution of this instrument is located at 209 South LaSalle
Street, Suite 300, Chicago, Illinois 60604, Attn: Corporate Trust Structured
Finance, Terwin Mortgage Trust 2004-5HE, or at such other address as the Trustee
may designate from time to time by notice to the Certificateholders, the
Depositor, the Seller, the Master Servicer, the Securities Administrator, the
Backup Servicer and the Servicers and (b) the Securities Administrator and the
Backup Servicer, the principal corporate trust office at which at any particular
time its corporate trust business in connection with this Agreement shall be
administered, which office at the date of the execution of this instrument is
located at 4 New York Plaza, New York, New York 10004-2477, Attention:
Institutional Trust Services/Global Debt--Terwin Mortgage Trust 2004-5HE, or at
such other address as the Securities Administrator may designate from time to
time by notice to the Certificateholders, the Trustee, the Depositor, the
Seller, the Master Servicer, the Servicers, the Backup Servicer and the
Securities Administrator. With respect to the Certificate Registrar and
presentment of Certificates for registration of transfer, exchange or final
payment, 2001 Bryan Street, 10th Floor, Dallas, Texas 75201, Attention:
Institutional Trust Services/Global Debt--Terwin Mortgage Trust 2004-5HE.

      Corresponding Certificates: With respect to the Class LT1-A1A Interest,
the Class A-1-A Certificates; with respect to the Class LT1-A1B Interest, the
Class A-1-B Certificates; with respect to the Class LT1-B1 Interest, the Class
B-1 Certificates; with respect to the Class LT1-B2 Interest, the Class B-2
Certificates; with respect to the Class LT1-B3 Interest, the Class B-3
Certificates; with respect to the Class LT1-M1 Interest, the Class M-1
Certificates; with respect to the Class LT1-M2 Interest, the Class M-2
Certificates; with respect to the Class LT1-M3 Interest, the Class M-3
Certificates; with respect to the Class LT1-AR Interest, the Class R
Certificate; with respect to the Class LT2-A1A Interest, the Class A-1-A
Certificates; with respect to the Class LT2-A1B Interest, the Class A-1-B
Certificates; with respect to the Class LT2-B1 Interest, the Class B-1
Certificates; with respect to the Class LT2-B2 Interest, the Class B-2
Certificates; with respect to the Class LT2-B3 Interest, the Class B-3
Certificates; with respect to the Class LT2-M1 Interest, the Class M-1
Certificates; with respect to the Class LT2-M2 Interest, the Class M-2
Certificates; with respect to the Class LT2-M3 Interest, the Class M-3
Certificates; and, with respect to the Class LT2-AR Interest, the Class R
Certificate.

      Corresponding REMIC 4 Interests: With respect to the Class LT3-A1A
Interest, the REMIC 4 A1A Interest and the REMIC 4 Residual Interest. With
respect to the Class LT3-A1B Interest, the REMIC 4 A1B Interest. With respect to
the Class LT3-B1 Interest, the REMIC 4 B1 Interest. With respect to the Class
LT3-B2 Interest, the REMIC 4 B2 Interest. With respect to the Class LT3-B3
Interest,

                                      -23-
<PAGE>

the REMIC 4 B3 Interest. With respect to the Class LT3-M1 Interest, the REMIC 4
M1 Interest. With respect to the Class LT3-M2 Interest, the REMIC 4 M2 Interest.
With respect to the Class LT3-M3 Interest, the REMIC 4 M3 Interest.

      Countrywide: Countrywide Home Loans Servicing LP, a Texas limited
partnership, or its successor in interest.

      Credit Risk Management Agreements: The respective agreements between each
Servicer and the Credit Risk Manager dated as of June 25, 2004.

      Credit Risk Manager: Risk Management Group, LLC, a New York limited
liability company, or its successor in interest.

      Credit Risk Manager Fee: The fee payable on each Distribution Date to the
Credit Risk Manager as compensation for all services rendered by it in exercise
and performance of any of the powers and duties of the Credit Risk Manager under
the Credit Risk Management Agreement, which amount shall equal one-twelfth of
the product of (i) the Credit Risk Manager Fee Rate and (ii) the Stated
Principal Balance of the Mortgage Loans as of the immediately preceding
Distribution Date.

      Credit Risk Manager Fee Rate: 0.015% per annum.

      Current Interest: Any of the Class A-1-A Current Interest, the Class A-1-B
Current Interest, the Class A-X-A Current Interest, the Class A-X-B Current
Interest, the Class R Current Interest, the Class M-1 Current Interest, the
Class M-2 Current Interest, the Class M-3 Current Interest, the Class M-1-X
Current Interest, the Class M-2-X Current Interest, the Class B-1 Current
Interest, the Class B-2 Current Interest, the Class B-3 Current Interest and the
Class N Current Interest.

      Custodian: Deutsche Bank National Trust Company, as custodian, or its
successor in interest.

      Custodian Fee: The fee payable to the Custodian by the Seller as set forth
in the Custodial Agreement, a form of which is attached hereto as Exhibit Q.

      Cut-off Date: June 1, 2004 for the Initial Mortgage Loans only.

      Cut-off Date Principal Balance: As to any Mortgage Loan, the unpaid
principal balance thereof as of the close of business on the calendar day
immediately preceding the Cut-off Date after application of all payments of
principal due on or prior to the Cut-off Date, whether or not received, and all
Principal Prepayments received prior to the Cut-off Date, but without giving
effect to any installments of principal received in respect of Due Dates on and
after the Cut-off Date.

      Definitive Certificates: As defined in Section 6.06 hereof.

      Definitive Regulation S Global Securities: As defined in Section 6.01
hereof.

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

      Delinquent: A Mortgage Loan is "delinquent" if any payment due thereon is
not made pursuant to the terms of such Mortgage Loan by the close of business on
the day such payment is scheduled to be due. A Mortgage Loan is "30 days
delinquent" if such payment has not been received by the close of business on
the corresponding day of the month immediately succeeding the month in which
such

                                      -24-
<PAGE>

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. With
respect to any Mortgage Loan due on any day other than the first day of the
month, such Mortgage Loan shall be deemed to be due on the first day of the
immediately succeeding month. Similarly for "60 days delinquent," "90 days
delinquent" and so on.

      Denomination: With respect to each Certificate, the amount set forth on
the face thereof as the "Initial Principal Balance of this Certificate."

      Depositor: Merrill Lynch Mortgage Investors, 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(3) of the Uniform
Commercial Code of the State of New York.

      Depository Agreement: With respect to Classes of Book-Entry Certificates,
the agreement among the Trustee, the Securities Administrator and the initial
Depository.

      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.

      Designated Transaction: A transaction in which the assets underlying the
Certificates consist of single-family residential, multi-family residential,
home equity, manufactured housing and/or commercial mortgage obligations that
are secured by single-family residential, multi-family residential, commercial
real property or leasehold interests therein.

      Determination Date: With respect to any Distribution Date, the 18th day of
the month of such Distribution Date or, if such 18th day is not a Business Day,
the immediately preceding Business Day.

      Disqualified Organization: (1) 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, (2) any organization
(other than a cooperative described in Section 521 of the Code) which is exempt
from tax under Chapter 1 of Subtitle A of the Code unless such organization is
subject to the tax imposed by Section 511 of the Code and (3) any organization
described in Section 1381(a)(2)(C) of the Code.

      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 July 2004.

      Due Date: With respect to any Distribution Date and any Mortgage Loan, the
day during the related Due Period on which a Scheduled Payment is due.

      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: An account that is (1) maintained with a depository
institution the long-term unsecured debt obligations of which are rated by each
Rating Agency in one of its two highest rating categories, or (2) maintained
with the corporate trust department of a bank which (A) has a rating of at least
Baa3 or P-3 by Moody's and (B) is either the Depositor or the corporate trust
department of a national bank or banking corporation which has a rating of at
least A-1 by S&P or F1 by Fitch, or (i) an account or accounts the deposits in
which are fully insured by the FDIC, or (ii) an account or accounts, acceptable
to each Rating Agency without reduction or withdrawal of the rating of any Class
of Certificates, as evidenced in writing, by a depository institution in which
such accounts are insured by the FDIC (to the limit established by the FDIC),
the uninsured deposits in which accounts are otherwise secured such that, as
evidenced by an Opinion of Counsel delivered to and acceptable to the Securities
Administrator, the Trustee and each Rating Agency, the Certificateholders have a
claim with respect to the funds in such account and a perfected first 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 with which such account is
maintained, or (iii) maintained at an eligible institution whose commercial
paper, short-term debt or other short-term deposits are rated at least A+ by S&P
and F-1+ by Fitch, or (iv) maintained with a federal or state chartered
depository institution the deposits in which are insured by the FDIC to the
applicable limits and the short-term unsecured debt obligations of which (or, in
the case of a depository institution that is a subsidiary of a holding company,
the short-term unsecured debt obligations of such holding company) are rated A
by S&P or Prime-1 by Moody's at the time any deposits are held on deposit
therein, or (v) otherwise acceptable to each Rating Agency, as evidenced by a
letter from each Rating Agency to the Trustee, or (3) a segregated trust
account or accounts maintained with the Trustee, the Securities Administrator or
any other federal or state chartered depository institution or trust company,
acting in its fiduciary capacity. Eligible Accounts may bear interest.

      ERISA: The Employee Retirement Income Security Act of 1974, including any
successor or amendatory provisions.

      ERISA-Qualifying Underwriting: A best efforts or firm commitment
underwriting or private placement that meets the requirements of an
underwriter's exemption granted by the U.S. Department of Labor.

      ERISA Restricted Certificates: The Class N Certificates, Class X
Certificates and Class R Certificate and any other Certificate, unless such
other Certificate (i) shall have received a rating from a Rating Agency at the
time of a transfer of such other Certificate that is in one of the three (or in
the case of Designated Transactions, four) highest generic rating categories and
(ii) is sold pursuant to an "underwriter exemption" granted by the United States
Department of Labor.

      Event of Default: As defined in Section 8.01 hereof.

      Exception Report: As defined in Section 2.02 hereof.

      Excess Interest: On any Distribution Date, all amounts received by any of
the Class A Certificates, Class R Certificate, Class M Certificates and Class B
Certificates to the extent attributable to the excess, if any, of the
Pass-Through Rates on such Certificates over the Adjusted Net WAC.

      Excess Proceeds: With respect to any Liquidated Loan, any Liquidation
Proceeds that are in excess of the sum of (1) the unpaid principal balance of
such Liquidated Loan as of the date of such liquidation plus (2) interest at the
Mortgage Rate from the Due Date as to which interest was last paid or advanced
to Certificateholders (and not reimbursed to each Servicer) up to the Due Date
in the month in which such Liquidation Proceeds are required to be distributed
on the unpaid principal balance of such Liquidated Loan outstanding during each
Due Period as to which such interest was not paid or advanced.

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

                                      -26-
<PAGE>

      Extra Principal Distribution Amount: With respect to any Distribution
Date, (1) prior to the Stepdown Date, the excess of (A) the sum of (i) the
Aggregate Certificate Principal Balance immediately preceding such Distribution
Date reduced by the Principal Funds with respect to such Distribution Date and
(ii) the Targeted Overcollateralization Amount over (B) the Pool Stated
Principal Balance of the Mortgage Loans as of such Distribution Date and (2) on
and after the Stepdown Date, (A) the sum of (i) the Aggregate Certificate
Principal Balance immediately preceding such Distribution Date, reduced by the
Principal Funds with respect to such Distribution Date and (ii) the greater of
(a) 3.90% of the Pool Stated Principal Balance of the Mortgage Loans and (b) the
Minimum Required Overcollateralization Amount less (B) the Pool Stated Principal
Balance of the Mortgage Loans as of such Distribution Date; provided, however,
that if on any Distribution Date a Trigger Event is in effect, the Extra
Principal Distribution Amount will not be reduced to the applicable percentage
of the then-current Pool Stated Principal Balance of the Mortgage Loans as of
the Due Date immediately prior to the Trigger Event until the next Distribution
Date on which the Trigger Event is not in effect.

      Fannie Mae: 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.

      Federal Funds Rate: The interest rate at which depository institutions
lend balances at the Federal Reserve to other depository institutions overnight.

      Fitch: Fitch, Inc., or its successor in interest.

      Floating Rate Certificate Carryover: With respect to a Distribution Date,
in the event that the Pass-Through Rate for a Class of Offered Certificates
(other than the Interest Only Certificates) or a Class of the Class B
Certificates is based upon the Available Funds Cap or the Maximum Rate Cap, the
excess of (x) the amount of interest that such Class would have been entitled to
receive on such Distribution Date had the Pass-Through Rate for that Class not
been calculated based on the Available Funds Cap or the Maximum Rate Cap, up to
but not exceeding the greater of (a) the Maximum Rate Cap or (b) (X) if
One-Month LIBOR exceeds the Lower Collar, the lesser of (1) One-Month LIBOR and
(2) the Upper Collar or (Y) if One-Month LIBOR is less than or equal to the
Lower Collar, zero, over (y) the amount of interest distributable on such Class
on such Distribution Date based on the lesser of (i) the Available Funds Cap and
(ii) the Maximum Rate Cap, together with (I) the unpaid portion of any such
excess from prior Distribution Dates (and interest accrued thereon at the then
applicable Pass-Through Rate for such Class, without giving effect to the
Available Funds Cap) and (II) any amount previously distributed with respect to
Floating Rate Certificate Carryover for such Class that is recovered as a
voidable preference by a trustee in bankruptcy.

      Form 10-K Certification: The certification required pursuant to Rule
13a-14 under the Exchange Act.

      Freddie Mac: 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.

      Funding Period: The period beginning on the Closing Date and ending on the
earlier of (a) the date on which the amount on deposit in the Pre-Funding
Account is reduced to zero or (b) 2:00 p.m., New York City time, on September
23, 2004.

      Grantor Trusts: The grantor trusts described in Section 2.07 hereof.

                                      -27-
<PAGE>

      GreenPoint: GreenPoint Mortgage Funding Inc., a New York corporation, or
its successor in interest.

      Included Mortgage Loan: With respect to any Distribution Date, any
Mortgage Loan with a Stated Principal Balance greater than zero as of the
preceding Distribution Date; provided, however, that no Subsequent Mortgage Loan
as to which the Subsequent Cut-Off Date is on or after the Due Date in the
related Due Period shall be treated as an Included Mortgage Loan for such
Distribution Date.

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

      Initial Certificate Notional Amount: With respect to the Interest Only
Certificates and the Class N Certificates, the notional amount of each such
Certificates on the Closing Date as set forth in Section 6.01 hereof.

      Initial Certificate Principal Balance: With respect to any Certificate,
the Certificate Principal Balance of such Certificate or any predecessor
Certificate on the Closing Date as set forth in Section 5.01 hereof.

      Initial Mortgage Loans: The Mortgage Loans included in the Trust Fund as
of the Closing Date.

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

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

      Insurance Proceeds: Proceeds paid in respect of the Mortgage Loans
pursuant to any Insurance Policy or any other insurance policy covering a
Mortgage Loan, to the extent such proceeds are payable to the mortgagee under
the Mortgage, a 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 such Servicer would follow in
servicing mortgage loans held for its own account, in each case other than any
amount included in such Insurance Proceeds in respect of Insured Expenses.

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

      Interest Carryforward Amount: Any of the Class A-1-A Interest Carryforward
Amount, the Class A-1-B Interest Carryforward Amount, the Class A-X-A Interest
Carryforward Amount, the Class A-X-B Interest Carryforward Amount, the Class R
Interest Carryforward Amount, the Class M-1 Interest Carryforward Amount, the
Class M-2 Interest Carryforward Amount, the Class M-3 Interest Carryforward
Amount, the Class M-1-X Interest Carryforward Amount, the Class M-2-X Interest
Carryforward Amount, the Class B-1 Interest Carryforward Amount, the Class B-2
Interest Carryforward Amount, the Class B-3 Interest Carryforward Amount or the
Class N Interest Carryforward Amount, as the case may be.

      Interest Determination Date: With respect to the Certificates (other than
the Class A-X-A, Class A-X-B, Class M-1-X, Class M-2-X, Class N and Class X
Certificates), (i) for any Accrual Period other than the first Accrual Period,
the second LIBOR Business Day preceding the commencement of such Accrual Period
and (ii) for the first Accrual Period, June 23, 2004.

                                      -28-
<PAGE>

      Interest Funds: With respect to any Distribution Date, the sum, without
duplication, of (1) all scheduled interest due during the related Due Period and
received before the related Servicer Remittance Date or advanced on or before
the related Servicer Remittance Date less the Administration Fee (2) all
Advances relating to interest with respect to the Mortgage Loans, (3) all
Compensating Interest with respect to the Mortgage Loans, (4) Liquidation
Proceeds with respect to the Mortgage Loans (to the extent such Liquidation
Proceeds relate to interest) collected during the related Prepayment Period, (5)
proceeds of any purchase pursuant to Sections 2.02, 2.03 or 10.01 (to the extent
such proceeds relate to interest) less (A) all Non-Recoverable Advances relating
to interest and (B) other amounts reimbursable to each Servicer, the Backup
Servicer, the Master Servicer, the Securities Administrator and the Trustee
pursuant to this Agreement and allocable to interest and (6) the amount of any
Required Withdrawal from the Capitalized Interest Account with respect to such
Distribution Date.

      Interest Only Certificates: The Class A-X-A, Class A-X-B, Class M-1-X, and
Class M-2-X Certificates collectively.

      Investment Letter: As defined in Section 6.02(a) hereof.

      JPMorgan: JPMorgan Chase Bank, or its successor in interest.

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

      Lender: As defined in Section 5.02(a) hereof.

      LIBOR Business Day: Any day on which banks in the City of London, England
and New York City, U.S.A. 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 related 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, sale by a Servicer pursuant to this
Agreement 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,
the applicable Servicing Fees, the Backup Servicing Fees, if applicable,
Servicing Advances and any other expenses related to such Mortgage Loan.

      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 lesser
of (X) the Appraised Value of the related Mortgaged Property and (Y) the sales
price of the related Mortgaged Property at the time of origination.

      Losses: Any losses, claims, damages, liabilities or expenses collectively.

                                      -29-
<PAGE>

      Lower Collar: With respect to each Distribution Date, the applicable per
annum rate set forth under the heading "Lower Collar" in the One-Month LIBOR Cap
Table herein.

      LPMI Loan: A Mortgage Loan covered by an LPMI Policy, as set forth in the
Mortgage Loan Schedule or otherwise identified to a Servicer in writing.

      LPMI Policy: A policy of primary mortgage insurance issued by a LPMI
Insurer pursuant to which the related premium is to be paid by a Servicer from
payments of interest made by the Mortgagor.

      Margin: Any of the Class A-1-A Margin, the Class A-1-B Margin, the Class
M-1 Margin, the Class M-2 Margin, the Class M-3 Margin, the Class B-1 Margin,
the Class B-2 Margin, the Class B-3 Margin and the Class R Margin.

      Master Servicer: CMMC, or its successor in interest.

      Master Servicer Collection Account: The account established and maintained
by the Master Servicer in accordance with Section 3.05.

      Master Servicer Remittance Date: With respect to any Mortgage Loan and any
Distribution Date, two (2) Business Days prior to the related Distribution Date.

      Master Servicing Fee: With respect to any Mortgage Loan and any
Distribution Date, the monthly fee payable to the Master Servicer pursuant to
Section 3.08(b) equal to the product of (a) 1/12th of the Master Servicing Fee
Rate and (b) the Stated Principal Balance of such Mortgage Loan as of the
immediately preceding Distribution Date, subject to a minimum of $10,000 per
annum; provided that in no event may the Master Servicing Fee for a Distribution
Date exceed the aggregate scheduled interest on the Mortgage Loans for the
related Due Period, reduced by the Servicing Fees and the Credit Risk Manager
Fee. The Master Servicer is also entitled to receive, as additional
compensation, all investment income earned on funds in the Master Servicer
Collection Account. In addition, the Master Servicer will be entitled to
reimbursements for certain expenses of the Master Servicer. The Master Servicer
shall be responsible for paying the Securities Administrator Fee in accordance
with a separate agreement.

      Master Servicing Fee Rate: 0.010% per annum.

      Master Servicer Withdrawals: As defined in Section 3.08(b) hereof.

      Maximum Rate Cap: With respect to the Class A-1-A, Class A-1-B, Class M-1,
Class M-2, Class M-3, Class B-1, Class B-2 and Class B-3 Certificates and any
Distribution Date, the product of (I) 12 times the quotient obtained by dividing
(x) the aggregate scheduled interest that would have been due on the Included
Mortgage Loans during the related Due Period had the Adjustable Rate Mortgage
Loans provided for interest at their respective maximum lifetime Mortgage Rates
and the Fixed Rate Mortgage Loans provided for interest at their respective
Mortgage Rates, less the Administration Fee, divided by (y) the Outstanding
Principal Balances of the Included Mortgage Loans for such Distribution Date and
(II) a fraction, the numerator of which is 30 and the denominator of which is
the actual number of days in the related Accrual Period; provided, however, that
in no event may the Maximum Rate Cap for a Distribution Date be less then the
Adjusted Net WAC for that Distribution Date.

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

      MERS Loan: Any Mortgage Loan registered with MERS on the MERS System.

                                      -30-
<PAGE>

      MERS System: The system of recording transfers of mortgage electronically
maintained by MERS.

      MIN: The loan number for any MERS Loan.

      Minimum Required Overcollateralization Amount: An amount equal to the
product of (x) 0.50% and (y) the sum of (x) the Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date and (y) the Original Pre-Funded Amount.

      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 5.06.

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

      Mortgage: With respect to a Mortgage Loan, the mortgage, deed of trust or
other instrument creating a second lien or a second 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 or the Custodian to be added to the Mortgage File pursuant to
this Agreement.

      Mortgage Loans: Such of the mortgage loans transferred and assigned to the
Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund (including any REO Property and, following the related
Subsequent Mortgage Loan Transfer Dates, any Subsequent Mortgage Loan delivered
pursuant to a Subsequent Transfer Instrument), the mortgage loans so held being
identified in the Mortgage Loan Schedule, notwithstanding foreclosure or other
acquisition of title of the related Mortgaged Property. Any mortgage loan that
was intended by the parties hereto to be transferred to the Trust Fund as
indicated by such Mortgage Loan Schedule which is in fact not so transferred for
any reason 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 Trustee to reflect the deletion of Deleted Mortgage Loans and the
addition of Replacement Mortgage Loans pursuant to the provisions of this
Agreement and as supplemented by each schedule of Subsequent Mortgage Loans
attached to a Subsequent Transfer Instrument) transferred to the Trustee as part
of the Trust Fund and from time to time subject to this Agreement, attached
hereto as Exhibit B, setting forth the following information with respect to
each Mortgage Loan:

                  (i)    the loan number;

                  (ii)   borrower name and/or address;

                  (iii)  the unpaid principal balance of the Mortgage Loans;

                  (iv)   the Initial Mortgage Rate;

                  (v)    the maturity date and the months remaining before
                         maturity date;

                                      -31-
<PAGE>

                  (vi)   the original principal balance;

                  (vii)  the Cut-off Date Principal Balance or Subsequent
                         Cut-off Date Principal Balance with respect to a
                         Subsequent Mortgage Loan;

                  (viii) the first payment date of the Mortgage Loan; (ix) the
                         Loan-to-Value Ratio

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

                  (xi)   a code indicating the property type;

                  (xii)  location of the related Mortgaged Property;

                  (xiii) a code indicating whether a prepayment penalty is
                         applicable and, if so, the term of such prepayment
                         penalty; and

                  (xiv)  the Credit Score and date obtained.

      Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan
and all amendments, modifications and attachments thereto.

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

      Mortgaged Property: The underlying property securing a Mortgage Loan.

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

      Mortgagor: The obligor on a Mortgage Note.

      Net Mortgage Rate: As to each Mortgage Loan, and at any time, the per
annum rate equal to the then current Mortgage Rate less the Servicing Fee Rate,
the Master Servicing Fee Rate and the Credit Risk Manager Fee Rate.

      Net WAC: As of any Distribution Date, a per annum rate equal to 12 times
the quotient obtained by dividing (x) the excess of (I) the total scheduled
interest on the Included Mortgage Loans for the related Due Period over (II) the
Administration Fee by (ii) the Outstanding Principal Balances of the Included
Mortgage Loans for such Distribution Date.

      Non-Recoverable Advance: Any portion of an Advance previously made or
proposed to be made by each Servicer that, in the good faith judgment of each
Servicer, will not or, in the case of a current delinquency, would not, be
ultimately recoverable by each Servicer from the related Mortgagor, related
Liquidation Proceeds or otherwise related to the Mortgage Loans.

      Non-Recoverable Servicing Advance: Any portion of a Servicing Advance
previously made or proposed to be made by a Servicer that, in the good faith
judgment of such Servicer, will not or, in the case of a current Servicing
Advance, would not, be ultimately recoverable by such Servicer from the related
Mortgagor, related Liquidation Proceeds or otherwise related to the Mortgage
Loans.

                                      -32-
<PAGE>

      Non-Supported Interest Shortfall: As defined in Section 5.03 hereof.

      Notices: As defined in Section 9.01 hereof.

      Offered Certificates: The Class A-1-A, Class A-1-B, Class A-X-A, Class
A-X-B, Class M-1, Class M-1-X, Class M-2, Class M-2-X, Class M-3 and Class R
Certificates.

      Officer's Certificate: A certificate (1) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a vice president (however
denominated), an Assistant Vice President, the Treasurer, the Secretary, or one
of the assistant treasurers or assistant secretaries of the Depositor, the
Master Servicer, the Servicers, the Backup Servicer or the Securities
Administrator (or any other officer customarily performing functions similar to
those performed by any of the above designated officers and also to whom, with
respect to a particular matter, such matter is referred because of such
officer's knowledge of and familiarity with a particular subject) or (2), if
provided for in this Agreement, signed by a Servicing Officer, as the case may
be, and delivered to the Depositor, the Master Servicer, the Servicers, the
Backup Servicer, the Securities Administrator or the Trustee, as the case may
be, as required by this Agreement.

      One-Month LIBOR: With respect to any Accrual Period, the rate determined
by the Securities Administrator on the related Interest Determination Date on
the basis of (a) the offered rates for one-month United States dollar deposits,
as such rates appear on Telerate page 3750, as of 11:00 a.m. (London time) on
such Interest Determination Date or (b) if such rate does not appear on Telerate
Page 3750 as of 11:00 a.m. (London time), the offered rates of the Reference
Banks for one-month United States dollar deposits, as such rates appear on the
Reuters Screen LIBOR Page, as of 11:00 a.m. (London time) on such Interest
Determination Date. If One-Month LIBOR is determined pursuant to clause (b)
above, on each Interest Determination Date, One-Month LIBOR for the related
Accrual Period will be established by the Securities Administrator as follows:

            (i)   If on such Interest Determination Date two or more Reference
                  Banks provide such offered quotations, One-Month LIBOR for the
                  related Accrual Period shall be the arithmetic mean of such
                  offered quotations (rounded upwards if necessary to the
                  nearest whole multiple of 0.03125%).

            (ii)  If on such Interest Determination Date fewer than two
                  Reference Banks provide such offered quotations, One-Month
                  LIBOR for the related Accrual Period shall be the higher of
                  (i) One-Month LIBOR as determined on the previous Interest
                  Determination Date and (ii) the Reserve Interest Rate.

      Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Depositor, the Master Servicer, the Servicers, the Backup Servicers or the
Securities Administrator, reasonably acceptable to each addressee of such
opinion; provided, however, that with respect to Section 6.04 or 10.01, or the
interpretation or application of the REMIC Provisions, such counsel must (1) in
fact be independent of the Depositor, the Master Servicer, the Servicers, the
Backup Servicers or the Securities Administrator, (2) not have any direct
financial interest in the Depositor, the Master Servicer, each Servicer or the
Securities Administrator or in any affiliate of any, and (3) not be connected
with the Depositor, the Master Servicer, the Servicers, the Backup Servicer or
Securities Administrator as an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions.

      Optional Termination: The termination of the trust hereunder pursuant to
clause (a) of Section 10.01 hereof.

                                      -33-
<PAGE>

      Optional Termination Amount: The repurchase price received by the
Securities Administrator in connection with any repurchase of all of the
Mortgage Loans pursuant to Section 10.01.

      Optional Termination Date: The Distribution Date on which the aggregate
Stated Principal Balance of the Mortgage Loans is equal to or less than 10% of
the sum of (i) the aggregate Stated Principal Balance of the Mortgage Loans as
of the Cut-off Date and (ii) the Original Pre-Funded Amount.

      Optional Termination Price: As of any Distribution Date on or after the
Optional Termination Date, an amount equal to the sum of (A) the Aggregate
Certificate Principal Balance, plus accrued interest on the Certificates and the
Class X Distributable Amount, (B) any unreimbursed out-of-pocket costs and
expenses owed to the Securities Administrator, the Trustee, the Servicers and
any unreimbursed Servicing Fees, Advances, Servicing Advances and Administrator
Fees (including any costs and expenses incurred in connection with the Optional
Terminations) and (C) any unreimbursed costs, penalties and/or damages incurred
by the Trust Fund in connection with any violation relating to any of the
Mortgage Loans of any predatory or abusive lending law.

      Original Pre-Funded Amount: The amount deposited by the Depositor in the
Pre-Funding Account on the Closing Date from the proceeds of the issuance of the
Certificates, which amount is $17,500,000.

      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: (1) Certificates theretofore canceled by the Securities
Administrator or delivered to the Securities Administrator for cancellation; and
(2) Certificates in exchange for which or in lieu of which other Certificates
have been executed by the Securities Administrator and delivered by the
Securities Administrator 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 Due Period.

      Outstanding Principal Balance: As of any Distribution Date and with
respect to any Included Mortgage Loan, the Stated Principal Balance of such
Included Mortgage Loan as of the immediately preceding Distribution Date (or, if
later, as of the Cut-Off Date, or Subsequent Cut-Off Date, as the case may be).

      Overcollateralization Amount: As of any date of determination, the excess
of (1) the sum of the Stated Principal Balance of the Mortgage Loans and the
amount on deposit in the Pre-Funding Account over (2) the Certificate Principal
Balance of the Certificates.

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

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

                                      -34-
<PAGE>

Certificates, the Class M-1-X Pass-Through Rate; with respect to the Class M-2-X
Certificates, the Class M-2-X Pass-Through Rate; with respect to the Class B-1
Certificates, the Class B-1 Pass-Through Rate; with respect to the Class B-2
Certificates, the Class B-2 Pass-Through Rate; with respect to the Class B-3
Certificates, the Class B-3 Pass-Through Rate; and with respect to the Class R
Certificate, the Class R Pass-Through Rate.

      Percentage Interest: With respect to:

                  (i)    any Class, the percentage interest in the undivided
                         beneficial ownership interest evidenced by such Class
                         which shall be equal to the Certificate Principal
                         Balance of such Class divided by the Class Principal
                         Balance of all Classes; and

                  (ii)   any Certificate, the Percentage Interest evidenced
                         thereby of the related Class shall equal the percentage
                         obtained by dividing the Denomination of such
                         Certificate by the aggregate of the Denominations of
                         all Certificates of such Class; except that in the case
                         of any Class N and Class X Certificates, the Percentage
                         Interest with respect to such Certificate shown on the
                         face of such Certificate.

      Permitted Activities: The primary activities of the trust created pursuant
to this Agreement which shall be:

                  (i)    holding Mortgage Loans transferred from the Depositor
                         and other assets of the Trust Fund, including the Cap
                         Contract and any credit enhancement and passive
                         derivative financial instruments that pertain to
                         beneficial interests issued or sold to parties other
                         than the Depositor, its Affiliates, or its agents;

                  (ii)   issuing Certificates and other interests in the assets
                         of the Trust Fund;

                  (iii)  receiving collections on the Mortgage Loans and the Cap
                         Contract and making payments on such Certificates and
                         interests in accordance with the terms of this
                         Agreement; and

                  (iv)   engaging in other activities that are necessary or
                         incidental to accomplish these limited purposes, which
                         activities cannot be contrary to the status of the
                         Trust Fund as a qualified special purpose entity under
                         existing accounting literature.

      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 rating the Certificates;

                  (iii)  commercial or finance company paper, other than
                         commercial or finance company paper issued by the
                         Depositor, the Securities Administrator or

                                      -35-
<PAGE>

                         any of its Affiliates, which is then receiving the
                         highest commercial or finance company paper rating of
                         each such Rating Agency;

                  (iv)   certificates of deposit, demand or time deposits,
                         federal funds, or bankers' acceptances (other than
                         banker's acceptances issued by the Securities
                         Administrator or any of its Affiliates) 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 are then rated one of the two highest long-term
                         and the highest short-term ratings of each such Rating
                         Agency for such securities;

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

                  (vi)   guaranteed reinvestment agreements issued by any bank,
                         insurance company or other corporation rated in the two
                         highest long-term or the highest short-term ratings of
                         each Rating Agency containing, at the time of the
                         issuance of such agreements, such terms and conditions
                         as will not result in the downgrading or withdrawal of
                         the rating then assigned to the Certificates by any
                         such Rating Agency as evidenced by a letter from each
                         Rating Agency;

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

                  (viii) securities (other than stripped bonds, stripped coupons
                         or instruments sold at a purchase price in excess of
                         115% of the face amount thereof) bearing interest or
                         sold at a discount issued by any corporation, other
                         than the Securities Administrator or any of its
                         Affiliates, 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;

                  (ix)   interests in any money market fund (including those
                         managed or advised by the Securities Administrator, the
                         Trustee or their respective affiliates) which (A) 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 such Rating Agency or (B) would not adversely
                         affect the then current rating by either Rating Agency
                         of any of the Certificates. Such investments in this
                         subsection (ix) may include money market mutual funds
                         or common trust funds, including, without limitation,
                         the J.P. Morgan Prime Money Market Fund or any other
                         fund for which JPMorgan Chase Bank ("JPMorgan Chase"),
                         the Securities Administrator or an affiliate thereof
                         serves as an investment advisor, administrator,
                         shareholder servicing agent and/or custodian or
                         subcustodian, notwithstanding that (i) JPMorgan Chase
                         or an affiliate

                                      -36-
<PAGE>

                         thereof charges and collects fees and expenses from
                         such funds for services rendered, (ii) JPMorgan Chase
                         or an affiliate thereof charges and collects fees and
                         expenses for services rendered pursuant to this
                         Agreement, and (iii) services performed for such funds
                         and pursuant to this Agreement may converge at any
                         time. The Trustee specifically authorizes JPMorgan
                         Chase or an affiliate thereof to charge and collect
                         from the Trust Fund such fees as are collected from all
                         investors in such funds for services rendered to such
                         funds (but not to exceed investment earnings thereon);
                         and

                  (x)    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, other than the Securities Administrator or any
                         of its Affiliates, which on the date of acquisition has
                         been rated by each such Rating Agency in their
                         respective highest applicable rating category;

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 above par 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 (ix) above); and
provided, further, (I) that no amount beneficially owned by any REMIC
(including, without limitation, any amounts collected by the Servicers but not
yet deposited in the Collection Account) may be invested in investments (other
than money market funds) treated as equity interests for Federal income tax
purposes, unless the Servicers shall receive an Opinion of Counsel, at the
expense of the party requesting that such investment be made, to the effect that
such investment will not adversely affect the status of the any REMIC provided
for herein as a REMIC under the Code or result in imposition of a tax on the
Trust Fund or any REMIC provided for herein and (II) each such investment must
be a "permitted investment" within the meaning of Section 860G(a)(5) of the
Code. 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 a
Certificate, (iv) rural electric and telephone cooperatives described in section
1381(a)(2)(C) of the Code, and (v) a Person that is not a citizen or resident of
the United States, a corporation or partnership (or other entity treated as a
corporation or partnership for United States federal income tax purposes)
created or organized in or under the laws of the United States or 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 trust, unless, in the case of this clause (v), such
Person has furnished the transferor, the Securities Administrator and the
Trustee with a duly completed Internal Revenue Service Form W-8ECI or applicable
successor form. The terms "United States," "State"

                                      -37-
<PAGE>

and "International Organization" shall have the meanings set forth in section
7701 of the Code. A corporation will not be treated as an instrumentality of the
United States or of any State 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 sum of (i)
the aggregate of the Stated Principal Balances, as of such Distribution Date, of
the Mortgage Loans that were Outstanding Mortgage Loans as of such date and (ii)
the Pre-Funded Amount as of such Distribution Date.

      Pre-Funded Amount: As of any date of determination, the amount on deposit
in the Pre-Funding Account (not including any income, gain or loss on such
amount).

      Pre-Funding Account: The account established and maintained pursuant to
Section 5.07.

      Prepayment Assumption: A rate of prepayment, as described in the
Prospectus Supplement in the definition of "Modeling Assumptions," relating to
the Certificates.

      Prepayment Interest Shortfall: With respect to any Distribution Date, for
each Mortgage Loan that was the subject of a partial Principal Prepayment or a
Principal Prepayment in full (other than a Principal Prepayment in full
resulting from the purchase of a Mortgage Loan pursuant to Section 2.02, 2.03 or
10.01 hereof), the amount, if any, by which (i) one month's interest at the
applicable Net Mortgage Rate on the Stated Principal Balance of such Mortgage
Loan as of the immediately preceding Distribution Date or in the case of a
partial Principal Prepayment on the amount of such prepayment exceeds (ii) the
amount of interest paid or collected in connection with such Principal
Prepayment.

      Prepayment Penalties: Any prepayment premium, penalty or charge payable by
a Mortgagor in connection with any Principal Prepayment on a Mortgage Loan
pursuant to the terms of the related Mortgage Note or Mortgage, as applicable.

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

      Principal Distribution Amount: With respect to each Distribution Date, the
sum of (i) the Principal Funds for such Distribution Date and (ii) any Extra
Principal Distribution Amount for such Distribution Date.

      Principal Funds: With respect to the Mortgage Loans and any Distribution
Date, the sum, without duplication, of (1) the scheduled principal due during
the related Due Period and received before the related Servicer Remittance Date
or advanced on or before the related Servicer Remittance Date, (2) prepayments
collected in the related Prepayment Period, (3) the Stated Principal Balance of
each Mortgage Loan that was purchased by the Depositor or the applicable
Servicer during the related Prepayment Period or, in the case of a purchase
pursuant to Section 9.01, on the Business Day prior to such Distribution Date,
(4) the amount, if any, by which the aggregate unpaid principal balance of any
Replacement Mortgage Loan is less than the aggregate unpaid principal of the
related Deleted Mortgage Loans delivered by the Seller in connection with a
substitution of a Mortgage Loan pursuant to Section 2.03(c), (5) all Liquidation
Proceeds collected during the related Prepayment Period (to the extent such
Liquidation Proceeds related to principal), (6) all Subsequent Recoveries
received during the related Due

                                      -38-
<PAGE>

Period, (7) with respect to the Distribution Date immediately following the end
of the Funding Period, any amounts in the Pre-Funding Account (as determined
without regard to income or losses arising from the investment of amounts on
deposit in the Pre-Funding Account) after giving effect to the purchase of any
Subsequent Mortgage Loans and (8) all other collections and recoveries in
respect of principal during the related Prepayment Period less (A) all
Non-Recoverable Advances relating to principal with respect to the Mortgage
Loans and (B) other amounts reimbursable to each Servicer, the Master Servicer,
the Securities Administrator and the Trustee pursuant to this Agreement.

      Principal Prepayment: Any Mortgagor payment or other recovery of (or
proceeds with respect to) principal on a Mortgage Loan (including Mortgage Loans
purchased or repurchased under Sections 2.02, 2.03, 3.12 and 10.01 hereof) that
is received in advance of its scheduled Due Date and is not accompanied by an
amount as to interest representing scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment. Partial Principal
Prepayments shall be applied by each Servicer in accordance with the terms of
the related Mortgage Note.

      Prospectus Supplement: The Prospectus Supplement dated June 24, 2004
relating to the public offering of the Class A-1-A, Class A-1-B, Class A-X-A,
Class A-X-B, Class R, Class M-1, Class M-2, Class M-3, Class M-1-X and Class
M-2-X Certificates.

      PTCE 95-60: As defined in Section 6.02(a) hereof.

      PUD: A Planned Unit Development.

      Purchase Price: With respect to any Mortgage Loan required to be
repurchased by the Seller or the applicable Transferor, pursuant to Section 2.02
or 2.03 hereof or purchased by the applicable Servicer pursuant to Section
3.12(c) hereof, an amount equal to the sum of (i) 100% of the unpaid principal
balance of the Mortgage Loan as of the date of such purchase together with any
unreimbursed Servicing Advances, (ii) accrued interest thereon at the applicable
Mortgage Rate from (a) the date through which interest was last paid by the
Mortgagor to (b) the Due Date in the month in which the Purchase Price is to be
distributed to Certificateholders and (iii) any unreimbursed costs, penalties
and/or damages incurred by the Trust Fund in connection with any violation
relating to such Mortgage Loan of any predatory or abusive lending law.

      QIB: As defined in Section 6.02(a) hereof.

      Rating Agency: Either of S&P or 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 (1) a Liquidated Loan, the amount, if any,
by which the Stated Principal Balance and accrued interest thereon at the Net
Mortgage Rate exceeds the amount actually recovered by each Servicer with
respect thereto (net of reimbursement of Advances and Servicing Advances) at the
time such Mortgage Loan became a Liquidated Loan or (2) with respect to a
Mortgage Loan which is not a Liquidated Loan, any amount of principal that the
Mortgagor is no longer legally required to pay (except for the extinguishment of
debt that results from the exercise of remedies due to default by the
Mortgagor).

                                      -39-
<PAGE>

      Record Date: With respect to any Distribution Date, the close of business
on the last Business Day of the month preceding the month in which the
applicable Distribution Date occurs (or, in the case of the first Distribution
Date, June 25, 2004).

      Reference Banks: Barclays Bank PLC, JPMorgan Chase Bank, Citibank, N.A.,
National Association 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 Securities Administrator which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London, England, (ii) whose quotations appear
on the Reuters Screen LIBOR Page on the relevant Interest Determination Date and
(iii) which have been designated as such by the Securities Administrator.

      Regular Certificate: Any one of the Class A, Class M and Class B
Certificates.

      Regulation S: Regulation S promulgated under the Securities Act or any
successor provision thereto, in each case as the same may be amended from time
to time; and all references to any rule, section or subsection of, or definition
or term contained in, Regulation S means such rule, section, subsection,
definition or term, as the case may be, or any successor thereto, in each case
as the same may be amended from time to time.

      Regulation S Global Securities: The Book-Entry Regulation S Global
Securities and the Definitive Regulation S Global Securities.

      Related Certificates As to the REMIC 4 A1A Interest, the Class A-1-A
Certificates; as to the REMIC 4 A1B Interest, the Class A-1-B Certificates; as
to the REMIC 4 B1 Interest, the Class B-1 Certificates; as to the REMIC 4 B2
Interest, the Class B-2 Certificates; as to the REMIC 4 B3 Interest, the Class
B-3 Certificates; as to the REMIC 4 M1 Interest, the Class M-1 Certificates; as
to the REMIC 4 M2 Interest, the Class M-2 Certificates; and as to the REMIC 4 M3
Interest, the Class M-3 Certificates.

      REMIC: A "real estate mortgage investment conduit" within the meaning of
section 860D of the Code. References herein to "the REMICs" or "a REMIC" shall
mean any of or, as the context requires, all of REMIC 1, REMIC 2, REMIC 3 and
REMIC 4.

      REMIC 1: As described in the Preliminary Statement and Section 2.07.

      REMIC 1 Interests: Each of the Class LT1-A1A Interest, the Class LT1-A1B
Interest, the Class LT1-B1 Interest, the Class LT1-B2 Interest, the Class LT1-B3
Interest, the Class LT1-M1 Interest, the Class LT1-M2 Interest, the Class LT1-M3
Interest, the Class LT1-C Interest, the Class LT1-AR Interest and the Class
LT1-R Interest.

      REMIC 1 Regular Interests: Each REMIC 1 Interest other than the Class
LT1-R Interest.

      REMIC 2: As described in the Preliminary Statement and Section 2.07.

      REMIC 2 Interests: Each of the Class LT2-A1A Interest, the Class LT2-A1B
Interest, the Class LT2-B1 Interest, the Class LT2-B2 Interest, the Class LT2-B3
Interest, the Class LT2-M1 Interest, the Class LT2-M2 Interest, the Class LT2-M3
Interest, the Class LT2-C Interest, the Class LT2-AR Interest, the Class
LT2-A1AX Interest, the Class LT2-A1BX Interest, the Class LT2-M1X Interest, the
Class LT2-M2X Interest and the Class LT2-R Interest.

                                      -40-
<PAGE>

      REMIC 2 IO Interests: Each of the Class LT2-A1AX Interest, the Class
LT2-A1BX Interest, the Class LT2-M1X Interest and the Class LT2-M2X Interest.

      REMIC 2 Regular Interests: Each REMIC 2 Interest other than the Class
LT2-R Interest.

      REMIC 3: As described in the Preliminary Statement and Section 2.07.

      REMIC 3 Interests: Each of the Class LT3-A1A Interest, the Class LT3-A1B
Interest, the Class LT3-B1 Interest, the Class LT3-B2 Interest, the Class LT3-B3
Interest, the Class LT3-M1 Interest, the Class LT3-M2 Interest, the Class LT3-M3
Interest, the Class LT3-X Interest, the Class LT3-AR Interest and the Class
LT3-R Interest.

      REMIC 3 Marker Interests: Each REMIC 3 Regular Interest other than the
Class LT3-X Interest.

      REMIC 3 Regular Interests: Each REMIC 3 Interest other than the Class
LT3-R Interest.

      REMIC 4: As described in the Preliminary Statement and Section 2.07.

      REMIC 4 A1A Interest: An uncertificated interest in REMIC 4 with an
initial principal balance equal to the initial Certificate Principal Balance of
the Related Certificates and with an interest rate, on each Distribution Date,
equal to the lesser of (i) One-Month LIBOR plus the Class A-1-A Margin and (ii)
the Adjusted Net WAC.

      REMIC 4 A1B Interest: An uncertificated interest in REMIC 4 with an
initial principal balance equal to the initial Certificate Principal Balance of
the Related Certificates and with an interest rate, on each Distribution Date,
equal to the lesser of (i) One-Month LIBOR plus the Class A-1-B Margin and (ii)
the Adjusted Net WAC.

      REMIC 4 B1 Interest: An uncertificated interest in REMIC 4 with an initial
principal balance equal to the initial Certificate Principal Balance of the
Related Certificates and with an interest rate, on each Distribution Date, equal
to the lesser of (i) One-Month LIBOR plus the Class B-1 Margin and (ii) the
Adjusted Net WAC.

      REMIC 4 B2 Interest: An uncertificated interest in REMIC 4 with an initial
principal balance equal to the initial Certificate Principal Balance of the
Related Certificates and with an interest rate, on each Distribution Date, equal
to the lesser of (i) One-Month LIBOR plus the Class B-2 Margin and (ii) the
Adjusted Net WAC.

      REMIC 4 B3 Interest: An uncertificated interest in REMIC 4 with an initial
principal balance equal to the initial Certificate Principal Balance of the
Related Certificates and with an interest rate, on each Distribution Date, equal
to the lesser of (i) One-Month LIBOR plus the Class B-3 Margin and (ii) the
Adjusted Net WAC.

      REMIC 4 M1 Interest: An uncertificated interest in REMIC 4 with an initial
principal balance equal to the initial Certificate Principal Balance of the
Related Certificates and with an interest rate, on each Distribution Date, equal
to the lesser of (i) One-Month LIBOR plus the Class M-1 Margin and (ii) the
Adjusted Net WAC.

      REMIC 4 M2 Interest: An uncertificated interest in REMIC 4 with an initial
principal balance equal to the initial Certificate Principal Balance of the
Related Certificates and with an interest rate, on

                                      -41-
<PAGE>

each Distribution Date, equal to the lesser of (i) One-Month LIBOR plus the
Class M-2 Margin and (ii) the Adjusted Net WAC.

      REMIC 4 M3 Interest: An uncertificated interest in REMIC 4 with an initial
principal balance equal to the initial Certificate Principal Balance of the
Related Certificates and with an interest rate, on each Distribution Date, equal
to the lesser of (i) One-Month LIBOR plus the Class M-3 Margin and (ii) the
Adjusted Net WAC.

      REMIC 4 XN Interest: An uncertificated regular interest in REMIC 4 with an
initial principal balance equal to the excess of sum of the principal balance of
the Mortgage Loans and the initial amount on deposit in the Pre-Funding Account
over the Aggregate Certificate Principal Balance and bearing interest on a
notional amount equal to the aggregate principal balance of the REMIC 3 Regular
Interests at a rate equal to the REMIC 4 XN Interest Rate. The REMIC 4 XN
Interest will not include any obligation to make any payments in respect of the
deemed interest rate cap contracts described in Section 2.07 or any right to
receive Prepayment Penalties in respect of the Mortgage Loans amounts paid by
the Servicer, the Seller or any Transferor in respect of Prepayment Penalties
pursuant to this Agreement or a Transfer Agreement, as applicable and amounts
received in respect of any indemnification paid as a result of a Prepayment
Penalty being unenforceable in breach of the representations and warranties set
forth in a Transfer Agreement.

      REMIX 4 XN Interest Rate: For any Distribution Date, the excess, if any,
of (a) the weighted average of the interest rates on the REMIC 3 Regular
Interests over (b) two times the weighted average of the interest rates on the
REMIC 3 Regular Interests (treating for purposes of this clause (b) the interest
rate on each of the REMIC 3 Marker Interests as capped at the interest rate on
the Corresponding REMIC 4 Regular Interests and treating the Class LT3-X
interest as capped at zero). The averages described in the preceding sentence
shall be weighted on the basis of the respective principal balances of the REMIC
3 Regular Interests immediately prior to such Distribution Date.

      REMIC 4 Interests: Each of the REMIC 4 A1A Interest, the REMIC 4 A1B
Interest, the REMIC 4 B1 Interest, the REMIC 4 B2 Interest, the REMIC 4 B3
Interest, the REMIC 4 M1 Interest, the REMIC 4 M2 Interest, the REMIC 4 M3
Interest, the REMIC 4 XN Interest, the Class A-X-A Certificates, the Class A-X-B
Certificates, the Class M-1-X Certificates, the Class M-2-X Certificates and the
REMIC 4 Residual Interest.

      REMIC 4 Regular Interests: Each of the REMIC 4 Interests other than the
REMIC 4 Residual Interest.

      REMIC 4 Residual Interest: An interest in REMIC 4 that is entitled to all
distributions on the Class R Certificate other than (i) distributions in respect
of the Class LT1-R Interest, the Class LT2-R Interest or the Class LT3-R
Interest and (ii) interest distributions on the Class R Certificate attributable
to an interest rate in excess of the Adjusted Net WAC.

      REMIC Pass-Through Rate: The Pass-Through Rate for a Class of Related
Certificates calculated by replacing "Available Funds Cap" in such definition
with "Adjusted Net WAC."

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

                                      -42-
<PAGE>

      REMIC Regular Interest: Any REMIC 4 Regular Interest.

      REO Property: A Mortgaged Property acquired by a 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 I (1)
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; (2)
with respect to any 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;
(3) have a similar or higher FICO score or credit grade than that of the Deleted
Mortgage Loan; (4) have a Loan-to-Value Ratio no higher than that of the Deleted
Mortgage Loan; (5) have a remaining term to maturity no greater than (and not
more than one year less than) that of the Deleted Mortgage Loan; (6) provide for
a prepayment charge on terms substantially similar to those of the prepayment
charge, if any, of the Deleted Mortgage Loan; (7) have the same lien priority as
the Deleted Mortgage Loan; (8) constitute the same occupancy type as the Deleted
Mortgage Loan; and (9) comply with each representation and warranty set forth in
Section 2.03 hereof.

      Request for Release: The Request for Release of Documents submitted by a
Servicer to the Trustee, substantially in the form of Exhibit I hereto.

      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.

      Required Loss Percentage: For any Distribution Date, the applicable
percentage for such Distribution Date set forth in the following table:

<TABLE>
<CAPTION>
DISTRIBUTION DATE OCCURRING IN              REQUIRED LOSS PERCENTAGE
------------------------------              ------------------------
<S>                                    <C>
July 2007 - June 2008                  3.25% with respect to July 2007,
                                       plus an additional 1/12  of 1.75%
                                       for each month thereafter

July 2008 - June 2009                  5.00% with respect to July 2008,
                                       plus an additional 1/12  of 1.25%
                                       for each month thereafter

July 2009 - June 2010                  6.25% with respect to July 2009,
                                       plus an additional 1/12  of 0.25%
                                       for each month thereafter

July 2010 and thereafter               6.50%
</TABLE>

      Required Percentage: As of any Distribution Date following a Stepdown
Date, the quotient of (1) the excess of (A) the Stated Principal Balances of the
Mortgage Loans as of such Distribution Date, over (B) the Certificate Principal
Balance of the most senior Class of Certificates outstanding, prior to giving
effect to distributions to be made on such Distribution Date and (2) the Stated
Principal Balance of the Mortgage Loans as of such Distribution Date.

      Required Withdrawal: With respect to any Distribution Date prior to the
Distribution Date in October 2004, an amount equal to the product of (i) the
Pre-Funded Amount as of the close of the preceding calendar month (or, if such
date would be prior to the Closing Date, the Original Pre-Funded Amount) and
(ii) the Net WAC for such Distribution Date.

                                      -43-
<PAGE>

      Reserve Interest Rate: With respect to any Interest Determination Date,
the rate per annum that the Securities Administrator determines to be (1) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
0.03125%) of the one-month United States dollar lending rates which New York
City banks selected by the Securities Administrator are quoting on the relevant
Interest Determination Date to the principal London offices of leading banks in
the London interbank market or (2) in the event that the Securities
Administrator can determine no such arithmetic mean, the lowest one-month United
States dollar lending rate which New York City banks selected by the Securities
Administrator are quoting on such Interest Determination Date to leading
European banks.

      Responsible Officer: When used with respect to a Servicer, any officer of
such Servicer with direct responsibility for the administration of this
Agreement and also means any other officer 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. When used with respect to the Trustee,
any Managing Director, any Director, Vice President, any Assistant Vice
President, any Associate, 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 who at such time shall be
officers to whom, with respect to a particular matter, the matter is referred
because of the officer's knowledge of and familiarity with the particular
subject and who has direct responsibility for the administration of this
Agreement. When used with respect to the Securities Administrator, any Vice
President, any Managing Director, any Director, any associate, any Assistant
Vice President, any Assistant Secretary, any Trust Officer or any other officer
or employee of the Securities Administrator 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 or employee's knowledge of and familiarity with the particular
subject and in each case who shall have direct responsibility for the
administration of this Agreement.

      Reuters Screen LIBOR Page: The display designated as page "LIBOR" on the
Reuters Monitor Money Rates Service (or such other page as may replace such
LIBOR page on that service for the purpose of displaying London interbank
offered rates of major banks.

      Rolling Three Month Delinquency: For any Distribution Date will be the
fraction, expressed as a percentage, equal to the average of the related
delinquency rates for each of the three (or one and two, in the case of the
first and second Distribution Dates) immediately preceding months

      Rule 144A Letter: As defined in Section 6.02(a) hereof.

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

      Sale Agreement: The Mortgage Loan Sale and Assignment Agreement dated as
of June 1, 2004 between the Depositor and the Seller.

      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.

      Section 302 Requirements: Any rules or regulations promulgated pursuant to
the Sarbanes-Oxley Act of 2002 (as such may be amended from time to time).

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

      Securities Administrator: JPMorgan, a New York banking corporation, or its
successor in interest.

                                      -44-
<PAGE>

      Securities Administrator Fee: The fee to be paid to the Securities
Administrator by the Master Servicer pursuant to a separate agreement. In
addition, the Securities Administrator shall be entitled to reimbursement for
certain expenses incurred in connection with its duties as Securities
Administrator.

      Seller: Terwin Advisors LLC, a Delaware limited liability company, or its
successor in interest.

      Servicer: Each of Countrywide, GreenPoint and SLS, or in each case, its
successor in interest.

      Servicer Advance Date: As to any Distribution Date, the related Servicer
Remittance Date.

      Servicer's Assignee: As defined in Section 10.14(a) hereof.

      Servicer Data Remittance Date: With respect to any Mortgage Loan and any
Distribution Date, the 10th day of the calendar month in which such Distribution
Date occurs, or if such 10th day is not a Business Day, the Business Day
immediately succeeding such 10th day.

      Servicer Remittance Date: With respect to any Countrywide serviced
Mortgage Loan and any Distribution Date, the 21st day of the calendar month in
which the related Distribution Date occurs or, if such 21st day is not a
Business Day, the Business Day immediately preceding such 21st day. With respect
to any GreenPoint or SLS serviced Mortgage Loan and any Distribution Date, the
18th day of the calendar month in which the related Distribution Date occurs or,
if such 18th day is not a Business Day, the Business Day immediately preceding
such 18th day.

      Servicer Withdrawals: As defined in Section 3.08(a) hereof.

      Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by a Servicer of its
servicing obligations hereunder, including, but not limited to, the cost of (1)
the preservation, restoration and protection of a Mortgaged Property, including
without limitation advances in respect of real estate taxes and assessments, (2)
any collection, enforcement or judicial proceedings, including without
limitation foreclosures, collections and liquidations, (3) the conservation,
management, sale and liquidation of any REO Property and (4) 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 as of the immediately preceding
Distribution Date 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 as of the
immediately preceding Distribution Date for the period covered by such payment
of interest.

      Servicing Fee Rate: As to any Mortgage Loan, 0.50% per annum.

      Servicing Officer: Any officer of a Servicer or 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 Securities Administrator, the Backup Servicer and the
Trustee by the applicable Servicer on the Closing Date pursuant to this
Agreement, as such lists may from time to time be amended.

      Servicing Rights Pledgee: One or more lenders, selected by a Servicer, to
which each Servicer may pledge and assign all of its right, title and interest
in, to and under this Agreement.

                                      -45-
<PAGE>

      Servicing Transfer Costs: In the event that a Servicer does not reimburse
the Securities Administrator under this Agreement, all costs associated with the
transfer of servicing from the predecessor Servicer, including, without
limitation, any costs or expenses associated with the termination of the
predecessor Servicer, the appointment of a successor servicer, the complete
transfer of all servicing data and the completion, correction or manipulation of
such servicing data as may be required by the Securities Administrator or any
successor servicer to correct any errors or insufficiencies in the servicing
data or otherwise to enable the Securities Administrator or successor servicer
to service the Mortgage Loans properly and effectively.

      SFAS 140: Statement of Financial Accounting Standard No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities dated September 2000, published by the Financial Accounting
Standards Board of the Financial Accounting Foundation.

      Similar Law: As defined in Section 6.02(a) hereof.

      SLS: Specialized Loan Servicing, LLC, a Delaware limited liability
company, and its successors and assigns.

      SLS Cross Default: An SLS Cross Default shall have occurred if SLS is
terminated as servicer under two or more pooling and servicing agreements, other
than this Agreement, as a result of an event of default by SLS thereunder.

      SLS Financial Trigger Event: An SLS Financial Trigger Event shall have
occurred if there is a default by SLS of any financial covenants contained in
Article VII (other than those in Section 7.3) of the Receivables Loan Agreement,
dated as of February 1, 2004, as may be amended from time to time, by and
between SLS Funding, LLC, a Delaware limited liability company, as borrower,
SLS, as collection agent, Wachovia Bank National Association, as a lender,
GreenPoint Bank, as a lender and Wachovia Capital Markets, LLC, as deal agent
for the lenders.

      SLS Serviced Mortgage Loans: Any Mortgage Loan for which SLS is acting as
servicer under this Agreement, as noted on the Mortgage Loan Schedule.

      SLS Servicing Tape: As defined in Section 3.30 hereof.

      SPV: As defined in Section 5.02(a) hereof.

      Startup Day: As defined in Section 2.07 hereof.

      Stated Principal Balance: With respect to any Mortgage Loan or related REO
Property (1) as of the Cut-off Date (or Subsequent Cut-off Date with respect to
Subsequent Mortgage Loans), the Cut-off Date Principal Balance thereof (or
Subsequent Cut-off Date Principal Balance thereof with respect to Subsequent
Mortgage Loans), and (2) as of any Distribution Date, such Cut-off Date
Principal Balance or Subsequent Cut-off Date Principal Balance (as the case may
be), 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 a Servicer as of the close
of business on the Determination Date related to such Distribution Date or with
respect to which Advances were made on a Servicer Advance Date prior to such
Distribution Date and (B) all Principal Prepayments with respect to such
Mortgage Loan received on or prior to the last day of the related Prepayment
Period, and all Liquidation Proceeds to the extent applied by a Servicer as
recoveries of principal in accordance with Section 3.12 with respect to such
Mortgage Loan, that were received by a Servicer as of the close of

                                      -46-
<PAGE>

business on the last day of the related Due Period. Notwithstanding the
foregoing, the Stated Principal Balance of a Liquidated Loan shall be deemed to
be zero.

      Stepdown Date: The later to occur of (1) the Distribution Date in July
2007 or (2) the first Distribution Date on which (A) the Class A Certificate
Principal Balance (reduced by the Principal Funds with respect to such
Distribution Date) is less than or equal to (B) 62.10% of the Stated Principal
Balances of the Mortgage Loans as of such Distribution Date.

      Subordinated Certificates: The Class M and Class B Certificates.

      Subsequent Cut-off Date Principal Balance: As to any Subsequent Mortgage
Loan, the unpaid principal balance thereof as of the close of business on the
calendar day immediately preceding the Subsequent Cut-off Date after application
of all payments of principal due on or prior to the Subsequent Cut-off Date,
whether or not received, and all Principal Prepayments received prior to the
Subsequent Cut-off Date, but without giving effect to any installments of
principal received in respect of Due Dates after the Subsequent Cut-off Date.

      Subsequent Cut-off Date: With respect to those Subsequent Mortgage Loans
sold to the Trust Fund pursuant to a Subsequent Transfer Instrument, the first
day of the month in which the related Subsequent Transfer Date occurs.

      Subsequent Mortgage Loan: A Mortgage Loan sold by the Depositor to the
Trust Fund pursuant to Section 2.10, such Mortgage Loan being identified on the
Mortgage Loan Schedule attached to a Subsequent Transfer Instrument, all of
which shall be "qualified mortgages" within the meaning of Section 860G(a)(3)(A)
of the Code (as determined without regard to Treasury Regulations Section
1.860G-2(a)(3)(iii) or any similar rule that treats a defective obligation as a
"qualified mortgage" for a temporary period).

      Subsequent Mortgage Loan Purchase Agreement: The agreement between the
Depositor and the Mortgage Loan Seller regarding the transfer of the Subsequent
Mortgage Loans by the Seller to the Depositor.

      Subsequent Recovery: Any amount received on a Mortgage Loan subsequent to
such Mortgage Loan being determined to be a Liquidated Mortgage Loan.

      Subsequent Transfer Date: With respect to each Subsequent Transfer
Instrument, the date on which the related Subsequent Mortgage Loans are sold to
the Trust Fund.

      Subsequent Transfer Instrument: Each Subsequent Transfer Instrument, dated
as of a Subsequent Transfer Date, executed by the Trustee and the Depositor
substantially in the form of Exhibit M, by which Subsequent Mortgage Loans are
sold to the Trust Fund.

      Subservicer: As defined in Section 3.02(a) hereof.

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

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

      Targeted Overcollateralization Amount: The product of (i) 1.95% and (ii)
the sum of (x) the Cut-off Date Principal Balance of the Initial Mortgage Loans
and (y) the Original Pre-Funded Amount.

                                      -47-
<PAGE>

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

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

      Transfer Affidavit: As defined in Section 6.02(b)(ii) hereof.

      Transfer Agreement: Any document pursuant to which the Seller acquired any
Mortgage Loan from the originator of such Mortgage Loan.

      Transferor: Any originator of a Mortgage Loan.

      Transferor Certificate: As defined in Section 6.02(a) hereof.

      Trigger Event: With respect to the Certificates after the Stepdown Date, a
Distribution Date on which (1) the quotient of (A) the aggregate Stated
Principal Balance of all Mortgage Loans which are 60 or more days Delinquent
measured on a rolling three month basis (including, for the purposes of this
calculation, Mortgage Loans in foreclosure and REO Properties) and (B) the
Stated Principal Balance of the Mortgage Loans as of the last day of the
preceding calendar month plus the Pre-Funded Amount allocable as of the such
Distribution Date, equals or exceeds the product of (i) 42.00% and (ii) Required
Percentage or (2) the quotient (expressed as a percentage) of (A) the aggregate
Realized Losses incurred from the Cut-off Date through the last day of the
calendar month preceding such Distribution Date and (B) the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date exceeds the Required Loss
Percentage.

      Trust Fund: The corpus of the trust (the "Terwin Mortgage Trust, Series
TMTS 2004-5HE") 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
Collection Account; (ii) the Collection Account, the Certificate Account, the
Master Servicer Collection Account, Pre-Funding Account and Capitalized Interest
Account, all amounts deposited therein pursuant to the applicable provisions of
this Agreement; (iii) property that secured a Mortgage Loan and has been
acquired by foreclosure, deed in lieu of foreclosure or otherwise; (iv) the
mortgagee's rights under the Insurance Policies with respect to the Mortgage
Loans; (v) the Cap Contract and Cap Contract Account; and (vi) all proceeds of
the conversion, voluntary or involuntary, of any of the foregoing into cash or
other liquid property.

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

      United States Person: (i) A citizen or resident of the United States, (ii)
a corporation, partnership or other entity treated as a corporation or
partnership for federal income tax purposes organized in or under the laws of
the United States or any state thereof or the District of Columbia (unless, in
the case of a partnership, Treasury regulations provide otherwise), (iii) an
estate the income of which is includible in gross income for United States tax
purposes regardless of its source or (iv) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in Treasury regulations, certain trusts in existence on
August

                                      -48-
<PAGE>

20, 1996, and treated as United States persons prior to such date, that elect to
continue to be treated as United States persons will also be United States
Persons.

      Unpaid Realized Loss Amount: The Class M-1 Unpaid Realized Loss Amount,
Class M-2 Unpaid Realized Loss Amount, Class M-3 Unpaid Realized Loss Amount,
Class B-1 Unpaid Realized Loss Amount, Class B-2 Unpaid Realized Loss Amount and
Class B-3 Unpaid Realized Loss Amount, collectively.

      Upper Collar: With respect to each Distribution Date on which amounts are
received on the Cap Contracts, a rate equal to the lesser of One-Month LIBOR and
9.600% per annum.

      USAP Report: A report in compliance with the Uniform Single Attestation
Program for Mortgage Bankers delivered in accordance with Section 3.18 or 4.15.

      Voting Rights: The portion of the voting rights of all the Certificates
that is allocated to any of the Certificates for purposes of the voting
provisions hereunder. Voting Rights allocated to each Class of Certificates
shall be allocated 93% to the Offered Certificates and 1% to each Class of the
Class A-X-A, Class A-X-B, Class M-1-X, Class M-2-X, Class N and Class X
Certificates, with the allocation among the Offered Certificates to be in
proportion to the Class Certificate Principal Balance of each Class relative to
the Class Certificate Principal Balance of all other Classes. Voting Rights will
be allocated among the Certificates of each such Class in accordance with their
respective Percentage Interests.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

      SECTION 2.01.Conveyance of Mortgage Loans.

      The Depositor, concurrently with the execution and delivery hereof, does
hereby sell, transfer, assign, set over and convey to the Trustee without
recourse all the right, title and interest of the Depositor in and to the assets
of the Trust Fund. Such assignment includes all interest and principal received
on or with respect to the Mortgage Loans, other than Subsequent Mortgage Loans,
on or after the Cut-off Date (other than Scheduled Payments due on the Mortgage
Loans on or before the Cut-off Date).

      In connection with such assignment, the Depositor does hereby deliver to,
and deposit with, the Trustee, or to the Custodian as the Trustee's designated
agent, the following documents or instruments with respect to each Mortgage Loan
and the Depositor shall, in accordance with Section 2.11, deliver to, and
deposit with, the Trustee the following documents or instruments with respect to
each Subsequent Mortgage Loan:

            (A)   The electronic Mortgage Loan Schedule, a copy of which has
      also been delivered to each Servicers, the Backup Servicer, the Master
      Servicer and the Trustee.

            (B)   The Original Mortgage Note endorsed in blank or, "Pay to the
      order of U.S. Bank National Association, as Trustee for Terwin Mortgage
      Trust 2004-5HE, Asset-Backed Certificates, Series 2004-5HE, without
      recourse" together with all riders thereto. The Mortgage Note shall
      include all intervening endorsements showing a complete chain of the title
      from the originator to the Transferor.

                                      -49-
<PAGE>

            (C)   Except as provided below and for each Mortgage Loan that is
      not a MERS Loan, the original recorded Mortgage together with all riders
      thereto, with evidence of recording thereon, or, if the original Mortgage
      has not yet been returned from the recording office, a copy of the
      original Mortgage together with all riders thereto certified by the
      Transferor to be true copy of the original of the Mortgage that has been
      delivered for recording in the appropriate recording office of the
      jurisdiction in which the Mortgaged Property is located and in the case of
      each MERS Loan, the original Mortgage together with all riders thereto,
      noting the presence of the MIN of the Loan and either language indicating
      that the Mortgage Loan is a MOM Loan or if the Mortgage Loan was not a MOM
      Loan at origination, the original Mortgage and the assignment thereof to
      MERS, 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.

            (D)   In the case of each Mortgage Loan that is not a MERS Loan, the
      original Assignment of each Mortgage in blank or, to "U.S. Bank National
      Association, as Trustee for Terwin Mortgage Trust 2004-5HE, Asset-Backed
      Certificates, Series 2004-5HE, without recourse."

            (E)   The original policy of title insurance (or a preliminary title
      report, commitment or binder if the original title insurance policy has
      not been received from the title insurance company).

            (F)   Originals of any intervening assignments of the Mortgage, with
      evidence of recording thereon or, if the original intervening assignment
      has not yet been returned from the recording office, a copy of such
      assignment certified to be a true copy of the original of the assignment
      which has been sent for recording in the appropriate jurisdiction in which
      the Mortgaged Property is located.

            (G)   Originals of all assumption and modification agreements, if
      any.

      If in connection with any Mortgage Loan, the Depositor cannot deliver the
Mortgage, Assignments of Mortgage or assumption, consolidation or modification,
as the case may be, with evidence of recording thereon, if applicable,
concurrently with the execution and delivery of this Agreement solely because of
a delay caused by the public recording office where such Mortgage, Assignments
of Mortgage or assumption, consolidation or modification, as the case may be,
has been delivered for recordation, the Depositor shall deliver or cause to be
delivered to the Trustee (or the Custodian) written notice stating that such
Mortgage or assumption, consolidation or modification, as the case may be, has
been delivered to the appropriate public recording office for recordation.
Thereafter, the Depositor shall deliver or cause to be delivered to the Trustee
(or the Custodian) such Mortgage, Assignments of Mortgage or assumption,
consolidation or modification, as the case may be, with evidence of recording
indicated thereon, if applicable, upon receipt thereof from the public recording
office. To the extent any required endorsement is not contained on a Mortgage
Note or an Assignment of Mortgage, the Depositor shall make or cause such
endorsement to be made.

      With respect to any Mortgage Loan, none of the Depositor, the Master
Servicer, the Servicers, the Securities Administrator or the Trustee shall be
obligated to cause to be recorded the Assignment of Mortgage referred to in this
Section 2.01. In the event an Assignment of Mortgage is not recorded, the Master
Servicer or each Servicer, as applicable, shall have no liability for its
failure to receive and act on notices related to such Assignment of Mortgage.

      The ownership of each Mortgage Note, the Mortgage and the contents of the
related Mortgage File is vested in the Trustee on behalf of the
Certificateholders. None of the Depositor, the Master

                                      -50-
<PAGE>

Servicer, the Servicers nor the Securities Administrator shall take any action
inconsistent with such ownership and shall not claim any ownership interest
therein. The Depositor, the Master Servicer, the Servicers and Securities
Administrator shall respond to any third party inquiries with respect to
ownership of the Mortgage Loans by stating that such ownership is held by the
Trustee on behalf of the Certificateholders. The Depositor agrees to take no
action inconsistent with the Trustee's ownership of the Mortgage Loans, to
promptly indicate to all inquiring parties that the Mortgage Loans have been
sold and to claim no ownership interest in the Mortgage Loans.

      It is the intention of this Agreement that the conveyance of the
Depositor's right, title and interest in and to the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan. If a conveyance
of Mortgage Loans from the Seller to the Depositor is characterized as a pledge
and not a sale, then the Depositor shall be deemed to have transferred to the
Trustee all of the Depositor's right, title and interest in, to and under the
obligations of the Seller deemed to be secured by said pledge; and it is the
intention of this Agreement that the Depositor shall also be deemed to have
granted to the Trustee a first priority security interest in all of the
Depositor's right, title, and interest in, to and under the obligations of the
Seller to the Depositor deemed to be secured by said pledge and that the Trustee
shall be deemed to be an independent custodian for purposes of perfection of the
security interest granted to the Depositor. If the conveyance of the Mortgage
Loans from the Depositor to the Trustee is characterized as a pledge, it is the
intention of this Agreement that this Agreement shall constitute a security
agreement under applicable law, and that the Depositor shall be deemed to have
granted to the Trustee a first priority security interest in all of the
Depositor's right, title and interest in, to and under the Mortgage Loans, all
payments of principal of or interest on such Mortgage Loans, all other rights
relating to and payments made in respect of the Trust Fund, and all proceeds of
any thereof. If the trust created by this Agreement terminates prior to the
satisfaction of the claims of any Person in any Certificates, the security
interest created hereby shall continue in full force and effect and the Trustee
shall be deemed to be the collateral agent for the benefit of such Person.

      In addition to the conveyance made in the first paragraph of this Section
2.01, the Depositor does hereby convey, assign and set over to the Trustee for
the benefit of the Certificateholders its rights and interests under the Sale
Agreement, including the Depositor's right, title and interest in the
representations and warranties contained in the Sale Agreement, the rights in
the Transfer Agreement described therein, and the benefit of the repurchase
obligations and the obligation of the Seller contained in the Sale Agreement to
take, at the request of the Depositor or the Trustee, all action on its part
which is reasonably necessary to ensure the enforceability of a Mortgage Loan.
The Trustee hereby accepts such assignment, and shall be entitled to exercise
all rights of the Depositor under the Sale Agreement as if, for such purpose, it
were the Depositor. The foregoing sale, transfer, assignment, set-over, deposit
and conveyance does not and is not intended to result in creation or assumption
by the Trustee of any obligation of the Depositor, the Seller, or any other
Person in connection with the Mortgage Loans or any other agreement or
instrument relating thereto.

      It is agreed and understood by the Depositor, the Servicer and the Trustee
that it is not intended that any Mortgage Loan be included in 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.

      SECTION 2.02.Acceptance by the Trustee of the Mortgage Loans and the Cap
Contract.

      Except as set forth as an exception in the exception report delivered with
the Initial Certification (the "Exception Report") or the Final Certification,
the Trustee accepts its appointment as Trustee hereunder and acknowledges the
Custodian's receipt, subject to the provisions of Section 2.01 and subject to
the review described below, of the Mortgage Note for each Mortgage Loan and
delivery of a Mortgage

                                      -51-
<PAGE>

File (but does not acknowledge receipt of all documents required to be included
in such Mortgage File) with respect to each Mortgage Loan and declares that it
holds and will hold such documents and any other documents constituting a part
of the Mortgage Files delivered to it in trust for the use and benefit of all
present and future Certificateholders. The Depositor will cause the Seller to
repurchase any Mortgage Loan to which a material exception was taken in the
Exception Report unless such exception is cured to the satisfaction of the
Trustee within 45 Business Days of the Closing Date (or the Subsequent Transfer
Date with respect to Subsequent Mortgage Loans).

      The Trustee acknowledges receipt of the Cap Contract (a form of which is
attached hereto) and is hereby instructed to enter into the Cap Contract, not in
its individual capacity, but solely as Trustee for the Terwin Mortgage Trust,
Series TMTS 2004-5HE.

      The Trustee agrees to cause the Custodian to deliver prior to the Closing
Date (or the Subsequent Transfer Date with respect to Subsequent Mortgage Loans)
to the Depositor, the Securities Administrator and each Servicer an Initial
Certification in the form annexed hereto as Exhibit B-1 to Exhibit Q. The
Trustee shall not be under any 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 70 days after the Closing Date (or the Subsequent Transfer
Date with respect to Subsequent Mortgage Loans), the Custodial Agreement
requires the Custodian to deliver to the Depositor, the Securities Administrator
and each Servicer an Interim Certification in the form annexed hereto as Exhibit
B-2 to Exhibit Q, with any applicable exceptions noted thereon.

      Not later than 90 days after the Closing Date (or the Subsequent Transfer
Date with respect to Subsequent Mortgage Loans), the Custodial Agreement
requires the Custodian to deliver to the Depositor, the Securities Administrator
and each Servicer a Final Certification in the form annexed hereto as Exhibit
B-3 to Exhibit Q, with any applicable exceptions noted thereon.

      If, in the course of such review, the Trustee is notified by the Custodian
that any document constituting a part of a Mortgage File does not meet the
requirements of Section 2.01, the Trustee shall cause the Custodian to list such
as an exception in the Final Certification; provided, however, that the Trustee
shall not make any determination as to whether (i) any endorsement is sufficient
to transfer all right, title and interest of the party so endorsing, as
noteholder or assignee thereof, in and to that Mortgage Note or (ii) any
assignment is in recordable form or is sufficient to effect the assignment of
and transfer to the assignee thereof under the mortgage to which the assignment
relates.

      The Seller shall promptly correct or cure such defect within 90 days from
the date it is so notified of such defect and, if the Seller does not correct or
cure such defect within such period, the Seller shall either (i) substitute for
the related Mortgage Loan pursuant to the provisions of Section 2.03(c), or (ii)
purchase such Mortgage Loan from the Trustee within 90 days from the date the
Seller was notified of such defect in writing at the Purchase Price of such
Mortgage Loan; provided, however, that if the cure, substitution or repurchase
of a Mortgage Loan pursuant to this provision is required by reason of a delay
in delivery of any documents by the appropriate recording office, then, provided
such defect does not cause such Mortgage Loan not to be a "qualified mortgage"
within the meaning of Section 860G(a)(3)(A) of the Code (as determined without
regard to Treasury Regulations Section 1.860G-2(a)(3)(iii) or any similar rule
that treats a defective obligation as a "qualified mortgage" for a temporary
period) the Seller shall be given 270 days from the Closing Date (or the
Subsequent Transfer Date with respect to Subsequent Mortgage Loans) to cure such
defect or, subject to the requirements of Section 2.03(c) hereof, substitute
for, or repurchase such Mortgage Loan; and further provided, that the Seller
shall have no

                                      -52-
<PAGE>

liability for recording any Assignment of Mortgage in favor of the Trustee or
for the Seller's failure to record such Assignment of Mortgage, and the Seller
shall not be obligated to repurchase or cure any Mortgage Loan as to which such
Assignment of Mortgage is not recorded. Any such substitution effected more than
90 days after the Closing Date shall not be effected prior to the delivery to
the Custodian of the Opinion of Counsel required by Section 2.05 hereof and any
substitution shall not be effected prior to the additional delivery to the
Custodian of a Request for Release certifying that such Mortgage Loan is a
Replacement Mortgage Loan substantially in the form of Exhibit I and the
Mortgage File for any such substitute Mortgage Loan. The Purchase Price for any
such Mortgage Loan shall be deposited by the Seller in the Certificate Account
on or prior to the Business Day immediately preceding the Distribution Date in
the month following the month of repurchase and, upon receipt of such deposit
and certification with respect thereto in the form of Exhibit I hereto, the
Custodian shall release the related Mortgage File to the Seller and shall
execute and deliver at such entity's request such instruments of transfer or
assignment prepared by such entity, in each case without recourse, as shall be
necessary to vest in such entity, or a designee, the Trustee's interest in any
Mortgage Loan released pursuant hereto.

      The Trustee shall request that the Seller correct or cure such omission,
defect or other irregularity, or substitute a Mortgage Loan pursuant to the
provisions of Section 2.03(c), within 90 days from the date the Seller was
notified of such omission or defect and, if the Seller does not correct or cure
such omission or defect within such period, the Trustee shall require that the
Seller purchase such Mortgage Loan from the Trust Fund within 90 days from the
date the Trustee notified the Seller of such omission, defect or other
irregularity at the Purchase Price of such Mortgage Loan. The Purchase Price for
any Mortgage Loan purchased pursuant to this Section 2.02 shall be paid to the
applicable Servicer and deposited by such Servicer in the Certificate Account,
promptly upon receipt, and, upon receipt by the Trustee of written notification
of such deposit signed by a Servicing Officer, the Trustee, upon receipt of a
Request for Release, shall promptly release to the Seller the related Mortgage
File and the Trustee shall execute and deliver such instruments of transfer or
assignment, without recourse, as shall be requested by the Seller and necessary
to vest in the Seller or its designee, as the case may be, any Mortgage Loan
released pursuant hereto, and the Trustee shall have no further responsibility
with regard to such Mortgage Loan. It is understood and agreed that the
obligation of the Seller to purchase, cure or substitute any Mortgage Loan as to
which a material defect in or omission of a constituent document exists shall
constitute the sole remedy respecting such defect or omission available to the
Trustee on behalf of Certificateholders. The preceding sentence shall not,
however, limit any remedies available to the Certificateholders, the Depositor,
Securities Administrator or the Trustee pursuant to the Sale Agreement and any
Transfer Agreement. The Trustee shall be under no duty or obligation to inspect,
review and examine such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, recordable or appropriate to the
represented purpose, or that they have actually been recorded, or that they are
other than what they purport to be on their face. Each Servicer, the Master
Servicer, the Securities Administrator and the Trustee shall keep confidential
the name of each Mortgagor except as required by this Agreement and each
Servicer, the Master Servicer, the Securities Administrator and the Trustee
shall not solicit any such Mortgagor for the purpose of refinancing the related
Mortgage Loan; notwithstanding anything herein to the contrary, the foregoing
shall not be construed to prohibit (i) disclosure of any and all information
that is or becomes publicly known, or information obtained by Trustee from
sources other than the other parties hereto, (ii) disclosure of any and all
information (A) if required to do so by any applicable law, rule or regulation,
(B) to any government agency or regulatory body having or claiming authority to
regulate or oversee any respects of Trustee's business or that of its
affiliates, (C) pursuant to any subpoena, civil investigation demand or similar
demand or request of any court, regulatory authority, arbitrator or arbitration
to which Trustee or any affiliate or an officer, director, employer or
shareholder thereof is a party or (D) to any affiliate, independent or internal
auditor, agent, employee or attorney of Trustee having a need to know the same,
provided that Trustee advises such recipient of the confidential nature of the
information being disclosed, or (iii) any other disclosure authorized by the
Depositor or Master Servicer.

                                      -53-
<PAGE>

      All of the Mortgage Files are being held by the Custodian pursuant to the
Custodial Agreement. Notwithstanding anything to the contrary contained herein,
the parties hereto acknowledge that the functions of the Trustee or the
Custodian, as the Trustee's agents with respect to the custody, acceptance,
inspection and release of the Mortgage Files pursuant to this Agreement shall be
performed by the Custodian pursuant to the Custodial Agreement.

      SECTION 2.03.Representations, Warranties and Covenants of the Depositor.

            (a)   The Depositor hereby represents and warrants to the Servicers,
the Master Servicer, the Securities Administrator and the Trustee as follows, as
of the date hereof:

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

            (iii) 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 the Sale Agreement and
      has duly authorized, by all necessary corporate action on its part, the
      execution, delivery and performance of this Agreement and the Sale
      Agreement; and this Agreement and the Sale Agreement, assuming the due
      authorization, execution and delivery hereof by the other parties hereto,
      constitutes a legal, valid and binding obligation of the Depositor,
      enforceable against the Depositor in accordance with its terms, subject,
      as to enforceability, to (i) bankruptcy, insolvency, reorganization,
      moratorium and other similar laws affecting creditors' rights generally
      and (ii) general principles of equity, regardless of whether enforcement
      is sought in a proceeding in equity or at law.

            (iv)  The execution and delivery of this Agreement and the Sale
      Agreement by the Depositor, the consummation of the transactions
      contemplated by this Agreement and the Sale Agreement, and the fulfillment
      of or compliance with the terms hereof are in the ordinary course of
      business of the Depositor and will not (A) result in a material breach of
      any term or provision of the charter or by-laws of the Depositor or (B)
      materially conflict with, result in a 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.

            (v)   No litigation is pending, or, to the best of the Depositor's
      knowledge, threatened, against the Depositor that would materially and
      adversely affect the execution, delivery or enforceability of this
      Agreement and the Sale Agreement or the ability of the Depositor to
      perform its obligations under this Agreement and the Sale 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 Depositor of, or compliance by the Depositor with, this
      Agreement and the Sale Agreement or the consummation of the transactions
      contemplated hereby, or if any such consent, approval, authorization or
      order

                                      -54-
<PAGE>

      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 (or the Subsequent Transfer Date with respect to
      Subsequent Mortgage Loans), and following the transfer of the Mortgage
      Loans to it by the Seller, the Depositor had good title to the Mortgage
      Loans and the Mortgage Notes were subject to no offsets, claims, liens,
      mortgage, pledge, charge, security interest, defenses or counterclaims.

            (b)   The representations and warranties of each Transferor with
respect to the related Mortgage Loans in the applicable Transfer Agreement,
which have been assigned to the Trustee hereunder, were made as of the date
specified in the applicable Transfer Agreement (or underlying agreement, if such
Transfer Agreement is in the form of an assignment of a prior agreement). To the
extent that any fact, condition or event with respect to a Mortgage Loan
constitutes a breach of both (i) a representation or warranty of the applicable
Transferor under the applicable Transfer Agreement and (ii) a representation or
warranty of the Seller under the Sale Agreement, the obligations of the Seller
under the Sale Agreement shall be enforced and to the extent the Seller does not
fulfill its contracted obligations then the obligations of the applicable
Transferor shall be enforced under any applicable representation or warranty
made by it. The Trustee further acknowledges that the Depositor shall have no
obligation or liability with respect to any breach of any representation or
warranty with respect to the Mortgage Loans under any circumstances.

            (c)   Upon discovery by any of the Depositor, the Master Servicer,
the Servicers, the Securities Administrator or the Trustee of a breach of any of
such representations and warranties that adversely and materially affects the
value of the related Mortgage Loan, prepayment charges or the interests of the
Certificateholders, the party discovering such breach shall give prompt written
notice to the other parties. Within 90 days of the discovery of such breach of
any representation or warranty, the applicable Transferor or the Seller, as
applicable, shall either (a) cure such breach in all material respects, (b)
repurchase such Mortgage Loan or any property acquired in respect thereof from
the Trustee at the Purchase Price or (c) within the two year period following
the Closing Date, substitute a Replacement Mortgage Loan for the affected
Mortgage Loan. In the event of discovery of a breach of any representation and
warranty of any Transferor or the Seller, the Trustee's rights shall be enforced
under the applicable Transfer Agreement and the Sale Agreement for the benefit
of Certificateholders. If a breach of the representations and warranties set
forth in the Transfer Agreement hereof exists solely due to the unenforceability
of a prepayment charge, the Trustee or the other party having notice thereof
shall notify the applicable Servicer thereof and not seek to enforce the
repurchase remedy provided for herein unless such Mortgage Loan is not current.
In the event of a breach of the representations and warranties with respect to
the Mortgage Loans set forth in a Transfer Agreement, the Trustee shall enforce
the right of the Trust Fund to be indemnified for such breach of representation
and warranty. In the event that such breach relates solely to the
unenforceability of a prepayment charge, amounts received in respect of such
indemnity up to the amount of such prepayment charge shall be distributed
pursuant to Section 5.05(j). As provided in the Sale Agreement, if the
Transferor substitutes for a Mortgage Loan for which there is a breach of any
representations and warranties in the related Transfer Agreement which adversely
and materially affects the value of such Mortgage Loan and such substitute
mortgage loan is not a Replacement Mortgage Loan, under the terms of the Sale
Agreement, the Seller will, in exchange for such substitute Mortgage Loan, (i)
provide the applicable Purchase Price for the affected Mortgage Loan or (ii)
within two years of the Closing Date, substitute such affected Mortgage Loan
with a Replacement Mortgage Loan. Any such substitution shall not be effected
prior to the additional delivery to the Trustee of a Request for Release
substantially in the form of Exhibit I and shall not be effected unless it is
within two years of the Startup Day. The Seller indemnifies and holds the Trust
Fund, the Trustee, the Securities Administrator, the Depositor, the Master
Servicer, each Servicer and each Certificateholder harmless against any and all
taxes, claims, losses, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments, and any other costs, fees and expenses that the Trust
Fund, the Trustee, the Securities

                                      -55-
<PAGE>

Administrator, the Depositor, the Master Servicer, each Servicer and any
Certificateholder may sustain in connection with any actions of the Seller
relating to a repurchase of a Mortgage Loan other than in compliance with the
terms of this Section 2.03 and the Sale Agreement, to the extent that any such
action causes (i) any federal or state tax to be imposed on the Trust Fund or
any REMIC provided for herein, including without limitation, any federal tax
imposed on "prohibited transactions" under Section 860F(a)(1) of the Code or on
"contributions after the startup day" under Section 860(d)(1) of the Code, or
(ii) any REMIC created hereunder to fail to qualify as a REMIC at any time that
any Certificate is outstanding. In furtherance of the foregoing, if the
Transferor or the Seller, as applicable, is not a member of MERS and repurchases
a Mortgage Loan which is registered on the MERS System, the Transferor or the
Seller, as applicable, at its own expense and without any right of
reimbursement, shall cause MERS to execute and deliver an assignment of the
Mortgage in recordable form to transfer the Mortgage from MERS to the Transferor
or the Seller, as applicable, and shall cause such Mortgage to be removed from
registration on the MERS System in accordance with MERS' rules and regulations.

      With respect to any Mortgage Loan repurchased by the Seller pursuant to
the Sale Agreement or by any Transferor pursuant to the applicable Transfer
Agreement, the principal portion of the funds received by the Securities
Administrator, in respect of such repurchase of a Mortgage Loan will be
considered a Principal Prepayment and shall be deposited in the Certificate
Account pursuant to Section 3.05. The Trustee, upon receipt of notice from the
Securities Administrator of its receipt of the full amount of the Purchase Price
for a Deleted Mortgage Loan, or upon receipt of the Mortgage File for a
Replacement Mortgage Loan substituted for a Deleted Mortgage Loan, shall release
or cause to be released and reassign to the Seller or the applicable Transferor,
as applicable, the related Mortgage File for the Deleted Mortgage Loan and shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, representation or warranty, as shall be necessary to vest in
such party or its designee or assignee title to any Deleted Mortgage Loan
released pursuant hereto, free and clear of all security interests, liens and
other encumbrances created by this Agreement, which instruments shall be
prepared by the Seller, and neither the Trustee nor the Securities Administrator
shall have any further responsibility with respect to the Mortgage File relating
to such Deleted Mortgage Loan.

      With respect to each Replacement Mortgage Loan to be delivered to the
Trustee (or the Custodian) pursuant to the terms of this Article II in exchange
for a Deleted Mortgage Loan: (i) the applicable Transferor or the Seller, as
applicable, must deliver to the Trustee (or its custodian) the Mortgage File for
the Replacement Mortgage Loan containing the documents set forth in Section 2.01
along with a written certification certifying as to the Mortgage Loan satisfying
all requirements under the definition of Replacement Mortgage Loan and the
delivery of such Mortgage File and containing the granting language set forth in
Section 2.01; and (ii) the Depositor will be deemed to have made, with respect
to such Replacement Mortgage Loan, each of the representations and warranties
made by it with respect to the related Deleted Mortgage Loan. The Custodian
shall review the Mortgage File with respect to each Replacement Mortgage Loan
and certify to the Depositor that all documents required by Section 2.01 have
been executed and received.

      For any month in which the Seller substitutes one or more Replacement
Mortgage Loans for one or more Deleted Mortgage Loans, the Seller will determine
the amount (if any) by which the aggregate principal balance of all such
Replacement Mortgage Loans as of the date of substitution and the aggregate
prepayment penalties with respect to such Replacement Mortgage Loans is less
than the aggregate Stated Principal Balance (after application of the principal
portion of the Scheduled Payment due in the month of substitution) and aggregate
prepayment penalties 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 deposited into the Certificate
Account by the Seller on the Determination Date for the Distribution Date
relating to the Prepayment Period during which the related Mortgage Loan became
required to be purchased or replaced hereunder.

                                      -56-
<PAGE>

      Notwithstanding any other provision of this Agreement, the right to
substitute Mortgage Loans pursuant to this Article II shall be subject to the
additional limitations that no substitution of a Replacement Mortgage Loan for a
Deleted Mortgage Loan shall be made unless the Securities Administrator shall
have received an Opinion of Counsel (at the expense of the party seeking to make
the substitution) that, under current law, such substitution will not (A) affect
adversely the status of any REMIC established hereunder as a REMIC, or of the
related "regular interests" as "regular interests" in any such REMIC, or (B)
cause any such REMIC to engage in a "prohibited transaction" or prohibited
contribution pursuant to the REMIC Provisions.

      The Trustee shall amend the Mortgage Loan Schedule to reflect the removal
of such Deleted Mortgage Loan from the terms of this Agreement and the
substitution of the Replacement Mortgage Loan or Replacement Mortgage Loans.
Upon such substitution by the Seller, such Replacement Mortgage Loan or
Replacement Mortgage Loans shall constitute part of the Mortgage Pool and shall
be subject in all respects to the terms of this Agreement and the Sale
Agreement, including all applicable representations and warranties thereof
included in the Sale Agreement as of the date of substitution.

            (d)   It is understood and agreed that the representations,
warranties and indemnification (i) set forth in this Section 2.03, (ii) of the
Seller and the Depositor set forth in the Sale Agreement and assigned to the
Trustee by the Depositor hereunder and (iii) of each Transferor, assigned by the
Seller to the Depositor pursuant to the Sale Agreement and assigned to the
Trustee by the Depositor hereunder shall each survive delivery of the Mortgage
Files and the Assignment of Mortgage of each Mortgage Loan to the Trustee and
shall continue throughout the term of this Agreement.

            (e)   The Depositor shall deliver a copy of the Mortgage Loan
Schedule to each Servicer on the Closing Date (or the Subsequent Transfer Date
with respect to Subsequent Mortgage Loans).

      SECTION 2.04.Representations and Warranties of the Master Servicer;
Representations and Warranties of the Servicers; Representations and Warranties
of the Securities Administrator; Representations and Warranties of the Backup
Servicer.

            (a)   The Master Servicer hereby represents and warrants to the
Depositor, the Servicers, the Securities Administrator, the Backup Servicer and
the Trustee as follows, as of the date hereof:

                  (i)   The Master Servicer is duly organized and is validly
existing as a corporation in good standing under the laws of the state of New
Jersey 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 master 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 power and authority to
master 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 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,

                                      -57-
<PAGE>

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
Master Servicer, the master servicing of the Mortgage Loans 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 charter or by-laws
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, or an affiliate thereof, is an
approved servicer of mortgage loans for Fannie Mae and for Freddie Mac.

                  (v)   Except as previously disclosed to the Depositor, 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 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.

            (b)   Countrywide hereby represents and warrants to the Depositor,
the Master Servicer, the Securities Administrator, the Backup Servicer and the
Trustee as follows, as of the date hereof:

                  (i)   Countrywide is duly organized and is validly existing as
a limited partnership 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 Countrywide 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)  Countrywide has the corporate power and authority and to
service each Mortgage Loan, and to execute, deliver and perform, and to enter
into and consummate the transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of Countrywide 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
Countrywide, enforceable against Countrywide in accordance with its terms,

                                      -58-
<PAGE>

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
Countrywide, the servicing of the Mortgage Loans 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 Countrywide and will not (A) result in a material breach
of any term or provision of the charter or by-laws of Countrywide 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 Countrywide is a party or by which it may be
bound, or (C) constitute a material violation of any statute, order or
regulation applicable to Countrywide of any court, regulatory body,
administrative agency or governmental body having jurisdiction over Countrywide;
and Countrywide 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
Countrywide's ability to perform or meet any of its obligations under this
Agreement.

                  (iv)  Countrywide is an approved servicer of mortgage loans
for Fannie Mae and is an approved servicer of all types of mortgage loans for
Freddie Mac.

                  (v)   No litigation is pending or, to the best of
Countrywide's knowledge, threatened, against Countrywide that would materially
and adversely affect the execution, delivery or enforceability of this Agreement
or the ability of Countrywide 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 Countrywide of, or compliance by Countrywide with, this Agreement
or the consummation of the transactions contemplated hereby, or if any such
consent, approval, authorization or order is required, Countrywide has obtained
the same.

                  (vii) Countrywide has fully furnished and will fully furnish
(for the period it serviced the Mortgage Loans), in accordance with the Fair
Credit Reporting Act and its implementing regulations, accurate and complete
information (e.g., favorable and unfavorable) on its borrower credit files to
Equifax, Experian and Trans Union Credit Information Company on a monthly basis.

            (c)   GreenPoint hereby represents and warrants to the Depositor,
the Master Servicer, the Securities Administrator, the Backup Servicer and the
Trustee as follows, as of the date hereof:

                  (i)   GreenPoint is duly organized and is validly existing as
a corporation 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 GreenPoint 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)  GreenPoint has the corporate power and authority and to
service each Mortgage Loan, and to execute, deliver and perform, and to enter
into and consummate the transactions

                                      -59-
<PAGE>

contemplated by this Agreement and has duly authorized by all necessary
corporate action on the part of GreenPoint 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 GreenPoint, enforceable
against GreenPoint 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
GreenPoint, the servicing of the Mortgage Loans 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 GreenPoint and will not (A) result in a material breach of
any term or provision of the charter or by-laws of GreenPoint 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 GreenPoint is a party or by which it may be bound, or (C)
constitute a material violation of any statute, order or regulation applicable
to GreenPoint of any court, regulatory body, administrative agency or
governmental body having jurisdiction over GreenPoint; and GreenPoint 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 GreenPoint's ability to
perform or meet any of its obligations under this Agreement.

                  (iv)  GreenPoint is an approved servicer of mortgage loans for
Fannie Mae and is an approved servicer of all types of mortgage loans for
Freddie Mac.

                  (v)   No litigation is pending or, to the best of GreenPoint's
knowledge, threatened, against GreenPoint that would materially and adversely
affect the execution, delivery or enforceability of this Agreement or the
ability of GreenPoint 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 GreenPoint of, or compliance by GreenPoint with, this Agreement
or the consummation of the transactions contemplated hereby, or if any such
consent, approval, authorization or order is required, GreenPoint has obtained
the same.

                  (vii) GreenPoint has fully furnished and will fully furnish
(for the period it serviced the Mortgage Loans), in accordance with the Fair
Credit Reporting Act and its implementing regulations, accurate and complete
information (e.g., favorable and unfavorable) on its borrower credit files to
Equifax, Experian and Trans Union Credit Information Company on a monthly basis.

            (d)   SLS hereby represents and warrants to the Depositor, the
Master Servicer, the Securities Administrator, the Backup Servicer and the
Trustee as follows, as of the date hereof:

                  (i)   SLS is duly organized and is validly existing as a
limited liability company in good standing under the laws of the State of
Delaware and is duly authorized and qualified to transact any and all business
contemplated by this Agreement to be conducted by SLS 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

                                      -60-
<PAGE>

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)  SLS has the corporate power and authority and to service
each Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of SLS 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 SLS, enforceable against
SLS 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 SLS, the
servicing of the Mortgage Loans 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
SLS and will not (A) result in a material breach of any term or provision of the
charter or by-laws of SLS 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 SLS is a party or
by which it may be bound, or (C) constitute a material violation of any statute,
order or regulation applicable to SLS of any court, regulatory body,
administrative agency or governmental body having jurisdiction over SLS; and SLS
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 SLS's
ability to perform or meet any of its obligations under this Agreement.

                  (iv)  SLS is an approved servicer of mortgage loans for HUD.

                  (v)   No litigation is pending or, to the best of SLS's
knowledge, threatened, against SLS that would materially and adversely affect
the execution, delivery or enforceability of this Agreement or the ability of
SLS 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 SLS of, or compliance by SLS with, this Agreement or the
consummation of the transactions contemplated hereby, or if any such consent,
approval, authorization or order is required, SLS has obtained the same.

                  (vii) SLS has fully furnished and will fully furnish (for the
period it serviced the Mortgage Loans), in accordance with the Fair Credit
Reporting Act and its implementing regulations, accurate and complete
information (e.g., favorable and unfavorable) on its borrower credit files to
four credit reporting services, including, but not limited to, Equifax,
Experian, and Trans Union Credit Information Company on a monthly basis after
June 1, 2004.

            (e)   The Securities Administrator and Backup Servicer hereby
represents and warrants to the Depositor, the Master Servicer, each Servicer and
the Trustee as of the date hereof:

                  (i)   The Securities Administrator and Backup Servicer is duly
organized and is validly existing as a New York banking corporation and is duly
authorized and qualified to transact any

                                      -61-
<PAGE>

and all business contemplated by this Agreement to be conducted by the
Securities Administrator and Backup Servicer.

                  (ii)  The Securities Administrator and the Backup Servicer has
the full corporate power and authority 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
Securities Administrator and the Backup Servicer the execution, delivery and
performance of this Agreement.

                  (iii) The execution and delivery of this Agreement by the
Securities Administrator and the Backup Servicer, 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
Securities Administrator and the Backup Servicer and will not (A) result in a
material breach of any term or provision of the charter or by-laws of the
Securities Administrator and the Backup 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 Securities Administrator and the Backup Servicer is a party or by
which it may be bound.

                  (iv)  No litigation is pending or, to the best of the
Securities Administrator and the Backup Servicer's knowledge, threatened,
against the Securities Administrator and the Backup Servicer that would
materially and adversely affect the execution, delivery or enforceability of
this Agreement or the ability of the Securities Administrator and the Backup
Servicer to perform any of its other obligations under this Agreement in
accordance with the terms hereof.

                  (v)   No consent, approval, authorization or order of any
court or governmental agency or body is required for the execution, delivery and
performance by the Securities Administrator and the Backup Servicer of, or
compliance by the Securities Administrator and the Backup Servicer with, this
Agreement or the consummation of the transactions contemplated hereby, or if any
such consent, approval, authorization or order is required, the Securities
Administrator and the Backup Servicer has obtained the same.

      SECTION 2.05.Substitutions and Repurchases of Mortgage Loans which are not
"Qualified Mortgages".

      Upon discovery by the Depositor, the Master Servicer, any Servicer, the
Securities Administrator, the Backup 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 Depositor shall, at the
Depositor's option, either (i) substitute, if the conditions in Section 2.03(c)
with respect to substitutions are satisfied, a Replacement Mortgage Loan for the
affected Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within 90
days of such discovery in the same manner as it would a Mortgage Loan for a
breach of representation or warranty contained in Section 2.03. The Trustee,
upon the written direction of the Depositor, shall reconvey to the Depositor 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 receipt by the Custodian on its behalf of the
documents identified in the Initial Certification in the form attached as an
exhibit to Exhibit Q hereto and concurrently with such receipt, the Trustee
acknowledges the transfer and assignment to it of the Trust Fund and,
concurrently

                                      -62-
<PAGE>

with such transfer and assignment, the Securities Administrator has caused to be
authenticated and delivered to or upon the order of the Depositor, in exchange
for the Mortgage Loans, Certificates duly authenticated by the Authenticating
Agent in authorized denominations evidencing ownership of the entire 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 its duties set forth in this Agreement in accordance with the
provisions hereof.

      SECTION 2.07.REMIC Elections.

            (a)   The Depositor hereby instructs and authorizes the Securities
Administrator on behalf of the Trustee to make an appropriate election to treat
each of REMIC 1, REMIC 2, REMIC 3 and REMIC 4 as a REMIC for federal income tax
purposes. The Trustee, upon the written direction of the Securities
Administrator, shall sign the returns providing for such elections and such
other tax or information returns which are required to be signed by the Trustee
under applicable law. This Agreement shall be construed so as to carry out the
intention of the parties that each of REMIC 1, REMIC 2, REMIC 3 and REMIC 4 be
treated as a REMIC at all times prior to the date on which the Trust Fund is
terminated.

            (b)   The Preliminary Statement sets forth the designations and
"latest possible maturity date" for federal income tax purposes of all interests
created hereby. The "Startup Day" for purposes of the REMIC Provisions shall be
the Closing Date. Each REMIC's fiscal year shall be the calendar year.

      REMIC 1 shall consist of all of the assets of the Trust Fund other than
(i) the interests issued by REMIC 1, REMIC 2, REMIC 3 and REMIC 4, (ii) the
rights to receive Prepayment Penalties, amounts paid by the Servicer, the Seller
or any Transferor in respect of Prepayment Penalties pursuant to this Agreement
or a Transfer Agreement, as applicable and amounts received in respect of any
indemnification paid as a result of a Prepayment Penalty being unenforceable in
breach of the representations and warranties set forth in a Transfer Agreement,
(iii) the grantor trusts described in Section 2.07 hereof, (iv) the Cap Contract
and Cap Contract Account, (v) the Pre-Funding Account and (vi) the Capitalized
Interest Account. REMIC 1 shall issue the REMIC 1 Regular Interests which shall
be designated as regular interests of such REMIC and shall issue the Class LT1-R
Interest that shall be designated as the sole class of residual interest in
REMIC 1. Each of the REMIC 1 Regular Interests shall have the characteristics
set forth in its definition and this Section 2.07.

      The assets of REMIC 2 shall be the REMIC 1 Regular Interests. The REMIC 2
Regular Interests shall be designated as the regular interests in REMIC 2 and
the Class LT2-R Interest shall be designated as the sole class of residual
interest in REMIC 2. Each of the REMIC 2 Regular Interests shall have the
characteristics set forth in its definition and this Section 2.07.

      The assets of REMIC 3 shall be the REMIC 2 Regular Interests (other than
the REMIC 2 IO Interests). The REMIC 3 Regular Interests shall be designated as
the regular interests in REMIC 3 and the Class LT3-R Interest shall be
designated as the sole class of residual interest in REMIC 3. Each of the REMIC
3 Regular Interests shall have the characteristics set forth in its definition
and this Section 2.07.

      The assets of REMIC 4 shall be the REMIC 3 Regular Interests and the REMIC
2 IO Interests. The REMIC 4 Regular Interests shall be designated as the regular
interests in REMIC 4 and the REMIC 4 Residual Interest shall be designated as
the sole class of residual interest in REMIC 4. For federal income tax purposes,
the interest rate on each REMIC 4 Regular Interest (other than the REMIC 4 XN
Interest and the Interest Only Certificates) and on the REMIC 4 Residual
Interest shall be subject to a cap equal to the Adjusted Net WAC.

                                      -63-
<PAGE>

      The beneficial ownership of the Class LT1-R Interest, the Class LT2-R
Interest, the Class LT3-R Interest and the REMIC 4 Residual Interest shall be
represented by the Class R Certificate. None of the Class LT1-R Interest, the
Class LT2-R Interest and the Class LT3-R Interest shall have a principal balance
or bear interest.

            (c)   The "tax matters person" with respect to each REMIC for
purposes of the REMIC Provisions shall be the beneficial owner of the Class R
Certificate; provided, however, that the Holder of a Class R Certificate, by its
acceptance thereof, irrevocably appoints the Securities Administrator as its
agent and attorney-in-fact to act as "tax matters person" with respect to each
REMIC for purposes of the REMIC Provisions. If there is more than one beneficial
owner of the Class R Certificate, the "tax matters person" shall be the Person
with the greatest percentage interest in the Class R Certificate and, if there
is more than one such Person, shall be determined under Treasury regulation
Section 1.860F-4(d) and Treasury regulation Section 301.6231(a)(7)-1.

            (d)   It is intended that the rights of the Class A-1-A
Certificates, Class A-1-B Certificates, Class R Certificate, Class M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class B-1
Certificates, Class B-2 Certificates and Class B-3 Certificates to receive
payments in respect of Excess Interest shall be treated as a right in interest
rate cap contracts written in favor of the holders of the Class A-1-A
Certificates, Class A-1-B Certificates, Class R Certificate, Class M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class B-1
Certificates, Class B-2 Certificates and Class B-3 Certificates by the grantor
trust or partnership described below in Section 2.07(e), and such shall be
accounted for as property held separate and apart from the regular interests in
REMIC 4 held by the holders of the Class A-1-A Certificates, Class A-1-B
Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
Certificates, Class B-1 Certificates, Class B-2 Certificates and Class B-3
Certificates and the residual interest in REMIC 4 held by the holder of the
Class R Certificate. For information reporting requirements, the rights of the
Class A-1-A, Class A-1-B, Class R, Class M-1, Class M-2, Class M-3, Class B-1,
Class B-2 and Class B-3 Certificates to receive payments in respect of Excess
Interest shall be assumed to have zero value or a de minimis value. This
provision is intended to satisfy the requirements of Treasury Regulations
Section 1.860G-2(i) for the treatment of property rights coupled with REMIC
interests to be separately respected and shall be interpreted consistently with
such regulation. On each Distribution Date, to the extent that any of the Class
A-1-A Certificates, Class A-1-B Certificates, Class R Certificate, M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class B-1
Certificates, Class B-2 Certificates and Class B-3 Certificates receive payments
of Excess Interest (other than from payments received in respect of the Cap
Contract), such amounts will be treated as distributed by REMIC 4 with respect
to the REMIC 4 XN Interest and then paid to the relevant Class of Certificates
pursuant to the related interest rate cap contract.

            (e)   Except as described in the following sentence, for federal
income tax purposes, the Class N and Class X Certificates shall represent
beneficial ownership of a grantor trust under subpart E, Part I of subchapter J
of the Code that holds the uncertificated REMIC 4 XN Interest, the Cap Contract,
the Cap Contract Account and the rights to receive Prepayment Penalties, amounts
paid by the Servicer, the Seller or any Transferor in respect of Prepayment
Penalties pursuant to this Agreement or a Transfer Agreement, as applicable and
amounts received in respect of any indemnification paid as a result of a
Prepayment Penalty being unenforceable in breach of the representations and
warranties set forth in a Transfer Agreement, and is treated as obligated to
make payments in respect of the interest rate cap contracts described in this
Section 2.07. If the Class N and Class X Certificates are beneficially owned by
more than one Person, and such Persons do not hold both the Class N and Class X
Certificates proportionately, then each such Person shall be treated as owning
an interest in a partnership that owns the uncertificated REMIC 4 XN Interest,
the Cap Contract, the Cap Contract Account and the rights to receive Prepayment
Penalties, amounts paid by the Servicer, the Seller or any Transferor in respect
of Prepayment Penalties pursuant to this Agreement or a Transfer Agreement, as
applicable and

                                      -64-
<PAGE>

amounts received in respect of any indemnification paid as a result of a
Prepayment Penalty being unenforceable in breach of the representations and
warranties set forth in a Transfer Agreement. For federal income tax purposes,
as long as the condition described in the preceding sentence is not satisfied,
the Securities Administrator shall treat the grantor trust as beneficially owned
by the holder of the Class N and Class X Certificates and shall treat such
portion of the Trust Fund as a grantor trust under subpart E, Part I of
subchapter J of the Code. If the condition described in the second preceding
sentence is satisfied, the Trustee shall treat the treat the uncertificated
REMIC 4 XN Interest, the Cap Contract, the Cap Contract Account and the rights
to receive Prepayment Penalties, amounts paid by the Servicer, the Seller or any
Transferor in respect of Prepayment Penalties pursuant to this Agreement or a
Transfer Agreement, as applicable and amounts received in respect of any
indemnification paid as a result of a Prepayment Penalty being unenforceable in
breach of the representations and warranties set forth in a Transfer Agreement,
as owned by a partnership, the beneficial owners of which are the beneficial
owners of the Class N and Class X Certificates. The Securities Administrator
shall (i) file all required tax and information returns with respect to the
ownership of the REMIC 4 XN Interest, the Cap Contract, the Cap Contract Account
and the rights to receive Prepayment Penalties, amounts paid by the Servicer,
the Seller or any Transferor in respect of Prepayment Penalties pursuant to this
Agreement or a Transfer Agreement, as applicable and amounts received in respect
of any indemnification paid as a result of a Prepayment Penalty being
unenforceable in breach of the representations and warranties set forth in a
Transfer Agreement (including partnership returns if the Class N and Class X
Certificates are beneficially owned by more than one Person and such Persons do
not hold both the Class N and Class X Certificates proportionately), (ii)
furnish or cause to be furnished to the holders of the Class N and Class X
Certificates information regarding their allocable share, if any, of the income
with respect to the REMIC 4 XN Interest, the Cap Contract, the Cap Contract
Account and the rights to receive Prepayment Penalties, amounts paid by the
Servicer, the Seller or any Transferor in respect of Prepayment Penalties
pursuant to this Agreement or a Transfer Agreement, as applicable and amounts
received in respect of any indemnification paid as a result of a Prepayment
Penalty being unenforceable in breach of the representations and warranties set
forth in a Transfer Agreement, (iii) file or cause to be filed with the Internal
Revenue Service Form 1041 (together with any necessary attachments) and such
other forms as may be applicable with respect to the grantor trust described
herein and (iv) comply with such information reporting obligations as may apply
with respect to payments deemed to be in respect of the interest rate cap
contracts described in this Section 2.07. The rights to receive Prepayment
Penalties, amounts paid by the Servicer, the Seller or any Transferor in respect
of Prepayment Penalties pursuant to this Agreement or a Transfer Agreement, as
applicable, and amounts receive in respect of any indemnification paid as a
result of a Prepayment Penalty being unenforceable in breach of the
representations and warranties set forth in a Transfer Agreement shall be issued
to, and at all times held by, the Trustee for the benefit of the holders of the
Class N and Class X Certificates or its registered assigns

            (f)   On each Distribution Date, payments in respect of principal
shall be deemed made to and Realized Losses deemed allocated to the REMIC 1
Regular Interests in the same amounts as such payments are made or Realized
Losses are allocated to the Corresponding Certificates. Principal received on
the Mortgage Loans and Realized Losses with respect to principal on the Mortgage
Loans that are not paid or allocated to Corresponding Certificates with respect
to the REMIC 1 Regular Interests shall be treated as distributed with respect to
the Class LT1-C Interest until its principal balance has been reduced to zero.
Each REMIC 1 Regular Interest shall be entitled to receive all amounts
distributed to the Corresponding Certificates in respect of unreimbursed amounts
of Realized Losses. The principal balance of the REMIC 1 Regular Interests will
be increased on each Distribution Date in an amount equal to any increase on
such Distribution Date in the Certificate Principal Balance of the Corresponding
Certificates pursuant to the last sentence of the definition of "Certificate
Principal Balance."

                                      -65-
<PAGE>

            (g)   On each Distribution Date, payments in respect of principal
shall be deemed made to and Realized Losses shall be deemed allocated to the
REMIC 2 Regular Interests in the same amounts as such payments are made or
Realized Losses are allocated to the Corresponding Certificates. Principal
received on the Mortgage Loans and Realized Losses with respect to principal on
the Mortgage Loans that are not paid or allocated to Corresponding Certificates
with respect to the REMIC 2 Regular Interests shall be treated as distributed
with respect to the Class LT2-C Interest until its principal balance has been
reduced to zero. Each REMIC 2 Regular Interest shall be entitled to receive all
amounts distributed to the Corresponding Certificates in respect of unreimbursed
amounts of Realized Losses. The principal balance of the REMIC 2 Regular
Interests will be increased on each Distribution Date in an amount equal to any
increase on such Distribution Date in the Certificate Principal Balance of the
Corresponding Certificates pursuant to the last sentence of the definition of
"Certificate Principal Balance."

            (h)   All payments in respect of the REMIC 2 Regular Interests
(other than the REMIC 2 IO Interests) shall be paid to the REMIC 3 Regular
Interests until the principal balance of all such interests have been reduced to
zero and any losses allocated to such interests have been reimbursed. Any excess
amounts shall be distributed to the Class LT3-R Interest. On each Distribution
Date, an amount equal to 50% of the increase in the Overcollateralization Amount
shall be payable as a reduction of the principal amounts of the REMIC 3 Marker
Interests (with such amount allocated among the REMIC 3 Marker Interests so that
each REMIC 3 Marker Interest will have its principal reduced by an amount equal
to 50% of any increase in the Overcollateralization Amount that results in a
reduction in the principal balance of its Corresponding REMIC 4 Interests) and
will be accrued and added to the principal balance of the Class LT3-X Interest.
All payments of scheduled principal and prepayments of principal on the Mortgage
Loans shall be allocated 50% to the Class LT3-X Interest and 50% to the REMIC 3
Marker Interests (with principal payments allocated to each of the REMIC 3
Marker Interests in an amount equal to 50% of the principal amounts distributed
to the Corresponding REMIC 4 Interests in reduction of their principal amounts).
Notwithstanding the preceding sentence, an amount equal to the principal
payments that result in a reduction in the Overcollateralization Amount shall be
treated as payable entirely to the Class LT3-X Interest. Realized Losses, other
than Realized Losses that are not applied against overcollateralization or the
principal amount of the Class M, Class X or Class B Certificates, shall be
applied to the REMIC 3 Marker Interests and the Class LT3-X Interest so that
after all distributions have been made on each Distribution Date (i) the
principal balance of each of the REMIC 3 Marker Interests is equal to 50% of the
principal balance of the Corresponding REMIC 4 Interests and (ii) the principal
balance of the Class LT3-X Interest is equal to the sum of (x) 50% of the
aggregate principal balance of the REMIC 2 Regular Interests and (y) 50% of the
Overcollateralization Amount. Each REMIC 3 Marker Interest shall be entitled to
receive an amount equal to 50% of all amounts distributed to the Corresponding
REMIC 4 Interest in respect of unreimbursed amounts of Realized Losses. The
Class LT3-X Interest shall be entitled to receive all other amounts distributed
to the Certificates in respect of unreimbursed amounts of Realized Losses. The
principal balance of the REMIC 3 Regular Interests will be increased on each
Distribution Date in an amount equal to any increase on such Distribution Date
in the Certificate Principal Balance of the Certificates pursuant to the last
sentence of the definition of "Certificate Principal Balance." The increase
described in the preceding sentence shall be allocated 50% to the Class LT3-X
Interest and 50% among the REMIC 3 Regular Interests so that each REMIC 3 Marker
Interest will have its principal amount increased by an amount equal to 50% of
the increase in the principal balance of its Corresponding REMIC 4 Interest
pursuant to the immediately following paragraph.

      All payments of scheduled principal and prepayments on the Mortgage Loans,
and Realized Losses on the Mortgage Loans, shall be allocated among the REMIC 4
Regular Interests in the same manner as such payments or Realized Losses are
allocated to the Related Certificates (treating the Class N Certificates and the
Class X Certificates as related to the REMIC 4 XN Interest for this purpose).
Each

                                      -66-
<PAGE>

REMIC 4 Regular Interest shall be entitled to receive all amounts distributed to
the Related Certificates in respect of unreimbursed amounts of Realized Losses
(treating the Class N Certificates and the Class X Certificates as related to
the REMIC 4 XN Interest for this purpose). The principal balance of the REMIC 4
Regular Interests will be increased on each Distribution Date in an amount equal
to any increase on such Distribution Date in the Certificate Principal Balance
of the Related Certificates pursuant to the last sentence of the definition of
"Certificate Principal Balance.

      In the event that any REMIC provided for herein fails to qualify as a
REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a
result of a prohibited transaction or prohibited contribution under the REMIC
Provisions due to the negligent performance by a Servicer of its duties and
obligations set forth herein, such Servicer shall indemnify the Trustee, the
Securities Administrator, the Master Servicer and the Trust Fund against any and
all Losses resulting from such negligence; provided, however, that such Servicer
shall not be liable for any such Losses attributable to the action or inaction
of the Securities Administrator, the Depositor, the Trustee or the Holder of
such Class R Certificate, as applicable, nor for any such Losses resulting from
misinformation provided by the Holder of such Class R Certificate on which such
Servicer has relied. The foregoing shall not be deemed to limit or restrict the
rights and remedies of the Holder of such Class R Certificate now or hereafter
existing at law or in equity. Notwithstanding the foregoing, however, in no
event shall such Servicer have any liability (1) for any action or omission that
is taken in accordance with and in compliance with the express terms of, or
which is expressly permitted by the terms of, this Agreement, (2) for any Losses
other than arising out of a negligent performance by such Servicer of its duties
and obligations set forth herein, and (3) for any special or consequential
damages to Certificateholders (in addition to payment of principal and interest
on the Certificates).

      In the event that any REMIC provided for herein fails to qualify as a
REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a
result of a prohibited transaction or prohibited contribution under the REMIC
Provisions due to the negligent performance by the Securities Administrator of
its duties and obligations set forth herein, the Securities Administrator shall
indemnify the Trust Fund against any and all Losses resulting from such
negligence; provided, however, that the Securities Administrator shall not be
liable for any such Losses attributable to the action or inaction of the
applicable Servicer, the Depositor, the Trustee or the Holder of such Class R
Certificate, as applicable, nor for any such Losses resulting from
misinformation provided by the Holder of such Class R Certificate on which the
Securities Administrator has relied. The foregoing shall not be deemed to limit
or restrict the rights and remedies of the Holder of such Class R Certificate
now or hereafter existing at law or in equity. Notwithstanding the foregoing,
however, in no event shall the Securities Administrator have any liability (1)
for any action or omission that is taken in accordance with and in compliance
with the express terms of, or which is expressly permitted by the terms of, this
Agreement, (2) for any Losses other than arising out of a negligent performance
by the Securities Administrator of its duties and obligations set forth herein,
and (3) for any special or consequential damages to Certificateholders (in
addition to payment of principal and interest on the Certificates).

      SECTION 2.08.Covenants of the Master Servicer.

      The Master Servicer hereby covenants to each of the other parties to this
Agreement as follows:

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

            (b)   no written information, certificate of an officer, statement
furnished in writing or written report delivered to the Depositor, any Servicer
or the Trustee, any affiliate of the Depositor, each

                                      -67-
<PAGE>

Servicer, the Securities Administrator, the Backup Servicer or the Trustee and
prepared by the Master Servicer pursuant to this Agreement will be inaccurate in
any material respect, provided, however, that the Master Servicer shall not be
responsible for inaccurate information provided to it by third parties.

      SECTION 2.09.Covenants of the Servicers.

            (a)   Each Servicer hereby covenants to each of the other parties to
this Agreement as follows:

                  (i)   Such 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

                  (ii)  No written information, certificate of an officer,
statement furnished in writing or written report delivered to the Depositor, the
Master Servicer, the Securities Administrator, the Backup Servicer or the
Trustee, any affiliate of the Depositor, the Master Servicer, the Securities
Administrator, the Backup Servicer or the Trustee and prepared by each Servicer
pursuant to this Agreement will be inaccurate in any material respect, provided,
however, that such Servicer shall not be responsible for inaccurate information
provided to it by third parties.

      SECTION 2.10.Related Agreements.

      The Trustee acknowledges receipt of the Cap Contract (a form of which is
attached hereto), the Sale Agreement and the Transfer Agreement.

      SECTION 2.11.Conveyance of Subsequent Mortgage Loans.

            (a)   Subject to the conditions set forth in paragraph (b) below, in
consideration of the remittance on each Subsequent Transfer Date to or upon the
order of the Depositor of all or a portion of the balance of funds in the
Pre-Funding Account, which constitute the purchase price for the related
Subsequent Mortgage Loans, as described in the next paragraph, the Depositor
shall on such Subsequent Transfer Date sell, transfer, assign, set over and
convey without recourse all of the right, title and interest of the Depositor in
and to (i) the Subsequent Mortgage Loans identified on the Mortgage Loan
Schedule attached to the related Subsequent Transfer Instrument delivered by the
Depositor on such Subsequent Transfer Date, including all interest and principal
received on or with respect to the Subsequent Mortgage Loans so assigned and the
Depositor shall deliver to, and deposit with, the Trustee all items with respect
to such Subsequent Mortgage Loans to be delivered pursuant to Section 2.01;
provided, however, that the Depositor reserves and retains all right, title and
interest in and to principal received and interest accruing on the Subsequent
Mortgage Loans on or prior to the related Subsequent Cut-off Date. The transfer
to the Trustee for deposit in the Mortgage Pool by the Depositor of the
Subsequent Mortgage Loans identified on the Mortgage Loan Schedule shall be
absolute and is intended by the Depositor, the Servicer, the Trustee and the
Certificateholders to constitute and to be treated as a sale of the Subsequent
Mortgage Loans by the Depositor to the Trust Fund. The related Mortgage File for
each Subsequent Mortgage Loan shall be delivered to the Trustee or to the
Custodian (as the duly appointed agent of the Trustee) on or before the related
Subsequent Transfer Date. The Trustee shall amend the Mortgage Loan Schedule to
reflect the removal of such Subsequent Mortgage Loans. After the Subsequent
Transfer Date, the Subsequent Mortgage Loans shall constitute part of the
Mortgage Pool and shall be subject in all respects to the terms of this
Agreement and the Sale Agreement, including all applicable representations and
warranties thereof included in the Sale Agreement as of the date of
substitution.

      Upon delivery by the Depositor of timely Addition Notices, and subject to
satisfaction of the conditions set forth in paragraphs (c) and (d) below, the
Trust Fund shall be obligated to purchase, in

                                      -68-
<PAGE>

accordance with the provisions of this Agreement, Subsequent Mortgage Loans
offered for sale by the Depositor during the Funding Period (subject to the
limitation that the aggregate purchase price for such Subsequent Mortgage Loans
may not exceed the Original Pre-Funded Amount). The purchase price paid by the
Trust Fund for the Subsequent Mortgage Loans on each Subsequent Transfer Date
shall be one-hundred percent (100%) of the aggregate Stated Principal Balance of
the Subsequent Mortgage Loans so transferred (as identified on the Mortgage Loan
Schedule provided by the Depositor) as of the related Subsequent Cut-off Date.
On each Subsequent Transfer Date, the aggregate purchase price for all
Subsequent Mortgage Loans purchased on such date shall be withdrawn by the
Securities Administrator from the Pre-Funding Account and paid to the Depositor.
Thereafter, the Pre-Funded Amount will equal the Original Pre-Funded Amount
reduced by the purchase price paid for Subsequent Mortgage Loans. This Agreement
shall constitute a fixed-price purchase contract in accordance with Section
860G(a)(3)(A)(ii) of the Code.

            (b)   The Depositor shall transfer to the Trustee for deposit in the
Mortgage Pool the Subsequent Mortgage Loans and the other property and rights
related thereto as described in paragraph (a) above, and the Securities
Administrator shall release funds from the Pre-Funding Account, only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date:

                  (i)    the Depositor shall have provided the Trustee, the
Securities Administrator and the Servicers with a timely Addition Notice;

                  (ii)   the Depositor shall have delivered to the Trustee (with
a copy to the Securities Administrator) a duly executed Subsequent Transfer
Instrument, which shall include a Mortgage Loan Schedule listing the Subsequent
Mortgage Loans, and the Depositor shall have delivered a computer file
containing such Mortgage Loan Schedule to the Securities Administrator, the
Trustee and the Servicer at least three Business Days prior to the related
Subsequent Transfer Date;

                  (iii)  as of each Subsequent Transfer Date, as evidenced by
delivery of the Subsequent Transfer Instrument, the Depositor shall not be
insolvent nor shall it have been rendered insolvent by such transfer nor shall
it be aware of any pending insolvency;

                  (iv)   the Funding Period shall not have terminated;

                  (v)    the Depositor shall have delivered to the Trustee (with
a copy to the Securities Administrator) a Subsequent Transfer Instrument
confirming the satisfaction of the conditions precedent specified in this
Section 2.11 and, pursuant to the Subsequent Transfer Instrument, assigned to
the Trustee without recourse for the benefit of the Certificateholders all the
right, title and interest of the Depositor, in, to and under the Subsequent
Mortgage Loan Purchase Agreement, to the extent of the Subsequent Mortgage
Loans;

                  (vi)   the Depositor shall have delivered to the Trustee a
letter (with copies provided to each Rating Agency and the Securities
Administrator), which the Trustee may rely on, including for purposes of
paragraph (c) and (d) stating that the characteristics of the Subsequent
Mortgage Loans substantially conform to the characteristics set forth in
paragraphs (c) and (d) below and that such Subsequent Mortgage Loans were not
selected in a manner that the Depositor believes to be adverse to
Certificateholders;

                  (vii)  the Depositor shall have delivered to the Trustee an
Opinion of Counsel addressed to the Trustee and the Rating Agencies with a copy
to the Securities Administrator with respect to the transfer of the Subsequent
Mortgage Loans substantially in the form of the Opinion of Counsel delivered to
the Trustee on the Closing Date regarding the true sale of the Subsequent
Mortgage Loans; and

                                      -69-
<PAGE>

                  (viii) the Trustee shall have delivered to the Depositor an
Opinion of Counsel addressed to the Depositor and the Rating Agencies with
respect to the Subsequent Transfer Instrument substantially in the form of the
Opinion of Counsel delivered to the Depositor on the Closing Date regarding
certain corporate matters relating to the Trustee.

            (c)   The obligation of the Trust Fund to purchase a Subsequent
Mortgage Loan on any Subsequent Transfer Date is subject to the satisfaction of
the conditions set forth in paragraph (d) below and the accuracy of the
following representations and warranties with respect to such Subsequent
Mortgage Loan determined as of the Subsequent Cut-off Date (or such other date
as is specified herein): (i) the Subsequent Mortgage Loan may not be 31 or more
days delinquent as of the related Subsequent Cut-off Date (except with respect
to not more than 1.5% of the Subsequent Mortgage Loans, by aggregate principal
balance as of the related Subsequent Cut-off Date, which may be 31 or more days
delinquent but less than 60 days delinquent as of the related Subsequent Cut-off
Date); (ii) the stated term to maturity of the Subsequent Mortgage Loan will not
be less than 120 months and will not exceed 360 months; (iii) the Subsequent
Mortgage Loan may not provide for negative amortization; (iv) the Subsequent
Mortgage Loan will not have a Loan-to-Value Ratio greater than 95.0%; (v) the
Subsequent Mortgage Loans will have as of the Subsequent Cut-off Date, a
weighted average term since origination not in excess of 6 months; (vi) the
Subsequent Mortgage Loan must have a first Monthly Payment due on or before June
23, 2004; (vii) the Subsequent Mortgage Loan will be underwritten in accordance
with the criteria set forth under the section "Underwriting Guidelines--The
Winter Group Underwriting Guidelines" in the Prospectus Supplement, (viii) the
Subsequent Mortgage Loan must provide for monthly interest payments due on the
first day of each calendar month (ix) as of the Subsequent Transfer Date for
such Subsequent Mortgage Loan, the Subsequent Mortgage Loan must be a "qualified
mortgage" within the meaning of Section 860G of the Code and Treasury
Regulations Section 1.860G-2 (as determined without regard to Treasury
Regulations Section 1.860G-2(a)(3) or any similar provision that treats a
defective obligation as a qualified mortgage for a temporary period), (x) as of
the Subsequent Transfer Date for such Subsequent Mortgage Loan, the Subsequent
Mortgage Loan does not provide for interest other than at either (a) a single
fixed rate in effect throughout the term of the Subsequent Mortgage Loan or (b)
a "variable rate" (within the meaning of Treasury Regulations Section
1.860G-1(a)(3)) in effect throughout the term of the Subsequent Mortgage Loan,
(xi) as of the Subsequent Transfer Date for such Subsequent Mortgage Loan, the
Depositor would not, based on the delinquency status of such Subsequent Mortgage
Loan, institute foreclosure proceedings prior to the next scheduled payment date
for such Subsequent Mortgage Loan and (xii) as of the Subsequent Transfer Date
for such Subsequent Mortgage Loan, the Subsequent Mortgage Loan was not the
subject of pending or final foreclosure proceedings.

            (d)   Following the purchase of the Subsequent Mortgage Loans by the
Trust Fund, the Mortgage Loans (including the Subsequent Mortgage Loans) will
have characteristics that, as of the Subsequent Cut-off Date, are not materially
inconsistent with the Initial Mortgage Loans.

      Notwithstanding the foregoing, any Subsequent Mortgage Loan may be
rejected by either Rating Agency if the inclusion of any such Subsequent
Mortgage Loan would adversely affect the ratings of any Class of Certificates.

      SECTION 2.12.Permitted Activities of the Trust. The Trust is created for
the object and purpose of engaging in the Permitted Activities.

      SECTION 2.13.Qualifying Special Purpose Entity. For purposes of SFAS 140,
the parties hereto intend that the Trust Fund shall be treated as a "qualifying
special purpose entity" as such term is used in SFAS 140 and any successor rule
thereto and its power and authority as stated in Section 2.11 of this Agreement
shall be limited in accordance with paragraph 35 or SFAS 140.

                                      -70-
<PAGE>

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                               OF MORTGAGE LOANS

      SECTION 3.01. Servicers to Service Mortgage Loans.

      For and on behalf of the Certificateholders, each Servicer shall service
and administer the Mortgage Loans in accordance with Accepted Servicing
Practices. In connection with such servicing and administration, each Servicer
shall have full power and authority, acting alone and/or through subservicers as
provided in Section 3.02 hereof, to do or cause to be done any and all things
that it may deem necessary or desirable in connection with such servicing and
administration, including but not limited to, the power and authority, subject
to the terms hereof (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds and (iv) 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, subject to Section 6.03, no
Servicer shall take any action that is inconsistent with or prejudices the
interests of the Trust Fund or the Certificateholders in any Mortgage Loan
serviced by it under this Agreement or the rights and interests of the other
parties to this Agreement except as otherwise required by this Agreement or by
law. Each Servicer shall not make or permit any modification, waiver or
amendment of any term of any Mortgage Loan which would cause any of the REMICs
provided for herein to fail to qualify as a REMIC or result in the imposition of
any tax under Section 860G(a) or 860G(d) of the Code. Each Servicer shall
represent and protect the interest of the Trust Fund in the same manner as each
currently protects its own interest in mortgage loans in its own portfolio in
any claim, proceeding or litigation regarding a Mortgage Loan, 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,
each Servicer, in its own name or in the name of the Depositor and the Trustee,
is hereby authorized and empowered by the Depositor, the Securities
Administrator and the Trustee, when each Servicer believes it appropriate in its
reasonable judgment, to execute and deliver, on behalf of the Trustee, the
Depositor, the Securities Administrator, the Certificateholders or any of them,
any and all instruments of satisfaction or cancellation, or of partial or full
release or discharge, subordinations 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. Each Servicer shall prepare and
deliver to the Depositor, the Securities Administrator and/or the Trustee such
documents requiring execution and delivery by either or both of them as are
necessary or appropriate to enable such Servicer to service and administer the
Mortgage Loans, to the extent that such Servicer is not permitted to execute and
deliver such documents pursuant to the preceding sentence. Upon receipt of such
documents, the Depositor, the Securities Administrator and/or the Trustee shall
execute such documents and deliver them to the related Servicer. For purposes of
this Section 3.01, the Trustee hereby will provide to each Servicer 50 powers of
attorney (intended to be one power of attorney for each state in the United
States) to execute and file any and all documents necessary to fulfill the
obligations of each Servicer under this Section 3.01.

      No Servicer shall be required to make any Servicing Advance with respect
to a Mortgage Loan that is 150 days or more delinquent.

      Each Servicer shall deliver a list of Servicing Officers to the Securities
Administrator and the Trustee by the Closing Date (or the Subsequent Transfer
Date with respect to Subsequent Mortgage Loans).

                                      -71-
<PAGE>

      Each Servicer for each related Mortgage Loan has fully furnished, in
accordance with the Fair Credit Reporting Act and its implementing regulations,
accurate and complete information (i.e., favorable and unfavorable) on its
borrower credit files to Equifax, Experian, and Trans Union Credit Information
Company (three of the credit repositories), on a monthly basis.

      Each Servicer will transmit full-file credit reporting data for each
Mortgage Loan pursuant to Fannie Mae Guide Announcement 97-02 and that for each
Mortgage Loan, each Servicer agrees that it shall report one of the following
statuses each month as follows: current, delinquent (30-, 60-, 90-days, etc.),
foreclosed or charged-off.

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

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

            (a) Each Servicer may arrange for the subservicing of any Mortgage
Loan by a subservicer, which may be an affiliate (each, a "Subservicer")
pursuant to a subservicing agreement (each, a "Subservicing Agreement");
provided, however, that (i) 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 and (ii) that such Subservicing Agreement would not result in a
withdrawal or downgrading by any Rating Agency of the ratings of any
Certificates evidenced by a letter to that effect delivered by each Rating
Agency to the Depositor. Notwithstanding the provisions of any Subservicing
Agreement, any of the provisions of this Agreement relating to agreements or
arrangements between the related Servicer and a Subservicer or reference to
actions taken through a Subservicer or otherwise, the related Servicer shall
remain obligated and liable to the Depositor, the Securities Administrator, 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 related
Servicer alone were servicing and administering the Mortgage Loans. Every
Subservicing Agreement entered into by each Servicer shall contain a provision
giving any successor servicer the option to terminate such agreement in the
event a successor servicer is appointed. All actions of the each Subservicer
performed pursuant to the related Subservicing Agreement shall be performed as
an agent of the related Servicer with the same force and effect as if performed
directly by such Servicer. The related Servicer shall deliver to the Securities
Administrator copies of all Subservicing Agreements. The Trustee shall have no
obligations, duties or liabilities with respect to a subservicer including no
obligation, duty or liability to monitor such subservicer or to pay a
Subservicer's fees and expenses.

            (b) For purposes of this Agreement, each 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 each Servicer.

                                      -72-
<PAGE>

      SECTION 3.03. Rights of the Depositor, the Securities Administrator, the
Backup Servicer and the Trustee in Respect of any Servicer.

      None of the Securities Administrator, the Trustee, the Backup Servicer nor
the Depositor shall have any responsibility or liability for any action or
failure to act by any Servicer, and none of them is obligated to supervise the
performance of each Servicer hereunder or otherwise.

      SECTION 3.04. The Master Servicer or Backup Servicer to Act as Servicer.

      Subject to Sections 7.04 and 8.02, in the event that a Servicer shall for
any reason no longer be a Servicer hereunder (including by reason of an Event of
Default), the successor servicer (which may be the Securities Administrator, the
Master Servicer or the Backup Servicer pursuant to Section 8.02) shall, within a
period of time not to exceed ninety (90) days from the date of notice of
termination or resignation, thereupon assume all of the rights and obligations
of such Servicer hereunder arising thereafter (except that the Securities
Administrator, the Master Servicer or Backup Servicer shall not be (i) liable
for losses of such Servicer pursuant to Section 3.10 hereof or any acts or
omissions of such predecessor Servicer hereunder, (ii) obligated to make
Advances or Servicing Advance 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 any expenses of such Servicer pursuant to Section 2.03 or (v)
deemed to have made any representations and warranties hereunder, including
pursuant to Section 2.04 or the first paragraph of Section 7.02 hereof;
provided, however that the Securities Administrator, the Master Servicer or the
Backup Servicer (subject to clause (ii) above) or its designee, in its capacity
as the successor servicer, shall immediately assume the terminated or resigning
Servicer's obligation to make Advances and Servicing Advances). No such
termination shall affect any obligation of the applicable Servicer to pay
amounts owed under this Agreement and to perform its duties under this Agreement
until its successor assumes all of its rights and obligations hereunder. If a
Servicer shall for any reason no longer be a Servicer (including by reason of
any Event of Default), the Securities Administrator, the Master Servicer or the
Backup Servicer (or any other successor servicer) may, at its option, succeed to
any rights and obligations of such Servicer under any subservicing agreement in
accordance with the terms thereof; provided, however, that the Securities
Administrator, the Master Servicer or the Backup Servicer (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 applicable Servicer thereunder; and such Servicer shall not
thereby be relieved of any liability or obligations under the subservicing
agreement arising prior to the date of such succession. Notwithstanding anything
to the contrary herein, in no event will a successor servicer be liable for any
expenses or liabilities that were incurred by a predecessor servicer. To the
extent any costs or expenses, including without limitation Servicing Transfer
Costs incurred by the Securities Administrator, the Master Servicer or the
Backup Servicer in connection with this Section 3.04, are not paid by the
applicable Servicer pursuant to this Agreement within 30 days of the date of the
Securities Administrator's, the Master Servicer's or the Backup Servicer's
invoice, as applicable, thereof, such amounts shall be payable out of funds on
deposit in the Master Servicer Collection Account. The terminated Servicer shall
reimburse the Trust Fund for any such expense incurred by the Trust Fund upon
receipt of a reasonably detailed invoice evidencing such expenses. If the
Securities Administrator, the Master Servicer or the Backup Servicer is
unwilling or unable to act as servicer, the Master Servicer shall seek to
appoint a successor servicer that is eligible in accordance with the criteria
specified this Agreement.

      The applicable Servicer shall, upon request of the Securities
Administrator, the Master Servicer or the Backup Servicer, but at the expense of
such Servicer, deliver to the assuming party all documents and records relating
to each subservicing agreement and the Mortgage Loans then being serviced and

                                      -73-
<PAGE>

otherwise use its best efforts to effect the orderly and efficient transfer of
the subservicing agreement to the assuming party.

      In the event that any Servicer shall for any reason no longer be able to
be a Servicer hereunder, notwithstanding anything to the contrary herein, the
Trustee and the Depositor hereby agree that within 10 Business Days of delivery
to the Trustee and the Securities Administrator by the Servicing Rights Pledgee
of a letter signed by such Servicer whereby such Servicer shall resign as
Servicer under this Agreement, the Servicing Rights Pledgee or its designee
shall be appointed as successor Servicer (provided that at the time of such
appointment the Servicing Rights Pledgee or such designee meets the requirements
of a successor Servicer set forth above) and the Servicing Rights Pledgee agrees
to be subject to the terms of this Agreement.

      SECTION 3.05. Collection of Mortgage Loan Payments; Collection Account;
Master Servicer Collection Account; Certificate Account.

            (a) Each Servicer shall make reasonable efforts in accordance with
Accepted Servicing Practices to collect all payments called for under the terms
and provisions of the Mortgage Loans to the extent such procedures shall be
consistent with this Agreement and the terms and provisions of any related
Required Insurance Policy. Consistent with the foregoing, each Servicer may in
its discretion (i) waive any late payment charge or, if applicable, any penalty
interest, or (ii) subject to Section 3.01, extend the due dates for payments due
on a Mortgage Note for a period not greater than 180 days; provided, however,
that any extension pursuant to clause (ii) above shall not affect the
amortization schedule of any Mortgage Loan for purposes of any computation
hereunder, except as provided below. In the event of any such arrangement
pursuant to clause (ii) above, subject to Section 5.01, each Servicer shall make
any Advances on the related Mortgage Loan during the scheduled period in
accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements. Notwithstanding the
foregoing, in the event that any Mortgage Loan is in default or, in the judgment
of a Servicer, such default is reasonably foreseeable, such Servicer, subject to
the provisions of Section 3.01, may also waive, modify or vary any term of such
Mortgage Loan (including modifications that would change the Mortgage Rate,
forgive the payment of principal or interest or extend the final maturity date
of such Mortgage Loan), accept payment from the related Mortgagor of an amount
less than the Stated Principal Balance in final satisfaction of such Mortgage
Loan, or consent to the postponement of strict compliance with any such term or
otherwise grant indulgence to any Mortgagor (any and all such waivers,
modifications, variances, forgiveness of principal or interest, postponements,
or indulgences collectively referred to herein as "forbearance"), provided,
however, that in determining which course of action permitted by this sentence
it shall pursue, each Servicer shall adhere to the standards of Section 3.01. A
Servicer's analysis supporting any forbearance and the conclusion that any
forbearance meets the standards of Section 3.01 shall be reflected in writing in
the Mortgage File.

            (b) Each Servicer will not waive any Prepayment Penalty or portion
thereof unless, (i) the enforceability thereof shall have been limited by
bankruptcy, insolvency, moratorium, receivership or other similar laws relating
to creditors' rights generally or is otherwise prohibited by law, or (ii) the
collectability thereof shall have been limited due to acceleration in connection
with a foreclosure or other involuntary payment, or (iii) the applicable
Servicer has not been provided with information sufficient to enable it to
collect the Prepayment Penalty, or (iv) in the applicable Servicer's reasonable
judgment as described in Section 3.01 hereof, (x) such waiver relates to a
default or a reasonably foreseeable default, (y) such waiver would maximize
recovery of total proceeds taking into account the value of such Prepayment
Penalty and related Mortgage Loan and (z) doing so is standard and customary in
servicing similar Mortgage Loans (including any waiver of a Prepayment Penalty
in connection with a refinancing of a Mortgage Loan that is related to a default
or a reasonably foreseeable default). Except as provided in the preceding
sentence, in no event will any Servicer waive a Prepayment Penalty in connection
with a

                                      -74-
<PAGE>

refinancing of a Mortgage Loan that is not related to a default or a reasonably
foreseeable default. If a Servicer waives or does not collect all or a portion
of a Prepayment Penalty relating to a Principal Prepayment in full or in part
due to any action or omission of such Servicer, other than as provided above,
such Servicer shall deposit the amount of such Prepayment Penalty (or such
portion thereof as had been waived for deposit) into the Collection Account for
distribution in accordance with the terms of this Agreement. In connection with
any waiver of a Prepayment Penalty by a Servicer, such Servicer shall account
for such waiver in its monthly reports as agreed upon by such Servicer and the
Credit Risk Manager.

            (c) Each 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.

            (d) Each Servicer shall establish and initially maintain, on behalf
of the Certificateholders, one or more Collection Accounts, in the form of time
deposit or demand accounts, titled "[Servicer's Name], as servicer for U.S. Bank
National Association, as trustee, in trust for the Holders of Terwin Mortgage
Trust 2004-5HE, Asset-Backed Certificates, TMTS Series 2004-5HE". Each Servicer
shall deposit into the Collection Account daily, within two Business Days of
receipt thereof, in immediately available funds, the following payments and
collections received or made by it on and after the Cut-Off Date with respect to
the Mortgage Loans (or Subsequent Cut-off Date with respect to Subsequent
Mortgage Loans):

                  (i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans, other than principal due on the Mortgage
Loans on or prior to the Cut-off Date or Subsequent Cut-off Date, as applicable;

                  (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 due on the Mortgage Loans on or prior to the Cut-off Date or Subsequent
Cut-off Date, as applicable;

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

                  (iv) all Subsequent Recoveries;

                  (v) all Compensating Interest;

                  (vi) any amount required to be deposited by each Servicer
pursuant to Section 3.05(g) in connection with any losses on Permitted
Investments;

                  (vii) any amounts required to be deposited by each Servicer
pursuant to Section 3.10 hereof;

                  (viii) all Advances made by each Servicer pursuant to Section
5.01;

                  (ix) all Prepayment Penalties; and

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

                                      -75-
<PAGE>

      The foregoing requirements for remittance by a Servicer into the
Collection Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, late payment charges,
insufficient funds charges and payments in the nature of assumption fees (i.e.
fees related to the assumption of a Mortgage Loan upon the purchase of the
related Mortgaged Property and other similar ancillary fees (other than
Prepayment Penalties) if collected, need not be remitted by such Servicer. In
the event that a 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 Securities Administrator, or such other
institution maintaining the Collection Account, to withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding. Each
Servicer shall maintain adequate records with respect to all withdrawals made
pursuant to this Section. All funds deposited in the Collection Account shall be
held in trust for the Certificateholders until withdrawn in accordance with
Section 3.08. In no event shall the Securities Administrator or the Trustee
incur liability for withdrawals from the Collection Account at the direction of
each Servicer.

      Each Servicer shall give notice to the Securities Administrator, the
Master Servicer, the Backup Servicer and the Trustee of the location of the
Collection Account maintained by it when established and prior to any change
thereof. Not later than twenty days after each Distribution Date, each Servicer
shall forward to the Securities Administrator, the Trustee and the Depositor the
most current available bank statement for the Collection Account. Copies of such
statement shall be provided by the Securities Administrator to any
Certificateholder and to any Person identified to the Securities Administrator
as a prospective transferee of a Certificate, upon request at the expense of the
requesting party, provided such statement is delivered by each Servicer to the
Securities Administrator.

            (e) The Master Servicer shall establish and maintain an account, for
the benefit of the Certificateholders, as a segregated account (the "Master
Servicer Collection Account"), which shall be an Eligible Account. The Master
Servicer shall, promptly upon receipt from the related Servicer on the Servicer
Remittance Date, deposit into the Master Servicer Collection Account and retain
on deposit until the related Master Servicer Remittance Date, the following
amounts:

                  (i) the aggregate amount remitted by such Servicer to the
Master Servicer pursuant to Section 3.08(a)(viii); and

                  (ii) any other amounts deposited hereunder which are required
to be deposited in the Master Servicer Collection Account pursuant to this
Agreement including, but not limited to, any amounts due to the Trustee, the
Securities Administrator or the Backup Servicer pursuant to Section 3.08 and
Article IX herein.

      In the event that the related Servicer shall remit to the Master Servicer
any amount not required to be remitted, such Servicer may at any time in writing
direct the Master Servicer to withdraw such amount from the Master Servicer
Collection Account, any provision herein to the contrary notwithstanding. Such
direction may be accomplished by delivering written notice to the Master
Servicer (upon which the Master Servicer may conclusively rely) which describes
the amounts deposited in error in the Master Servicer Collection Account. All
funds deposited in the Master Servicer Collection Account shall be held by the
Master Servicer in trust for the Certificateholders until disbursed in
accordance with this Agreement or withdrawn in accordance with Section 3.08(b).
In no event shall the Master Servicer incur liability for withdrawals from the
Master Servicer Collection Account at the direction of the related Servicer. The
Master Servicer shall give notice to the Securities Administrator, the Master
Servicer, the Backup Servicer and each Servicer of the location of the Master
Servicer Collection Account maintained by it when established and prior to any
change thereof.

                                      -76-
<PAGE>

            (f) The Securities Administrator shall establish and maintain, on
behalf of the Certificateholders, the Certificate Account. The Securities
Administrator shall, promptly upon receipt from the Master Servicer on the
Master Servicer Remittance Date, deposit or cause to be deposited in the
Certificate Account and retain therein the following:

                  (i) The aggregate amount remitted by the Master Servicer to
the Securities Administrator pursuant to Section 3.05(e); and;

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

                  (iii) any amount required to be deposited by the Securities
Administrator pursuant to Section 3.05(g) in connection with any losses on
Permitted Investments; and

                  (iv) the Optional Termination Amount paid by Countrywide
pursuant to Section 10.01.

      Any amounts received by the Securities Administrator prior to 1:00 p.m.
New York City time (or such earlier deadline for investment in the Permitted
Investments designated by the Securities Administrator) which are required to be
deposited in the Certificate Account by each Servicer or Master Servicer shall
be invested in Permitted Investments on the Business Day on which they were
received. The foregoing requirements for remittance by each Servicer and Master
Servicer and deposit by each Servicer and Master Servicer into the Certificate
Account shall be exclusive. In the event that the Master Servicer shall remit to
the Securities Administrator any amount not required to be remitted, it may at
any time in writing direct the Securities Administrator to withdraw such amount
from the Certificate Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering written notice
to the Securities Administrator (upon which the Securities Administrator may
conclusively rely) which describes the amounts deposited in error in the
Certificate Account. All funds deposited in the Certificate Account shall be
held by the Securities Administrator 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 Securities Administrator incur liability for
withdrawals from the Certificate Account at the direction of the Master
Servicer. The Securities Administrator shall give notice to the Trustee, the
Master Servicer and each Servicer of the location of the Certificate Account
maintained by it when established and prior to any change thereof.

            (g) Each institution that maintains a Collection Account or the
Master Servicer Collection Account shall invest the funds in each such account,
as directed by a Servicer, the Master Servicer, as applicable, in writing, in
Permitted Investments, which shall mature not later than (i) in the case of the
Collection Account the Business Day preceding the related Servicer Remittance
Date (except that if such Permitted Investment is an obligation of the
institution that maintains such Collection Account or is otherwise immediately
available, then such Permitted Investment shall mature not later than each
Servicer Remittance Date) and (ii) in the case of the Master Servicer Collection
Account, the Business Day preceding the related Master Servicer Remittance Date
(except that if such Permitted Investment is an obligation of the institution
that maintains such Master Servicer Collection Account or is otherwise
immediately available, then such Permitted Investment shall mature not later
than each Master Servicer Remittance Date) and, 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 a Servicer or the Master Servicer, as applicable, for the
benefit of the Certificateholders. All income and gain net of any losses
realized from amounts on deposit in the Collection Account shall be for the
benefit of the related Servicer as servicing compensation and shall be remitted
to it monthly as provided herein. The amount of any losses incurred in the
Collection Account in respect of any such investments shall be deposited by the
related Servicer in the Collection Account out of such Servicer's own funds
immediately as realized. All income and gain

                                      -77-
<PAGE>

net of any losses realized from amounts on deposit in the Master Servicer
Collection Account shall be for the benefit of the Master Servicer as master
servicing compensation and shall be remitted to it monthly as provided herein.
The amount of any losses incurred in the Master Servicer Collection Account in
respect of any such investments shall be deposited by the Master Servicer in the
Master Servicer Collection Account out of such Master Servicer's own funds
immediately as realized. The Securities Administrator shall retain the funds in
the Certificate Account uninvested.

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

      To the extent required by the related Mortgage Note, each 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
each Servicer) for the payment of taxes, assessments, hazard insurance premiums
or comparable items for the account of the Mortgagors. Nothing herein shall
require each 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 each
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
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.

      Upon reasonable advance notice in writing if required by federal
regulation, each Servicer will provide to each Certificateholder 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 to comply with applicable
regulations of the OTS or other regulatory authorities with respect to
investment in the Certificates; provided, that each Servicer shall be entitled
to be reimbursed by each such Certificateholder for actual expenses incurred by
each Servicer in providing such reports and access.

      SECTION 3.08. Withdrawals from a Collection Account, Master Servicer
Collection Account and Certificate Account.

            (a) Each Servicer shall from time to time, make withdrawals from the
Collection Account for the following purposes:

                  (i) to pay to such Servicer (to the extent not previously paid
to or withheld by each 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 such Servicer for Advances made by it (or to
reimburse the Advance Financing Person 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) that represent late recoveries of payments
of

                                      -78-
<PAGE>

principal and/or interest on such particular Mortgage Loan(s) in respect of
which any such Advance was made;

                  (iii) to reimburse such Servicer for any Non-Recoverable
Advance previously made and any Non-Recoverable Servicing Advances previously
made to the extent that, in the case of Non-Recoverable Servicing Advances,
reimbursement therefor constitutes "unanticipated expenses" within the meaning
of Treasury Regulation Section 1.860G-1(b)(3)(ii);

                  (iv) to pay to such Servicer earnings on or investment income
with respect to funds in or credited to the Collection Account;

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

                  (vi) [RESERVED];

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

                  (viii) to pay to the Depositor or such 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;

                  (ix) to reimburse such Servicer, the Master Servicer, the
Securities Administrator, the Trustee or the Depositor for expenses incurred by
any of them in connection with the Mortgage Loans or Certificates and
reimbursable pursuant to Section 3.25 or Section 6.03 hereof provided that
reimbursement therefor would constitute "unanticipated" expenses within the
meaning of Treasury Regulation Section 1.860G-1(b)(3)(ii);

                  (x) to reimburse the Securities Administrator for enforcement
expenses reasonably incurred in respect of a breach of defect giving rise to the
purchase obligation in Section 2.03 that were incurred in the Purchase Price of
the Mortgage Loans including any expenses arising out of the enforcement of the
purchase obligation; provided that any such expenses will be reimbursable under
this subclause (x) only to the that such expenses would constitute
"unanticipated expenses" within the meaning of Treasury Regulation Section
1.860G-1(b)(3)(ii) if paid by one of the REMICs provided for herein;

                  (xi) to pay the Trustee and/or Securities Administrator any
amounts owed to them pursuant to Article IX.

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

                  (xiii) to clear and terminate the Collection Account upon
termination of this Agreement pursuant to Section 10.01 hereof.

                                      -79-
<PAGE>

      In addition, no later than 1:00 p.m. Eastern Time on each Servicer
Remittance Date, each Servicer shall cause to be withdrawn from the Collection
Account the Interest Funds, the Principal Funds and the Administration Fee
(other than the related Servicing Fee) (collectively, the "Servicer
Withdrawals"), to the extent on deposit, and such amount shall be deposited in
the Master Servicer Collection Account; provided, however, if the Master
Servicer does not receive such Servicer Withdrawals by 4:00 p.m. Eastern Time,
such Servicer Withdrawals shall be deposited by the Master Servicer in the
Master Servicer Collection Account by 1:00 p.m. Eastern Time on the next
Business Day. In the event such Servicer Withdrawals are not deposited by 1:00
p.m. Eastern Time, each Servicer shall pay, out of its own funds, interest on
such amount at a rate equal to the Master Servicer's Prime Rate for each date or
part thereof.

      Each Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Collection Account.

      Each Servicer shall provide written notification to the Trustee, the
Master Servicer and the Securities Administrator on or prior to the next
succeeding Servicer Remittance Date upon making any withdrawals from the
Collection Account pursuant to subclauses (iii) and (vii) above.

      Unless otherwise specified, any amounts reimbursable to each Servicer or
the Securities Administrator from amounts on deposit in the Collection Account,
the Master Servicer Collection Account or the Certificate Accounts shall be
deemed to come from first, Interest Funds, and thereafter, Principal Funds for
the related Distribution Date.

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

                  (i) to withdraw any amounts deposited in such Master Servicer
Collection Account and not required to be deposited therein;

                  (ii) to clear and terminate the Master Servicer Collection
Account upon termination of this Agreement pursuant to Section 10.01 hereof;

                  (iii) (a) to pay itself the Master Servicing Fee with respect
such Distribution Date and (b) to pay itself, the Trustee, the Securities
Administrator or the Backup Servicer any amounts permitted to be paid or
reimbursed to any such Person in accordance with Sections 3.08, 3.25 or 7.03, or
Articles IV or IX; and

                  (iv) to pay itself any investment income with respect to funds
in or credited to the Master Servicer Collection Account and any sub-account
thereof.

      In addition, no later than 1:00 p.m. Eastern Time on the Master Servicer
Remittance Date, the Master Servicer shall cause to be withdrawn from the Master
Servicer Collection Account the Interest Funds, the Principal Funds and the
Administration Fee (other than the Servicing Fees and the Master Servicing Fee)
(collectively, the "Master Servicer Withdrawals"), to the extent on deposit, and
such amount shall be deposited in the Certificate Account; provided, however, if
the Securities Administrator does not receive such Master Servicer Withdrawals
by 4:00 p.m. Eastern Time, such Master Servicer Withdrawals shall be deposited
by the Securities Administrator in the Certificate Account by 1:00 p.m. Eastern
Time on the next Business Day. In the event such Master Servicer Withdrawals are
not deposited by 1:00 p.m. Eastern Time, the Master Servicer shall pay, out of
its own funds, interest on such amount at a rate equal to the Federal Funds Rate
for each date or part thereof.

                                      -80-
<PAGE>

      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 Master Servicer Collection Account.

      Unless otherwise specified, any amounts reimbursable to a Servicer, the
Master Servicer or the Trustee from amounts on deposit in the Collection
Account, the Master Servicer Collection Account or the Certificate Accounts
shall be deemed to come from first, Interest Funds, and thereafter, Principal
Funds for the related Distribution Date.

            (c) The Securities Administrator shall withdraw funds from the
Certificate Account for distribution to the Certificateholders in the manner
specified in this Agreement in Section 5.05 (and to withhold from the amounts so
withdrawn, the amount of any taxes that it is authorized to retain pursuant to
this Agreement). In addition, the Securities Administrator shall from time to
time make withdrawals from the Certificate Account for the following purposes:

                  (i) to reimburse the Seller, the Master Servicer and/or the
Depositor for expenses incurred by any of them and reimbursable pursuant to
Section 10.01 hereof;

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

                  (iii) to clear and terminate the Certificate Account upon
termination of the Agreement pursuant to Section 10.01 hereof;

                  (iv) to pay the Credit Risk Manager the Credit Risk Manager
Fee; and

                  (v) to pay or reimburse itself, the Master Servicer or the
Trustee any amounts permitted to be paid or reimbursed to any such Person in
accordance with the provisions of this Agreement, including, without limitation,
any Advances made by the Master Servicer in its individual capacity as successor
servicer.

      SECTION 3.09. [RESERVED]

      SECTION 3.10. [RESERVED]

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

      When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the related Servicer shall, except as set forth below, to the extent
it has knowledge of such conveyance or prospective conveyance, exercise its
rights to accelerate the maturity of the related Mortgage Loan under any
"due-on-sale" clause contained in the related Mortgage or Mortgage Note;
provided, however, that such Servicer shall not exercise any such right if the
"due-on-sale" clause, in the reasonable belief of such Servicer, is not
enforceable under applicable law; provided, further, that such Servicer shall
not take any action in relation to the enforcement of any "due-on-sale" clause
which would adversely affect or jeopardize coverage under any Required Insurance
Policy. An Opinion of Counsel at the expense of the related Servicer (which the
expense shall constitute a Servicing Advance) delivered to the Securities
Administrator, the Trustee and the Depositor shall conclusively establish the
reasonableness of such Servicer's belief that any "due-on-sale" clause is not
enforceable under applicable law. In such event, a Servicer shall make
reasonable efforts to enter into an assumption and modification agreement with
the Person to whom such property has been or is about to be conveyed, pursuant
to which such Person becomes liable under the Mortgage Note and, unless
prohibited by applicable law or the Mortgage, the Mortgagor remains liable
thereon. If the foregoing is not permitted under applicable law, the related

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Servicer is authorized to enter into a substitution of liability agreement with
such Person, pursuant to which the original Mortgagor is released from liability
and such Person is substituted as Mortgagor and becomes liable under the Note.
In addition to the foregoing, a Servicer shall not be required to enforce any
"due-on-sale" clause if in the reasonable judgment of such Servicer, entering
into an assumption and modification agreement with a Person to whom such
property shall be conveyed and releasing the original Mortgagor from liability
would be in the best interests of the Certificateholders. The Mortgage Loan, as
assumed, shall conform in all respects to the requirements, representations and
warranties of this Agreement. A Servicer shall notify the Securities
Administrator that any such assumption or substitution agreement has been
completed by forwarding to the Securities Administrator the original copy of
such assumption or substitution agreement (indicating the Mortgage File to which
it relates) which copy shall be added by the Securities Administrator to the
related Mortgage File and which shall, for all purposes, be considered a part of
such Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. Each Servicer shall be responsible for recording
any such assumption or substitution agreements. In connection with any such
assumption or substitution agreement, the Monthly Payment on the related
Mortgage Loan shall not be changed but shall remain as in effect immediately
prior to the assumption or substitution, the stated maturity or outstanding
principal amount of such Mortgage Loan shall not be changed nor shall any
required monthly payments of principal or interest be deferred or forgiven. Any
fee collected by a Servicer for consenting to any such conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to
such Servicer as additional servicing compensation.

      Notwithstanding the foregoing paragraph or any other provision of this
Agreement, no Servicer shall be deemed to be in default, breach or any other
violation of its obligations hereunder by reason of any assumption of a Mortgage
Loan by operation of law or any assumption which the related Servicer may be
restricted by law from preventing, for any reason whatsoever.

      SECTION 3.12. Realization Upon Defaulted Mortgage Loans; Determination of
Excess Proceeds.

            (a) Each Servicer shall use reasonable efforts consistent with the
Acceptable Servicing Practices to foreclose upon or otherwise comparably convert
the ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of Delinquent payments. In connection with such foreclosure or other
conversion, a 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, however, that such Servicer shall not be
required to expend its own funds in connection with the restoration of any
property that shall have suffered damage due to an uninsured cause unless it
shall determine (i) that such restoration 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
Collection Account pursuant to Section 3.08 hereof). The related Servicer shall
be responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
thereof from the proceeds of liquidation of the related Mortgaged Property, as
contemplated in Section 3.08 hereof. If a Servicer has knowledge that a
Mortgaged Property that such 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 such Servicer, each
Servicer will, prior to acquiring the Mortgaged Property, consider such risks
and only take action in accordance with Accepted Servicing Practices.

      With respect to any REO Property, the deed or certificate of sale shall be
taken in the name of the Trustee or its nominee. Pursuant to its efforts to sell
such REO Property, the related Servicer shall either itself or through an agent
selected by such Servicer protect and conserve such REO Property in the same

                                      -82-
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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 such
Servicer deems to be in the best interest of such Servicer and the
Certificateholders for the period prior to the sale of such REO Property. A
Servicer or an affiliate may receive usual and customary real estate referral
fees for real estate brokers in connection with the listing and disposition of
REO Property. The related Servicer shall prepare 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 such
Servicer 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 Collection Account no later than the close of business on each Determination
Date. Each 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 related Servicer shall dispose of such Mortgaged Property
prior to the expiration of three years from the end of the year of its
acquisition by the Trust Fund or, at the expense of the Trust Fund, request, in
accordance with applicable procedures for obtaining an automatic extension of
the grace period, 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
which case such property must be disposed of prior to the end of such extension,
unless the Trustee and Securities Administrator shall have been supplied with an
Opinion of Counsel (such Opinion of Counsel not to be an expense of the Trustee
or the Securities Administrator), to the effect that the holding by the Trust
Fund of such Mortgaged Property subsequent to such three-year period or
extension will not result in the imposition of taxes on "prohibited
transactions" of the Trust Fund or any of the REMICs provided for herein as
defined in section 860F of the Code or cause any of the REMICs provided for
herein to fail to qualify as a REMIC at any time that any Certificates are
outstanding, in which case the Trust Fund may continue to hold such Mortgaged
Property (subject to any conditions contained in such Opinion of Counsel).
Notwithstanding any other provision of this Agreement, no Mortgaged Property
acquired by the Trust Fund shall be rented (or allowed to continue to be rented)
or otherwise used for the production of income by or on behalf of the Trust Fund
in such a manner or pursuant to any terms that would (i) cause such Mortgaged
Property to fail to qualify as "foreclosure property" within the meaning of
section 860G(a)(8) of the Code or (ii) subject the Trust Fund or any REMIC
provided for herein to the imposition of any federal, state or local income
taxes on the income earned from such Mortgaged under section 860G(c) of the Code
or otherwise, unless the related Servicer or the Depositor has agreed to
indemnify and hold harmless the Trust Fund with respect to the imposition of any
such taxes.

      The decision of a Servicer to foreclose on a defaulted Mortgage Loan shall
be subject to a determination by such 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 such
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 Collection 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

                                      -83-
<PAGE>

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 related Servicer as provided above, shall be deposited in the
Collection Account on the next succeeding Determination Date following receipt
thereof for distribution on the related Distribution Date.

      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 related Servicer for any related unreimbursed Servicing Advances
and Servicing Fees, pursuant to Section 3.08(a)(vi) or this Section 3.12;
second, to reimburse such Servicer for any unreimbursed Advances, pursuant to
Section 3.08(a)(ii) or this Section 3.12; third, to any prepayment penalties and
then 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, each Servicer shall determine the
respective aggregate amounts of Excess Proceeds, if any, that occurred in the
related Prepayment Period.

            (c) Each Servicer, in its sole discretion, shall have the right to
elect (by written notice sent to the Trustee, the Securities Administrator and
the Seller) to purchase for its own account from the Trust Fund any Mortgage
Loan that is 90 days or more Delinquent at a price equal to the Purchase Price.
The Purchase Price for any Mortgage Loan purchased hereunder shall be delivered
to the Securities Administrator for deposit to the Certificate Account and the
Securities Administrator, upon receipt of such confirmation of deposit and a
Request for Release from the related Servicer in the form of Exhibit I hereto,
shall release or cause to be released to the related Servicer the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment prepared by each Servicer, in each case without recourse, as shall be
necessary to vest in such Servicer any Mortgage Loan released pursuant hereto
and such Servicer 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. Such
Servicer shall thereupon own such Mortgage Loan, and all security and documents,
free of any further obligation to the Securities Administrator 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 a
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, such Servicer will promptly notify the Custodian by
delivering a Request for Release substantially in the form of Exhibit I. Upon
receipt of a copy of such request, the Custodian shall promptly release the
related Mortgage File to the related Servicer, and such Servicer is authorized
to cause the removal from the registration on the MERS System of any such
Mortgage if applicable, and the Trustee shall at the related Servicer's written
direction execute and deliver to the such 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 such Servicer,
together with the Mortgage Note with written evidence of cancellation thereon.
Expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Mortgagor to the extent permitted by
law, and otherwise to the Trust Fund to the extent such expenses constitute
"unanticipated expenses" within the meaning of Treasury Regulations Section
1.860G-1(b)(3)(ii). 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

                                      -84-
<PAGE>

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 Custodian, upon delivery to the
Custodian of a Request for Release in the form of Exhibit I signed by a
Servicing Officer, release the Mortgage File to the related Servicer. Subject to
the further limitations set forth below, the related Servicer shall cause the
Mortgage File or documents so released to be returned to the Custodian when the
need therefor by such Servicer no longer exists, unless the Mortgage Loan is
liquidated and the proceeds thereof are deposited in the Collection Account.

      Each Request for Release may be delivered to the Custodian (i) via mail or
courier, (ii) via facsimile or (iii) by such other means, including, without
limitation, electronic or computer readable medium, as the related Servicer and
the Custodian shall mutually agree. The Custodian shall promptly release the
related Mortgage File(s) within five (5) Business Days of receipt of a properly
completed Request for Release pursuant to clauses (i), (ii) or (iii) above.
Receipt of a properly completed Request for Release shall be authorization to
the Custodian to release such Mortgage Files, provided the Custodian has
determined that such Request for Release has been executed, with respect to
clauses (i) or (ii) above, or approved, with respect to clause (iii) above, by
an authorized Servicing Officer of the related Servicer, and so long as the
Custodian complies with its duties and obligations under the agreement. If the
Trustee or its designee is unable to release the Mortgage Files within the
period previously specified, the Custodian shall immediately notify the related
Servicer indicating the reason for such delay. If the related Servicer is
required to pay penalties or damages due to the Custodian's negligent failure to
release the related Mortgage File or the Custodian's negligent failure to
execute and release documents in a timely manner, the Custodian, shall be liable
for such penalties or damages respectively caused by it.

      Notwithstanding the foregoing, in connection with a Principal Prepayment
in full of any Mortgage Loan, the Master Servicer or the Backup Servicer may
request release of the related Mortgage File from the Custodian, in accordance
with the provisions of this Agreement, in the event the related Servicer fails
to do so. If requested by the Master Servicer, the Backup Servicer or a
Servicer, the Custodian shall forward such Mortgage File or other requested
items to the requesting party by overnight mail at the requesting party's
expense.

      If a Servicer at any time seeks to initiate a foreclosure proceeding in
respect of any Mortgaged Property as authorized by this Agreement, such 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, a Servicer shall cause possession of any Mortgage
File or of the documents therein that shall have been released by the Custodian
to be returned to the Custodian promptly after possession thereof shall have
been released by the Custodian unless (i) the Mortgage Loan has been liquidated
and the Liquidation Proceeds relating to the Mortgage Loan have been deposited
in the Collection Account, and the related Servicer shall have delivered to the
Custodian a Request for Release in the form of Exhibit I 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 related Servicer shall have delivered to the Custodian 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 the Servicers
to be Held for the Trustee.

                                      -85-
<PAGE>

      Notwithstanding any other provisions of this Agreement, each Servicer
shall transmit to the Custodian on behalf of the Trustee as required by this
Agreement all documents and instruments in respect of a Mortgage Loan coming
into the possession of such Servicer from time to time required to be delivered
to the Trustee pursuant to the terms hereof and shall account fully to the
Securities Administrator for any funds received by such Servicer or which
otherwise are collected by that Servicer as Liquidation Proceeds or Insurance
Proceeds in respect of any Mortgage Loan. All Mortgage Files and funds collected
or held by, or under the control of, a 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
Collection Account, shall be held by such 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. Each Servicer also
agrees that it shall not create, incur or subject any Mortgage File or any funds
that are deposited in the Collection Account or in any Escrow Account, or any
funds that otherwise are or may become due or payable to the Trustee, or the
Securities Administrator as its designee, 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 each Servicer
shall be entitled to set off against and deduct from any such funds any amounts
that are properly due and payable to such Servicer under this Agreement.

      SECTION 3.15. Servicing Compensation.

      As compensation for its activities hereunder, each Servicer shall be
entitled to retain or withdraw from the Collection 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 as of the immediately preceding Distribution Date.

      Additional servicing compensation in the form of any Excess Proceeds, late
payment fees, assumption fees (i.e. fees related to the assumption of a Mortgage
Loan upon the purchase of the related Mortgaged Property) and similar fees
payable by the Mortgagor, and all income and gain net of any losses realized
from Permitted Investments in the Collection Account shall be retained by the
related Servicer to the extent not required to be deposited in the Collection
Account pursuant to Sections 3.05, or 3.12(a) hereof. Each Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder and shall not be entitled to reimbursement therefor except
as specifically provided in Sections 3.08 and 3.12 hereof. The Servicers shall
not be entitled to any Prepayment Penalties. In no event shall the Trustee, the
Master Servicer or the Securities Administrator be liable for any Servicing Fee
or for any differential between the Servicing Fee and the amount necessary to
induce a successor servicer to act as successor servicer under this Agreement.

      SECTION 3.16. Access to Certain Documentation.

      Each Servicer shall provide to the OTS and the FDIC and to comparable
regulatory authorities supervising Holders of the Certificates and the examiners
and supervisory agents of the OTS, the FDIC and such other authorities, access
to the documentation regarding the Mortgage Loans required by applicable
regulations of the OTS and the FDIC. Such access shall be afforded without
charge, but only upon reasonable and prior written request and during normal
business hours at the offices of related Servicer designated by it provided,
that each Servicer shall be entitled to be reimbursed by each such
Certificateholder for actual expenses incurred by the related Servicer in
providing such reports and access. Nothing in this Section shall limit the
obligation of each Servicer to observe any applicable law prohibiting disclosure
of information regarding the Mortgagors and the failure of the related Servicer
to

                                      -86-
<PAGE>

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.

      Pursuant to this Agreement, each Servicer shall deliver to the Master
Servicer and the Backup Servicer on or before March 15th of each year beginning
in 2005, (or such other date that the Depositor gives each Servicer at least 30
days prior notice of) in order to remain in compliance with the Section 302
Requirements, an Officer's Certificate stating, as to each signatory thereof,
that (i) a review of the activities of each Servicer during the preceding
calendar year and of performance under this Agreement or a similar agreement has
been made under such officer's supervision, and (ii) to the best of such
officers' knowledge, based on such review, the related Servicer has fulfilled
all of its obligations under this Agreement throughout such year, or, if there
has been a default in the fulfillment of any such obligation, specifying each
such default known to such officers and the nature and status thereof. The
Master Servicer shall forward a copy of each such statement received by it to
each Rating Agency. Copies of such statement shall be provided by the Master
Servicer to any Certificateholder upon written request at the
Certificateholder's expense, provided such statement has been delivered by each
Servicer to the Master Servicer.

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

      On or before March 15th of each year, beginning in 2005 or such other date
in order to remain in compliance with the Section 302 Requirements, each
Servicer at its expense shall cause a nationally recognized firm of independent
public accountants (who may also render other services to such Servicer or any
Affiliate thereof) that is a member of the American Institute of Certified
Public Accountants to furnish a USAP Report to the Securities Administrator, the
Master Servicer, the Trustee and the Depositor. Copies of the USAP Report shall
be provided by the Securities Administrator to any Certificateholder upon
request at the Certificateholder's expense, provided such report has been
delivered by such Servicer to the Securities Administrator.

      SECTION 3.19. Duties and Removal of the Credit Risk Manager.

      For and on behalf of the Seller, the Credit Risk Manager will provide
reports and recommendations concerning certain delinquent and defaulted Mortgage
Loans, and as to the collection of any Prepayment Penalties with respect to the
Mortgage Loans. Such reports and recommendations will be based upon information
provided to the Credit Risk Manager pursuant to the Credit Risk Management
Agreement, and the Credit Risk Manager shall look solely to each Servicer for
all information and data (including loss and delinquency information and data)
relating to the servicing of the Mortgage Loans. Upon any termination of the
Credit Risk Manager or the appointment of a successor Credit Risk Manager, the
Securities Administrator, if it has been notified in writing of such termination
or appointment, shall give written notice thereof to each Servicer, the Master
Servicer, the Trustee and the Depositor.

      If Holders of the Certificates entitled to 66 2/3% or more of the Voting
Rights request in writing to the Trustee to terminate the Credit Risk Manager
under this Agreement, the Credit Risk Manager shall be removed pursuant to this
Section 3.19. Upon receipt of such notice, the Securities Administrator shall
provide written notice to the Credit Risk Manager of its removal, which shall be
effective upon receipt of such notice by the Credit Risk Manager.

      SECTION 3.20. Periodic Filings.

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<PAGE>

            (a) As part of the Form 10-K required to be filed pursuant to the
terms of this Agreement, the Securities Administrator shall include the
accountants report required pursuant to Section 3.18 as well as the Officer's
Certificate delivered by each Servicer pursuant to Section 3.17 relating to each
Servicer's performance of its obligations under this Agreement.

            (b) The Securities Administrator shall prepare for filing, and
execute (other than the initial filings, the Form 10-Ks and the Certification),
on behalf of the Trust Fund, and file with the Securities and Exchange
Commission, (i) within 15 days after each Distribution Date in each month, each
Monthly Statement on Form 8-K under the Exchange Act executed by the Securities
Administrator commencing with the Distribution Date in May 2004 and ending with
the Distribution Date following the filing of a Form 15 Suspension Notice with
respect to the Trust Fund, (ii) prior to January 30, 2005, the Securities
Administrator shall, in accordance with industry standards, file a Form 15
Suspension Notification with respect to the Trust Fund, if applicable and (iii)
prior to March 31, 2005, the Securities Administrator shall file a Form 10-K
(executed by SLS), in substance conforming to industry standards, with respect
to the Trust Fund. In addition, the Form 10-K shall include Form 10-K
Certification signed by SLS. Upon such filing with the Securities and Exchange
Commission, the Securities Administrator shall promptly deliver to the Depositor
a copy of any such executed report, statement or information. Prior to making
any such filings and certifications, the Securities Administrator shall comply
with the provisions set forth in this Section. The Depositor hereby grants to
the Securities Administrator a limited power of attorney to execute (other than
the Form 10-Ks and the Certification) 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.

            (c) [RESERVED].

            (d) The obligations set forth in paragraphs (a) through (c) of this
Section shall only apply with respect to periods for which the Securities
Administrator is obligated to file Form 8-Ks and 10-Ks pursuant to paragraph (b)
of this Section. In the event a Form 15 is properly filed pursuant to paragraph
(b) of this Section, there shall be no further obligations under paragraphs (a)
through (c) of this Section commencing with the fiscal year in which the Form 15
is filed (other than the obligations in paragraphs (a) and (b) of this Section
to be performed in such fiscal year that relate back to the prior fiscal year).

      SECTION 3.21. Annual Certificate by Securities Administrator.

            (a) Within 15 days prior to the date on which a Form 10-K is
required to be filed, an officer of the Securities Administrator shall execute
and deliver an Officer's Certificate, signed by a Responsible Officer of the
Securities Administrator or any officer to whom that officer reports, to the
Depositor and SLS for the benefit of such Depositor and SLS and their respective
officers, directors and affiliates, certifying as to the matters described in
the Officer's Certificate attached hereto as Exhibit K.

            (b) The Securities Administrator shall indemnify and hold harmless
the Depositor, SLS and the Trustee and their respective officers, directors,
agents and affiliates from and against any losses, damages, penalties, fines,
forfeitures, reasonable legal fees and related costs, judgments and other costs
and expenses arising out of or based upon a breach by the Securities
Administrator or any of its officers, directors, agents or affiliates of its
obligations under this Section 3.21 any material misstatement

                                      -88-
<PAGE>

or omission in the Officer's Certificate required under this Section or the
negligence, bad faith or willful misconduct of the Securities Administrator in
connection therewith. If the indemnification provided for herein is unavailable
or insufficient to hold harmless the Depositor, SLS and the Trustee, then the
Securities Administrator agrees that it shall contribute to the amount paid or
payable by the Depositor, SLS and the Trustee as a result of the losses, claims,
damages or liabilities of the Depositor, SLS and the Trustee in such proportion
as is appropriate to reflect the relative fault of the Securities Administrator
on the one hand and the Depositor, SLS and the Trustee on the other in
connection with a breach of the Securities Administrator's obligations under
this Section 3.21, any material misstatement or omission in the Officer's
Certificate required under this Section or the Securities Administrator's
negligence, bad faith or willful misconduct in connection therewith.

      SECTION 3.22. Annual Certificate by Countrywide and GreenPoint.

            (a) Within 15 days prior to the date on which a Form 10-K is
required to be filed, Countrywide and GreenPoint shall each execute and deliver
an Officer's Certificate, signed by the senior officer in charge of servicing of
Countrywide or GreenPoint or any officer to whom that officer reports, to the
Master Servicer, SLS and the Depositor for the benefit of the Master Servicer,
SLS and the Depositor and their respective officers, directors and affiliates,
certifying as to matters described in the Officer's Certificate attached hereto
as Exhibit L.

            (b) Countrywide and GreenPoint shall each indemnify and hold
harmless the Depositor, SLS and the Master Servicer, and their respective
officers, directors, agents and affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments and other costs and expenses arising out of or based upon a breach by
Countrywide, GreenPoint or any of their respective officers, directors, agents
or affiliates of its obligations under this Section 3.22, any material
misstatement or omission in the Officer's Certificate required under this
Section or the negligence, bad faith or willful misconduct of Countrywide or
GreenPoint in connection therewith. If the indemnification provided for herein
is unavailable or insufficient to hold harmless the Depositor, SLS or the Master
Servicer, then Countrywide and GreenPoint each agree that it shall contribute to
the amount paid or payable by the Depositor, SLS or the Master Servicer, as
applicable, as a result of the losses, claims, damages or liabilities of the
Depositor, SLS or the Master Servicer in such proportion as is appropriate to
reflect the relative fault of the Depositor, SLS or the Master Servicer, as
applicable, on the one hand and Countrywide or GreenPoint on the other in
connection with a breach of Countrywide's or GreenPoint's obligations under this
Section 3.22, any material misstatement or omission in the Officer's Certificate
required under this Section or each Servicer's negligence, bad faith or willful
misconduct in connection therewith.

      SECTION 3.23. Prepayment Penalty Reporting Requirements.

            (a) Promptly after each Distribution Date, each Servicer shall
provide to the Depositor, the Master Servicer and the Securities Administrator
the following information with regard to each Mortgage Loan that has prepaid
during the related Prepayment Period:

                  (i) loan number;

                  (ii) current Mortgage Rate;

                  (iii) current principal balance;

                  (iv) original principal balance;

                  (v) Prepayment Penalty amount due; and

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                  (vi) Prepayment Penalty amount collected.

      SECTION 3.24. Servicer Reports.

            (a) On the Servicer Data Remittance Date, each Servicer shall
deliver to the Master Servicer and the Securities Administrator electronically
at masterservicing@jpmorgan.com and lrps@jpmorgan.com (or by such other means as
the Servicers, the Master Servicer and the Securities Administrator may agree
from time to time) a servicer report with respect to the related Distribution
Date, in a form mutually acceptable to the Servicers, the Master Servicer and
the Securities Administrator and containing the information set forth in Exhibit
R. On the same date with respect to each Servicer and on the 18th day of each
month (or the next succeeding Business Day) with respect to the Master Servicer
shall electronically transmit to the Securities Administrator, a data file
containing the information set forth in such servicer report with respect to the
related Distribution Date. Such servicer report shall include (i) the amount of
Advances to be made by the Servicer (or the Master Servicer, if any) in respect
of the related Distribution Date, the aggregate amount of Advances outstanding
after giving effect to such Advances, and the aggregate amount of Nonrecoverable
Advances in respect of such Distribution Date and (ii) such other information
with respect to the Mortgage Loans (to the extent such information is available
on the systems of the Servicers) as the Securities Administrator may reasonably
require to perform the calculations necessary to make the distributions
contemplated by Section 6.01 and to prepare the statements to Certificateholders
contemplated by Section 5.06 and for the Securities Administrator to perform its
obligations under this Agreement. The Securities Administrator shall not be
responsible to recompute, recalculate or verify any information provided to it
by the Servicers and the Master Servicer.

            (b) The Depositor acknowledges that it authorizes each Servicer to
release and provide to the Credit Risk Manager the mortgage loan information
described in Section 2.01 and Section 2.02 of each Servicer's Credit Risk
Management Agreement.

      SECTION 3.25. Indemnification.

            (a) Each Servicer shall indemnify the Seller, the Trust Fund, the
Trustee, the Securities Administrator, the Master Servicer, the other Servicer,
the Backup Servicer and the Depositor and their officers, directors, employees
and agents and hold each of them harmless against any and all claims, losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgements, and any other costs, fees and expenses that any of
such parties may sustain in any way related to the failure of each Servicer to
perform its duties and service the Mortgage Loans in compliance with the terms
of this Agreement. Each Servicer immediately shall notify the Seller, the
Trustee, the Securities Administrator, the Master Servicer, the other Servicer,
the Backup Servicer and the Depositor or any other relevant party if a claim is
made by a third party with respect to this Agreement or the Mortgage Loans,
assume (with the prior written consent of the indemnified party, which consent
shall not be unreasonably withheld or delayed) the defense of any such claim and
pay all expenses in connection therewith, including counsel fees, and promptly
pay, discharge and satisfy any judgement or decree which may be entered against
it or any of such parties in respect of such claim. Each Servicer shall follow
any reasonable written instructions received from the Trustee in connection with
such claim it being understood that the Trustee shall have no duty to monitor or
give instructions with respect to such claims. Each Servicer shall provide the
Depositor, the Securities Administrator, the Backup Servicer and the Master
Servicer with a written report of all expenses and advances incurred by such
Servicer pursuant to this Section 3.25(a), and such Servicer shall promptly
reimburse itself from the assets of the Trust Fund in the applicable Collection
Account for all expenses and advances incurred by the applicable Servicer
pursuant to this Section 3.25(a). Such Servicer shall promptly reimburse itself
from the assets of the Trust Fund in the Collection Account for all amounts
advanced by it pursuant to the preceding sentence except when the claim in any
way relates to the failure of such Servicer to service and administer the
Mortgage

                                      -90-
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Loans in material compliance with the terms of this Agreement or the negligence,
bad faith or willful misconduct of such Servicer. The provisions of this
paragraph shall survive the termination of this Agreement, the payment of the
outstanding Certificates and the resignation or removal of the Trustee, Master
Servicer, the Backup Servicer, the Securities Administrator and a Servicer. Any
payment hereunder made by a Servicer shall be from such Servicer's own funds,
without reimbursement from the Trust Fund therefor.

            (b) The Master Servicer shall indemnify the Seller, the Trust Fund,
the Trustee, the Securities Administrator, each Servicer, the Backup Servicer
and the Depositor and their officers, directors, employees and agents and hold
each of them harmless against any and all claims, losses, damages, penalties,
fines, forfeitures, reasonable and necessary legal fees and related costs,
judgements, and any other costs, fees and expenses that any of such parties may
sustain in any way related to the failure of the Master Servicer to perform its
duties and master service the Mortgage Loans in compliance with the terms of
this Agreement. The Master Servicer immediately shall notify the Seller, the
Trustee, each Servicer, the Securities Administrator, the Backup Servicer and
the Depositor or any other relevant party if a claim is made by a third party
with respect to this Agreement or the Mortgage Loans, assume (with the prior
written consent of the indemnified party, which consent shall not be
unreasonably withheld or delayed) the defense of any such claim and pay all
expenses in connection therewith, including counsel fees, and promptly pay,
discharge and satisfy any judgement or decree which may be entered against it or
any of such parties in respect of such claim. The Master Servicer shall follow
any written instructions received from the Trustee in connection with such claim
it being understood that the Trustee shall have no duty to monitor or give
instructions with respect to such claims. The Master Servicer shall provide each
Servicer, the Securities Administrator, the Backup Servicer and the Depositor
with a written report of all expenses and advances incurred by the Master
Servicer pursuant to this Section 3.25(b). The Master Servicer shall promptly
reimburse itself from the assets of the Trust Fund in the Master Servicer
Collection Account for all amounts advanced by it pursuant to the preceding
sentence except when the claim in any way relates to the failure of the Master
Servicer to service and administer the Mortgage Loans in material compliance
with the terms of this Agreement or the negligence, bad faith or willful
misconduct of the Master Servicer. The provisions of this paragraph shall
survive the termination of this Agreement and the payment of the outstanding
Certificates.

            (c) [RESERVED].

            (d) [RESERVED].

      SECTION 3.26. Nonsolicitation.

      For as long as each Servicer services the Mortgage Loans, each Servicer
covenants that it will not, and that it will ensure that its affiliates and
agents, will not, directly solicit or provide information for any other party to
solicit for prepayment or refinancing of any of the Mortgage Loans by the
related Mortgagors. It is understood that the promotions undertaken by each
Servicer which are directed to the general public at large, or certain segments
thereof, shall not constitute solicitation as that term is used in this Section
3.26.

      SECTION 3.27. SLS as Servicer.

      Upon the Master Servicer's request, SLS shall make available electronic
data to the Master Servicer and the Backup Servicer in any month during the
first week of the subsequent month.

      SECTION 3.28. Quarterly Audit.

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      Not later than 30 days following the end of each fiscal quarter of SLS,
commencing with the quarter ending in September 2004, SLS shall, at its expense,
cause an independent third-party auditor selected by it to furnish to the
Trustee, the Depositor, the Master Servicer and the Backup Servicer a report
stating that the SLS Serviced Mortgage Loans are being serviced in accordance
with the provisions of this Agreement or, if there has been a material default
in the fulfillment of any such obligation, specifying each such material default
known to such auditor and the nature and status thereof and the action being
taken by SLS to cure such material default. The conclusions of the auditor shall
be based on a statistical sample of the SLS Serviced Mortgage Loans and a review
of SLS's collection, default management, escrow administration, cash management,
insurance administration and quality control procedures. In the event that such
firm requires the Securities Administrator to agree to the procedures performed
by such firm, the Servicer shall direct the Securities Administrator in writing
to so agree; it being understood and agreed that the Securities Administrator
will deliver such letter of agreement in conclusive reliance upon the direction
of the Servicer and the Securities Administrator makes no independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.

      SECTION 3.29. Maintenance of LPMI Policy.

      Each Servicer shall take all such actions as are necessary to service,
maintain and administer the LPMI Loans in accordance with the LPMI Policy and to
perform and enforce the rights of the insured under such LPMI Policy. Except as
expressly set forth herein, a Servicer shall have full authority on behalf of
the Trust Fund to do anything it reasonably deems appropriate or desirable in
connection with the servicing, maintenance and administration of the LPMI
Policy. Such Servicer shall not modify or assume a Mortgage Loan covered by the
LPMI Policy or take any other action with respect to such Mortgage Loan which
would result in non-coverage under the LPMI Policy of any loss which, but for
the actions of such Servicer, would have been covered thereunder. If the LPMI
insurer fails to pay a claim under the LPMI Policy as a result of breach by such
Servicer of its obligations hereunder or under the LPMI Policy, such Servicer
shall be required to deposit in the related Collection Account on or prior to
the next succeeding Remittance Date an amount equal to such unpaid claim from
its own funds without any right to reimbursement from the Trust Fund. A Servicer
shall cooperate with the LPMI insurer and shall use its best efforts to furnish
all reasonable aid, evidence and information in the possession of such Servicer
to which such Servicer has access with respect to any LPMI Loan.

      SECTION 3.30. SLS Servicing Tape; Storage and Access to Servicing Tape.

      At the end of each Business Day, all servicing data related to the
Mortgage Loans serviced by SLS will be saved in an electronic medium (the "SLS
Servicing Tape") in a format that is easily uploaded to the systems of both the
Master Servicer and the Backup Servicer. SLS or its designee shall (i) maintain
the Servicing Tape at an off-site location, (ii) provide ready access to the
Servicing Tape to both the Master Servicer and the Backup Servicer; provided,
however, the Master Servicer shall have any obligation to open or review such
Servicing Tape nor to verify any information or data contained therein or to
verify the presence of the Servicing Tape at such location and (iii) send the
SLS Servicing Tape directly to the Backup Servicer in an electronic format
acceptable to the Backup Servicer on a monthly basis.

                                   ARTICLE IV

  ADMINISTRATION, MASTER SERVICING AND BACKUP SERVICING OF THE MORTGAGE LOANS

      SECTION 4.01. Master Servicer.

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<PAGE>

      The Trustee shall furnish the Master Servicer with any limited powers of
attorney needed to enable the Master Servicer to service and administer the
related Mortgage Loans and REO Property. The Trustee shall have no
responsibility for any action of the Master Servicer pursuant to any such
limited power of attorney and shall be indemnified by the Master Servicer for
any cost, liability or expense incurred by the Trustee in connection with such
Person's use or misuse of any such power of attorney.

      For and on behalf of the Certificateholders, as independent contractors of
the Trustee, the Master Servicer shall, in accordance with this Agreement,
master service and administer the Mortgage Loans by overseeing and enforcing the
servicing of the Mortgage Loans by the related Servicer according to the terms
of this Agreement.

      The Trustee and the Custodian shall provide access to the records and
documentation in possession of the Trustee or the Custodian regarding the
related Mortgage Loans and REO Property and the servicing thereof to the
Certificateholders, the FDIC, and the supervisory agents and examiners of the
FDIC, such access being afforded only upon reasonable prior written request and
during normal business hours at the office of the Trustee or the Custodian;
provided, however, that, unless otherwise required by law, neither the Trustee
or the Custodian shall be required to provide access to such records and
documentation to the Certificateholders. The Trustee and the Custodian shall
allow representatives of the above entities to photocopy any of the records and
documentation and shall provide equipment for that purpose at a charge that
covers the Trustee's or the Custodian's actual costs.

      The Trustee shall execute and deliver to the Master Servicer upon written
request any court pleadings, requests for trustee's sale or other documents
necessary or desirable prepared by the Master Servicer 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 any
other Mortgage Loan Document; (iii) obtain a deficiency judgment against the
Mortgagor; or (iv) enforce any other rights or remedies provided by the Mortgage
Note or any other Mortgage Loan Document or otherwise available at law or
equity.

      SECTION 4.02. REMIC Related Covenants.

      For as long as any REMIC shall exist, the Securities Administrator and the
Trustee shall each act in accordance herewith to treat such REMIC as a REMIC,
and the Securities Administrator and the Trustee shall each comply with any
directions of the Seller, the Master Servicer, the Backup Servicer or a 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 unless such
sale is as a result of a repurchase of the Mortgage Loans pursuant to this
Agreement or Trustee has received a REMIC Opinion prepared at the expense of the
Trust Fund; and (b) other than with respect to a substitution pursuant to
Section 2.03 of this Agreement or with respect to a withdrawal of amounts on
deposit in the Pre-Funding Account or the Capitalized Interest Account on or
prior to July 15, 2004, accept any contribution to any REMIC after the Startup
Day without receipt of a Opinion of Counsel at the expense of the Trust Fund
stating that such contribution will not result in the imposition of a tax upon
any REMIC (including but not limited to the tax on prohibited transactions as
defined in Code Section 860F(a)(2) and the tax on prohibited contributions set
forth on Section 860G(d) of the Code).

      SECTION 4.03. 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

                                      -93-
<PAGE>

and the fidelity bond shall be in such form and amount generally acceptable for
entities serving as master servicers or trustees.

      SECTION 4.04. Powers 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
Section 9.13, 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; provided, however, that the Master Servicer
shall not (and, consistent with its responsibilities under Section 4.03, 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 formed hereby to fail to qualify as a REMIC or result in the imposition of
a tax upon the Trust Fund or any REMIC provided for herein (including but not
limited to the tax on prohibited transactions as defined in Section 860F(a)(2)
of the Code and the tax on contributions to a REMIC set forth in Section 860G(d)
of the Code) unless the Master Servicer has received an Opinion of Counsel (but
not at the expense of the Master Servicer) to the effect that the contemplated
action will not cause any REMIC formed hereby to fail to qualify as a REMIC or
result in the imposition of a tax upon any REMIC formed hereby or the Trust
Fund. The Trustee shall furnish the Master Servicer, upon written request from a
Servicing Officer, with any powers of attorney empowering the Master Servicer or
the Servicers 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 this Agreement, and the Trustee shall execute and deliver such
other documents, as the Master Servicer or any 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 the Servicers and shall be
indemnified by the Master Servicer or the Servicers, as applicable, for any
cost, liability or expense incurred by the Trustee in connection with such
Person's use or misuse of any such power of attorney). 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 9.12. In the performance of its duties hereunder, the Master
Servicer shall be an independent contractor and shall not, except in those
instances where it is taking action in the name of the Trustee, be deemed to be
the agent of the Trustee.

      SECTION 4.05. Due-on-Sale Clauses; Assumption Agreements.

      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 this Agreement. If applicable law prohibits the enforcement of a
due-on-sale clause or such clause is otherwise not enforced in accordance with
this Agreement, and, as a consequence, a Mortgage Loan is assumed, the original
Mortgagor may be released from liability in accordance with this Agreement.

                                      -94-
<PAGE>

      SECTION 4.06. Documents, Records and Funds in Possession of Master
Servicer to be Held for Trustee

            (a) The Master Servicer shall transmit to the Trustee or Custodian
such documents and instruments coming into the possession of the Master Servicer
from time to time as are required by the terms hereof to be delivered to the
Trustee or Custodian. Any funds received by the Master Servicer in respect of
any Mortgage Loan or which otherwise are collected by the Master Servicer as
Liquidation Proceeds or Insurance Proceeds in respect of any Mortgage Loan shall
be deposited in the Master Servicer Collection Account. The Master Servicer
shall, and shall cause the Servicers to, provide access to information and
documentation regarding the Mortgage Loans to the Securities Administrator and
the Trustee, its agents and accountants at any time upon reasonable request and
during normal business hours, and to Certificateholders that are savings and
loan associations, banks or insurance companies, the Office of Thrift
Supervision, the FDIC and the supervisory agents and examiners of such Office
and Corporation or examiners of any other federal or state banking or insurance
regulatory authority if so required by applicable regulations of the Office of
Thrift Supervision or other regulatory authority, such access to be afforded
without charge but only upon reasonable request in writing and during normal
business hours at the offices of the Master Servicer designated by it. In
fulfilling such a request the Master Servicer shall not be responsible for
determining the sufficiency of such information.

      (b) All Mortgage Files and funds collected or held by, or under the
control of, the Master Servicer, in respect of any Mortgage Loans, whether from
the collection of principal and interest payments or from Liquidation Proceeds
or Insurance Proceeds, shall be deposited in the Master Servicer Collection
Account.

      SECTION 4.07. Monitoring of the Servicers.

            (a) The Master Servicer shall be responsible for monitoring the
compliance by the Servicers with their respective duties under this Agreement.
In the review of each Servicer's activities, the Master Servicer may rely upon
an Officer's Certificate of each Servicer with regard to such Servicer's
compliance with the terms of this Agreement. In the event that the Master
Servicer, in its judgment, determines that a Servicer should be terminated in
accordance with the terms hereof, or that a notice should be sent pursuant to
the terms hereof with respect to the occurrence of an event that, unless cured,
would constitute an Servicer Event of Default, the Master Servicer shall notify
the Seller, the Securities Administrator, the Backup Servicer 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
Securities Administrator and the Certificateholders, shall enforce the
obligations of the Servicers under this Agreement, and shall, in the event that
a Servicer fails to perform its obligations in accordance with this Agreement,
subject to the preceding paragraph and Article IX, cause the Trustee to
terminate the rights and obligations of such Servicer hereunder in accordance
with the provisions of Article IX. Such enforcement, including, without
limitation, the legal prosecution of claims 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 the termination of a Servicer, appointment of a successor Servicer or
the transfer and assumption of the servicing by the Master Servicer (or in the
case of SLS, the Backup Servicer) (including, without limitation, (i) all legal
costs and expenses and all due diligence costs and expenses associated with an

                                      -95-
<PAGE>

evaluation of the potential termination of such Servicer as a result of a
Servicer Event of Default 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
servicer to service the Mortgage Loans in accordance with this 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 the Servicers to comply with
the remittance requirements and other obligations set forth in this Agreement.

            (e) If the Master Servicer acts as successor Servicer, it will not
assume liability for the representations and warranties of the terminated
Servicer.

      SECTION 4.08. [RESERVED]

      SECTION 4.09. [RESERVED].

      SECTION 4.10. Presentment of Claims and Collection of Proceeds.

      The Master Servicer shall enforce each Servicer's obligations under this
Agreement to, prepare and present on behalf of the Trustee and the
Certificateholders all claims under the Insurance Policies and take such actions
(including the negotiation, settlement, compromise or enforcement of the
insured's claim) as shall be necessary to realize recovery under such policies.
Any proceeds disbursed to the Master Servicer in respect of such policies, bonds
or contracts shall be promptly deposited in the Master Servicer Collection
Account upon receipt, except that any amounts realized that are to be applied to
the repair or restoration of the related Mortgaged Property as a condition
precedent to the presentation of claims on the related Mortgage Loan to the
insurer under any applicable insurance policy need not be so or remitted.

      SECTION 4.11. Trustee or Custodian to Retain Possession of Certain
Insurance Policies and Documents.

      The Custodian, 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 has been distributed in
full and the Master Servicer and the Servicers have otherwise fulfilled their
respective obligations under this Agreement, the Custodian 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 Custodian, 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
Mortgage Loan Documents that come into the possession of the Master Servicer
from time to time.

      SECTION 4.12. Realization Upon Defaulted Loans.

      The Master Servicer shall cause the Servicers to foreclose upon, repossess
or otherwise comparably convert the ownership of Mortgaged Properties securing
such of the Mortgage Loans as come into and continue in default and as to which
no satisfactory arrangements can be made for collection of delinquent payments,
all in accordance with this Agreement.

      SECTION 4.13. REO Property.

                                      -96-
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            (a) In the event the Trust Fund acquires ownership of any REO
Property in respect of any related Mortgage Loan, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of the related
Certificateholders. The Master Servicer shall cause the Servicers to sell, any
REO Property as expeditiously as possible and in accordance with the provisions
of this Agreement. Further, the Master Servicer shall cause the Servicers to
sell any REO Property prior to three years after the end of the calendar year of
its acquisition by the Subsidiary REMIC unless (i) the Trustee, the Securities
Administrator and the Master Servicer shall have been supplied by the Servicers
with an Opinion of Counsel to the effect that the holding by the Trust Fund of
such REO Property subsequent to such three-year period will not result in the
imposition of taxes on "prohibited transactions" of any REMIC hereunder as
defined in section 860F of the Code or cause any REMIC hereunder to fail to
qualify as a REMIC at any time that any Certificates are outstanding, in which
case the Trust Fund may continue to hold such Mortgaged Property (subject to any
conditions contained in such Opinion of Counsel) or (ii) the Servicers shall
have applied for, prior to the expiration of such three-year period, an
extension of such three-year period in the manner contemplated by Section
856(e)(3) of the Code, in which case the three-year period shall be extended by
the applicable extension period. The Master Servicer shall cause the Servicers
to protect and conserve, such REO Property in the manner and to the extent
required by this 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 cause the Servicers to deposit all
funds collected and received in connection with the operation of any REO
Property in the Collection Account.

      SECTION 4.14. Annual Statement as to Compliance.

      Pursuant to this Agreement, the Master Servicer shall deliver to the
Depositor, the Trustee, SLS and the Securities Administrator on or before March
15 of each year beginning in 2005, (or such other date to which the Depositor
and Master Servicer mutually agree) in order to remain in compliance with the
Section 302 Requirements, an Officer's Certificate stating, as to each signatory
thereof, that (i) a review of the activities of the Master Servicer during the
preceding calendar year and of performance under this Agreement or a similar
agreement has been made under such officer's supervision, and (ii) to the best
of such officers' knowledge, based on such review, the Master Servicer has
fulfilled all of its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officers and the nature and status
thereof. The Securities Administrator shall forward a copy of each such
statement received by it to each Rating Agency. Copies of such statement shall
be provided by the Securities Administrator to any Certificateholder upon
written request at the Certificateholder's expense, provided such statement has
been delivered by the Master Servicer to the Securities Administrator.

      SECTION 4.15. Annual Independent Public Accountants' Servicing Statement;
Financial Statements.

      If the Master Servicer has, during the course of any calendar year,
directly serviced any of the Mortgage Loans, then on or before March 15 of each
year, beginning in 2005 or such other date in order to remain in compliance with
the Section 302 Requirements, the Master Servicer at its expense shall cause a
nationally recognized firm of independent public accountants (who may also
render other services to each Servicer or any Affiliate thereof) that is a
member of the American Institute of Certified Public Accountants to furnish a
USAP Report to the Securities Administrator, SLS and the Depositor. Copies of
the USAP Report shall be provided by the Securities Administrator and the
Trustee to any Certificateholder upon request at the Certificateholder's
expense, provided such report has been delivered by the Master Servicer to the
Securities Administrator.

                                      -97-
<PAGE>

      SECTION 4.16. Annual Certificate by Master Servicer.

            (a) Within 15 days prior to the date on which a Form 10-K is
required to be filed, the Master Servicer shall execute and deliver an Officer's
Certificate signed by the senior officer in charge of servicing of the Master
Servicer or any officer to whom that officer reports, to the Securities
Administrator and Depositor for the benefit of the Securities Administrator, SLS
and Depositor and their respective officers, directors and affiliates,
certifying as to matters described in the Officer's Certificate attached hereto
as Exhibit P.

            (b) The Master Servicer shall indemnify and hold harmless the
Securities Administrator, SLS, the Trustee and the Depositor and their
respective officers, directors, agents and affiliates from and against any
losses, damages, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments and other costs and expenses arising out of or based
upon a breach by each Servicer or any of its officers, directors, agents or
affiliates of its obligations under this Section 4.16, any material misstatement
or omission in the Officer's Certificate required under this Section or the
negligence, bad faith or willful misconduct of the Master Servicer in connection
therewith. If the indemnification provided for herein is unavailable or
insufficient to hold harmless the Securities Administrator, SLS and the
Depositor, then the Master Servicer agrees that it shall contribute to the
amount paid or payable by the Securities Administrator and the Depositor as a
result of the losses, claims, damages or liabilities of the Depositor in such
proportion as is appropriate to reflect the relative fault of the Depositor on
the one hand and the Master Servicer on the other in connection with a breach of
each Servicer's obligations under this Section 4.16, any material misstatement
or omission in the Officer's Certificate required under this Section or the
Master Servicer's negligence, bad faith or willful misconduct in connection
therewith.

      SECTION 4.17. Obligation of the Master Servicer in Respect of Prepayment
Interest Shortfalls.

      In the event a Prepayment Interest Shortfall occurs that is not otherwise
covered by Compensating Interest payments by a Servicer, the Master Servicer
shall deposit in the Master Servicer Collection Account not later than the
Master Servicer Remittance Date an amount equal to the lesser of (i) the
aggregate amounts required to be paid by each Servicer with respect to
Prepayment Interest Shortfalls attributable to Principal Prepayments on the
related Mortgage Loans for the related Distribution Date, and not so paid by the
Servicer, and (ii) the Master Servicing Fee for such Distribution Date, without
reimbursement therefor.

      SECTION 4.18. Obligation of the Master Servicer in Respect of Collection
Account.

      The Master Servicer shall enforce the obligation of the Servicers to
establish and maintain Collection Accounts in accordance with this Agreement,
with records to be kept with respect thereto on a Mortgage Loan by Mortgage Loan
basis, into which accounts shall be deposited within two Business Days of
receipt all collections of principal and interest on any Mortgage Loan and with
respect to any REO Property received by the Servicers, including Principal
Prepayments, Insurance Proceeds, Liquidation Proceeds, and advances made from
each Servicer's own funds (less servicing compensation as permitted by Section
3.15) and all other amounts to be deposited in the Collection Account

      SECTION 4.19. Backup Servicer.

      JPMorgan will act as Backup Servicer to the SLS Serviced Mortgage Loans
under this Agreement. If SLS is terminated under this Agreement, JPMorgan (or
its affiliate, which will meet the requirements of successor servicer set forth
in this Agreement) will be required to act as successor servicer thereunder,
provided, however, that the Seller may designate an entity other than JPMorgan
to act as successor servicer so long as that entity meets the requirements set
forth in Section 8.02 of this Agreement. The

                                      -98-
<PAGE>

Backup Servicer will have no servicing obligations until and unless it becomes a
successor servicer. At such time as the Backup Servicer (or its affiliate)
becomes the successor servicer to SLS, the Backup Servicer will assume all of
SLS's servicing obligations as set forth in this Agreement. The Seller has the
right to terminate JPMorgan as Backup Servicer at its discretion; provided,
however, that the Trustee has received a letter from each Rating Agency that
such a termination and appointment will not result in a downgrading of the
rating of any of the Certificates related to the applicable Mortgage Loans.

                                   ARTICLE V

                                 DISTRIBUTIONS

      SECTION 5.01. Advances by the Master Servicer and the Servicers.

      Each Servicer shall deposit in the related Collection Account at the time
described below an amount equal to, with respect to the Mortgage Loans, all
Scheduled Payments of principal and interest at the Mortgage Rate less the
Servicing Fee which were due on the related Mortgage Loans during the applicable
Due Period; provided however, that with respect to any Balloon Loan that is
delinquent on its maturity date, the related Servicer will not be required to
advance the related balloon payment but will be required to continue to make
advances in accordance with this Section 5.01 with respect to such Balloon Loan
in an amount equal to an assumed scheduled payment of interest at the Mortgage
Rate less the Servicing Fee that would otherwise be due based on the original
amortization schedule for that Mortgage Loan. Each Servicer's obligation to make
such Advances as to any related Mortgage Loan will continue through the last
Scheduled Payment due prior to the payment in full of such Mortgage Loan, or the
related Mortgaged Property or related REO Property has been liquidated or until
the purchase or repurchase thereof (or substitution therefor) from the Trust
Fund pursuant to the terms of this Agreement. No Servicer shall be required to
advance shortfalls of principal or interest resulting from any related
bankruptcy proceedings or the application of the Relief Act.

      Each Servicer shall be obligated to make Advances with respect to those
Mortgage Loans serviced by it in accordance with the provisions of this
Agreement; provided however, that such obligation with respect to any related
Mortgage Loan shall cease if the Master Servicer or a Servicer determines, in
its sole discretion, that Advances with respect to such Mortgage Loan are
Nonrecoverable Advances. In the event that the Master Servicer or a Servicer
determines that any such Advances are Nonrecoverable Advances, the Master
Servicer or such Servicer shall provide the Master Servicer with a certificate
signed by a Servicing Officer evidencing such determination.

      By 2:00 p.m. New York time on the Servicer Remittance Date, each Servicer
shall remit in immediately available funds to the Master Servicer for deposit in
the Master Servicer Collection Account an amount equal to the aggregate amount
of Advances, if any, to be made in respect of the Mortgage Loans for the related
Distribution Date either (i) from its own funds or (ii) from the Collection
Account, to the extent of any Amounts For Future Distribution on deposit therein
(in which case it will cause to be made an appropriate entry in the records of
the Collection Account that Amounts For Future Distribution have been, as
permitted by this Section 5.01, used by such Servicer in discharge of any such
Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the
total amount of Advances to be made by such Servicer with respect to the
Mortgage Loans. In addition, a Servicer shall have the right to reimburse itself
for any such Advance made by it from its own funds from Amounts For Future
Distribution. In addition, a Servicer shall have the right to reimburse itself
for any outstanding Advance made by it from its own funds from amounts held from
time to time in the Collection Account to the extent such amounts are not then
required to be distributed. Any funds so applied and transferred pursuant to the
previous two sentences shall be replaced by such Servicer by deposit in the
Collection Account no later than the close

                                      -99-
<PAGE>

of business on the related Servicer Remittance Date on which such funds are
required to be distributed pursuant to this Agreement.

      SECTION 5.02. Advance Facility.

            (a) Each Servicer is hereby authorized to enter into a financing or
other facility (any such arrangement, an "Advance Facility"), the documentation
for which complies with Section 5.02(e) below, under which (1) the related
Servicer assigns or pledges its rights under this Agreement to be reimbursed for
any or all Advances and/or Servicing Advances to (i) a Person, which may be a
special-purpose bankruptcy-remote entity (an "SPV"), (ii) a Person, which may
simultaneously assign or pledge such rights to an SPV or (iii) a lender (a
"Lender"), which, in the case of any Person or SPV of the type described in
either of the preceding clauses (i) or (ii), may directly or through other
assignees and/or pledgees, assign or pledge such rights to a Person, which may
include a trustee acting on behalf of holders of debt instruments (any such
Person or any such Lender, an "Advance Financing Person"), and/or (2) an Advance
Financing Person agrees to fund all of the Advances and/or Servicing Advances
required to be made by such Servicer pursuant to this Agreement. No consent of
the Trustee, the Securities Administrator, Certificateholders or any other party
shall be required before a Servicer may enter into an Advance Facility, nor
shall the Trustee, the Securities Administrator or the Certificateholders be a
third party beneficiary of any obligation of an Advance Financing Person to such
Servicer. Notwithstanding the existence of any Advance Facility under which an
Advance Financing Person agrees to fund Advances and/or Servicing Advances, (A)
the related Servicer (i) shall remain obligated pursuant to this Agreement to
make Advances and/or Servicing Advances pursuant to and as required by this
Agreement and (ii) shall not be relieved of such obligations by virtue of such
Advance Facility and (B) neither the Advance Financing Person nor any Servicer's
Assignee (as hereinafter defined) shall have any right to proceed against or
otherwise contact any Mortgagor for the purpose of collecting any payment that
may be due with respect to any related Mortgage Loan or enforcing any covenant
of such Mortgagor under the related Mortgage Loan documents.

            (b) If a Servicer enters into an Advance Facility, such Servicer and
the related Advance Financing Person shall deliver to the Trustee at the address
set forth in Section 5.02 hereof a written notice (an "Advance Facility
Notice"), stating (a) the identity of the Advance Financing Person, (b) the
identity of the Person (the "Servicer's Assignee") that will, subject to Section
3.22(c) hereof, have the right to make withdrawals from the Collection Account
pursuant to Section 3.08 hereof to reimburse previously unreimbursed Advances
and/or Servicing Advances ("Advance Reimbursement Amounts") and (c) that such
Servicer's Assignee shall agree to be bound by the provisions of this Section
5.02. The Advance Facility Notice shall be executed by the Advance Facility
Person and such Servicer's Assignee. Advance Reimbursement Amounts (i) shall
consist solely of amounts in respect of Advances and/or Servicing Advances for
which such Servicer would be permitted to reimburse itself in accordance with
Section 3.08 hereof, assuming such Servicer had made the related Advance(s)
and/or Servicing Advance(s) and (ii) shall not consist of amounts payable to a
successor Servicer in accordance with Section 3.08 hereof to the extent
permitted under Section 5.02(e) below.

            (c) Notwithstanding the existence of an Advance Facility, a
Servicer, on behalf of the Advance Financing Person and the Servicer's Assignee,
shall be entitled to receive reimbursements of Advances and/or Servicing
Advances in accordance with Section 3.08 hereof, which entitlement may be
terminated by the Advance Financing Person pursuant to a written notice to the
Trustee and the Securities Administrator in the manner set forth in Section 5.02
hereof. Upon receipt of such written notice, such Servicer shall no longer be
entitled to receive reimbursement for any Advance Reimbursement Amounts and the
Servicer's Assignee shall immediately have the right to receive from the
Collection Account all Advance Reimbursement Amounts. Notwithstanding the
foregoing, and for the avoidance of doubt, (i) the related Servicer and/or the
Servicer's Assignee shall only be entitled to reimbursement of Advance

                                     -100-
<PAGE>

Reimbursement Amounts hereunder from withdrawals from the Collection Account
pursuant to Section 3.08 of this Agreement and shall not otherwise be entitled
to make withdrawals or receive amounts that shall be deposited in the Master
Servicer Collection Account pursuant to Section 3.06 hereof, and (ii) none of
the Trustee, the Securities Administrator or the Certificateholders shall have
any right to, or otherwise be entitled to, receive any Advance Reimbursement
Amounts to which such Servicer or Servicer's Assignee, as applicable, shall be
entitled pursuant to Section 3.08 hereof. An Advance Facility may be terminated
by the joint written direction of the related Servicer and the related Advance
Financing Person. Written notice of such termination shall be delivered to the
Trustee and the Securities Administrator in the manner set forth in Section 5.02
hereof. None of the Depositor, the Securities Administrator nor the Trustee
shall, as a result of the existence of any Advance Facility, have any additional
duty or liability with respect to the calculation or payment of any Advance
Reimbursement Amount, nor, as a result of the existence of any Advance Facility,
shall the Depositor, the Securities Administrator or the Trustee have any
additional responsibility to track or monitor the administration of the Advance
Facility or the payment of Advance Reimbursement Amounts to the Servicer's
Assignee. Each Servicer shall indemnify the Depositor, the Trustee, the Master
Servicer, the Securities Administrator, any successor Servicer and the Trust
Fund for any claim, loss, liability or damage resulting from any claim by the
related Advancing Financing Person, or Servicer's Assignee, except to the extent
that such claim, loss, liability or damage resulted from or arose out of
negligence, recklessness or willful misconduct on the part of the Depositor, the
Trustee, the Securities Administrator or any successor Servicer, as the case may
be, or a breach of any obligation under this Agreement, by the successor
Servicer. Each Servicer shall maintain and provide to any successor Servicer
and, upon request, the Trustee and the Securities Administrator a detailed
accounting on a loan-by-loan basis as to amounts advanced by, pledged or
assigned to, and reimbursed to any Advancing Financing Person. The successor
Servicer shall be entitled to rely on any such information provided by the
predecessor Servicer, and the successor Servicer shall not be liable for any
errors in such information.

            (d) An Advance Financing Person who receives an assignment or pledge
of rights to receive Advance Reimbursement Amounts and/or whose obligations are
limited to the funding of Advances and/or Servicing Advances pursuant to an
Advance Facility shall not be required to meet the criteria for qualification as
a Sub-Servicer.

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

            (f) For purposes of any certification of a Servicing Officer of a
Servicer made pursuant to Section 3.22 any Nonrecoverable Advance referred to
therein may have been made by such Servicer or any predecessor Servicer. In
making its determination that any Advance theretofore made has become a
Nonrecoverable Advance, such Servicer shall apply the same criteria in making
such determination regardless of whether such Advance shall have been made by
such Servicer or any predecessor Servicer.

                                     -101-
<PAGE>

            (g) Any amendment to this Section 5.02 or to any other provision of
this Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 5.02, including
amendments to add provisions relating to a successor servicer, may be entered
into by the Trustee, the Depositor, the Securities Administrator, the Backup
Servicer and the Servicers without the consent of any Certificateholder,
provided such amendment complies with Section 11.01 hereof. All reasonable costs
and expenses (including attorneys' fees) of each party hereto of any such
amendment shall be borne solely by the Servicer requesting such amendment. The
parties hereto hereby acknowledge and agree that: (a) the Advances and/or
Servicing Advances financed by and/or pledged to an Advance Financing Person
under any Advance Facility are obligations owed to a Servicer payable only from
the cash flows and proceeds received under this Agreement for reimbursement of
Advances and/or Servicing Advances only to the extent provided herein, and the
Trustee and the Trust are not, as a result of the existence of any Advance
Facility, obligated or liable to repay any Advances and/or Servicing Advances
financed by the Advance Financing Person; (b) such Servicer will be responsible
for remitting to the Advance Financing Person the applicable amounts collected
by it as reimbursement for Advances and/or Servicing Advances funded by the
Advance Financing Person, subject to the provisions of this Agreement; and (c)
neither the Trustee nor the Securities Administrator shall have any
responsibility to track or monitor the administration of the financing
arrangement between such Servicer and any Advance Financing Person.

      SECTION 5.03. 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, each Servicer shall, from amounts in respect of its
Servicing Fee for such Distribution Date, deposit into the Collection Account,
as a reduction of the Servicing Fee for such Distribution Date, no later than
each Servicer Advance Date immediately preceding such Distribution Date, an
amount up to the Prepayment Interest Shortfall. In case of such deposit, such
Servicer shall not be entitled to any recovery or reimbursement from the
Depositor, the Trustee, the Trust Fund or the Certificateholders. With respect
to any Distribution Date, to the extent that the Prepayment Interest Shortfall
exceeds Compensating Interest (such excess, a "Non-Supported Interest
Shortfall"), such Non-Supported Interest Shortfall shall reduce the Current
Interest with respect to each Class of Certificates, pro rata based upon the
amount of interest each such Class would otherwise be entitled to receive on
such Distribution Date.

      SECTION 5.04. Distributions on the REMIC Interests.

      On each Distribution Date, amounts on deposit in the Certificate Account
shall be treated for federal income tax purposes as applied to distributions on
the interests in REMIC 1, REMIC 2, REMIC 3 and REMIC 4 in an amount sufficient
to make the distributions on the respective Certificates on such Distribution
Date in accordance with the provisions of Section 5.05.

      SECTION 5.05. Distributions.

            (a) [RESERVED].

            (b) On each Distribution Date, the Securities Administrator shall
make the following distributions from the Certificate Account of an amount equal
to the Interest Funds to the Holders of record of each Class of Certificates, in
the following order of priority:

                  (i) to each Class of Class R Certificate, Class A-1-A
Certificates, Class A-1-B Certificates, Class A-X-A Certificates and Class A-X-B
Certificates, concurrently, the Current Interest and any Interest Carryforward
Amount with respect to such Class; provided, however, if such amount is not
sufficient to make a full distribution of the Current Interest and any Interest
Carryforward Amount

                                     -102-
<PAGE>

with respect to all of the Class R Certificate, Class A-1-A Certificates, Class
A-1-B Certificates, Class A-X-A Certificates and Class A-X-B Certificates, such
amount will be distributed pro rata among each Class R Certificate, Class A-1-A
Certificates, Class A-1-B Certificates, Class A-X-A Certificates and Class A-X-B
Certificates based on the ratio of (x) the Current Interest and Interest
Carryforward Amount for each Class of Class R Certificate, Class A-1-A
Certificates, Class A-1-B Certificates, Class A-X-A Certificates and Class A-X-B
Certificates to (y) the total amount of Current Interest and any Interest
Carryforward Amount for the Class of Class R Certificate, Class A-1-A
Certificates, Class A-1-B Certificates, Class A-X-A Certificates and Class A-X-B
Certificates;

                  (ii) to the Class M-1 Certificates and the Class M-1-X
Certificates, concurrently, the Current Interest and any Interest Carryforward
Amount with respect to such Class; provided, however, if such amount is not
sufficient to make a full distribution of the Current Interest and any Interest
Carryforward Amount with respect to all of the Class M-1 Certificates and Class
M-1-X Certificates, such amount will be distributed pro rata among each Class
M-1 Certificates and Class M-1-X Certificates based on the ratio of (x) the
Current Interest and Interest Carryforward Amount for each Class of Class M-1
Certificates and Class M-1-X Certificates to (y) the total amount of Current
Interest and any Interest Carryforward Amount for the Class of Class M-1
Certificates and Class M-1-X Certificates;

                  (iii) to the Class M-2 Certificates and the Class M-2-X
Certificates, concurrently, the Current Interest and any Interest Carryforward
Amount with respect to such Class; provided, however, if such amount is not
sufficient to make a full distribution of the Current Interest and any Interest
Carryforward Amount with respect to all of the Class M-2 Certificates and Class
M-2-X Certificates, such amount will be distributed pro rata among each Class
M-2 Certificates and Class M-2-X Certificates based on the ratio of (x) the
Current Interest and Interest Carryforward Amount for each Class of Class M-2
Certificates and Class M-2-X Certificates to (y) the total amount of Current
Interest and any Interest Carryforward Amount for the Class of Class M-2
Certificates and Class M-2-X Certificates;

                  (iv) to the Class M-3 Certificates, the Class M-3 Current
Interest and any Class M-3 Interest Carryforward Amount;

                  (v) to the Class B-1 Certificates, the Class B-1 Current
Interest and any Class B-1 Interest Carryforward Amount;

                  (vi) to the Class B-2 Certificates, the Class B-2 Current
Interest and any Class B-2 Interest Carryforward Amount;

                  (vii) to the Class B-3 Certificates, the Class B-3 Current
Interest and any Class B-3 Interest Carryforward Amount; and

                  (viii) any remainder pursuant to Section 5.05(f) hereof.

            (c) [RESERVED].

            (d) On each Distribution Date, the Securities Administrator shall
make the following distributions from the Certificate Account of an amount equal
to the Principal Distribution Amount in the following order of priority, and
each such distribution shall be made only after all distributions pursuant to
Section 5.05(b) above (excluding Section 5.05(b)(viii)) shall have been made
until such amount shall have been fully distributed for such Distribution Date:

                  (i) to the Class R, Class A-1-A and Class A-1-B Certificates,
sequentially to the Class R, Class A-1-A and Class A-1-B Certificates until the
Certificate Principal Balance is reduced to zero, the Class A Principal
Distribution Amount until the Certificate Principal Balances thereof have

                                     -103-
<PAGE>

been reduced to zero; provided, however, in the event that the Class M and Class
B Certificate Principal Balances have been reduced to zero, principal allocated
to the Class A Certificates will be distributed pro rata to the Class A-1-A and
Class A-1-B Certificates until their Certificate Principal Balances have been
reduced to zero.

                  (ii) to the Class M-1 Certificates, the Class M-1 Principal
Distribution Amount;

                  (iii) to the Class M-2 Certificates, the Class M-2 Principal
Distribution Amount;

                  (iv) to the Class M-3 Certificates, the Class M-3 Principal
Distribution Amount;

                  (v) to the Class B-1 Certificates, the Class B-1 Principal
Distribution Amount;

                  (vi) to the Class B-2 Certificates, the Class B-2 Principal
Distribution Amount;

                  (vii) to the Class B-3 Certificates, the Class B-3 Principal
Distribution Amount; and

                  (viii) any remainder pursuant to Section 5.05(f) hereof.

            (e) [RESERVED].

            (f) On each Distribution Date, the Securities Administrator shall
make the following distributions up to the following amounts from the
Certificate Account of the remainders pursuant to Section 5.05(b)(viii) and
(d)(viii) hereof and, to the extent required to make the distributions set forth
below in clauses (i) through (ix) of this Section 5.05(f), and each such
distribution shall be made only after all distributions pursuant to Sections
5.05(b) and (d) above (excluding Section 5.05(b)(viii) and Section
5.05(d)(viii)) shall have been made until such remainders shall have been fully
distributed for such Distribution Date:

                  (i) for distribution as part of the Principal Distribution
Amount, the Extra Principal Distribution Amount;

                  (ii) to the Class M-1 Certificates, the Class M-1 Unpaid
Realized Loss Amount;

                  (iii) to the Class M-2 Certificates, the Class M-2 Unpaid
Realized Loss Amount;

                  (iv) to the Class M-3 Certificates, the Class M-3 Unpaid
Realized Loss Amount;

                  (v) to the Class B-1 Certificates, the Class B-1 Unpaid
Realized Loss Amount;

                  (vi) to the Class B-2 Certificates, the Class B-2 Unpaid
Realized Loss Amount;

                                     -104-
<PAGE>

                  (vii) to the Class B-3 Certificates, the Class B-3 Unpaid
Realized Loss Amount;

                  (viii) to the extent required to make the allocations set
forth below, on a pro rata basis:

                        (A) to the Class R, Class A-1-A and Class A-1-A
Certificates, the Floating Rate Certificate Carryover for such Class,

                        (B) to the Class M-1 Certificates, the Floating Rate
Certificate Carryover for such Class;

                        (C) to the Class M-2 Certificates, the Floating Rate
Certificate Carryover for such Class;

                        (D) to the Class M-3 Certificates, the Floating Rate
Certificate Carryover for such Class;

                        (E) to the Class B-1 Certificates, the Floating Rate
Certificate Carryover for such Class;

                        (F) to the Class B-2 Certificates, the Floating Rate
Certificate Carryover for such Class;

                        (G) to the Class B-3 Certificates, the Floating Rate
Certificate Carryover for such Class;

                  (ix) the remainder pursuant to Section 5.05(g) hereof.

            (g) on each Distribution Date, the Securities Administrator shall
allocate the remainder pursuant to Section 5.05(f)(ix) as follows:

                  (i) to the Class N Certificates in the following order of
priority, (I) the Class N Current Interest, (II) the Class N Interest
Carryforward Amount, and (III) any other amounts remaining after application
pursuant to clauses (I) and (II) , to reduce the Class N Certificate Notional
Amount until the Class N Certificate Notional Amount has been reduced to zero;

                  (ii) to the Holders of the Class X Certificates, the Class X
Distributable Amount; and

                  (iii) the remainder pursuant to Section 5.05(h) hereof.

            (h) On each Distribution Date, the Securities Administrator shall
allocate the remainder pursuant to Section 5.05(g)(iii) hereof to the Class R
Certificate and such distributions shall be made only after all preceding
distributions shall have been made until such remainder shall have been fully
distributed.

            (i) on each Distribution Date, the Securities Administrator shall
distribute all amounts representing Prepayment Penalties, amounts paid by the
Servicer, the Seller or the Transferor in respect of Prepayment Penalties
pursuant to this Agreement or any Transfer Agreement, as applicable and amounts
received in respect of any indemnification paid as a result of a

                                     -105-
<PAGE>

Prepayment Penalty being unenforceable in breach of the representations and
warranties set forth in a Transfer Agreement to the Class N and Class X
Certificates as follows:

                  (i) to the Class N Certificates in the following order of
priority, (I) the Class N Current Interest remaining after distributions on such
Distribution Date pursuant to Section 5.05(g), (II) the Class N Interest
Carryforward Amount remaining after distributions on such Distribution Date
pursuant to Section 5.05(g) and (III) to reduce the Class N Certificate Notional
Amount remaining after distributions on such Distribution Date pursuant to
Section 5.05(g) until the Class N Certificate Notional Amount has been reduced
to zero; and

                  (ii) any remainder, to the Class X Certificates.

            (j) On each Distribution Date, after giving effect to distributions
on such Distribution Date, the Securities Administrator shall allocate the
Applied Realized Loss Amount for the Certificates to reduce the Certificate
Principal Balances of the Subordinated Certificates in the following order of
priority:

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

                  (ii) to the Class B-2 Certificate until the Class B-2
Principal Balance is reduced to zero;

                  (iii) to the Class B-1 Certificate until the Class B-1
Principal Balance is reduced to zero;

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

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

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

            (k) Subject to Section 10.02 hereof respecting the final
distribution, on each Distribution Date the Securities Administrator 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 or if the Securities Administrator has not been
provided with a Holder's wire instruction or if such Holder has provided the
Securities Administrator with written request at least five (5) Business Days
prior to the related Record Date 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.

      In accordance with this Agreement, the Servicer shall prepare and deliver
a report (the "Remittance Report") to the Trustee and the Securities
Administrator in the form of a computer readable magnetic tape (or by such other
means as the Master Servicer or the Servicer, as applicable, the Securities
Administrator may agree from time to time) containing such data and information
such as to permit the Trustee to prepare the Monthly Statement to
Certificateholders and make the required distributions for the related
Distribution Date.

                                     -106-
<PAGE>

            (l) Any payments received under the terms of the Cap Contract will
be available to pay the holders of the Offered Certificates and Class B
Certificates up to the amount of any Floating Rate Certificate Carryover
remaining after the application of Section 5.05(f)(viii) on such Distribution
Date (other than any Floating Rate Certificate Carryover attributable to the
fact that Applied Realized Loss Amounts are not allocated to the Class A and
Class R Certificates). Any amounts in the Cap Contract Account on any
Distribution Date in excess of amounts required to pay such outstanding Floating
Rate Certificate Carryovers on such Distribution Date will be distributed to the
holders of the Class N and Class X Certificates in accordance with the
provisions of Section 5.05(i) hereof (after all other distributions have been
made thereunder on such Distribution Date). Payments from the Cap Contract
Account in respect of such Floating Rate Certificate Carryovers shall be paid to
the Offered Certificates and Class B Certificates in accordance with the
provisions of Section 5.05(f)(viii) hereof (and taking into account only
Floating Rate Certificate Carryovers other than Floating Rate Certificate
Carryover attributable to the fact that Applied Realized Loss Amounts are not
allocated to the Class A and Class R Certificates).

For any Distribution Date on which there is a payment under the Cap Contract
based on a notional balance in excess of the aggregate Certificate Principal
Balance of the Offered Certificates and the Class B Certificates, the amount
representing such excess payment, to the extent not otherwise used to pay
Floating Rate Certificate Carryovers, shall not be an asset of the Trust Fund
and, instead, shall be paid into and distributed out of a separate trust created
by this Agreement for the benefit of the Class N and Class X Certificates and
shall be distributed to the Class N and Class X Certificates pursuant to the
priorities specified in Section 5.05(i).

                (i) On or prior to the Cap Contract Termination Date, amounts,
if any, received by the Trustee for the benefit of the Trust Fund in respect of
the Cap Contract shall be deposited by the Trustee into the Cap Contract
Account. With respect to any Distribution Date on or prior to the Cap Contract
Termination Date, the amount, if any, payable by the Cap Contract Counterparty
under the Cap Contract will equal the product of (i) the excess of (x) One-Month
LIBOR (as determined by the Cap Contract Counterparty and subject to a cap equal
to the rate with respect to such Distribution Date as shown under the heading
"Upper Collar" in the Cap Table), over (y) the rate with respect to such
Distribution Date as shown under the heading "Lower Collar" in the Cap Table,
(ii) an amount equal to the Cap Contract Notional Balances and (iii) the number
of days in such Accrual Period, divided by 360. If a payment is made to the
Trust Fund under the Cap Contract and the Trustee intends to distribute excess
amounts to the holders of the Class N and Class X Certificates as described
above, the Trustee shall send a notice on the Business Day prior to the related
Distribution Date stating the amount received on the Cap Contract, the amount
paid with respect to Floating Rate Certificate Carryovers (other than any
Floating Rate Certificate Carryover attributable to the fact that Applied
Realized Loss Amounts are not allocated to the Class A and Class R Certificates)
and the amount due to the holders of the Class N and Class X Certificates. Such
notice shall be sent by the Trustee via facsimile to the holders of the Class N
and Class X Certificates.

                (ii) Amounts on deposit in the Cap Contract Account will remain
uninvested pending distribution to Certificateholders.

The Cap Contract is scheduled to remain in effect until the Cap Contract
Termination Date and will be subject to early termination only in limited
circumstances. Such circumstances include certain insolvency or bankruptcy
events in relation to the Cap Contract Counterparty (after a grace period of
three Local Business Days, as defined in the Cap Contract, after notice of such
failure is received by the Cap Contract Counterparty) to make a payment due
under the Cap Contract, the failure by the Cap Contract Counterparty or the
Trustee (after a cure period of 20 days after notice of such failure is
received) to

                                     -107-
<PAGE>

perform any other agreement made by it under the Cap Contract, the termination
of the Trust Fund and the Cap Contract becoming illegal or subject to certain
kinds of taxation.

      SECTION 5.06. Monthly Statements to Certificateholders.

            (a) Not later than each Distribution Date based solely on
information provided by the Master Servicer or Servicer, as applicable, the
Securities Administrator shall prepare and make available on its website located
at www.jpmorgan.com/sfr to each Holder of a Class of Certificates of the Trust
Fund, the Master Servicer, the Trustee, each Servicer, the Rating Agencies and
the Depositor a statement setting forth for each $1,000 principal amount of
Certificates:

                  (i) the amount of the related distribution to Holders of each
Class allocable to principal, separately identifying (A) the aggregate amount of
any Principal Prepayments included therein, (B) the aggregate of all scheduled
payments of principal included therein, (C) the Extra Principal Distribution
Amount, if any, and (D) the aggregate amount of prepayment penalties, if any;

                  (ii) the amount of such distribution to Holders of each Class
allocable to interest, together with any Non-Supported Interest Shortfalls
allocated to each Class;

                  (iii) any Interest Carryforward Amount for each Class of the
Certificates;

                  (iv) the Class Certificate Principal Balance or Class Notional
Amount 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 Pool Stated Principal Balance for such Distribution
Date and the amount on deposit in the Pre-Funding Account on such Distribution
Date;

                  (vi) the related amount of the Administrator Fee and Servicing
Fees paid to or retained by the Securities Administrator or the Servicers;

                  (vii) the Pass-Through Rate for each Class of Certificates for
such Distribution Date;

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

                  (ix) the amount of Servicing Advances for such Distribution
Date and the aggregate amount of Servicing Advances outstanding as of the last
day of the calendar month preceding such Distribution Date and the aggregate
amount of such Servicing Advances from the Closing Date to such Distribution
Date;

                  (x) the aggregate amount of reimbursement to the related
Servicer of non-recoverable Advances previously made;

                  (xi) the aggregate amount of recovery to the Trust Fund of
reimbursement previously deemed non-recoverable;

                  (xii) the cumulative amount of (A) Realized Losses and (B)
Applied Realized Loss Amounts to date;

                  (xiii) the amount of (A) Realized Losses and (B) Applied
Realized Loss Amounts with respect to such Distribution Date;

                                     -108-
<PAGE>

                  (xiv) the number and aggregate principal amounts of Mortgage
Loans (A) Delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 days,
(2) 60 days, (3) 90 days, (4) 120 days and (5) 150 or more days, and (B) in
foreclosure or bankruptcy and Delinquent (1) 30 days, (2) 60 days, (3) 9 days
and (4) 120 or more days;

                  (xv) the number and aggregate principal amounts of Mortgage
Loans that were in bankruptcy as of the close of business on the last day of the
calendar month preceding such Distribution Date;

                  (xvi) the number and aggregate principal amounts of Mortgage
Loans that were in foreclosure as of the close of business on the last day of
the calendar month preceding such Distribution Date;

                  (xvii) the total number and principal balance of any REO
Properties as of the close of business on the last day of the calendar month
preceding such Distribution Date;

                  (xviii) the aggregate Stated Principal Balance of all
Liquidated Loans as of the immediately preceding Distribution Date;

                  (xix) whether a Trigger Event has occurred;

                  (xx) amount on deposit in the Pre-Funding Account and the
Capitalized Interest Account;

                  (xxi) with respect to each Class of Certificates, any Interest
Carryforward Amount with respect to such Distribution Date for each such Class,
any Interest Carryforward Amount paid for each such Class and any remaining
Interest Carryforward Amount for each such Class;

                  (xxii) with respect to each Class Certificates any Floating
Rate Certificate Carryover with respect to such Distribution Date for each such
Class, any Floating Rate Certificate Carryover paid for each such Class and any
remaining Floating Rate Certificate Carryover for each such Class;

                  (xxiii) the number and Stated Principal Balance (as of the
immediately preceding Distribution Date) of any Mortgage Loans which were
purchased or repurchased during the preceding Due Period and since the Cut-off
Date;

                  (xxiv) the number and aggregate Stated Principal Balance of
Mortgage Loans for which prepayment penalties were received during the related
Prepayment Period and, for each such Mortgage Loan, the amount of prepayment
penalties received during the related Prepayment Period and in the aggregate of
such amounts for all such Mortgage Loans since the Cut-off Date;

                  (xxv) the current and cumulative number and amount of
prepayment penalties and the current and cumulative amount of late payment fees
received during the related Prepayment Period;

                  (xxvi) the total number and principal balance of any Mortgage
Loans that were repurchased during the calendar month preceding such
Distribution Date and the total number and principal balance of any Mortgage
Loans that were repurchased from the Closing Date to such Distribution Date;

                                     -109-
<PAGE>

                  (xxvii) the aggregate amount of Subsequent Recoveries for such
Distribution Date and the aggregate amount of Subsequent Recoveries collected
after the Closing Date to such Distribution Date;

                  (xxviii) the weighted average remaining term to maturity of
the Mortgage Loans as of the first day of the calendar month preceding such
Distribution Date;

                  (xxix) the amount and purpose of any withdrawal from the
Collection Account pursuant to Section 3.08(a)(v);

                  (xxx) the amount of any payments to each Class of Certificates
that are treated as payments received in respect of a REMIC Regular Interest and
the amount of any payments to each Class of Certificates that are not treated as
payments received in respect of a REMIC Regular Interest;

                  (xxxi) as of each Distribution Date, the amount, if any, to be
deposited in the Certificate Account pursuant to the Cap Contract as described
in Section 5.05(l) and the amount thereof to be paid to the Offered Certificates
as described in Section 5.05(l) hereof; and

                  (xxxii) as of each Distribution Date, the Floating Rate
Certificate Carryover for each Class of Certificates (other than the Interest
Only Certificates and the Class N and Class X Certificates) and the portion of
such Floating Rate Certificate Carryover that is attributable to the fact that
Applied Realized Loss Amounts are not allocated to the Class A and Class R
Certificates.

            (b) [RESERVED];

            (c) If so requested in writing or as required by applicable law,
within a reasonable period of time after the end of each calendar year, the
Securities Administrator shall make available on its website or cause to be
furnished to each Person who at any time during the calendar year was a
Certificateholder of record, a statement containing the information set forth in
clauses (a)(i) and (a)(ii) of this Section 5.06 aggregated for such calendar
year or applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Securities Administrator shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Securities Administrator pursuant to any
requirements of the Code as from time to time in effect. Within a reasonable
period of time after the end of each calendar year if requested in writing or
required by applicable law, the Securities Administrator will prepare and
deliver to each certificateholder of record during the previous calendar year, a
statement containing information necessary to enable certificateholders to
prepare their tax returns. The Securities Administrator will not be responsible
for any errors, omissions or misstatements that may be incorporated in such
statement.

            (d) Upon filing with the Internal Revenue Service, the Securities
Administrator shall furnish to the Holders of the Class R Certificate 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 R Certificate with respect
to the following matters: the original projected principal and interest cash
flows on the Closing Date on each Class of regular and residual interests
created hereunder and on the Mortgage Loans, based on the Prepayment Assumption;

                  (i) The projected remaining principal and interest cash flows
as of the end of any calendar quarter with respect to each Class of regular and
residual interests created hereunder and the Mortgage Loans, based on the
Prepayment Assumption;

                  (ii) The Prepayment Assumption and any interest rate
assumptions used in determining the projected principal and interest cash flows
described above;

                                     -110-
<PAGE>

                  (iii) The original issue discount (or, in the case of the
Mortgage Loans, market discount) or premium accrued or amortized through the end
of such calendar quarter with respect to each Class of regular or residual
interests created hereunder and to the Mortgage Loans, together with each
constant yield to maturity used in computing the same;

                  (iv) 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 REMICs with respect
to such regular interests or bad debt deductions claimed with respect to the
Mortgage Loans;

                  (v) The amount and timing of any non-interest expenses of the
REMICs; and

                  (vi) Any taxes (including penalties and interest) imposed on
the REMICs, including, without limitation, taxes on "prohibited transactions,"
"contributions" or "net income from foreclosure property" or state or local
income or franchise taxes.

      The Securities Administrator shall only be required to provide the
information pursuant to clauses (i), (ii) and (iii) above if such information is
provided to the Securities Administrator by the Depositor.

      SECTION 5.07. Pre-Funding Account.

            (a) No later than the Closing Date, the Securities Administrator
shall establish and maintain on behalf of the Trustee for the benefit of the
Certificateholders a segregated trust account that is an Eligible Account, which
shall be titled "Pre-Funding Account, U.S. Bank National Association, as trustee
for the registered holders of Terwin Mortgage Trust 2004-5HE, Asset-Backed
Certificates, TMTS Series 2004-5HE" (the "Pre-Funding Account"). The Securities
Administrator, as agent for the Trustee, shall, promptly upon receipt, deposit
in the Pre-Funding Account and retain therein the Original Pre-Funded Amount
remitted on the Closing Date to the Trustee by the Seller. Funds deposited in
the Pre-Funding Account shall be held in trust by the Trustee on behalf of the
Certificateholders for the uses and purposes set forth herein. The Trustee
hereby appoints the Securities Administrator as its agent in connection with
establishing and maintaining the Pre-Funding Account pursuant to this Section
5.07.

            (b) The Securities Administrator shall invest funds deposited in the
Pre-Funding Account in Permitted Investments as directed in writing by the
Seller (provided that if the Securities Administrator does not receive written
direction from the Seller, then amounts in the Pre-Funding Account shall not be
invested) with a maturity date no later than the Business Day preceding each
Distribution Date or Subsequent Transfer Date, as the case may be. For federal
income tax purposes, the Seller shall be the owner of the Pre-Funding Account
and shall report all items of income, deduction, gain or loss arising therefrom.
All income and gain realized from investment of funds deposited in the
Pre-Funding Account shall be transferred to the Capitalized Interest Account on
the Business Day immediately preceding each Distribution Date or Subsequent
Transfer Date, as the case may be. The Seller shall deposit in the Pre-Funding
Account the amount of any net loss incurred in respect of any such Permitted
Investment immediately upon realization of such loss without any right of
reimbursement therefor. The Pre-Funding Account will not be an asset of any of
the REMICs provided for herein.

            (c) Amounts on deposit in the Pre-Funding Account shall be withdrawn
by the Securities Administrator as follows:

                  (i) On any Subsequent Transfer Date, the Securities
Administrator shall withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Stated Principal Balances of the Subsequent Mortgage Loans
transferred and assigned to the Trustee for deposit in the Mortgage Pool on such
Subsequent Transfer Date and pay such amount to or upon the order of the

                                     -111-
<PAGE>

Depositor upon satisfaction of the conditions set forth in Section 2.11 with
respect to such transfer and assignment;

                  (ii) To withdraw any amount not required to be deposited in
the Pre-Funding Account or deposited therein in error; and

                  (iii) To clear and terminate the Pre-Funding Account upon the
earlier to occur of (A) the Distribution Date in the month immediately following
the end of the Funding Period and (B) the termination of this Agreement, with
any amounts remaining on deposit therein being deposited into the Certificate
Account for distribution in accordance with the terms thereof.

      SECTION 5.08. Capitalized Interest Account.

            (a) No later than the Closing Date, the Securities Administrator, on
behalf of the Trustee, shall establish and maintain a segregated trust account
that is an Eligible Account, which shall be titled "Capitalized Interest
Account, U.S. Bank National Association, as trustee for the registered holders
of Terwin Mortgage Trust 2004-5HE, Asset-Backed Certificates, TMTS Series
2004-5HE" (the "Capitalized Interest Account"). The Securities Administrator
shall, promptly upon receipt, deposit in the Capitalized Interest Account and
retain therein the Capitalized Interest Amount remitted on the Closing Date to
the Securities Administrator by the Depositor. Funds deposited in the
Capitalized Interest Account shall be held in trust by the Trustee on behalf of
the Certificateholders for the uses and purposes set forth herein. The Trustee
hereby appoints the Securities Administrator as its agent in connection with
establishing and maintaining the Capitalized Interest Account pursuant to this
Section 5.08. With respect to each Distribution Date prior to the Distribution
Date in October 2004, the Securities Administrator will withdraw from the
Capitalized Interest Account and deposit into the Certificate Account an amount
equal to the Required Withdrawal. The Seller is required to deposit into the
Capitalized Interest Account an amount sufficient to permit the Securities
Administrator to make the withdrawals required by this Section 5.08.

            (b) The Securities Administrator will invest funds deposited in the
Capitalized Interest Account in Permitted Investments as directed in writing by
the Seller (provided that if the Securities Administrator does not receive
written direction from the Seller, then amounts in the Capitalized Interest
Account shall not be invested) with a maturity date no later than the Business
Day preceding each Distribution Date. For federal income tax purposes, the
Seller shall be the owner of the Capitalized Interest Account and shall report
all items of income, deduction, gain or loss arising therefrom. At no time will
the Capitalized Interest Account be an asset of any of the REMICs provided for
herein. All income and gain realized from investment of funds deposited in the
Capitalized Interest Account shall be for the sole and exclusive benefit of the
Seller and shall be remitted by the Securities Administrator to the Seller on
each Distribution Date. The Seller shall deposit in the Capitalized Interest
Account the amount of any net loss incurred in respect of any such Permitted
Investment immediately upon realization of such loss.

      Upon the earliest of (i) the Distribution Date immediately following the
end of the Funding Period and (ii) the termination of this Agreement in
accordance with Section 10.01, any amount remaining on deposit in the
Capitalized Interest Account after withdrawals pursuant to paragraph (a) above
shall be withdrawn by the Trustee and paid to the Seller or its designee.

                                   ARTICLE VI

                                THE CERTIFICATES

      SECTION 6.01. The Certificates.

                                     -112-
<PAGE>

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

<TABLE>
<CAPTION>
                                                               Original Certificate
                  Minimum          Integral Multiples in      Principal Balance or
 Class         Denomination          Excess of Minimum           Notional Amount
 -----         ------------        ---------------------      ----------------------
<S>            <C>                 <C>                        <C>
A-1-A          $  25,000.00        $     1.00                     $ 140,956,000.00
A-1-B          $  25,000.00        $     1.00                     $ 122,457,000.00
A-X-A          $ 100,000.00        $     1.00                     $ 140,956,000.00
A-X-B          $ 100,000.00        $     1.00                     $ 122,457,000.00
M-1            $  25,000.00        $     1.00                     $  20,963,000.00
M-2            $  25,000.00        $     1.00                     $  16,738,000.00
M-3            $  25,000.00        $     1.00                     $    4,550,00.00
M-1-X          $ 100,000.00        $     1.00                     $  20,963,000.00
M-2-X          $ 100,000.00        $     1.00                     $  16,738,000.00
B-1            $  25,000.00        $     1.00                     $   4,713,000.00
B-2            $  25,000.00        $     1.00                     $   4,388,000.00
B-3            $ 100,000.00        $     1.00                     $   3,900,000.00
N              $ 250,000.00        $ 1,000.00                     $  18,000,000.00
X                       N/A               N/A                                  100%
R              $     100.00               N/A                     $         100.00
</TABLE>

      The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trust Fund, 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 Authenticating Agent 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
authentication. On the Closing Date, the Authenticating Agent shall authenticate
the Certificates to be issued at the written direction of the Depositor, or any
Affiliate thereof.

      The Class B Certificates may be sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of one or more permanent
global certificates in definitive, fully registered form without interest
coupons with the applicable legends set forth in Exhibit A hereto added to the
forms of such Certificates (each, a "Book-Entry Regulation S Global Security"),
which shall be deposited on behalf of the Holders of such Certificates
represented thereby with the Securities Administrator, as custodian for DTC and
registered in the name of a nominee of DTC, duly executed and authenticated by
the Securities Administrator and the Authenticating Agent as hereinafter
provided. The aggregate principal amounts of the Book-Entry Regulation S Global
Securities may from time to time be increased or decreased by adjustments made
on the records of the Securities Administrator or DTC or its nominee, as the
case may be, as hereinafter provided.

                                     -113-
<PAGE>

      The Class N or Class X Certificates sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of one or more
permanent global certificates in physical, fully registered form without
interest coupons with the applicable legends set forth in Exhibit A hereto added
to the forms of such Certificates (each, a "Definitive Regulation S Global
Security"), which shall be delivered to the Holders of such Certificates
represented thereby by the Securities Administrator, duly executed and
authenticated by the Securities Administrator and the Authenticating Agent as
hereinafter provided. The aggregate principal amounts of the Definitive
Regulation S Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Securities Administrator, as
hereinafter provided.

      SECTION 6.02. Appointment of Certificate Registrar; Certificate Register;
Registration of Transfer and Exchange of Certificates.

            (a) The Securities Administrator is hereby appointed Certificate
Registrar (the "Certificate Registrar") and in such capacity, it shall maintain,
or cause to be maintained in accordance with the provisions of Section 6.09
hereof, a Certificate Register for the Trust Fund in which, subject to the
provisions of subsections (b) and (c) below and to such reasonable regulations
as it may prescribe, the Securities Administrator 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 Authenticating Agent 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 Securities Administrator. Whenever any
Certificates are so surrendered for exchange, the Securities Administrator shall
execute and the Authenticating Agent shall 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 Securities Administrator 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 a Securities Administrator in accordance
with such Securities Administrator's customary procedures.

      No Transfer of a Class N or Class X Certificate shall be made unless such
Transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under the Securities Act and such state securities
laws. In the event that a Transfer is to be made in reliance upon an exemption
from the Securities Act and such laws, in order to assure compliance with the
Securities Act and such laws, the Certificateholder desiring to effect such
Transfer and such Certificateholder's prospective transferee shall (except with
respect to the initial transfer of a Class N or Class X Certificate by Merrill
Lynch & Co.) each certify to the Securities Administrator in writing the facts
surrounding the Transfer in substantially the forms set forth in Exhibit F (the
"Transferor Certificate") and (i) deliver a letter in substantially the form of
either Exhibit G (the "Investment Letter") or Exhibit H (the "Rule 144A Letter")
or (ii) there shall be delivered to the Securities Administrator an Opinion of
Counsel that such Transfer may be made pursuant to an exemption from the
Securities Act, which Opinion of Counsel shall not be an expense of the
Depositor, the Securities Administrator or the Trustee. The Depositor shall
provide to any Holder of a Class N or

                                     -114-
<PAGE>

Class X Certificate and any prospective transferee designated by any such
Holder, information regarding the related Certificates and the Mortgage Loans
and such other information as shall be necessary to satisfy the condition to
eligibility set forth in Rule 144A(d)(4) for Transfer of any such Certificate
without registration thereof under the Securities Act pursuant to the
registration exemption provided by Rule 144A. The Securities Administrator shall
cooperate with the Depositor in providing the Rule 144A information referenced
in the preceding sentence, including providing to the Depositor such information
in the possession of the Securities Administrator 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 Class N or Class X Certificate desiring to effect such Transfer
shall, and does hereby agree to, indemnify the Depositor, the Securities
Administrator and the Trustee 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.

      By acceptance of a Regulation S Global Security, whether upon original
issuance or subsequent transfer, each Holder of such a Certificate acknowledges
the restrictions on the transfer of such Certificate set forth thereon and
agrees that it will only transfer such a Certificate as provided herein. In
addition, each Holder of a Regulation S Global Security shall be deemed to have
represented and warranted to the Depositor, the Securities Administrator and any
of their respective successors that: (i) such Person is not a "U.S. person"
within the meaning of Regulation S and was, at the time the buy order was
originated, outside the United States and (ii) such Person understands that such
Certificates have not been registered under the Securities Act and that (x)
until the expiration of the 40-day distribution compliance period (within the
meaning of Regulation S), no offer, sale, pledge or other transfer of such
Certificates or any interest therein shall be made in the United States or to or
for the account or benefit of a U.S. person (each as defined in Regulation S),
(y) if in the future it decides to offer, resell, pledge or otherwise transfer
such Certificates, such Certificates may be offered, resold, pledged or
otherwise transferred only (A) to a person which the seller reasonably believes
is a "qualified institutional buyer" (a "QIB") as defined in Rule 144A under the
Securities Act, that is purchasing such Certificates for its own account or for
the account of a qualified institutional buyer to which notice is given that the
transfer is being made in reliance on Rule 144A or (B) in an offshore
transaction (as defined in Regulation S) in compliance with the provisions of
Regulation S, in each case in compliance with the requirements of this
Agreement; and it will notify such transferee of the transfer restrictions
specified in this Section.

      No Transfer of a Class N or Class X Certificate, or a beneficial interest
therein, may be made to a non-United States Person unless the Securities
Administrator has received, in the manner required by applicable United States
Treasury Regulations (and with all required attachments, including, where the
non-United States Person is providing an Internal Revenue Service Form W-8IMY
(or any successor form), Internal Revenue Service Forms W-8BEN or W-9 (or any
successor forms) from all persons treated as beneficially owning an interest in
the Class N or Class X Certificate through such non-United States Person either
directly, through an intermediary or through an entity that is treated as a
partnership or other look-through entity for non-United States federal tax
purposes), a properly completed Internal Revenue Service Form W-8IMY, W-8BEN or
W-8ECI (or any successor form) from such non-United States Person.

      No transfer of an ERISA Restricted Certificate that is a Class R
Certificate may be made to any Person that is an employee benefit plan subject
to Title I of ERISA, a plan subject to Section 4975 of the Code or a plan
subject to any state, local or other federal law substantively similar to the
foregoing provisions of ERISA or the Code ("Similar Law"), or to any Person
directly or indirectly acting on behalf of or using any assets of any such plan
(collectively, "Plan"). Each Person to whom a Class R Certificate is to be
transferred shall be required or deemed to represent that it is not a Plan.

      No transfer of an ERISA-Restricted Certificate that is a Class N or Class
X Certificate shall be made to any Person unless the Securities Administrator
has received (A) a representation that either (I) such transferee is not a Plan,
or (II) if the Certificate has been the subject of an ERISA-Qualifying
Underwriting, a representation that such transferee is an insurance company that
is acquiring the Certificate with assets of an "insurance company general
account," as defined in Section V(e) of Prohibited Transaction Class Exemption
("PTCE") 95-60, and the acquisition and holding of the Certificate are covered
and exempt under Sections I and III of PTCE 95-60, or (B) solely in the case of
any such Certificate that is a Definitive Certificate, an Opinion of Counsel
satisfactory to the Securities Administrator to the effect that the acquisition
and holding of such Certificate will not constitute or result in a nonexempt
prohibited transaction under ERISA or the Code, or a violation of Similar Law,
and will not subject the Securities Administrator or the Trustee to any
obligation in addition to those expressly undertaken in this Agreement, which
Opinion of Counsel shall not be an expense of the Securities Administrator or
the Trustee.

                                     -115-
<PAGE>
      For purposes of the two immediately preceding paragraphs of this
Subsection 6.02(a), other than clause (B) in the immediately preceding
paragraph, the representations as set forth therein shall be deemed to have been
made to the Securities Administrator by the transferee's acceptance of an ERISA
Restricted Certificate (or the acceptance by a Certificate Owner of the
beneficial interest in any Class of ERISA Restricted Certificates).
Notwithstanding any other provision herein to the contrary, any purported
transfer of an ERISA Restricted Certificate to or on behalf of a Plan without
the delivery to the Securities Administrator of a representation or an Opinion
of Counsel satisfactory to the Securities Administrator as described above shall
be void and of no effect. The Securities Administrator shall not be under any
liability to any Person for any registration of transfer of any ERISA Restricted
Certificate that is in fact not permitted by this Section 6.02(a) nor shall the
Securities Administrator be under any liability 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 Securities Administrator in accordance with the foregoing
requirements. The Securities Administrator shall be entitled, but not obligated,
to recover from any Holder of any ERISA Restricted Certificate that was in fact
a Plan and that held such Certificate in violation of this Section 6.02(a) all
payments made on such ERISA Restricted Certificate at and after the time it
commenced such holding. Any such payments so recovered shall be paid and
delivered to the last preceding Holder of such Certificate that is not a Plan.

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

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

                  (ii) No Ownership Interest in a Class R Certificate may be
purchased, transferred or sold, directly or indirectly, except in accordance
with the provisions hereof. No Ownership Interest in a Class R Certificate may
be registered on the Closing Date or thereafter transferred, and the Securities
Administrator shall not register the Transfer of any Class R Certificate unless,
in addition to the certificates required to be delivered to the Securities
Administrator under subparagraph (b) above, the Securities Administrator 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 E-1 and
an affidavit of the proposed transferor in the form attached hereto as Exhibit
E-2. In the absence of a contrary instruction from the transferor of a Class R
Certificate, declaration (11) in Appendix A of the Transfer Affidavit may be
left blank. If the transferor requests by written notice to the Securities
Administrator prior to the date of the proposed transfer that one of the two
other forms of declaration (11) in Appendix A of the Transfer Affidavit be used,
then the requirements of this Section 6.02(b)(ii) shall not have been satisfied
unless the Transfer Affidavit includes such other form of declaration.

                  (iii) Each Person holding or acquiring any Ownership Interest
in a Class 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 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 R Certificate and (C) not to Transfer its Ownership Interest
in a Class R Certificate or to cause the Transfer of an Ownership Interest in a
Class R Certificate to any other Person if it has actual knowledge that such
Person is not a Permitted Transferee. Further, no transfer, sale or other
disposition of any Ownership Interest in a Class R Certificate may be made to a
person who is not a U.S. Person (within the meaning of section 7701 of the Code)
unless such person furnishes the transferor, the

                                     -116-
<PAGE>

Securities Administrator with a duly completed and effective Internal Revenue
Service Form W-8ECI (or any successor thereto) and the Securities Administrator
consents to such transfer, sale or other disposition in writing.

                  (iv) Any attempted or purported Transfer of any Ownership
Interest in a Class R Certificate in violation of the provisions of this Section
5.02(b) 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 R Certificate in violation of the provisions of this Section 5.02(b), 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
R Certificate. The Securities Administrator shall be under no liability to any
Person for any registration of Transfer of a Class R Certificate that is in fact
not permitted by Section 5.02(a) and 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 after receipt of the related Transfer
Affidavit. The Securities Administrator shall be entitled but not obligated to
recover from any Holder of a Class 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
R Certificate at and after either such time. Any such payments so recovered by
the Securities Administrator shall be paid and delivered by the Securities
Administrator to the last preceding Permitted Transferee of such Certificate.

                  (v) At the option of the Holder of the Class R Certificate,
the Class LT1-R Interest, the Class LT2-R Interest, the Class LT3-R Interest and
the REMIC 4 Residual Interest may be severed and represented by separate
certificates (with the separate certificate that represents the REMIC 4 Residual
Interest also representing all rights of the Class R Certificate to
distributions attributable to a Pass-Through Rate on the Class R Certificate in
excess of the Adjusted Net WAC); provided, however, that such separate
certification may not occur until the Securities Administrator receives an
Opinion of Counsel to the effect that separate certification in the form and
manner proposed would not result in the imposition of federal tax upon the Trust
Fund or any of the REMICs provided for herein or cause any of the REMICs
provided for herein to fail to qualify as a REMIC; and provided further, that
the provisions of Sections 5.02(a) and (b) will apply to each such separate
certificate as if the separate certificate were a Class R Certificate. If, as
evidenced by an Opinion of Counsel, it is necessary to preserve the REMIC status
of any of the REMICs provided for herein, the Class LT1-R Interest, the Class
LT2-R Interest, the Class LT3-R Interest and the REMIC 4 Residual Interest shall
be severed and represented by separate certificates (with the separate
certificate that represents the REMIC 4 Residual Interest also representing all
rights of the Class R Certificate to distributions attributable to a
Pass-Through Rate on the Class R Certificate in excess of the Adjusted Net WAC).

      The restrictions on Transfers of a Class R Certificate set forth in this
Section 5.02(b) shall cease to apply (and the applicable portions of the legend
on a Class R Certificate may be deleted) with respect to Transfers occurring
after delivery to the Securities Administrator of an Opinion of Counsel, which
Opinion of Counsel shall not be an expense of the Securities Administrator or
the Depositor, to the effect that the elimination of such restrictions will not
cause any of the REMICs provided for herein 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, any REMIC provided for herein, a Certificateholder or
another Person. Each Person holding or acquiring any Ownership Interest in a
Class R Certificate hereby consents to any amendment of this Agreement that,
based on an Opinion of Counsel furnished to the Securities Administrator, is
reasonably necessary (a) to ensure that the record ownership of, or any
beneficial interest in, a Class 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 R Certificate that is held by a
Person that is not a Permitted Transferee to a Holder that is a Permitted
Transferee.

                                     -117-
<PAGE>

            (c) The transferor of the Class R Certificate shall notify the
Securities Administrator in writing upon the transfer of the Class R
Certificate.

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

      SECTION 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.

      If (a) any mutilated Certificate is surrendered to the Securities
Administrator or the Securities Administrator receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate and of the
ownership thereof and (b) there is delivered to the Securities Administrator and
the Trustee such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of notice to the Securities Administrator
that such Certificate has been acquired by a bona fide purchaser, the Securities
Administrator 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 Securities
Administrator 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 Securities Administrator and
the Trustee and their counsel) 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 Securities Administrator under the terms of this
Section 5.03 shall be canceled and destroyed by the Securities Administrator in
accordance with its standard procedures without liability on its part.

      SECTION 6.04. Persons Deemed Owners.

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

      SECTION 6.05. Access to List of Certificateholders' Names and Addresses.

      If three or more Certificateholders (a) request such information in
writing from the Securities Administrator, (b) state that such
Certificateholders desire to communicate with other Certificateholders with
respect to their rights under this Agreement or under the Certificates, and (c)
provide a copy of the communication that such Certificateholders propose to
transmit or if the Depositor shall request such information in writing from the
Securities Administrator, then the Securities Administrator shall, within ten
Business Days after the receipt of such request, provide the Depositor or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of the Trust Fund held by the Securities Administrator, if
any. The Depositor and every Certificateholder, by receiving and holding a
Certificate, agree that the Securities Administrator 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 6.06. Book-Entry Certificates.

      The Regular Certificates, upon original issuance, shall be issued in the
form of one or more typewritten Certificates representing the Book-Entry
Certificates, to be delivered to the Depository by or

                                     -118-
<PAGE>

on behalf of the Depositor. The Class N, Class R and Class X Certificates shall
be definitive certificates. The Book-Entry Certificates shall initially be
registered on the Certificate Register in the name of the Depository or its
nominee, and no Certificate Owner of a Book-Entry Certificate will receive a
definitive certificate representing such Certificate Owner's interest in such
Certificates, except as provided in Section 6.08. Unless and until definitive,
fully registered Certificates ("Definitive Certificates") have been issued to
the Certificate Owners of the Book-Entry Certificates pursuant to Section 6.08:

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

            (b) the Depositor, the Securities Administrator and the Trustee may
deal with the Depository and the Depository Participants for all purposes
(including the making of distributions) as the authorized representative of the
respective Certificate Owners of the Book-Entry Certificates;

            (c) registration of the Book-Entry Certificates may not be
transferred by the Securities Administrator except to another Depository;

            (d) the rights of the respective Certificate Owners of the
Book-Entry 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 the Book-Entry Certificates and the Depository
and/or the Depository Participants. Pursuant to the Depository Agreement, unless
and until Definitive Certificates are issued pursuant to Section 6.08, the
Depository will make book-entry transfers among the Depository Participants and
receive and transmit distributions of principal and interest on the related
Certificates to such Depository Participants;

            (e) the Depository may collect its usual and customary fees, charges
and expenses from its Depository Participants;

            (f) the Securities Administrator and 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 6.07. 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 Securities Administrator and the
Trustee shall give all such notices and communications to the Depository.

      SECTION 6.08. Definitive Certificates.

      If, after Book-Entry Certificates have been issued with respect to any
Certificates, (a) the Depository or the Depositor advises the Securities
Administrator and the Trustee that the Depository is no longer willing,
qualified or able to discharge properly its responsibilities under the
Depository Agreement with respect to such Certificates and the Securities
Administrator or the Depositor is unable to locate a

                                     -119-
<PAGE>

qualified successor, (b) the Depositor, at its sole option, advises the
Securities Administrator and the Trustee that it elects to terminate the
book-entry system with respect to such Certificates through the Depository or
(c) after the occurrence and continuation of an Event of Default, Certificate
Owners of such Book-Entry Certificates having not less than 51% of the Voting
Rights evidenced by any Class of Book-Entry Certificates advise the Securities
Administrator, 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
Securities Administrator shall notify all Certificate Owners of such Book-Entry
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 Securities Administrator
with an adequate inventory of certificates to facilitate the issuance and
transfer of Definitive Certificates. Upon surrender to the Securities
Administrator of any such Certificates by the Depository, accompanied by
registration instructions from the Depository for registration, the
Authenticating Agent shall authenticate and the Securities Administrator shall
deliver such Definitive Certificates. Neither the Depositor nor the Securities
Administrator 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 Securities Administrator, to the
extent applicable with respect to such Definitive Certificates and the
Securities Administrator shall recognize the Holders of such Definitive
Certificates as Certificateholders hereunder.

      SECTION 6.09. Maintenance of Office or Agency.

      The Securities Administrator will maintain or cause to be maintained at
its expense an office or offices or agency or agencies where Certificates may be
surrendered for registration of transfer or exchange. The Securities
Administrator initially designates its offices at 2001 Bryan Street, 10th Floor,
Dallas, Texas 75201, Attention: Institutional Trust Services, Terwin Mortgage
Trust 2004-5HE as offices for such purposes. The Securities Administrator will
give prompt written notice to the Certificateholders of any change in such
location of any such office or agency.

      SECTION 6.10. Authenticating Agents.

            (a) The Trustee may appoint one or more Authenticating Agents (each,
an "Authenticating Agent") which shall be authorized to act on behalf of the
Trustee in authenticating the Certificates. Wherever reference is made in this
Agreement to the authentication of Certificates by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication on behalf of the Trustee by an Authenticating Agent and a
certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent must be an entity organized and
doing business under the laws of the United States of America or of any state,
having a combined capital and surplus of at least $15,000,000, authorized under
such laws to do a trust business and subject to supervision or examination by
federal or state authorities. If the Authenticating Agent is a party other than
the Trustee, the Trustee shall have no liability in connection with the
performance or failure of performance of the Authenticating Agent. The Trustee
hereby appoints JPMorgan as the initial Authenticating Agent. The Trustee shall
be the Authenticating Agent during any such time as no other Authenticating
Agent has been appointed and has not resigned.

            (b) Any Person into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which any Authenticating Agent shall be a
party, or any Person succeeding to the corporate agency

                                     -120-
<PAGE>

business of any Authenticating Agent, shall continue to be the Authenticating
Agent without the execution or filing of any paper or any further act on the
part of the Trustee or the Authenticating Agent.

            (c) Any Authenticating Agent may at any time resign by giving at
least 30 days' advance written notice of resignation to the Trustee and the
Depositor. The Trustee may at any time terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent and the Depositor. Upon receiving a notice of resignation
or upon such a termination, or in case at any time any Authenticating Agent
shall cease to be eligible in accordance within the provisions of this Section
6.10, the Trustee may appoint a successor Authenticating Agent, shall give
written notice of such appointment to the Depositor and shall mail notice of
such appointment to all Holders of Certificates. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall become vested with all
the rights, powers, duties and responsibilities of its predecessor hereunder,
with like effect as if originally named as Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section 6.10. No Authenticating Agent shall have responsibility or
liability for any action taken by it as such at the direction of the Trustee.
Any Authenticating Agent (except the Securities Administrator) shall be entitled
to reasonable compensation for its services and any such compensation shall be
payable solely by the Trust Fund, without any right of reimbursement from the
Depositor, each Servicer, the Securities Administrator, the Master Servicer or
the Trustee; provided that the Securities Administrator shall not be entitled to
any additional compensation for serving as Authenticating Agent.

                                  ARTICLE VII

      THE DEPOSITOR, THE MASTER SERVICER, THE SERVICER AND THE SECURITIES
                                 ADMINISTRATOR

      SECTION 7.01. Respective Liabilities of the Depositor, the Master
Servicer, each Servicer and the Securities Administrator.

      The Depositor, the Master Servicer, each Servicer and the Securities
Administrator 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 7.02. Merger or Consolidation of the Depositor, the Master
Servicer, each Servicer or the Securities Administrator.

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

      Any Person into which the Depositor, the Master Servicer, each Servicer or
the Securities Administrator may be merged or consolidated, or any Person
resulting from any merger or consolidation to which the Depositor, the Master
Servicer, each Servicer or the Securities Administrator shall be a party, or any
Person succeeding to the business of the Depositor, the Master Servicer, each
Servicer or the Securities Administrator, shall be the successor of the
Depositor, the Master Servicer or Servicer, as the case may be, hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding
(except for the execution of an

                                     -121-
<PAGE>

assumption agreement where such succession is not effected by operation of law);
provided, however, that the successor or surviving Person to each Servicer shall
be qualified to sell mortgage loans to, and to service mortgage loans on behalf
of, Fannie Mae or Freddie Mac.

      SECTION 7.03. Limitation on Liability of the Depositor, Master Servicer,
each Servicer, the Backup Servicer, the Trustee, the Securities Administrator
and Others.

      None of the Depositor, the Master Servicer, each Servicer, the Backup
Servicer, the Trustee, the Securities Administrator nor any of the directors,
officers, employees or agents of the Depositor, the Master Servicer, each
Servicer, the Backup Servicer, the Trustee or the Securities Administrator shall
be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer, each
Servicer, the Backup Servicer, the Trustee, the Securities Administrator or any
such Person against any breach of representations or warranties made by it
herein or protect the Depositor, the Master Servicer, each Servicer, the Backup
Servicer, the Trustee, the Securities Administrator or any such Person from any
liability that would otherwise be imposed by reasons of willful misfeasance, bad
faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Depositor, the Master
Servicer, each Servicer, the Backup Servicer, the Trustee or the Securities
Administrator and any director, officer, employee or agent of the Depositor, the
Master Servicer, each Servicer, the Backup Servicer, the Trustee or the
Securities Administrator 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 Master Servicer, each Servicer, the Backup
Servicer, the Trustee, the Securities Administrator and any director, officer,
employee or agent of the Depositor, the Master Servicer, each Servicer, the
Backup Servicer, the Trustee or the Securities Administrator shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense, incurred in connection with the performance of their duties under this
agreement or 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 incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. None of the Depositor, the Master Servicer,
each Servicer, the Backup Servicer, the Trustee nor the Securities Administrator
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, however, that any
of the Depositor, the Master Servicer, each Servicer, the Backup Servicer, the
Trustee or the Securities Administrator 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 Master Servicer, each
Servicer, the Backup Servicer, the Trustee and the Securities Administrator
shall be entitled to be reimbursed therefor out of the Collection Account as
provided by Section 3.08 hereof.

      In addition, the Master Servicer, the Backup Servicer, the Trustee and
Securities Administrator shall be entitled to be reimbursed out of the
Certificate Account for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Master Servicer, the Backup Servicer, the
Trustee or Securities Administrator 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 Master Servicer, the Backup Servicer, Trustee
or Securities Administrator acting in its capacity as Master Servicer or
Securities Administrator hereunder and (B) to the extent that the Securities
Administrator or 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

                                     -122-
<PAGE>

not in the ordinary course of the duties of a trustee, in the absence of a
breach or default by any party hereto, the reasonable compensation, expenses and
disbursements of such persons), except any such compensation, expense,
disbursement or advance that either (i) arises from its negligence, bad faith or
willful misconduct or (ii) does not constitute an "unanticipated expense" within
the meaning of Treasury Regulations Section 1.860G-1(b)(3)(ii).

      On each Distribution Date, the Securities Administrator shall be entitled
to the Administrator Fee as compensation for its services hereunder.

      SECTION 7.04. Limitation on Resignation of the Servicers.

      A 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 a Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee and the Securities Administrator. No such
resignation shall become effective until the Securities Administrator or a
successor servicer reasonably acceptable to the Securities Administrator is
appointed and has assumed such Servicer's responsibilities, duties, liabilities
and obligations hereunder. Any such resignation shall not relieve each Servicer
of any of the obligations specified in Sections 7.01 and 7.02 as obligations
that survive the resignation or termination of each Servicer.

      The Securities Administrator and the Depositor hereby specifically (i)
consent to the pledge and assignment by each Servicer of all each Servicer's
right, title and interest in, to and under this Agreement to the Servicing
Rights Pledgee, for the benefit of certain lenders, and (ii) agree that upon
delivery to the Trustee by the Servicing Rights Pledgee of a letter signed by
each Servicer whereby each Servicer shall resign as Servicer under this
Agreement, the Trustee shall appoint the Servicing Rights Pledgee or its
designee as successor Servicer, provided that at the time of such appointment,
the Servicing Rights Pledgee or such designee meets the requirements of a
successor Servicer as set forth herein and agrees to be subject to the terms of
this Agreement. If, pursuant to any provision hereof, the duties of each
Servicer are transferred to a successor Servicer, the entire amount of the
Servicing Fee and other compensation payable to each Servicer pursuant hereto
shall thereafter be payable to such successor Servicer.

      SECTION 7.05. Errors and Omissions Insurance; Fidelity Bonds.

      Each Servicer shall maintain with responsible companies, at its own
expense, a blanket Fidelity Bond and an Errors and Omissions Insurance Policy,
with broad coverage on all officers, employees or other persons acting in any
capacity requiring such persons to handle funds, money, documents or papers
relating to the related Mortgage Loans ("Servicer Employees"). Any such Fidelity
Bond and Errors and Omissions Insurance Policy shall protect and insure the
related Servicer against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of the Servicer Employees. Each Fidelity
Bond and Errors and Omissions Insurance Policy also shall protect and insure the
related Servicer against losses in connection with the release or satisfaction
of a related Mortgage Loan without having obtained payment in full of the
indebtedness secured thereby. No provision of this Section 3.19 requiring such
Fidelity Bond and Errors and Omissions Insurance Policy shall diminish or
relieve the related Servicer from its duties and obligations as set forth in
this Agreement. The minimum coverage under any such bond and insurance policy
shall be at least equal to the corresponding amounts required by FNMA. Each
Servicer will furnish a copy of the Fidelity Bond or Errors and Omissions
Insurance Policy to the Trustee upon request.

      SECTION 7.06. Limitation on Resignation of the Master Servicer and the
Backup Servicer.

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      Neither the Master Servicer nor the Backup Servicer shall resign from the
obligations and duties hereby imposed on it except upon determination that its
duties hereunder are no longer permissible under applicable law or unless a
successor servicer has been appointed. Any such determination permitting the
resignation of the Master Servicer or the Backup Servicer shall be evidenced by
an Opinion of Counsel at the expense of the Master Servicer or the Backup
Servicer, as applicable, to such effect delivered to the Trustee and the
Securities Administrator. No such resignation shall become effective until a
successor Master Servicer or successor Backup Servicer reasonably acceptable to
the Securities Administrator is appointed and has assumed the Master Servicer's
or the Backup Servicer's, as applicable, responsibilities, duties, liabilities
and obligations hereunder. Any such resignation shall not relieve the Master
Servicer or the Backup Servicer of any of the obligations specified in Sections
7.01 and 7.02 as obligations that survive the resignation or termination of the
Master Servicer or the Backup Servicer.

      SECTION 7.07. Assignment of Master Servicing.

      The Master Servicer may sell and assign its rights and delegate its duties
and obligations in its entirety as Master Servicer under this Agreement;
provided, however, that, prior to the end of the Funding Period: (i) any
purchaser or transferee must accept in writing such assignment and delegation
and assume the obligations of the Master Servicer hereunder shall (a) be a
Person which shall be qualified to service mortgage loans for Fannie Mae or
Freddie Mac or a Person who has an Affiliate who is qualified; (b) have a net
worth of not less than $15,000,000 (unless otherwise approved by each Rating
Agency pursuant to clause (ii) below); (c) be reasonably satisfactory to the
Trustee and the Depositor; and (d) execute and deliver to the Trustee an
agreement, in form and substance reasonably satisfactory to the Trustee, which
contains an assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by it as
master servicer under this Agreement, any custodial agreement from and after the
effective date of such agreement; (ii) each Rating Agency shall be given prior
written notice of the identity of the proposed successor to the Master Servicer
and each Rating Agency's rating of the Certificates in effect immediately prior
to such assignment, sale and delegation will not be downgraded, qualified or
withdrawn as a result of such assignment, sale and delegation, as evidenced by a
letter to such effect delivered to the Master Servicer and the Trustee; and
(iii) the Master Servicer assigning and selling the master servicing shall
deliver to the Trustee an officer's certificate and an Independent opinion of
counsel, each stating that all conditions precedent to such action under this
Agreement have been completed and such action is permitted by and complies with
the terms of this Agreement. No such assignment or delegation shall affect any
liability of the Master Servicer arising out of acts or omissions prior to the
effective date thereof.

      SECTION 7.08. Limitation Upon Liability of the Credit Risk Manager.

      Neither the Credit Risk Manager, nor any of its directors, officers,
employees, or agents 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 made in good faith pursuant to this Agreement or the Credit Risk
Management Agreement, in reliance upon information provided by each Servicer
under the Credit Risk Management Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Credit Risk Manager or any
such person against liability that would otherwise be imposed by reason of
willful malfeasance, gross negligence or bad faith in its performance of its
duties or by reason of reckless disregard for its obligations and duties under
this Agreement or the applicable Credit Risk Management Agreement. The Credit
Risk Manager and any director, officer, employee, or agent of the Credit Risk
Manager 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,
and may rely in good faith upon the accuracy of information furnished by each
Servicer pursuant to the Credit Risk Management Agreement in the performance of
its duties thereunder and hereunder.

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                                  ARTICLE VIII

                        DEFAULT; TERMINATION OF SERVICER

      SECTION 8.01. Events of Default.

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

                  (i) any failure by each Servicer to make any Advance, to
deposit in the Collection Account or the Certificate Account or remit to the
Securities Administrator any payment (excluding a payment required to be made
under Section 5.01 hereof) required to be made under the terms of this
Agreement, which failure shall continue unremedied for three Business Days and,
with respect to a payment required to be made under Section 5.01 hereof, for one
Business Day, after the date on which written notice of such failure shall have
been given to each Servicer by the Securities Administrator or the Depositor, or
to the Securities Administrator and each Servicer by the Holders of Certificates
evidencing not less than 25% of the Voting Rights evidenced by the Certificates;
or

                  (ii) any failure by each Servicer to observe or perform in any
material respect any other of the covenants or agreements on the part of each
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 each Servicer by the Securities Administrator or the
Depositor, or to the Securities Administrator by the Holders of Certificates
evidencing not less than 25% of the Voting Rights evidenced by the Certificates;
or

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

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

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

                  (vi) with respect to SLS only, an SLS Event of Termination
shall have occurred.

      If an Event of Default shall occur with respect to any Servicer, then, and
in each and every such case, so long as such Event of Default shall not have
been remedied within the applicable grace period, or solely with respect to
clause (i) above by 5:00 p.m. on each Servicer Remittance Date, the Securities
Administrator may, or at the direction of the Holders of Certificates evidencing
not less than 25% of the Voting Rights evidenced by the Certificates, shall, by
notice in writing to such Servicer (with a copy to each Rating Agency),
terminate all of the rights and obligations of such 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 such
Servicer of such written notice, all authority and power of such Servicer
hereunder, whether with respect to the Mortgage Loans or otherwise, shall pass
to and be vested

                                     -125-
<PAGE>

in the Securities Administrator. If an Event of Default described in clause (i)
hereof shall occur, the Trustee shall, by notice in writing to the Master
Servicer or a Servicer, and the Depositor, terminate all of the rights and
obligations of the Master Servicer or a Servicer, in its capacity as Master
Servicer or Servicer, as applicable, under this Agreement and in and to the
Mortgage Loans and the proceeds thereof. The Securities Administrator is hereby
authorized and empowered to execute and deliver, on behalf of each Servicer and
the Trustee, 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 each Servicer to pay
amounts owed pursuant to Article VIII. Each Servicer agrees to cooperate with
the Securities Administrator in effecting the termination of such Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Securities Administrator of all cash amounts which shall at the
time be credited to the Collection Account, or thereafter be received with
respect to the Mortgage Loans. Each Servicer and the Securities Administrator
shall promptly notify the Rating Agencies of the occurrence of an Event of
Default or an event that, with notice, passage of time, other action or any
combination of the foregoing would be an Event of Default, such notice to be
provided in any event within two Business Days of such occurrence.

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

      SECTION 8.02. Securities Administrator to Act; Master Servicer and Backup
Servicer to Act; Appointment of Successor.

            (a) On and after the time the Master Servicer or any Servicer
receives a notice of termination, the Securities Administrator (in the case of
the Master Servicer), Master Servicer (in the case of Countrywide) or the Backup
Servicer (in the case of SLS) shall be the successor in all respects to the
Master Servicer or such Servicer, as applicable, in its capacity as master
servicer or servicer under this Agreement and the transactions set forth or
provided for herein, and all the responsibilities, duties and liabilities
relating thereto and arising thereafter shall be assumed by the Securities
Administrator (except for any representations or warranties of the Master
Servicer under this Agreement, the responsibilities, duties and liabilities
contained in Section 2.03) (in the case of the Master Servicer), the Master
Servicer (except for any representations or warranties of Countrywide contained
in Section 2.03) (in the case of Countrywide) or the Backup Servicer (except for
any representations and warranties of SLS contained in Section 2.03) (in the
case of SLS) by the terms and provisions hereof including, without limitation,
the Servicers' obligations to make Advances pursuant to Section 3.21 and subject
Section 3.08; provided, however, that if the Securities Administrator, Master
Servicer or Backup Servicer, as applicable, is prohibited by law or regulation
from obligating itself to make advances regarding delinquent mortgage loans,
then the Securities Administrator, Master Servicer or Backup Servicer, as
applicable, shall not be obligated to make Advances pursuant to Section 3.21;
and provided further, that any failure to perform such duties or
responsibilities caused by the Master Servicer's or any Servicer's failure to
provide information required by Section 9.01 shall not be considered a default
by the Securities Administrator (in the case of the Master Servicer), the Master
Servicer (in the case of Countrywide) or the Backup Servicer (in the case of
SLS) as successor to any Servicer hereunder. As compensation therefor, the
Master

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<PAGE>

Servicer (in the case of Countrywide) or the Backup Servicer (in the case of
SLS) shall be entitled to the Servicing Fee and all other compensation to which
the related Servicer would have been entitled if it had continued to act
hereunder and the Securities Administrator (in the case of the Master Servicer)
shall be entitled to all compensation to which the Master Servicer is entitled
hereunder. Nothing in this Section 8.02(a) shall require the Securities
Administrator to make an Advance with respect to any Mortgage Loan for which the
Master Servicer or any Servicer was not required to make such an advance.

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

            (c) (1) In the event of a SLS Event of Termination, notwithstanding
anything to the contrary above, the Trustee, the Master Servicer, the Backup
Servicer and the Depositor hereby agree that upon delivery to the Trustee, the
Securities Administrator, the Master Servicer and the Backup Servicer by the
Servicing Rights Pledgee of a letter signed by the Servicing Rights Pledgee
within 10 days of when the terminated Servicer provides the Servicing Rights
Pledgee notice of a SLS Event of Termination related to it, the Servicing Rights
Pledgee or its designee shall be appointed as successor Servicer, provided that
at the time of such appointment, the Servicing Rights Pledgee or such designee
meets the requirements of a successor Servicer set forth in paragraph (c)(2)
below and the Servicing Rights Pledgee or such designee agrees to be subject to
the terms of this Agreement.

      (2) In the event that the Servicing Rights Pledgee does not deliver to the
Trustee, the Securities Administrator, the Master Servicer and the Backup
Servicer the letter described in preceding paragraph within the 10-day period
referred to in the preceding paragraph, the Master Servicer (in the case of
Countrywide) or the Backup Servicer (in the case of SLS) shall be the successor
in all respects to the related Servicer in its capacity as Servicer under this
Agreement and the transactions set forth or provided for herein, and all the
responsibilities, duties and liabilities relating thereto and arising thereafter
shall be assumed by the Master Servicer (except for any representations or
warranties of Countrywide contained in Section 2.03) (in the case of
Countrywide) or the Backup Servicer (except for any representations and
warranties of SLS contained in Section 2.03) (in the case of Countrywide) by the
terms and provisions hereof including, without limitation, the Servicer's
obligations to make Advances pursuant to Section 3.21.

      (3) It is understood and acknowledged by the parties hereto that (a) there
will be a period of transition (not to exceed 90 days when servicing is being
transferred to the Master Servicer or a successor servicer and not to exceed 30
days when servicing is being transferred to the Backup Servicer) before the
actual servicing functions can be fully transferred to any successor Master
Servicer or Servicer appointed in accordance with the provisions hereof and (b)
any failure to perform such duties or responsibilities caused by the Master
Servicer's or any Servicer's, as applicable, failure to provide information
required by Section 9.01 shall not be considered a default by the Securities
Administrator (in the case of the Master Servicer), the Master Servicer (in the
case of Countrywide) or the Backup Servicer (in the case of SLS) as successor to
the Master Servicer or any Servicer, as applicable, hereunder. Notwithstanding
the above and subject to the immediately following paragraph, the Securities
Administrator, the Master

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<PAGE>

Servicer or the Backup Servicer, as applicable, may, if it shall be unwilling to
so act, or shall, if it is unable to so act promptly appoint or petition a court
of competent jurisdiction to appoint, an established mortgage loan servicing
institution acceptable to each Rating Agency and having a net worth of not less
than $15,000,000, as the successor to the related Servicer under this Agreement
in the assumption of all or any part of the responsibilities, duties or
liabilities of the related Servicer under this Agreement.

      Notwithstanding anything to the contrary herein, any successor Master
Servicer or Servicer appointed pursuant to this Section 8.02(c)(2) shall agree
to fully effect the servicing transfer within the 90-day or 30-day period
referred to in Section 8.02(c)(2) above and to make all Advances that would
otherwise be made by another party under Section 8.01 as of the date of such
appointment. Each successor Master Servicer and Servicer shall be entitled to
reimbursement for any unreimbursed Advances it has made in connection with this
Section 8.02 pursuant to Section 3.08. In addition, any successor to the related
Servicer shall give notice to the Mortgagors of such change of Servicer and
shall, during the term of its service as a Servicer, maintain in force the
policy or policies that each Servicer is required to maintain pursuant to this
Agreement.

            (d) In connection with the termination or resignation of any
Servicer hereunder, (i) the successor Servicer, including the Master Servicer or
Backup Servicer, as applicable, shall represent and warrant that it or an
Affiliate is a member of MERS in good standing and shall agree to comply in all
material respects with the rules and procedures of MERS in connection with the
servicing of the Mortgage Loans that are registered with MERS, in which case the
predecessor Servicer shall cooperate with the successor Servicer in causing MERS
to revise its records to reflect the transfer of servicing to the successor
Servicer as necessary under MERS' rules and regulations, and (ii) the
predecessor Servicer shall cooperate with the successor Servicer in causing MERS
to transfer the servicing of such Mortgage Loan on the MERS(R) System to the
successor Servicer. The predecessor Servicer shall file or cause to be filed any
such assignment in the appropriate recording office. The predecessor Servicer,
as applicable, shall bear any and all fees of MERS, costs of preparing any
assignments of Mortgage, and fees and costs of filing any assignments of
Mortgage that may be required under this Section 8.02.

      SECTION 8.03. Notification to Certificateholders.

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

            (b) Within 60 days after the occurrence of any Event of Default of
which a Responsible Officer of the Securities Administrator has actual
knowledge, the Securities Administrator shall transmit by mail to all
Certificateholders and the Trustee notice of each such Event of Default
hereunder known to the Securities Administrator, unless such Event of Default
shall have been cured or waived.

      SECTION 8.04. Waiver of Servicer Events of Default.

      The Holders representing at least 66 2/3% of the Voting Rights evidenced
by all Classes of Certificates affected by any SLS Event of Termination
hereunder may waive such SLS Event of Termination; provided, however, that a SLS
Event of Termination under clause (i) or (vi) of Section 8.01 may be waived only
by all of the Holders of the Regular Certificates. Upon any such waiver of an
Event of Default, such Event of Default shall cease to exist and shall be deemed
to have been remedied for every purpose hereunder. No such waiver shall extend
to any subsequent Event of Default or impair any right consequent thereon except
to the extent expressly so waived.

      SECTION 8.05. SLS Events of Default.

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<PAGE>

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

                  (i) any failure by SLS to provide the monthly data tape to the
Backup Servicer, which failure continues for three Business Days after the date
such action is required hereunder;

                  (ii) SLS fails to make the Advance required pursuant to
Section 5.01 of this Agreement and such failure continues for two Business Days
after the date such action is required hereunder;

                  (iii) an SLS Financial Trigger Event occurs and is continuing;

                  (iv) as of any Determination Date, the Rolling Three Month
Delinquency Rate exceeds 15% and the Rating Agencies do not confirm the ratings
of the Certificates within ten (10) Business Days of such date; or

                  (v) an SLS Cross Default occurs.

                                   ARTICLE IX

            CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR

      SECTION 9.01. Duties of the Trustee.

            (a) The Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement as duties of the Trustee.
During the continuance of an Event of Default, the Trustee shall exercise such
of the rights and powers vested in it by this Agreement, and use the same degree
of care and skill in its exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs. Any
permissive right of the Trustee enumerated in this Agreement shall not be
construed as a duty.

            (b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to it, which are specifically required to be furnished pursuant to any provision
of this Agreement, shall examine them to determine whether they conform to the
requirements of this Agreement. If any such instrument is found not to conform
to the requirements of this Agreement in a material manner, the Trustee shall
take such action as it deems appropriate to have the instrument corrected, and
if the instrument is not corrected to its satisfaction, the Trustee will provide
notice to the Certificateholders. Notwithstanding the foregoing, the Trustee
shall have no obligation to reconcile, recompute or recalculate any remittances
or reports of any Servicer, and the Trustee may fully rely upon and shall have
no liability with respect to information provided by any Servicer.

            (c) The Trustee shall promptly remit to the related Servicer any
complaint, claim, demand, notice or other document (collectively, the "Notices")
delivered to the Trustee as a consequence of the assignment of any Mortgage Loan
hereunder and relating to the servicing of the Mortgage Loans; provided than any
such notice (i) is delivered to the Trustee at is Corporate Trust Office, and
(ii) contains information sufficient to permit the Trustee to make a
determination that the real property to which such document relates is a
Mortgaged Property. The Trustee shall have no duty hereunder with respect to any
Notice it may receive or which may be alleged to have been delivered to or
served upon it unless such Notice is delivered to it or served upon it at its
Corporate Trust Office and such Notice contains the information required
pursuant to clause (ii) of the preceding sentence.

                                     -129-
<PAGE>

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

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

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

                  (iii) The Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good faith in
accordance with the consent or at the direction of Holders of Certificates as
provided herein relating to the time, method and place of conducting any remedy
pursuant to this Agreement, or exercising or omitting to exercise any trust or
power conferred upon the Trustee under this Agreement; and

                  (iv) The Trustee shall not be required to expend or risk its
own funds or otherwise incur financial or other 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
indemnity satisfactory to it against such risk or liability is not assured to
it, and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of any Servicer under this Agreement, except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Master Servicer in accordance
with the terms of this Agreement.

                  (v) 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 the Holders in accordance with
this Agreement relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee under this Agreement.

      SECTION 9.02. Certain Matters Affecting the Trustee.

            (a) Except as otherwise provided in Section 9.01:

                  (i) The Trustee may request and conclusively rely upon, and
shall be fully protected in acting or refraining from acting upon, any
resolution, Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document reasonably believed by it to
be genuine and to have been signed or presented by the proper party or parties,
and the manner of obtaining consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe;

                  (ii) The Trustee may consult with counsel of its selection and
any advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect

                                     -130-
<PAGE>

of any action taken or suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;

                  (iii) The Trustee shall not be under any obligation to
exercise any of the trusts or powers vested in it by this Agreement or to
institute, conduct or defend any litigation hereunder or in relation hereto at
the request, order or direction of any of the Certificateholders, pursuant to
the provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity satisfactory to it
against the costs, expenses and liabilities which may be incurred therein or
thereby;

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

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

                  (vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, nominees, attorneys or a custodian, and shall not be responsible for any
misconduct or negligence on the part of any agent, nominee, attorney or
custodian appointed by the Trustee in good faith; and

                  (vii) The Trustee shall not be liable for any loss on any
investment of funds pursuant to this Agreement (other than as issuer of the
investment security);

                  (viii) The Trustee shall not be deemed to have notice of any
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Certificates and this Agreement. The Trustee
shall not have any responsibility or liability for any action or failure to act
by the Master Servicer, Backup Servicer or any Servicer nor shall the Trustee be
obligated to supervise or monitor the performance of the Master Servicer, Backup
Servicer or any Servicer hereunder or otherwise;

                  (ix) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, each agent, custodian
and other Person employed to act hereunder;

                  (x) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligence or willful misconduct in
the performance of such act; and

                  (xi) The Depositor and the Seller hereby approve of the
appointment of the Custodian to act as custodian pursuant to the Custodial
Agreement and each further agree that the Trustee appointed the Custodian to act
as custodian with due care

                                     -131-
<PAGE>

                  (xii) if requested by each Servicer, the Trustee may appoint
each Servicer as the trustee's attorney-in-fact in order to carry out and
perform certain activities that are necessary or appropriate for the servicing
and administration of the Mortgage Loans pursuant to this Agreement. Such
appointment shall be evidenced by a power of attorney in such form as may be
agreed to by the Trustee and each Servicer. The Trustee shall have no liability
for any action or inaction of each Servicer in connection with such power of
attorney and the Trustee shall be indemnified by each Servicer for all
liabilities, costs and expenses incurred by the Trustee in connection with each
Servicer's use or misuse of such powers of attorney; and

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

            (c) Notwithstanding anything in this Agreement to the contrary, in
no event shall the Trustee be liable to any Person for any act or omission of
the Master Servicer, the Backup Servicer or any Servicer.

      SECTION 9.03. The Trustee Not Liable for Certificates or Mortgage Loans.

      The recitals contained herein and in the Certificates (other than the
authentication and countersignature on the Certificates) shall be taken as the
statements of the Seller, and neither the Trustee nor the Certificate Registrar
assumes any responsibility for the correctness of the same. The Trustee does not
make any representations or warranties as to the validity or sufficiency of this
Agreement, the Custodial Agreement or of the Certificates (other than the
signature and countersignature on the Certificates) or of any Mortgage Loan or
related document or of MERS or the MERS System. The Trustee shall not be
accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor in respect of the Mortgage Loans
or deposited in or withdrawn from the Collection Account by any Servicer. The
Trustee shall not have any duty (a) to see to any recording, filing or
depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording, filing or depositing thereof,
(b) to see to any insurance or (c) to see to the payment or discharge of any
tax, assessment or other governmental charge or any lien or encumbrance of any
kind owing with respect to, assessed or levied against, any part of the Trust.

      SECTION 9.04. The Trustee May Own Certificates.

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

      SECTION 9.05. Trustee's Fees and Expenses.

      The Trustee shall be paid by the Securities Administrator from the fee
paid to the Securities Administrator by the Master Servicer pursuant to an
agreement between the Trustee and the Securities Administrator. In addition, the
Trustee and its officers, directors, employees and agents will be entitled to
recover from the Certificate Account, and shall be indemnified from the Trust
Fund for, all reasonable out-of-pocket expenses, disbursements and advances upon
any Event of Default, any breach of this Agreement or the Custodial Agreement or
any loss, liability, expense, claim or legal action (including any pending or
threatened claim or legal action) incurred or made by any of them in the
performance of their

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duties or the administration of the trusts hereunder or under the Custodial
Agreement (including the reasonable compensation, expenses and disbursements of
its counsel) except any such expense, loss, liability, disbursement or advance
(i) as may arise from its negligence or intentional misconduct or (ii) that does
not constitute an "unanticipated expense" within the meaning of Treasury
Regulations Section 1.860G-1(b)(3)(ii). If funds in the Certificate Account are
insufficient therefor, the Trustee shall recover such expenses from future
collections on the Mortgage Loans or as otherwise agreed by the
Certificateholders. 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. Such obligations shall survive the termination of this Agreement
and the removal or resignation of the Trustee.

      SECTION 9.06. [RESERVED].

      SECTION 9.07. Eligibility Requirements for the Trustee.

      The Trustee hereunder shall at all times be an entity duly organized and
validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers, and
shall each have a combined capital and surplus of at least $50,000,000, a
minimum long-term debt rating in the third highest rating category by a Rating
Agency, a minimum short-term debt rating in the second highest rating category
by a Rating Agency, and shall each be subject to supervision or examination by
federal or state authority. If such entity publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 9.07,
the combined capital and surplus of such entity shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. The principal office of the Trustee (other than the initial
Trustee) shall be in a state with respect to which an Opinion of Counsel has
been delivered to such Trustee at the time such Trustee is appointed Trustee to
the effect that the Trust will not be a taxable entity under the laws of such
state. In case at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 9.07, the Trustee shall resign immediately
in the manner and with the effect specified in Section 9.08 hereof.

      SECTION 9.08. Resignation and Removal of the Trustee.

      The Trustee may at any time resign and be discharged from the trust hereby
created by giving written notice thereof to the Depositor, the Seller, the
Master Servicer, the Backup Servicer, each Servicer and the Rating Agency. Upon
receiving such notice of resignation of the Trustee, the Depositor shall
promptly appoint a successor Trustee that meets the requirements in Section
9.07, by written instrument, in duplicate, one copy of which instrument shall be
delivered to each of the resigning Trustee and one copy to the successor
Trustee. If no successor Trustee shall have been so appointed and having
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

      If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 9.07 hereof or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Trustee. If the Depositor removes the Trustee under the
authority of the immediately preceding sentence, the Depositor shall promptly
appoint a successor Trustee that meets the requirements of Section 9.07, by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the successor Trustee and one copy to each of the Master Servicer,
the Backup Servicer and each Servicer.

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

      Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 9.08 shall not become
effective until acceptance of appointment by the successor Trustee, as provided
in Section 9.10 hereof.

      SECTION 9.09. [RESERVED].

      SECTION 9.10. Successor Trustee.

      Any successor Trustee appointed as provided in Section 9.08 hereof shall
execute, acknowledge and deliver to the Depositor, the Seller, each Servicer,
the Backup Servicer, the Master Servicer and to its predecessor Trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor Trustee shall become effective, and such successor
Trustee without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Trustee. The Depositor,
the Seller, each Servicer, the Backup Servicer, the Master Servicer and the
predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee, all such rights, powers, duties and
obligations.

      No successor Trustee shall accept appointment as provided in this Section
9.10 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 9.07 hereof and the appointment of such
successor Trustee shall not result in a downgrading of the Classes of
Certificates rated by the Rating Agencies, as evidenced by a letter from each
Rating Agency.

      Upon acceptance of appointment by a successor Trustee as provided in this
Section 9.10, the successor Trustee shall mail notice of such appointment
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to the Rating Agencies.

      SECTION 9.11. Merger or Consolidation of the Trustee.

      Any corporation or association into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation or association
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation or association succeeding to the business
of the Trustee shall be the successor of the Trustee hereunder, provided such
corporation or association shall be eligible under the provisions of Section
9.07, 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 9.12. 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 Depositor and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee or co-trustees jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the

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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 9.12, such powers, duties, obligations, rights and trusts as the
Depositor and the Trustee may consider necessary or desirable. If the Depositor
shall not have joined in such appointment within 15 days after the receipt by it
of a request to do so, or in the case an Event of Default shall have occurred
and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 9.07 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 9.10.

      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) To the extent necessary to effectuate the purposes of this
Section 9.12, all rights, powers, duties and obligations conferred or imposed
upon the Trustee, except for the obligation of the Trustee in its capacity as
successor servicer under this Agreement to advance funds on behalf of a
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 set or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer, Backup
Servicer or any other Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction of
the Trustee;

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

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

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

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

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

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      SECTION 9.13. Tax Matters.

            (a) It is intended that each of the REMICs provided for herein REMIC
shall constitute, and that the affairs of the Trust Fund shall be conducted so
as to allow each such REMIC to qualify as, a "real estate mortgage investment
conduit" as defined in and in accordance with the REMIC Provisions. It is also
intended that each of the grantor trusts provided for in Section 2.07 hereof
shall constitute, and that the affairs of the Trust Fund shall be conducted so
as to allow each such grantor trust to qualify as, a grantor trust under the
provisions of Subpart E, Part I of Subchapter J of the Code. In furtherance of
such intention, the Securities Administrator covenants and agrees that it shall
act as agent (and the Securities Administrator is hereby appointed to act as
agent) on behalf of each of the REMICs and grantor trusts provided for herein
and that in such capacity it shall: (a) prepare and file, or cause to be
prepared and filed, in a timely manner, a U.S. Real Estate Mortgage Investment
Conduit Income Tax Return (Form 1066 or any successor form adopted by the
Internal Revenue Service) and prepare and file or cause to be prepared and filed
with the Internal Revenue Service and applicable state or local tax authorities
income tax or information returns for each taxable year with respect to each of
the REMICs and grantor trusts provided for herein, 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 SS-4 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 each of the REMICs provided
for herein; (c) make or cause to be made elections, on behalf of each of the
REMICs provided for herein to be treated as a REMIC on the federal tax return of
such REMICs for their first taxable years (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 or other
applicable tax law or with respect to the grantor trusts provided for herein,
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 R Certificate to a Person
that is not a Permitted Transferee, or an agent (including a broker, nominee or
other middleman) of a Person that is not a Permitted Transferee, or a
pass-through entity in which a Person that is not a Permitted Transferee is the
record holder of an interest (the reasonable cost of computing and furnishing
such information may be charged to the Person liable for such tax); (f) to the
extent that they are under its control conduct the affairs of each of the REMICs
and grantor trusts provided for herein at all times that any Certificates are
outstanding so as to maintain the status of each of the REMICs provided for
herein as a REMIC under the REMIC Provisions and the status of each of the
grantor trusts provided for herein as a grantor trust under Subpart E, Part I of
subchapter J of the Code; (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 of the REMICs provided for herein or result in the imposition of tax upon
any such REMIC; (h) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the grantor trust status
under Subpart E, Part I of Subchapter J of the Code of any of the grantor trusts
provided to herein or result in the imposition of tax upon any such grantor
trusts; (i) pay, from the sources specified in the last paragraph of this
Section 9.13(a), the amount of any federal, state and local taxes, including
prohibited transaction taxes as described below, imposed on each of the REMICs
or grantor trusts provided for herein 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 Securities Administrator
from withholding payment of such tax, if permitted by law, pending the outcome
of such proceedings); (j) sign or cause to be signed by the

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required person federal, state or local income tax or information returns; (k)
maintain records relating to each of the REMICs and grantor trusts provided for
herein, including but not limited to the income, expenses, assets and
liabilities of each of the REMICs and grantor trusts provided for herein, 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, in each instance,
to the extent provided by each Servicer; and (l) as and when necessary and
appropriate, represent each of the REMICs and grantor trusts provided for herein
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 of the REMICs provided for herein, enter into
settlement agreements with any governmental taxing agency, extend any statute of
limitations relating to any tax item of any of the REMICs provided for herein,
and otherwise act on behalf of each of the REMICs and grantor trusts provided
for herein in relation to any tax matter involving any of such REMICs or any
controversy involving the Trust Fund. The Trustee agrees to sign such tax
returns prepared by the Securities Administrator pursuant to this Agreement as
may be required by applicable law.

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

      In the event that any tax is imposed on "prohibited transactions" of any
of the REMICs provided for herein as defined in Section 860F(a)(2) of the Code,
on the "net income from foreclosure property" of the any of such REMICs 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, 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 or as a result of
the location of the Trustee, (ii) any party hereto (other than the Trustee) to
the extent any such other tax arises out of or results from a breach by such
other party of any of its obligations under this Agreement or as a result of the
location of such other party 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 R Certificateholder pursuant to Section 5.05, and
second with amounts (other than amounts derived by the Trust Fund from a payment
on the Cap Contract) otherwise to be distributed to all other Certificateholders
in the following order of priority: first, to the Class N Certificates (pro
rata), second to the Class X Certificates (pro rata), third, to the Class B-3
Certificates (pro rata), fourth, to the Class B-2 Certificates (pro rata),
fifth, to the Class B-1 Certificates (pro rata), sixth, to the Class M-3
Certificates (pro rata), seventh, to the Class M-2 Certificates (pro rata),
eighth, to the Class M-1 Certificates and ninth to the Class A Certificates (pro
rata). Notwithstanding anything to the contrary contained herein, to the extent
that such tax is payable by the Class R Certificate, the Trustee is hereby
authorized pursuant to such instruction to retain on any Distribution Date, from
the Holder of the Class R Certificate (and, if necessary, from the Holders of
all other Certificates in the priority specified in the preceding sentence),
funds otherwise distributable to such Holders in an amount

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<PAGE>

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.

      (b) Each of the Depositor, the Securities Administrator and the Trustee
agrees not to knowingly or intentionally take any action or omit to take any
action that would (i) cause the termination of the REMIC status of any of the
REMICs provided for herein or result in the imposition of a tax upon any of the
REMICs provided for herein or (ii) cause the termination of the grantor trust
status of any of the grantor trusts provided for herein or result in the
imposition of a tax upon any of the grantor trusts provided for herein.

      (c) In the event that the beneficial ownership of the Class N and Class X
Certificates is held by a single Person for federal income tax purposes or by
multiple Persons who beneficially own the Class N and Class X Certificates
proportionately, such Person or Persons shall be treated as the direct or
indirect beneficial owner of the REMIC 4 XN, the Cap Contract, the Cap Contract
Account and the right to Prepayment Penalties, amounts paid by the Servicer, the
Seller or any Transferor in respect of Prepayment Penalties pursuant to this
Agreement or a Transfer Agreement, as applicable and amounts received in respect
of any indemnification paid as a result of a Prepayment Penalty being
unenforceable in breach of the representations and warranties set forth in a
Transfer Agreement. In the event that the Trustee and the Securities
Administrator receive written notice that the beneficial ownership of the Class
N and the Class X Certificates is held by two or more Persons for federal income
tax purposes that do not beneficially own the Class N and Class X Certificates
proportionately, the Trustee shall treat the Class N Certificateholders and the
Class X Certificateholders as partners in a partnership that owns the REMIC 4 XN
Interest, the Cap Contract, the Cap Contract Account and the right to Prepayment
Penalties, amounts paid by the Servicer, the Seller or any Transferor in respect
of Prepayment Penalties pursuant to this Agreement or a Transfer Agreement, as
applicable and amounts received in respect of any indemnification paid as a
result of a Prepayment Penalty being unenforceable in breach of the
representations and warranties set forth in a Transfer Agreement, and shall not
treat the Class N and Class X Certificates as a direct interest in any REMIC
hereunder. By acquiring the Class N and the Class X Certificates, the respective
Holders will agree to treat the Class N and Class X Certificates in the manner
described in the preceding sentences for federal income tax purposes in the
event that the beneficial ownership of the Class N Certificates and the Class X
Certificates is separated. In such event, (i) a separate capital account shall
be established and maintained for each Holder of a Class N or Class X
Certificate in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv),
which shall be credited with income or gain and debited by any expenses
(including any payments deemed made to the Holders of any of the Class A, Class
M-1, Class M-2, Class M-3, Class B or Class R Certificates on interest rate cap
agreements for federal income tax purposes) or losses or distributions allocable
to the assets deemed held by such partnership, (ii) the Class N Certificates
shall be allocated income in an amount equal to interest at the Class N Interest
Rate and any original issue discount that would be reportable thereon if the
Class N Certificate were a debt instrument issued on the date ownership of the
Class N and Class X Certificates is separated, with a principal balance equal to
the Class N Notional Balance, (iii) the Class X and Class N Certificates shall
be allocated income with respect to all Prepayment Penalties, amounts paid by
the Servicer, the Seller or any Transferor in respect of Prepayment Penalties
pursuant to this Agreement or a Transfer Agreement, as applicable and amounts
received in respect of any indemnification paid as a result of a Prepayment
Penalty being unenforceable in breach of the representations and warranties set
forth in a Transfer Agreement, in accordance with the allocation of such amounts
pursuant to Section 5.05(i), to the extent not allocated under Section
9.13(c)(ii) above, (iv) the Class X and Class N Certificates shall be allocated
accruals (under any reasonable method) of any "cap premiums" deemed received on
the date ownership of the Class X and Class N Certificates is separated in
respect of the obligation of the REMIC 4 XN Interest to pay amounts of Excess
Interest under Section 2.07, and shall be allocated expense in respect of any
actual payment of such Excess Interest based on which one of such Classes
economically bears such expense, (v) the Class X Certificates

                                     -138-
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shall be allocated all remaining income and any expenses and Realized Losses
with respect to the REMIC 4 XN Interest and the related deemed obligation under
Section 2.07 to make certain payments in respect of Excess Interest, until the
capital account of the Class X Certificates is reduced to zero, and any
remaining expenses or losses shall be allocated to the Class N Certificates,
(vi) neither the Class N nor the Class X Certificates shall be responsible for
restoring any deficit to its capital account, (vii) upon termination of the
Trust Fund pursuant to Article X, all amounts available for distribution to
Holders of the Class N and Class X Certificates shall be distributed in
accordance with their positive capital account balances, first to the Class N
Certificates until their Notional Amount and any accrued but unpaid interest
thereon are reduced to zero, and then to the Class X Certificates, and (viii)
the Securities Administrator shall maintain books and records with respect to
the partnership on a calendar year basis (unless a different taxable year is
required by the Code) and shall prepare or cause to be prepared, and shall cause
the Holder of the largest Percentage Interest of the Class X Certificates to
sign and file or cause to be filed all federal and state tax and information
returns for the partnership and shall furnish or cause to be furnished Schedule
K-1's to the Holders of the Class N and Class X Certificates at the time
required by the Code. Unless otherwise directed by a majority of the Percentage
Interests of the Class N and Class X Certificates, the Trustee shall not make an
election under Section 754 of the Code. The Holder of the largest Percentage
Interest of the Class X Certificates, by acceptance of its Class X
Certificate(s), agrees to act as "tax matters partner" (within the meaning of
Section 6231(a)(7) of the Code) and to sign and timely file all federal and
state partnership tax and information returns prepared by the Trustee pursuant
to this Section 9.13(c).

      SECTION 9.14. Duties of Securities Administrator.

            (a) The Securities Administrator undertakes to perform such duties
and only such duties as are specifically set forth in this Agreement as duties
of the Securities Administrator. Any permissive right of the Securities
Administrator enumerated in this Agreement shall not be construed as a duty.

            (b) The Securities Administrator, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to it, which are specifically required to be furnished
pursuant to any provision of this Agreement, shall examine them to determine
whether they conform to the requirements of this Agreement; provided, however,
that the Securities Administrator shall not be responsible for the accuracy or
content of any resolution, certificate statement, opinion, report, document,
order or other instrument furnished by the Servicers, the Master Servicer, or
the Depositor. If any such instrument is found not to conform to the
requirements of this Agreement in a material manner, the Securities
Administrator shall take such action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to its
satisfaction, the Securities Administrator will provide notice to the
Certificateholders. Notwithstanding the foregoing, the Securities Administrator
shall have no obligation to reconcile, recompute or recalculate any remittances
or reports of any Servicer, and the Securities Administrator may fully rely upon
and shall have no liability with respect to information provided by any
Servicer.

            (c) On each Distribution Date, the Securities Administrator, as
paying agent, shall make monthly distributions and the final distribution to the
Certificateholders from funds in the Certificate Account as provided in Sections
6.01 and 10.02 herein.

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

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                  (i) The duties and obligations of the Securities Administrator
shall be determined solely by the express provisions of this Agreement; the
Securities Administrator shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this Agreement; no
implied covenants or obligations shall be read into this Agreement against the
Securities Administrator and, in the absence of bad faith on the part of the
Securities Administrator, the Securities Administrator 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 Securities
Administrator that conform to the requirements of this Agreement;

                  (ii) The Securities Administrator shall not be liable for an
error of judgment made in good faith by a Responsible Officer of the Securities
Administrator unless it shall be proved that the Securities Administrator was
negligent in ascertaining or investigating the facts related thereto;

                  (iii) The Securities Administrator shall not be personally
liable with respect to any action taken, suffered or omitted to be taken by it
in good faith in accordance with the consent or at the direction of Holders of
Certificates as provided herein relating to the time, method and place of
conducting any remedy pursuant to this Agreement, or exercising or omitting to
exercise any trust or power conferred upon the Securities Administrator under
this Agreement; and

                  (iv) The Securities Administrator shall not be required to
expend or risk its own funds or otherwise incur financial or other 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 indemnity satisfactory to it against such risk or liability is
not assured to it, and none of the provisions contained in this Agreement shall
in any event require the Securities Administrator to perform, or be responsible
for the manner of performance of, any of the obligations of any Servicer under
this Agreement, except during such time, if any, as the Securities Administrator
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.

      SECTION 9.15. Certain Matters Affecting the Securities Administrator.

            (a) Except as otherwise provided in Section 9.14:

                  (i) The Securities Administrator may request and conclusively
rely upon, and shall be fully protected in acting or refraining from acting
upon, any resolution, Officers' Certificate, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document reasonably believed
by it to be genuine and to have been signed or presented by the proper party or
parties, and the manner of obtaining consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Securities Administrator may prescribe;

                  (ii) The Securities Administrator may consult with counsel of
its selection and any advice of such counsel or 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
advice or Opinion of Counsel;

                  (iii) The Securities Administrator shall not be under any
obligation to exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement, unless such
Certificateholders shall have offered to the Securities Administrator reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities which may be incurred therein or thereby;

                                     -140-
<PAGE>

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

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

                  (vi) The Securities Administrator may execute any of the
trusts or powers hereunder or perform any duties hereunder either directly or by
or through agents, nominees, attorneys or a custodian, and shall not be
responsible for any misconduct or negligence on the part of any agent, nominee,
attorney or custodian appointed by the Securities Administrator in good faith;

                  (vii) The Securities Administrator shall not be liable for any
loss on any investment of funds pursuant to this Agreement (other than as issuer
of the investment security);

                  (viii) The Securities Administrator shall not be deemed to
have notice of any Event of Default unless a Responsible Officer of the
Securities Administrator has actual knowledge thereof or unless written notice
of any event which is in fact such a default is received by the Securities
Administrator at the Corporate Trust Office of the Securities Administrator, and
such notice references the Certificates and this Agreement. The Securities
Administrator shall not have any responsibility or liability for any action or
failure to act by the Master Servicer, Backup Servicer or any Servicer nor shall
the Securities Administrator be obligated to supervise or monitor the
performance of the Master Servicer, Backup Servicer or any Servicer hereunder or
otherwise;

                  (ix) The rights, privileges, protections, immunities and
benefits given to the Securities Administrator, including, without limitation,
its right to be indemnified, are extended to, and shall be enforceable by, each
agent, custodian and other Person employed to act hereunder;

                  (x) The right of the Securities Administrator to perform any
discretionary act enumerated in this Agreement shall not be construed as a duty,
and the Securities Administrator shall not be answerable for other than its
negligence or willful misconduct in the performance of such act; and

                  (xi) The Depositor and the Seller hereby approve of the
appointment of the to act as custodian pursuant to the Custodial Agreement and
each further agree that the Securities Administrator appointed the Custodian to
act as custodian with due care.

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

            (c) Notwithstanding anything in this Agreement to the contrary, in
no event shall the Securities Administrator be liable to any Person for any act
or omission of the Master Servicer, the Backup Servicer, any Servicer or the
Custodian.

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<PAGE>

      SECTION 9.16. Securities Administrator Not Liable for Certificates or
Mortgage Loans.

      The recitals contained herein and in the Certificates (other than the
authentication and countersignature on the Certificates) shall be taken as the
statements of the Seller, and neither the Securities Administrator nor the
Certificate Registrar assumes any responsibility for the correctness of the
same. The Securities Administrator does not make any representations or
warranties as to the validity or sufficiency of this Agreement, the Custodial
Agreement or of the Certificates (other than the signature and countersignature
on the Certificates) or of any Mortgage Loan or related document or of MERS or
the MERS System. The Securities Administrator shall not be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor in respect of the Mortgage Loans or deposited in or withdrawn
from the Collection Account by any Servicer. The Securities Administrator shall
not have any duty (a) to see to any recording, filing or depositing of this
Agreement or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording, filing or depositing thereof, (b) to see to
any insurance or (c) to see to the payment or discharge of any tax, assessment
or other governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust.

      SECTION 9.17. Securities Administrator May Own Certificates.

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

      SECTION 9.18. Fees and Expenses of the Securities Administrator.

      The Securities Administrator shall be entitled to the Securities
Administrator Fee paid by the Master Servicer pursuant to a separate agreement.
In addition, the Securities Administrator and its officers, directors, employees
and agents will be entitled to recover from the Certificate Account, and shall
be indemnified from the Trust Fund for, all reasonable out-of-pocket expenses,
disbursements and advances upon any Event of Default, any breach of this
Agreement or the Custodial Agreement or any loss, liability, expense, claim or
legal action (including any pending or threatened claim or legal action)
incurred or made by any of them in the performance of their duties or the
administration of the trusts hereunder or under the Custodial Agreement
(including the reasonable compensation, expenses and disbursements of its
counsel) except any such expense, loss, liability, disbursement or advance (i)
as may arise from its negligence or intentional misconduct or (ii) that does not
constitute an "unanticipated expense" within the meaning of Treasury Regulations
Section 1.860G-1(b)(3)(ii). If funds in the Certificate Account are insufficient
therefor, the Securities Administrator shall recover such expenses from future
collections on the Mortgage Loans or as otherwise agreed by the
Certificateholders. Such compensation and reimbursement obligation shall not be
limited by any provision of law in regard to the compensation of a Securities
Administrator of an express trust. Such obligations shall survive the
termination of this Agreement and the removal or resignation of the Securities
Administrator.

      SECTION 9.19. Eligibility Requirements for the Securities Administrator.

      The Securities Administrator hereunder shall at all times be an entity
duly organized and validly existing under the laws of the United States of
America or any state thereof, authorized under such laws to exercise corporate
trust powers, and shall each have a combined capital and surplus of at least
$50,000,000, a minimum long-term debt rating in the third highest rating
category by a Rating Agency, a minimum short-term debt rating in the second
highest rating category by a Rating Agency, and shall each

                                     -142-
<PAGE>

be subject to supervision or examination by federal or state authority. If such
entity publishes reports of condition at least annually, pursuant to law or to
the requirements of the aforesaid supervising or examining authority, then for
the purposes of this Section 9.19, the combined capital and surplus of such
entity shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. The principal office of the
Securities Administrator (other than the initial Securities Administrator) shall
be in a state with respect to which an Opinion of Counsel has been delivered to
such Securities Administrator at the time such Securities Administrator is
appointed Securities Administrator to the effect that the Trust will not be a
taxable entity under the laws of such state. In case at any time the Securities
Administrator shall cease to be eligible in accordance with the provisions of
this Section 9.19, the Securities Administrator shall resign immediately in the
manner and with the effect specified in Section 9.20 hereof.

      SECTION 9.20. Resignation and Removal of the Securities Administrator.

      The Securities Administrator (including the Securities Administrator as
paying agent and as Certificate Registrar) may at any time resign and be
discharged from the trust hereby created by giving written notice thereof to the
Depositor, the Seller, the Master Servicer, the Backup Servicer, each Servicer
and the Rating Agency. Upon receiving such notice of resignation of the
Securities Administrator, the Depositor shall promptly appoint a successor
Securities Administrator that meets the requirements in Section 9.19, by written
instrument, in duplicate, one copy of which instrument shall be delivered to
each of the resigning Securities Administrator and one copy to the successor
Securities Administrator. If no successor Securities Administrator shall have
been so appointed and having accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Securities Administrator may
petition any court of competent jurisdiction for the appointment of a successor
Securities Administrator.

      If at any time the Securities Administrator shall cease to be eligible in
accordance with the provisions of Section 9.19 hereof or if at any time the
Securities Administrator shall be legally unable to act, or shall be adjudged a
bankrupt or insolvent, or a receiver of the Securities Administrator or of its
property shall be appointed, or any public officer shall take charge or control
of the Securities Administrator or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Depositor may remove the
Securities Administrator. If the Depositor removes the Securities Administrator
under the authority of the immediately preceding sentence, the Depositor shall
promptly appoint a successor Securities Administrator that meets the
requirements of Section 9.19, by written instrument, in duplicate, one copy of
which instrument shall be delivered to the successor Securities Administrator
and one copy to each of the Master Servicer, the Backup Servicer and each
Servicer.

      The Holders of Certificates entitled to at least 51% of the Voting Rights
may at any time remove the Securities Administrator and appoint a successor
Securities Administrator by written instrument or instruments, in triplicate,
signed by such Holders or their attorneys-in-fact duly authorized, one complete
set of which instruments shall be delivered to the Depositor, one complete set
to the Securities Administrator so removed and one complete set to the successor
so appointed. A copy of such instrument shall be delivered to the
Certificateholders, the Securities Administrator and the Master Servicer, the
Backup Servicer and each Servicer by the Depositor.

      Any resignation or removal of the Securities Administrator and appointment
of a successor Securities Administrator pursuant to any of the provisions of
this Section 9.20 shall not become effective until acceptance of appointment by
the successor Securities Administrator, as provided in Section 9.21 hereof.

      SECTION 9.21. Successor Securities Administrator.

                                     -143-
<PAGE>

      Any successor Securities Administrator appointed as provided in Section
9.20 hereof shall execute, acknowledge and deliver to the Depositor, the Seller,
each Servicer, the Backup Servicer, the Master Servicer and to its predecessor
Securities Administrator an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Securities Administrator
shall become effective, and such successor 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 Securities Administrator. The Depositor, the Seller, each
Servicer, the Backup Servicer, the Master Servicer and the predecessor
Securities Administrator shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Securities Administrator, all such rights, powers,
duties and obligations.

      No successor Securities Administrator shall accept appointment as provided
in this Section 9.21 unless at the time of such acceptance such successor
Securities Administrator shall be eligible under the provisions of Section 9.19
hereof and the appointment of such successor Securities Administrator shall not
result in a downgrading of the Classes of Certificates rated by the Rating
Agencies, as evidenced by a letter from each Rating Agency.

      Upon acceptance of appointment by a successor Securities Administrator as
provided in this Section 9.21, the successor Securities Administrator shall mail
notice of such appointment hereunder to all Holders of Certificates at their
addresses as shown in the Certificate Register and to the Rating Agencies.

      SECTION 9.22. Merger or Consolidation of Securities Administrator.

      Any corporation or association into which the Securities Administrator may
be merged or converted or with which it may be consolidated or any corporation
or association resulting from any merger, conversion or consolidation to which
the Securities Administrator shall be a party, or any corporation or association
succeeding to the business of the Securities Administrator shall be the
successor of the Securities Administrator hereunder, provided such corporation
or association shall be eligible under the provisions of Section 9.19, 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.

                                   ARTICLE X

                                  TERMINATION

      SECTION 10.01. Termination upon Liquidation or Repurchase of all Mortgage
Loans.

      Subject to Section 10.03, the obligations and responsibilities of the
Depositor, the Master Servicer, each Servicer, the Securities Administrator and
the Trustee created hereby with respect to the Trust Fund shall terminate upon
the earlier of (a) the exercise by Countrywide of an Optional Termination; and
(b) the later of (i) the maturity or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust Fund and the
disposition of all REO Property and (ii) the distribution to Certificateholders
of all amounts required to be distributed to them pursuant to this Agreement, as
applicable. In no event shall the trusts created hereby continue beyond the
earlier of (i) the expiration of 21 years from the death of the last survivor of
the descendants of Joseph P. Kennedy, the late Ambassador of the United States
to the Court of St. James's, living on the date hereof and (ii) the Latest
Possible Maturity Date.

                                     -144-
<PAGE>

      Any termination pursuant to clause (a) above shall be effected by
Countrywide purchasing all Mortgage Loans and REO Properties at a price equal to
the Optional Termination Price. Notwithstanding anything to the contrary herein,
the Optional Termination Amount paid by Countrywide shall be deposited by the
Securities Administrator directly into the Certificate Account immediately upon
Optional Termination.

      The right of Countrywide to effect an Optional Termination pursuant to
clause (a) above shall be conditioned upon (i) the consent of the holders of the
majority interest in the Class X Certificates and (ii) the aggregate Stated
Principal Balance of the Mortgage Loans, at the time of any such repurchase,
aggregating ten (10) percent or less of the sum of (x) the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date and (y) the
Original Pre-Funded Amount.

      SECTION 10.02. Final Distribution on the Certificates.

      If on any Determination Date, (i) the Securities Administrator determines
that there are no Outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than the funds in the Collection Account, the Securities
Administrator shall send a final distribution notice promptly to each
Certificateholder or (ii) the Securities Administrator determines that a Class
of Certificates shall be retired after a final distribution on such Class, the
Securities Administrator shall notify the Certificateholders within seven (7)
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 Certificates at the office of the Securities Administrator
specified in such notice. If each Servicer elects to terminate the Trust Fund
pursuant to clause (a) of Section 10.01, at least 10 days prior to the date
notice is to be mailed to the affected Certificateholders, the Securities
Administrator 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 Mortgage Loans and REO Properties.

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

      In the event such notice is given, the Securities Administrator shall
cause all funds in the Collection Account to be deposited in the Certificate
Account on the Business Day prior to the applicable Distribution Date in an
amount equal to the final distribution in respect of the Certificates. Upon such
final deposit with respect to the Trust Fund, certification to the Trustee that
such required amount has been deposited in the Trust Fund and the receipt by the
Trustee of a Request for Release therefor, the Trustee shall promptly release to
the Mortgage Files for the Mortgage Loans.

      Upon presentation and surrender of the Certificates, the Securities
Administrator shall cause to be distributed to Certificateholders of each Class
the amounts allocable to such Certificates held in the

                                     -145-
<PAGE>

Certificate Account in the order and priority set forth in Section 5.05 hereof
on the final Distribution Date and in proportion to their respective Percentage
Interests.

      In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Securities Administrator shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within six months after the second notice all the applicable
Certificates shall not have been surrendered for cancellation, the Securities
Administrator may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds and other assets that remain a part of the Trust Fund. If within one year
after the second notice all Certificates shall not have been surrendered for
cancellation, the Class R Certificateholders shall be entitled to all unclaimed
funds and other assets of the Trust Fund that remain subject hereto. Upon
payment to the Class R Certificateholders of such funds and assets, neither the
Securities Administrator nor the Trustee shall have any further duties or
obligations with respect thereto.

      SECTION 10.03. Additional Termination Requirements.

            (a) In the event Countrywide exercises its option to effect an
Optional Termination as provided in Section 10.01, the Trust Fund shall be
terminated in accordance with the following additional requirements, unless the
Trustee has been supplied with an Opinion of Counsel, at the expense of
Countrywide 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 any of the REMICs provided for herein as defined
in section 860F of the Code, or (ii) cause any of the REMICs provided for herein
to fail to qualify as a REMIC at any time that any Certificates are outstanding:

                  (i) The Depositor shall establish a 90-day liquidation period
and notify the Trustee and the Securities Administrator thereof, which shall in
turn specify the first day of such period in a statement attached to the final
tax returns of each of the REMICs provided for herein pursuant to Treasury
Regulation Section 1.860F-1. The Depositor shall satisfy all the requirements of
a qualified liquidation under Section 860F of the Code and any regulations
thereunder, as evidenced by an Opinion of Counsel obtained at the expense of
each Servicer;

                  (ii) During such 90-day liquidation period, and at or prior to
the time of making the final payment on the Certificates, the Depositor as agent
of the Trustee shall sell all of the assets of the Trust Fund for cash; and

                  (iii) At the time of the making of the final payment on the
Certificates, the Securities Administrator shall distribute or credit, or cause
to be distributed or credited, to the Class R Certificateholders all cash on
hand (other than cash retained to meet outstanding claims), and the Trust Fund
shall terminate at that time, whereupon neither the Securities Administrator nor
the Trustee shall have any further duties or obligations with respect to sums
distributed or credited to the Class R Certificateholders.

            (b) By their acceptance of the Certificates, the Holders thereof
hereby authorize the Depositor 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 hereby agrees to adopt and
sign such a plan of complete liquidation prepared and delivered to it by
Depositor upon the written request of the Depositor, and the receipt of the
Opinion of Counsel referred to in Section 9.03(a) and to take such other action
in connection therewith as may be reasonably requested by the Depositor.

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<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

      SECTION 11.01. Amendment.

      This Agreement may be amended from time to time by the Depositor, the
Master Servicer, each Servicer, the Securities Administrator and the Trustee,
without the consent of any of the Certificateholders to,

                  (i) to cure any ambiguity or correct any mistake,

                  (ii) to correct, modify or supplement any provision therein
which may be inconsistent with any other provision herein,

                  (iii) to add any other provisions with respect to matters or
questions arising under this Agreement, or

                  (iv) to modify, alter, amend, add to or rescind any of the
terms or provisions contained in this Agreement, provided, however, that, in the
case of clauses (iii) and (iv), such amendment will not, as evidenced by an
Opinion of Counsel to such effect, adversely effect in any material respect the
interests of any Holder; provided, further, however, that such amendment will be
deemed to not adversely affect in any material respect the interest of any
Holder if the Person requesting such amendment obtains a letter from each Rating
Agency stating that such amendment will not result in a reduction or withdrawal
of its rating of any Class of 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, without the consent of the
Certificateholders, the Depositor, the Master Servicer, each Servicer, the
Securities Administrator and the Trustee may at any time and from time to time
amend this Agreement to modify, eliminate or add to any of its provisions to
such extent as shall be necessary or appropriate to maintain the qualification
of any of the REMICs provided for herein as REMICs under the Code or to avoid or
minimize the risk of the imposition of any tax on the Trust Fund or any of the
REMICs provided for herein 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 and the Securities Administrator shall have been
provided 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
or the Securities Administrator, 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,
each Servicer, the Securities Administrator, the Trustee and the Holders of the
Certificates affected thereby evidencing not less than 66 2/3% of the Voting
Rights for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments required to be distributed on any Certificate without the consent
of the Holder of such Certificate, (ii) adversely affect in any material respect
the interests of the Holders of any Class of Certificates in a manner other than
as described in (i), without the consent of the Holders of Certificates of such
Class evidencing 66 2/3% 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.

                                     -147-
<PAGE>

      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, any of the REMICs provided for herein or the
Certificateholders or cause any of the REMICs provided for herein 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 or upon the written request of
the Trustee to the Securities Administrator, the Securities Administrator 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 Securities Administrator may prescribe.

      Nothing in this Agreement shall require the Trustee or the Securities
Administrator to enter into an amendment without receiving an Opinion of
Counsel, satisfactory to the Trustee or the Securities Administrator 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.

      The Trustee may, but shall not be obligated to, enter into any supplement,
modification or waiver which affects its rights, duties or obligations
hereunder.

      SECTION 11.02. Counterparts.

      This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.

      SECTION 11.03. Governing Law.

      THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES
THEREOF.

      SECTION 11.04. Intention of Parties.

      It is the express intent of the parties hereto that the conveyance of the
Mortgage Notes, Mortgages, assignments of Mortgages, title insurance policies
and any modifications, extensions and/or assumption agreements and private
mortgage insurance policies relating to the Mortgage Loans by the 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,

                                     -148-
<PAGE>

in the event that, notwithstanding the intent of the parties, such assets are
held to be the property of the Depositor, or if for any other reason this
Agreement is held or deemed to create a security interest in such assets, then
(i) this Agreement shall be deemed to be a security agreement within the meaning
of the Uniform Commercial Code of the State of New York and (ii) the conveyance
provided for in this Agreement shall be deemed to be an assignment and a grant
by the Depositor to the Trustee, for the benefit of the Certificateholders, of a
security interest in all of the assets that constitute the Trust Fund, whether
now owned or hereafter acquired.

      The Depositor for the benefit of the Certificateholders shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
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 11.05. Notices.

            (a) The Securities Administrator 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 Trustee, the
Securities Administrator or each Servicer and the appointment of any successor;

                  (iv) The repurchase or substitution of Mortgage Loans pursuant
to Sections 2.02, 2.03 and 3.12;

                  (v) The final payment to Certificateholders; and

                  (vi) Any change in the location of the Certificate Account.

      The Securities Administrator shall promptly furnish or make available 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.

      All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when delivered to (a) in the case of the
Depositor, Merrill Lynch Mortgage Investors, Inc. 250 Vesey Street, 4 World
Financial Center, 10th Floor, New York, New York 10080, Attention: Asset-Backed
Finance; (b) in the case of the Seller, to Terwin Advisors LLC, 3 Park Avenue,
40th Floor, New York, New York 10016, Attention: Karey Geddes, or such other
address or telecopy number as may hereafter be furnished to the Depositor, the
Master Servicer, the Backup Servicer, the Servicers and the Trustee in writing
by the Seller; (c) in the case of the Trustee, to U.S. Bank National
Association, 209

                                     -149-
<PAGE>

South LaSalle Street, Suite 300, Chicago, Illinois 60604, Attention: Terwin
2004-4HE (telecopy number: (312) 325-8905), or such other address or telecopy
number as may hereafter be furnished to the Depositor, the Master Servicer, the
Backup Servicer, the Servicers and the Seller in writing by the Trustee; (d) in
the case of the Certificate Registrar, to the Securities Administrator's
Corporate Trust Office; (e) in the case of CMMC, 3415 Vision Drive, Columbus,
Ohio 43218, Attention: Diane Bentz with a copy to: 343 Thornall Street, Edison,
New Jersey 08837, Attention General Counsel, or such other addresses or telecopy
number as may be furnished to the Depositor, the Seller, the Master Servicer,
the Backup Servicer, any other Servicer and the Trustee in writing by CMMC; (f)
in the case of SLS, 3900 South Cherry Street, Englewood, Colorado 80110,
Attention: Toby Wells and David Frosh, or such other address or telecopy number
as may be furnished to the Depositor, the Seller, the Master Servicer, the
Backup Servicer, any other Servicer and the Trustee in writing by SLS; (g) in
the case of Countrywide, Countrywide Home Loans Servicing LP, 400 Countrywide
Way, Simi Valley, California 93065, facsimile number (805) 520-5623, Attention:
Mark Wong, or such other address or telecopy number as may be furnished to the
Depositor, the Seller, the Master Servicer, the Backup Servicer, any other
Servicer and the Trustee in writing by Countrywide; (h) in the case of
GreenPoint, GreenPoint Mortgage Funding Inc, 100 Wood Hollow Drive, Novato,
California 94945, or such other address or telecopy number as may be furnished
to the Depositor, the Seller, the Master Servicer, the Backup Servicer, any
other Servicer and the Trustee in writing by GreenPoint; (i) in the case of the
Securities Administrator and Backup Servicer, to its Corporate Trust Office, or
such other address or telecopy number as may be furnished to the Depositor, the
Seller, the Master Servicer, any Servicer and the Trustee in writing by the
Securities Administrator or the Backup Servicer, as applicable; (j) in the case
of the Credit Risk Manager, Risk Management Group, LLC, 60 Sackett Street, Suite
5, Brooklyn, New York 11231, Attention: Charles Cacici or such other address or
telecopy number as may be furnished to the Depositor, the Seller, the Master
Servicer, the Backup Servicer, the Servicers and the Trustee in writing by the
Credit Risk Manager; (k) in the case of Moody's, 99 Church Street, New York, New
York 10007, Attention: Residential Pass-Through Monitoring, or such other
address as Moody's may hereafter furnish to the Depositor, the Seller, the
Master Servicer, the Backup Servicer, the Servicers and the Trustee in writing;
and (l) in the case of S&P, 55 Water Street, 41st Floor, New York, New York
10041, Attention: Mortgage Surveillance Monitoring, or such other address as S&P
may hereafter furnish to the Depositor, the Seller, the Master Servicer, the
Backup Servicer, the Servicers and the Trustee in writing. Any notice required
or permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Notice of any Event of Default shall be given by telecopy and by
certified mail. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have duly been given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder shall also be mailed to the appropriate
party in the manner set forth above.

      SECTION 11.06. Severability of Provisions.

      If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

      SECTION 11.07. Assignment.

      Notwithstanding anything to the contrary contained herein, except as
provided pursuant to Section 6.02, this Agreement may not be assigned by the
Securities Administrator without the prior written consent of the Depositor.

                                     -150-
<PAGE>

      SECTION 11.08. Limitation on Rights of Certificateholders.

      The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's
legal representative or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a petition or winding up of the Trust
Fund, or otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.

      No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

      No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of an Event
of Default and of the continuance thereof, as hereinbefore provided, the Holders
of Certificates evidencing not less than 25% of the Voting Rights evidenced by
the Certificates shall also have made written request to the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such indemnity satisfactory to it 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 11.09. Inspection and Audit Rights.

      The Master Servicer and Servicer each agree that, on reasonable prior
notice, it will permit any representative of the Depositor or the Trustee during
the Master Servicer's or Servicer's normal business hours, to examine all the
books of account, records, reports and other papers of the Master Servicer or
Servicer relating to the Mortgage Loans, to make copies and extracts therefrom,
to cause such books to be audited by independent certified public accountants
selected by the Depositor or the Trustee and to discuss its affairs, finances
and accounts relating to the Mortgage Loans with its officers, employees,
agents, counsel and independent public accountants (and by this provision the
Master Servicer or Servicer hereby authorizes such accountants to discuss with
such representative such affairs, finances and accounts), all at such reasonable
times and as often as may be reasonably requested. Any out-of-pocket expense
incident to the exercise by the Depositor or the Trustee of any right under this
Section 10.09 shall be borne by the party requesting such inspection (except in
the case of the Trustee in which case such expenses shall be borne by the
requesting Certificateholder(s)); all other such expenses shall be borne by each
Servicer.

      SECTION 11.10. Certificates Nonassessable and Fully Paid.

                                     -151-
<PAGE>

      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
Authenticating Agent pursuant to this Agreement, are and shall be deemed fully
paid.

                                     -152-
<PAGE>

      IN WITNESS WHEREOF, the Depositor, the Master Servicer, each Servicer, the
Securities Administrator and the Trustee have caused their names to be signed
hereto by their respective officers thereunto duly authorized as of the day and
year first above written.

                                  MERRILL LYNCH MORTGAGE INVESTORS, INC.,
                                           as Depositor
                                  By:______________________________________
                                  Name: Matthew Whalen
                                  Title: President

                                  TERWIN ADVISORS LLC,
                                           as Seller
                                  By:______________________________________
                                  Name:
                                  Title:

                                  JPMORGAN CHASE BANK,
                                           as Securities Administrator and
                                           Backup Servicer
                                  By:______________________________________
                                  Name:
                                  Title:

                                  U.S. BANK NATIONAL ASSOCIATION,
                                            not in its individual capacity,
                                           but solely as Trustee
                                  By:______________________________________
                                  Name: Melissa A. Rosal
                                  Title: Vice President

                                  CHASE MANHATTAN MORTGAGE CORPORATION,
                                           as Master Servicer
                                  By:______________________________________
                                  Name:
                                  Title:

<PAGE>

                                  COUNTRYWIDE HOME LOANS SERVICING LP,
                                           as Servicer
                                  By:______________________________________
                                  Name:
                                  Title:

                                  SPECIALIZED LOAN SERVICING, LLC,
                                           as Servicer
                                  By:______________________________________
                                  Name:
                                  Title:

                                  GREENPOINT MORTGAGE FUNDING, INC,
                                           as Servicer
                                  By:______________________________________
                                  Name:
                                  Title:

                                  Acknowledged and Agreed for purposes of
                                  Section 3.19 and Section 6.08
                                  RISK MANAGEMENT GROUP, LLC,
                                           as Credit Risk Manager
                                  By:______________________________________
                                  Name:
                                  Title:

<PAGE>

                                   EXHIBIT A

                             FORMS OF CERTIFICATES

                            [INTENTIONALLY OMITTED]

                                      A-1
<PAGE>

                                    EXHIBIT B

                             MORTGAGE LOAN SCHEDULE

                             [INTENTIONALLY OMITTED]

                                      B-1
<PAGE>

                                   EXHIBIT C

                                   [RESERVED]

                                      C-1
<PAGE>

                                    EXHIBIT D

                          FORM OF TRUSTEE CERTIFICATION

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Countrywide Home Loans Servicing LP
4500 Park Granada, M.S. Ch-143
Calabasas, California 91302

GreenPoint Mortgage Funding Inc.
100 Wood HollowDrive
Novato, California 94945

Specialized Loan Servicing, LLC
3900 South Cherry Street
Englewood, Colorado 80110
Attention: Toby Wells and David Frosh

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

Re:  Pooling and Servicing Agreement dated as of June 1, 2004 among Merrill
     Lynch Mortgage Investors, Inc., as depositor (the "Depositor"), Terwin
     Advisors LLC, as seller (the "Seller"), Chase Manhattan Mortgage
     Corporation, as master servicer (the "Master Servicer"), JPMorgan Chase
     Bank, as securities administrator (the "Securities Administrator") and
     backup servicer (the "Backup Servicer"), Countrywide Home Loans Servicing
     LP, as servicer ("Countrywide" or a "Servicer"), GreenPoint Mortgage
     Funding Inc., as servicer ("GreenPoint" or a "Servicer"), Specialized Loan
     Servicing, LLC, as servicer ("SLS" or a "Servicer," and together with
     Countrywide and GreenPoint, the "Servicers") and U.S. Bank National
     Association, as trustee (the "Trustee"), relating to Terwin Mortgage Trust,
     Asset-Backed Certificates, Series TMTS 2004-5HE

Ladies and Gentlemen:

      In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that [,
except as set forth in Schedule A hereto,] (based solely on the Custodian's
Initial Certification) as to each Mortgage Loan listed in the Mortgage Loan
Schedule attached hereto (other than any Mortgage Loan paid in full or listed on
the attachment hereto) the Custodian has reviewed the Mortgage File and the
Mortgage Loan Schedule and has determined that:

                                      D-1

<PAGE>

      (i)   All documents in the Mortgage File required to be delivered to the
Trustee pursuant to Section 2.01 of the Pooling and Servicing Agreement are in
its possession;

      (ii)  In connection with each Mortgage Loan or Assignment thereof as to
which documentary evidence of recording was not received on the Closing Date, it
has received evidence of such recording; and

      (iii) Such documents have been reviewed by it and appear regular on their
face and relate to such Mortgage Loan.

      The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond confirming (i) that the Mortgage Loan number and
the name of the Mortgagor in each Mortgage File conform to the respective
Mortgage Loan number and name listed on the Mortgage Loan Schedule and (ii) the
existence in each Mortgage File of each of the documents listed in subparagraphs
(i)(A) through (G), inclusive, of Section 2.01 in the Agreement. The Trustee
makes no representations or warranties as to the validity, legality,
recordability, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage Loan or 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.

                                     U.S. BANK NATIONAL ASSOCIATION, as Trustee

                                     By: __________________________________
                                     Name: ________________________________
                                     Title: _______________________________

                                      D-2

<PAGE>

                                   EXHIBIT E-1

                           FORM OF TRANSFEREE'S LETTER
                              TERWIN MORTAE TRUST,
                 ASSET-BACKED CERTIFICATES, SERIES TMTS 2004-5HE

                                     [DATE]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

[Add appropriate parties]

Ladies and Gentlemen:

      We propose to purchase Terwin Mortgage Trust, Asset-Backed Certificates,
Series TMTS 2004-5HE, Class R, described in the Prospectus Supplement, dated
June 24, 2004, and Prospectus, dated June 18, 2004.

      1. We certify that (a) we are not a disqualified organization and (b) we
are not purchasing such Class R Certificate on behalf of a disqualified
organization; for this purpose the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code. We
understand that any breach by us of this certification may cause us to be liable
for an excise tax imposed upon transfers to disqualified organizations.

      2. We certify that (a) we have historically paid our debts as they became
due, (b) we intend, and believe that we will be able, to continue to pay our
debts as they become due in the future, (c) we understand that, as beneficial
owner of the Class R Certificate, we may incur tax liabilities in excess of any
cash flows generated by the Class R Certificate, and (d) we intend to pay any
taxes associated with holding the Class R Certificate as they become due and (e)
we will not cause income from the Class R Certificate to be attributable to a
foreign permanent establishment or fixed base (within the meaning of an
applicable income tax treaty) of ours or another U.S. taxpayer.

      3. We acknowledge that we will be the beneficial owner of the Class R
Certificate and:(1)

            -     The Class R Certificate will be registered in our name.

--------------------------
(1)   Check appropriate box and if necessary fill in the name of the
      Transferee's nominee.

<PAGE>

            -     The Class R Certificate will be held in the name of our
                  nominee, _________________, which is not a disqualified
                  organization.

      4. We certify that we are not an employee benefit plan subject to Title I
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), a
plan subject to Section 4975 of the Code, or a plan subject to any state,
local or other federal law substantively similar to the foregoing provisions of
ERISA or the Code ("Similar Law"), and are not directly or indirectly acquiring
the Class R Certificate on behalf of or using any assets of any such plan
(collectively, "Plan").

      5. We certify that (i) we are a U.S. person or (ii) we will hold the Class
R Certificate in connection with the conduct of a trade or business within the
United States and have furnished the transferor, the Trustee and the Securities
Administrator with a duly completed and effective Internal Revenue Service Form
W-8ECI or successor form at the time and in the manner required by the Code; for
this purpose the term "U.S. person" means a citizen or resident of the United
States, a corporation, or partnership (unless, in the case of a partnership,
Treasury regulations are adopted that provide otherwise) created or organized in
or under the laws of the United States, any State thereof or the District of
Columbia, including an entity treated as a corporation or partnership for
federal income tax purposes, an estate whose income is subject to United States
federal income tax regardless of the source of its income, 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 U.S. persons have the authority
to control all substantial decisions of the trust (or, to the extent provided in
applicable Treasury regulations, certain trusts in existence on August 20, 1996
which are eligible to elect to be treated as U.S. Persons. We agree that any
breach by us of this certification shall render the transfer of any interest in
the Class R Certificate to us absolutely null and void and shall cause no rights
in the Class R Certificate to vest in us.

      6. We agree that in the event that at some future time we wish to transfer
any interest in the Class R Certificate, we will transfer such interest in the
Class R Certificate only (a) to a transferee that (i) is not a disqualified
organization and is not purchasing such interest in the Class R Certificate on
behalf of a disqualified organization, (ii) is a U.S. person or will hold the
Class R Certificate in connection with the conduct of a trade or business within
the United States and will furnish us, the Trustee and the Securities
Administrator with a duly completed and effective Internal Revenue Service Form
W-8ECI or successor form at the time and in the manner required by the Code and
(iii) has delivered to the Trustee and the Securities Administrator a letter in
the form of this letter (including the affidavit appended hereto) and, we will
provide the Trustee and the Securities Administrator a written statement
substantially in the form of Exhibit E-2 to the Agreement.

                                     E-1-2

<PAGE>

     7.    We hereby designate _______________________ as our fiduciary to act
as the tax matters person for each of the REMICs provided for in the Agreement.

                                        Very truly yours,

                                        [PURCHASER]

                                        By:_____________________________________
                                            Name:
                                            Title:

Accepted as of __________ __, 200__

[TERWIN MORTGAGE TRUST] MERRILL LYNCH MORTGAGE INVESTORS, INC.

By:_____________________________
    Name:
    Title:

                                     E-1-3

<PAGE>

                                   APPENDIX A

                                    Affidavit pursuant to (i) Section 860E(e)(4)
                                    of the Internal Revenue Code of 1986, as
                                    amended, and (ii) certain provisions of the
                                    Pooling and Servicing Agreement

Under penalties of perjury, the undersigned declares that the following is true:

            (1)   He or she is an officer of _________________________ (the
                  "Transferee"),

            (2)   the Transferee's Employer Identification number is __________,

            (3)   the Transferee is not a "disqualified organization" (as
                  defined below), has no plan or intention of becoming a
                  disqualified organization, and is not acquiring any of its
                  interest in the Terwin Mortgage Trust, Asset-Backed
                  Certificates, Series TMTS 2004-5HE, Class R on behalf of a
                  disqualified organization or any other entity,

            (4)   unless Merrill Lynch Mortgage Investors, Inc.("MLMI") has
                  consented to the transfer to the Transferee by executing the
                  form of Consent affixed as Appendix B to the Transferee's
                  Letter to which this Certificate is affixed as Appendix A, the
                  Transferee is a "U.S. person" (as defined below),

            (5)   that no purpose of the transfer is to avoid or impede the
                  assessment or collection of tax,

            (6)   the Transferee has historically paid its debts as they became
                  due,

            (7)   the Transferee intends, and believes that it will be able, to
                  continue to pay its debts as they become due in the future,

            (8)   the Transferee understands that, as beneficial owner of the
                  Class R Certificate, it may incur tax liabilities in excess of
                  any cash flows generated by the Class R Certificate,

            (9)   the Transferee intends to pay any taxes associated with
                  holding the Class R Certificate as they become due,

            (10)  the Transferee consents to any amendment of the Pooling and
                  Servicing Agreement that shall be deemed necessary by MLMI
                  (upon advice of counsel) to constitute a reasonable
                  arrangement to ensure that the Class R Certificate will not be
                  owned directly or indirectly by a disqualified organization,
                  and

            (11)  IF BRACKETED, THE FOLLOWING CERTIFICATIONS ARE INAPPLICABLE
                  [the transfer is not a direct or indirect transfer of the
                  Class R Certificate to a foreign permanent establishment or
                  fixed base (within the meaning of an applicable income tax
                  treaty) of the Transferee, and as to each of the residual
                  interests represented by the Class R Certificate, the present
                  value of the anticipated tax liabilities associated with
                  holding such residual interest does not exceed the sum of:

                                     E-1-4

<PAGE>

            (A)   the present value of any consideration given to the Transferee
                  to acquire such residual interest;

            (B)   the present value of the expected future distributions on such
                  residual interest; and

            (C)   the present value of the anticipated tax savings associated
                  with holding such residual interest as the related REMIC
                  generates losses.

      For purposes of this declaration, (i) the Transferee is assumed to pay tax
      at a rate equal to the highest rate of tax specified in Section 11(b)(1)
      of the Code, but the tax rate specified in Section 55(b)(1)(B) of the Code
      may be used in lieu of the highest rate specified in Section 11(b)(1) of
      the Code if the Transferee has been subject to the alternative minimum tax
      under Section 55 of the Code in the preceding two years and will compute
      its taxable income in the current taxable year using the alternative
      minimum tax rate, and (ii) present values are computed using a discount
      rate equal to the Federal short-term rate prescribed by Section 1274(d) of
      the Code for the month of the transfer and the compounding period used by
      the Transferee;]

[(11) (A)   at the time of the transfer, and at the close of each of the
            Transferee's two fiscal years preceding the Transferee's fiscal year
            of transfer, the Transferee's gross assets for financial reporting
            purposes exceed $100 million and its net assets for financial
            reporting purposes exceed $10 million; and

      (B)   the Transferee is an eligible corporation as defined in Treasury
            regulations Section 1.860E-1(c)(6)(i) and has agreed in writing that
            any subsequent transfer of the Class R Certificate will be to
            another eligible corporation in a transaction that satisfies
            Treasury regulation Sections 1.860E-1(c)(4)(i), 1.860E-1(c)(4)(ii),
            1.860E-1(c)(4)(iii) and 1.860E-1(c)(5) and such transfer will not be
            a direct or indirect transfer to a foreign permanent establishment
            (within the meaning of an applicable income tax treaty) of a
            domestic corporation.

For purposes of this declaration, the gross and net assets of the Transferee do
not include any obligation of any related person as defined in Treasury
regulation Section 1.860E-1(c)(6)(ii) or any other asset if a principal purpose
for holding or acquiring the other asset is to permit the Transferee to make
this declaration or to satisfy the requirements of Treasury regulation Section
1.860E-1(c)(5)(i).]

(12) The Transferee will not cause income from the Class R Certificate to be
attributable to a foreign permanent establishment or fixed base (within the
meaning of an applicable income tax treaty) of the Transferee or another U.S.
taxpayer.

                                     E-1-5

<PAGE>

For purpose of this affidavit, the term "disqualified organization" means the
United States, any state or political subdivision thereof, any foreign
government, any international organization, any agency or instrumentality of any
of the foregoing (except any entity treated as other than an instrumentality of
the foregoing for purposes of Section 168(h)(2)(D) of the Internal Revenue Code
of 1986, as amended (the "Code")), any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from taxation under the
Code (unless such organization is subject to tax on excess inclusions) and any
organization that is described in Section 1381(a)(2)(C) of the Code and the term
"U.S. Person" means a citizen or resident of the United States, a corporation or
partnership (unless, in the case of a partnership, Treasury regulations are
adopted that provide otherwise) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia, including an
entity treated as a corporation or partnership for federal income tax purposes,
an estate whose income is subject to Unites 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 such trust, and one or
more such U.S. Persons have the authority to control all substantial decisions
of such trust, (or, to the extent provided in applicable Treasury regulations,
certain trusts in existence on August 20, 1996 which are eligible to elect to be
treated as U.S. Persons).

By:

      Address of Investor for receipt of distribution:

      Address of Investor for receipt of tax information:

      (Corporate Seal)

      Attest:

                              , Secretary

                                     E-1-6

<PAGE>

      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 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

      , 200_ .

      Notary Public

      County of
      State of
      My commission expires the ________ day of ______________

                                        By:
                                             Name:
                                             Title:

      Dated: _____________

                                     E-1-7

<PAGE>

                                   EXHIBIT E-2

                         FORM OF TRANSFEROR'S AFFIDAVIT
                             TERWIN MORTGAGE TRUST,
                 ASSET-BACKED CERTIFICATES, SERIES TMTS 2004-5HE

                                     [DATE]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

Re:   Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

      _______________________ (the "Transferor") has reviewed the attached
affidavit of _____________________________ (the "Transferee"), and has no actual
knowledge that such affidavit is not true, and has no reason to believe that the
Transferee has the intention to impede the assessment or collection of any
federal, state or local taxes legally required to be paid with respect to the
Class R Certificate referred to in the attached affidavit. In addition, the
Transferor has conducted a reasonable investigation at the time of the transfer
and found that the Transferee had historically paid its debts as they came due
and found no significant evidence to indicate that the Transferee will not
continue to pay its debts as they become due.

                                        Very truly yours,

                                        __________________________________
                                        Name:
                                        Title:

                                      E-2-1

<PAGE>

                                    EXHIBIT F

                       FORM OF TRANSFEROR CERTIFICATE FOR
                        CLASS N AND CLASS X CERTIFICATES

                                     [DATE]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

RE:   Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

Ladies and Gentlemen:

      In connection with our disposition of the Class [N or X] Certificate, we
certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being disposed
by us in a transaction that is exempt from the registration requirements of the
Act and (b) we have not offered or sold any Certificates to, or solicited offers
to buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action that 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 June 1,
2004, among Merrill Lynch Mortgage Investors, Inc., as depositor, Terwin
Advisors LLC, as seller, Chase Manhattan Mortgage Corporation, as master
servicer, JPMorgan Chase Bank, as securities administrator and backup servicer,
Countrywide Home Loans Servicing LP, as servicer, Specialized Loan Servicing,
LLC, as servicer and U.S. Bank National Association, as trustee.

                                        Very truly yours,

                                        _______________________________
                                        Name of Transferor

                                        By: ___________________________
                                        Name:
                                        Title

                                       F-1

<PAGE>

                                    EXHIBIT G

                            FORM OF INVESTMENT LETTER
                              (ACCREDITED INVESTOR)

                                     [DATE]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

Re:   Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

Ladies and Gentlemen:

      ______________ (the "Purchaser") intends to purchase from ________________
(the "Transferor") $_______ by original principal balance (the "Transferred
Certificates") of Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS
2004-5HE, Class [____] (the "Certificates"), issued pursuant to a Pooling and
Servicing Agreement dated as of June 1, 2004 among Merrill Lynch Mortgage
Investors, Inc., as depositor (the "Depositor"), Terwin Advisors LLC, as seller
(the "Seller"), Chase Manhattan Mortgage Corporation, as master servicer (the
"Master Servicer"), JPMorgan Chase Bank, as securities administrator (the
"Securities Administrator") and backup servicer (the "Backup Servicer"),
Countrywide Home Loans Servicing LP, as servicer ("Countrywide" or a
"Servicer"), GreenPoint Mortgage Funding Inc., as servicer ("GreenPoint" or a
"Servicer"), Specialized Loan Servicing, LLC, as servicer ("SLS" or a
"Servicer," and together with Countrywide and GreenPoint, the "Servicers") and
U.S. Bank National Association, as trustee (the "Trustee"). [THE PURCHASER
INTENDS TO REGISTER THE TRANSFERRED CERTIFICATE IN THE NAME OF
____________________, AS NOMINEE FOR _________________.] All terms used and not
otherwise defined herein shall have the meanings set forth in the Pooling and
Servicing Agreement.

      For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Purchaser certifies, represents and warrants to, and
covenants with, the Depositor and the Trustee that:

      1. The Purchaser understands that (a) the Certificates have not been
registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, (b) neither the
Depositor nor the Trustee is required, and neither of them intends, to so
register or qualify the Certificates, (c) the Certificates cannot be resold
unless (i) they are registered and qualified under the Securities Act and the
applicable state securities laws or (ii) an exemption from registration and
qualification is available and (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates.

      2. The Certificates will bear a legend to the following effect:

      THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
      AS AMENDED (THE "ACT"), THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
      (THE "1940 ACT") OR ANY STATE SECURITIES OR "BLUE SKY" LAWS, AND MAY NOT,
      DIRECTLY OR INDIRECTLY, BE SOLD OR OTHERWISE TRANSFERRED, OR OFFERED FOR
      SALE, UNLESS SUCH TRANSFER IS NOT SUBJECT

                                       G-1

<PAGE>

      TO REGISTRATION UNDER THE ACT, THE 1940 ACT AND ANY APPLICABLE STATE
      SECURITIES LAWS AND SUCH TRANSFER ALSO COMPLIES WITH THE OTHER PROVISIONS
      OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF
      THIS CERTIFICATE SHALL BE MADE UNLESS THE SECURITIES ADMINISTRATOR SHALL
      HAVE RECEIVED, IN FORM AND SUBSTANCE SATISFACTORY TO THE SERVICER (A) AN
      INVESTMENT LETTER FROM THE PROSPECTIVE INVESTOR; AND (B) REPRESENTATIONS
      FROM THE TRANSFEROR REGARDING THE OFFERING AND SALE OF THE CERTIFICATES.

      [IN THE CASE OF CLASS N OR CLASS X CERTIFICATES ONLY]

      NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE SECURITIES
      ADMINISTRATOR SHALL HAVE RECEIVED A REPRESENTATION FROM THE TRANSFEREE OF
      THIS CERTIFICATE EITHER (I) THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
      BENEFIT PLAN SUBJECT TO TITLE I OF ERISA, A PLAN SUBJECT TO SECTION 4975
      OF THE CODE, A PLAN SUBJECT TO ANY STATE, LOCAL OR OTHER FEDERAL LAW
      SUBSTANTIVELY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA AND THE CODE
      ("SIMILAR LAW"), AND IS NOT DIRECTLY OR INDIRECTLY ACQUIRING THIS
      CERTIFICATE ON BEHALF OF OR USING ANY ASSETS OF ANY SUCH PLAN, OR (II) IF
      THE CERTIFICATE HAS BEEN THE SUBJECT OF AN ERISA-QUALIFYING UNDERWRITING,
      THAT SUCH TRANSFEREE IS AN INSURANCE COMPANY THAT IS ACQUIRING THE
      CERTIFICATE WITH ASSETS OF AN "INSURANCE COMPANY GENERAL ACCOUNT," AS
      DEFINED IN SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE")
      95-60, AND THE ACQUISITION AND HOLDING OF THE CERTIFICATE ARE COVERED AND
      EXEMPT UNDER SECTIONS I AND III OF PTCE 95-60, OR (B) SOLELY IN THE EVENT
      THE CERTIFICATE IS A DEFINITIVE CERTIFICATE, AN OPINION OF COUNSEL
      SATISFACTORY TO THE SECURITIES ADMINISTRATOR, AND UPON WHICH THE
      SECURITIES ADMINISTRATOR AND TRUSTEE SHALL BE ENTITLED TO RELY, TO THE
      EFFECT THAT THE ACQUISITION AND HOLDING OF THE CERTIFICATE WILL NOT
      CONSTITUTE OR RESULT IN A NONEXEMPT PROHIBITED TRANSACTION UNDER ERISA OR
      THE CODE, OR A VIOLATION OF SIMILAR LAW, AND WILL NOT SUBJECT THE
      SECURITIES ADMINISTRATOR OR THE TRUSTEE TO ANY OBLIGATION IN ADDITION TO
      THOSE EXPRESSLY UNDERTAKEN IN THE POOLING AND SERVICING AGREEMENT, WHICH
      OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE SECURITIES ADMINISTRATOR
      OR THE TRUSTEE. IF THE CERTIFICATE IS NOT A DEFINITIVE CERTIFICATE, THE
      TRANSFEREE IS DEEMED TO HAVE MADE THE REPRESENTATION IN (A)(I) OR (A)(II)
      ABOVE.

      [IN THE CASE OF CLASS R CERTIFICATES ONLY]

      NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE SECURITIES
      ADMINISTRATOR SHALL HAVE RECEIVED A REPRESENTATION FROM THE TRANSFEREE OF
      THIS CERTIFICATE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN
      SUBJECT TO TITLE I OF ERISA, A PLAN SUBJECT TO SECTION 4975 OF THE CODE,
      OR A PLAN SUBJECT TO ANY STATE, LOCAL OR OTHER FEDERAL LAW SUBSTANTIVELY
      SIMILAR TO THE FOREGOING PROVISIONS OF ERISA AND THE CODE ("SIMILAR LAW"),
      AND IS NOT DIRECTLY OR INDIRECTLY ACQUIRING THIS CERTIFICATE ON BEHALF OF
      OR USING ANY ASSETS OF ANY SUCH PLAN.

      3. The Purchaser is acquiring the Transferred Certificates for its own
account [FOR INVESTMENT ONLY]**/ and not with a view to or for sale or other
transfer in connection with any distribution of the Transferred Certificates in
any manner that would violate the Securities Act or any applicable state
securities laws, subject, nevertheless, to the understanding that disposition of
the Purchaser's property shall at all times be and remain within its control.

--------------------
**/   Not required of a broker/dealer purchaser.

                                       G-2

<PAGE>

      4. The Purchaser (a) is a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business matters,
and in particular in such matters related to securities similar to the
Certificates, such that it is capable of evaluating the merits and risks of
investment in the Certificates, (b) is able to bear the economic risks of such
an investment and (c) is an "accredited investor" within the meaning of Rule
501(a) promulgated pursuant to the Securities Act.

      5. The Purchaser will not nor has it authorized nor will it authorize any
person to (a) offer, pledge, sell, dispose of or otherwise transfer any
Certificate, any interest in any Certificate or any other similar security to
any person in any manner, (b) solicit any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner, or (e) take any other action, that would constitute a distribution of
any Certificate under the Securities Act or the Investment Company Act of 1940,
as amended (the "1940 Act"), that would render the disposition of any
Certificate a violation of Section 5 of the Securities Act or any state
securities law, or that would require registration or qualification pursuant
thereto. Neither the Purchaser nor anyone acting on its behalf has offered the
Certificates for sale or made any general solicitation by means of general
advertising or in any other manner with respect to the Certificates. The
Purchaser will not sell or otherwise transfer any of the Certificates, except in
compliance with the provisions of the Pooling and Servicing Agreement.

      6. The Purchaser is (a) not an employee benefit plan subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), a
plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code") or a plan subject to any state, local or other federal law
substantively similar to the foregoing provisions of ERISA or the Code ("Similar
Law"), and are not directly or indirectly acquiring the Class R Certificate on
behalf of or using any assets of any such plan (collectively, "Plan"), or (b) in
the case of Class N and Class X Certificates only, (I) if the Certificate has
been the subject of an ERISA-Qualifying Underwriting, is an insurance company
that is acquiring the Certificate with assets of an "insurance company general
account," as defined in Section V(e) of Prohibited Transaction Class Exemption
("PTCE") 95-60, and the acquisition and holding of the Certificate are covered
and exempt under Sections I and III of PTCE 95-60, or (II) solely in the case of
any such Certificate that is a Definitive Certificate, herewith deliver an
Opinion of Counsel satisfactory to the Securities Administrator to the effect
that the acquisition and holding of such Certificate will not constitute or
result in a nonexempt prohibited transaction under ERISA or the Code, or a
violation of Similar Law, and will not subject the Securities Administrator or
the Trustee to any obligation in addition to those expressly undertaken in this
Agreement, which Opinion of Counsel shall not be an expense of the Securities
Administrator or the Trustee.

      7. Prior to the sale or transfer by the Purchaser of any of the
Certificates, the Purchaser will obtain from any subsequent purchaser
substantially the same certifications, representations, warranties and covenants
contained in the foregoing paragraphs and in this letter or a letter
substantially in the form of Exhibit H to the Pooling and Servicing Agreement.

                                       G-3

<PAGE>

      8. The Purchaser agrees to indemnify the Trustee, the Securities
Administrator, the Master Servicer, each Servicer and the Depositor against any
liability that may result from any misrepresentation made herein.

                                        Very truly yours,

                                        [PURCHASER]

                                        By:____________________________________
                                            Name:
                                            Title:

                                       G-4

<PAGE>

                                    EXHIBIT H

                       FORM OF RULE 144A INVESTMENT LETTER
                         (QUALIFIED INSTITUTIONAL BUYER)

                                     [DATE]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

Re:   Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

Ladies and Gentlemen:

      ______________ (the "Purchaser") intends to purchase from ________________
(the "Transferor") $_______ by original principal balance (the "Transferred
Certificates") of Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS
2004-5HE, Class [_____] (the "Certificates"), issued pursuant to a Pooling and
Servicing Agreement dated as of June 1, 2004 among Merrill Lynch Mortgage
Investors, Inc., as depositor (the "Depositor"), Terwin Advisors LLC, as seller
(the "Seller"), Chase Manhattan Mortgage Corporation, as master servicer (the
"Master Servicer"), JPMorgan Chase Bank, as securities administrator (the
"Securities Administrator") and backup servicer (the "Backup Servicer"),
Countrywide Home Loans Servicing LP, as servicer ("Countrywide" or a
"Servicer"), GreenPoint Mortgage Funding Inc., as servicer ("GreenPoint" or a
"Servicer"), Specialized Loan Servicing, LLC, as servicer ("SLS" or a
"Servicer," and together with Countrywide and GreenPoint, the "Servicers") and
U.S. Bank National Association, as trustee (the "Trustee"). [THE PURCHASER
INTENDS TO REGISTER THE TRANSFERRED CERTIFICATE IN THE NAME OF ________________,
AS NOMINEE FOR __________________.] All terms used and not otherwise defined
herein shall have the meanings set forth in the Pooling and Servicing Agreement.

      For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Purchaser certifies, represents and warrants to, and
covenants with, the Depositor and the Trustee that:

      In connection with our acquisition of the above Transferred 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 Transferred Certificates and all
matters relating thereto or any additional information deemed necessary to our
decision to purchase the Transferred Certificates, (d) we (i) are not an
employee benefit plan subject to Title I of ERISA, a plan subject to Section
4975 of the Code, or a plan subject to any state, local or other federal law
substantively similar to the foregoing provisions of ERISA and the Code
("Similar Law"), nor are we directly or indirectly acquiring any Certificate on
behalf of or using any assets of any such plan, or (ii) in the case of Class N
and Class X certificates only, (A) if the Certificate has been the subject of an
ERISA-Qualifying Underwriting, are an insurance company that is acquiring the
Certificate with assets of an "insurance company general account," as defined in
Section V(e) of Prohibited Transaction Class Exemption ("PTCE") 95-60, and the
acquisition and holding of the Certificate are covered and exempt under Sections
I and III of PTCE 95-60, or (B) solely in the event the Certificate is a
Definitive Certificate, herewith deliver an Opinion of Counsel satisfactory to
the Securities Administrator, and upon which the Securities Administrator and
Trustee shall be entitled to rely, to the effect that the acquisition and
holding of the Certificate will not constitute or result in a nonexempt
prohibited transaction under ERISA or the Code, or a violation of Similar Law,
and will not subject the Securities Administrator or the Trustee to any
obligation in addition to those expressly undertaken in the Pooling and
Servicing Agreement, which Opinion of Counsel shall not be an expense of the
Securities Administrator or the Trustee,

                                       H-1

<PAGE>
(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 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 one of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are aware
that the sale of the Transferred Certificates to us is being made in reliance on
Rule 144A. We are acquiring the Transferred 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
by us, based upon certifications of such purchaser or information we have in our
possession, 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.

      We agree to indemnify the Trustee, the Securities Administrator, the
Master Servicer, each Servicer and the Depositor against any liability that may
result from any misrepresentation made herein.

                                        Very truly yours,

                                        [PURCHASER]

                                        By:_____________________________________
                                           Name:
                                           Title:

                                       H-2

<PAGE>

                                                                         ANNEX 1

            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 the 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 $____________(2)* 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 Federal, 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 such institution or is a foreign savings and
               loan association or equivalent institution and (b) has an
               audited net worth of at least $25,000,000 as demonstrated in
               its latest annual financial statements, a copy of which is
               attached hereto.

         -     Broker-dealer. The Buyer is a dealer registered pursuant to
               Section 15 of the Securities Exchange Act of 1934, as amended.

         -     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

-------------------------
(2) Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.

                                      H-3
<PAGE>

               insurance commissioner or a similar official or agency of the
               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 subject to
               Title I of the Employee Retirement Income Security Act of
               1974, as amended.

         -     Investment Advisor. The Buyer is an investment advisor
               registered under the Investment Advisors Act of 1940, as
               amended.

         -     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, as amended.

         -     Business Development Company. Buyer is a business development
               company as defined in Section 202(a)(22) of the Investment
               Advisors Act of 1940, as amended.

      3. The term "securities" as used for purposes of the calculation of the
dollar amount in paragraph 2 excludes: (i) securities of issuers that are
affiliated with the Buyer, (ii) securities that are part of an unsold allotment
to or subscription by the Buyer, if the Buyer is a dealer, (iii) securities
issued or guaranteed by the U.S. or any instrumentality thereof, (iv) bank
deposit notes and certificates of deposit, (v) loan participations, (vi)
repurchase agreements, (vii) securities owned but subject to a repurchase
agreement and (viii) currency, interest rate and commodity swaps.

      4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.

      5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

                                      H-4

<PAGE>

      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 as provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.

                                        By:_____________________________________
                                            Name:
                                            Title:

                                        Date:___________________________________

                                      H-5

<PAGE>

                                                                         ANNEX 2

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [FOR TRANSFEREES THAT ARE REGISTERED INVESTMENT COMPANIES]

      The undersigned (the "Buyer") hereby certifies as follows to the parties
listed in the Rule 144A Transferee Certificate to which this certification
relates with respect to the Certificates described therein:

      1. As indicated below, the undersigned is the President, Chief Financial
Officer or Senior Vice President of the Buyer or, if the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A 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 Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

         -     The Buyer owned $___________ in securities (other than the
               excluded securities referred to below) as of the end of the
               Buyer's most recent fiscal year (such amount being calculated
               in accordance with Rule 144A).

         -     The Buyer is part of a Family of Investment Companies which
               owned in the aggregate $__________ in securities (other than
               the excluded securities referred to below) as of the end of
               the Buyer's most recent fiscal year (such amount being
               calculated in accordance with Rule 144A).

      3. The term "Family of Investment Companies" as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

      4. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer or are part of the Buyer's Family of
Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.

      5. The Buyer is familiar with Rule 144A and understands 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.

                                      H-6

<PAGE>

      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.

                                        By:_____________________________________
                                           Name:
                                           Title:

                                        IF AN ADVISER:

                                        ________________________________________
                                        Print Name of Buyer

                                        Date:___________________________________

                                      H-7

<PAGE>

                                    EXHIBIT I

                        REQUEST FOR RELEASE OF DOCUMENTS

                                     [DATE]

      To:   U.S. Bank National Association
            209 S. LaSalle Street, Suite 300
            Chicago, Illinois 60604

Re:   Pooling and Servicing Agreement dated as of June 1, 2004 among Merrill
      Lynch Mortgage Investors, Inc., as depositor (the "Depositor"), Terwin
      Advisors LLC, as seller (the "Seller"), Chase Manhattan Mortgage
      Corporation, as master servicer (the "Master Servicer"), JPMorgan Chase
      Bank, as securities administrator (the "Securities Administrator") and
      backup servicer (the "Backup Servicer"), Countrywide Home Loans Servicing
      LP, as servicer ("Countrywide" or a "Servicer"), GreenPoint Mortgage
      Funding Inc., as servicer ("GreenPoint" or a "Servicer"), Specialized Loan
      Servicing, LLC, as servicer ("SLS" or a "Servicer," and together with
      Countrywide and GreenPoint, the "Servicers") and U.S. Bank National
      Association, as trustee (the "Trustee"), relating to Terwin Mortgage
      Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

        In connection with the administration of the Mortgage Loans held by you,
as Custodian, 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

_______ 2.  Foreclosure

_______ 3.  Substitution

_______ 4.  Other Liquidation (Repurchases, etc.)

_______ 5.  Nonliquidation

_______ 6.  Other Reason: __________________________

Address to which the Trustee should deliver the Mortgage File:

                                        By:_____________________________________
                                             (authorized signer)

                                        Address:________________________________

                                      I-1

<PAGE>

                                        Date:___________________________________

If box 1 or 2 above is checked, and if all or part of the Mortgage File was
previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to the
above specified Mortgage Loan.

If box 3, 4, 5 or 6 above is checked, upon our return of all of the above
documents to you as Trustee, please acknowledge your receipt by signing in the
space indicated below, and returning this form.

Please acknowledge the execution of the above request by your signature and date
below:

U.S. Bank National Association,
as Trustee

By:_________________________________        _________________________________
    Signature                               Date

Documents returned to Trustee:

By:_________________________________        _________________________________
    Signature                               Date

                                      I-2

<PAGE>

                                    EXHIBIT J

                                   [RESERVED]

                                      J-1

<PAGE>

                                    EXHIBIT K

                OFFICER'S CERTIFICATE OF SECURITIES ADMINISTRATOR

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Re:  Pooling and Servicing Agreement dated as of June 1, 2004 among Merrill
     Lynch Mortgage Investors, Inc., as depositor (the "Depositor"), Terwin
     Advisors LLC, as seller (the "Seller"), Chase Manhattan Mortgage
     Corporation, as master servicer (the "Master Servicer"), JPMorgan Chase
     Bank, as securities administrator (the "Securities Administrator") and
     backup servicer (the "Backup Servicer"), Countrywide Home Loans Servicing
     LP, as servicer ("Countrywide" or a "Servicer"), GreenPoint Mortgage
     Funding Inc., as servicer ("GreenPoint" or a "Servicer"), Specialized Loan
     Servicing, LLC, as servicer ("SLS" or a "Servicer," and together with
     Countrywide and GreenPoint, the "Servicers") and U.S. Bank National
     Association, as trustee (the "Trustee") (the "Agreement), relating to
     Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

      The Securities Administrator hereby certifies to the Depositor and SLS,
and their respective officers, directors and affiliates, and with the knowledge
and intent that they will rely upon this certification, that:

1.   The Securities Administrator has reviewed the annual report on Form 10-K
     for the fiscal year [[ ]], and all reports on Form 8-K containing
     distribution reports filed in respect of periods included in the year
     covered by that annual report, relating to the above referenced trust.

2.   Based solely upon the information provided to us by the Master Servicer,
     the information set forth in the reports referenced in (i) above does not
     contain any untrue statement of material fact; and;

3.   Based on its knowledge, the distribution information required to be
     provided by the Securities Administrator under the Pooling and Servicing
     Agreement is included in these reports.

Date:

                                       JPMorgan Chase Bank,
                                       not in its individual capacity but solely
                                       as Securities Administrator
                                       By:    __________________________________
                                       Name:  __________________________________
                                       Title: __________________________________

                                       K-1

<PAGE>

                                    EXHIBIT L

                        OFFICER'S CERTIFICATE OF SERVICER

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Chase Manhattan Mortgage Corporation
3415 Vision Drive
Columbus, Ohio  43218

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

Re:  Pooling and Servicing Agreement dated as of June 1, 2004 among Merrill
     Lynch Mortgage Investors, Inc., as depositor (the "Depositor"), Terwin
     Advisors LLC, as seller (the "Seller"), Chase Manhattan Mortgage
     Corporation, as master servicer (the "Master Servicer"), JPMorgan Chase
     Bank, as securities administrator (the "Securities Administrator") and
     backup servicer (the "Backup Servicer"), Countrywide Home Loans Servicing
     LP, as servicer ("Countrywide" or a "Servicer"), GreenPoint Mortgage
     Funding Inc., as servicer ("GreenPoint" or a "Servicer"), Specialized Loan
     Servicing, LLC, as servicer ("SLS" or a "Servicer," and together with
     Countrywide and GreenPoint, the "Servicers") and U.S. Bank National
     Association, as trustee (the "Trustee") (the "Agreement'), relating to
     Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

      I, [identify the certifying individual], an authorized representative of
[Name of the applicable Servicer] hereby certify to the Master Servicer, the
Servicer, the Securities Administrator and the Depositor, and each of their
respective officers, directors and affiliates, and with the knowledge and intent
that they will rely upon this certification, that:

1.   I have reviewed the information required to be delivered to the Master
     Servicer pursuant to the Agreement (the "Servicing Information").

2.   Based on my knowledge, the information in the Annual Statement of
     Compliance, and all servicing reports, officer's certificates and other
     information relating to the servicing of the Mortgage Loans submitted to
     the Master Servicer by [Name of the applicable Servicer] taken as a whole,
     does not contain any untrue statement of a material fact or omit to state
     a material fact necessary to make the statements made, in light of the
     circumstances under which such statements were made, not misleading as of
     the last day of the period covered by the Annual Statement of Compliance;

3.   Based on my knowledge, the Servicing Information required to be provided
     to the Master Servicer by [Name of the applicable Servicer] under the
     Agreement has been provided to the Master Servicer; and

                                      L-1

<PAGE>

4.    I am responsible for reviewing the activities performed by [Name of the
      applicable Servicer] under the Agreement and based upon the review
      required hereunder, and except as disclosed in the Annual Statement of
      Compliance, the Annual Independent Certified Public Accountant's Servicing
      Report and all servicing reports, officer's certificates and other
      information relating to the servicing of the Mortgage Loans submitted to
      the Master Servicer by [Name of the applicable Servicer], [Name of the
      applicable Servicer] has, as of the last day of the period covered by the
      Annual Statement of Compliance fulfilled its obligations under this
      Agreement.

Date:

                                        [NAME OF APPLICABLE SERVICER]
                                        By:    _________________________________
                                        Name:  _________________________________
                                        Title: _________________________________

                                       L-2

<PAGE>

                                    EXHIBIT M

                     FORM OF SUBSEQUENT TRANSFER INSTRUMENT

      Pursuant to this Subsequent Transfer Instrument, dated _________, 2004
(the "Instrument"), between Merrill Lynch Mortgage Investors, Inc., as seller
(the "Depositor"), and U.S. Bank National Association, as trustee of the Terwin
Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE, as purchaser
(the "Trustee"), and pursuant to the Pooling and Servicing Agreement, dated as
of June 1, 2004 (the "Pooling and Servicing Agreement"), among the Merrill Lynch
Mortgage Investors, Inc., as depositor, Terwin Advisors LLC, as seller, Chase
Manhattan Mortgage Corporation, as master servicer, JPMorgan Chase Bank, as
securities administrator and backup servicer, Countrywide Home Loans Servicing
LP, as servicer, GreenPoint Mortgage Funding Inc., as servicer, Specialized Loan
Servicing, LLC, as servicer and U.S. Bank National Association, as trustee, on
behalf of the Trust Fund, of the Mortgage Loans listed on the attached Schedule
of Mortgage Loans (the "Subsequent Mortgage Loans").

      Capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the Pooling and Servicing Agreement.

            Section 1. Conveyance of Subsequent Mortgage Loans.

      (a) The Depositor does hereby sell, transfer, assign, set over and convey
to the Trustee, on behalf of the Trust Fund, without recourse, all of its right,
title and interest in and to the Subsequent Mortgage Loans, and including all
amounts due on the Subsequent Mortgage Loans after the related Subsequent
Cut-off Date, and all items with respect to the Subsequent Mortgage Loans to be
delivered pursuant to Section 2.01 of the Pooling and Servicing Agreement;
provided, however, that the Depositor reserves and retains all right, title and
interest in and to amounts due on the Subsequent Mortgage Loans on or prior to
the related Subsequent Cut-off Date. The Depositor, contemporaneously with the
delivery of this Instrument, has delivered or caused to be delivered to the
Trustee each item set forth in Section 2.01 of the Pooling and Servicing
Agreement. The transfer to the Trustee by the Depositor of the Subsequent
Mortgage Loans identified on the Mortgage Loan Schedule attached hereto as
Exhibit B shall be absolute and is intended by the Depositor, the Servicer, the
Trustee and the Certificateholders to constitute and to be treated as a sale by
the Depositor to the Trust Fund.

      (b) The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey to the Trustee
without recourse for the benefit of the Certificateholders all the right, title
and interest of the Depositor, in, to and under the Subsequent Mortgage Loan
Purchase Agreement, dated the date hereof, between the Depositor as purchaser
and the Servicer as seller, to the extent of the Subsequent Mortgage Loans, a
copy of which agreement is annexed hereto as Attachment G.

            (c) Additional terms of the sale are set forth on Attachment A
hereto.

            Section 2. Representations and Warranties; Conditions Precedent.

      (a) The Depositor hereby confirms that each of the conditions precedent
and the representations and warranties set forth in Sections 2.03 and 2.10 of
the Pooling and Servicing Agreement are satisfied as of the date hereof with
respect to the Subsequent Mortgage Loans.

                                      M-1

<PAGE>

      (b) All terms and conditions of the Pooling and Servicing Agreement are
hereby ratified and confirmed; provided, however, that in the event of any
conflict, the provisions of this Instrument shall control over the conflicting
provisions of the Pooling and Servicing Agreement.

            Section 3. Recordation of Instrument.

      To the extent permitted by applicable law, this Instrument, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the [Servicer]
at the Certificateholders' expense on direction of the related
Certificateholders, but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders or is necessary for the administration or servicing of
the Mortgage Loans.

            Section 4. Governing Law.

      This Instrument shall be construed in accordance with the laws of the
State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to principles of conflicts of law.

            Section 5. Counterparts.

      This Instrument may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same instrument.

            Section 6. Successors and Assigns.

      This Instrument shall inure to the benefit of and be binding upon the
Depositor and the Trustee and their respective successors and assigns.

                                        MERRILL LYNCH MORTGAGE
                                        INVESTORS, INC.

                                        By:
                                        Name:
                                        Title:

                                        U.S. BANK NATIONAL ASSOCIATION,
                                        not in its individual capacity but
                                        solely as Trustee for Terwin Mortgage
                                        Trust, Asset-Backed Certificates,
                                        Series TMTS 2004-5HE

                                        By:
                                        Name:
                                        Title:

                                      M-2

<PAGE>

                                   ATTACHMENTS

A.    Additional terms of sale.

B.    Schedule of Subsequent Mortgage Loans.

C.    Depositor's Officer's certificate.

D.    Opinions of Depositor's counsel (bankruptcy, corporate).

E.    Trustee's Certificate.

F.    Opinion of Trustee's Counsel.

G.    Subsequent Mortgage Loan Purchase Agreement.

                                      M-3

<PAGE>

                                  ATTACHMENT A

                            ADDITIONAL TERMS OF SALE

      A.    General

            1.    Subsequent Cut-off Date: ___________ 1, 2004

            2.    Subsequent Transfer Date: ____________, 2004

            3.    Aggregate Principal Balance of the Subsequent Mortgage Loans
                  as of the Subsequent Cut-off Date: $___________

            4.    Purchase Price: 100.00%

      B.    The following representations and warranties with respect to each
Subsequent Mortgage Loan determined as of the Subsequent Cut-off Date (or such
other date as is specified herein) shall be true and correct: (i) the Subsequent
Mortgage Loan may not be 30 or more days delinquent as of the related Subsequent
Cut-off Date (except with respect to not more than 1.5% of the Subsequent
Mortgage Loans, by aggregate principal balance as of the related Subsequent
Cut-off Date, which may be 30 or more days delinquent but less than 60 days
delinquent as of the related Cut-off Date); (ii) the stated term to maturity of
the Subsequent Mortgage Loan will not be less than 120 months and will not
exceed 360 months; (iii) the Subsequent Mortgage Loan may not provide for
negative amortization; (iv) the Subsequent Mortgage Loan will not have a
Loan-to-Value Ratio greater than 95.0%; (v) the Subsequent Mortgage Loans will
have as of the Subsequent Cut-off Date, a weighted average term since
origination not in excess of 6 months; (vi) the Subsequent Mortgage Loan must
have a first Monthly Payment due on or before [October 1, 2004]; (vii) the
Subsequent Mortgage Loan shall be underwritten in accordance with the criteria
set forth under the section "Underwriting Guidelines--The Winter Group
Underwriting Guidelines" in the Prospectus Supplement (viii) as of both the
Subsequent Cut-off Date and Subsequent Transfer Date for such Subsequent
Mortgage Loan, the Subsequent Mortgage Loan must provide for monthly interest
payments which are due on the first day of each calendar month, (ix) as of the
Subsequent Transfer Date for such Subsequent Mortgage Loan, the Subsequent
Mortgage Loan must be a "qualified mortgage" within the meaning of Section 860G
of the Code and Treasury Regulations Section 1.860G-2 (as determined without
regard to Treasury Regulations Section 1.860G-2(a)(3) or any similar provision
that treats a defective obligation as a qualified mortgage for a temporary
period), (x) as of the Subsequent Transfer Date for such Subsequent Mortgage
Loan, the Subsequent Mortgage Loan does not provide for interest other than at
either (a) a single fixed rate in effect throughout the term of the Subsequent
Mortgage Loan or (b) a "variable rate" (within the meaning of Treasury
Regulations Section 1.860G-1(a)(3)) in effect throughout the term of the
Subsequent Mortgage Loan, (xi) as of the Subsequent Transfer Date for such
Subsequent Mortgage Loan, the Depositor would not, based on the delinquency
status of such Subsequent Mortgage Loan, institute foreclosure proceedings prior
to the next scheduled payment date for such Subsequent Mortgage Loan and (xii)
as of the Subsequent Transfer Date for such Subsequent Mortgage Loan, the
Subsequent Mortgage Loan was not the subject of pending or final foreclosure
proceedings.

C.    Following the purchase of the Subsequent Mortgage Loans by the Trust Fund,
the Mortgage Loans (including the related Subsequent Mortgage Loans) will as of
the Subsequent Cut-off Date not be materially inconsistent with the Initial
Mortgage Loans. Notwithstanding the foregoing, any Subsequent Mortgage Loan may
be rejected by either Rating Agency if the inclusion of such Subsequent Mortgage
Loan would adversely affect the ratings on any class of Offered Certificates.

                                      M-4

<PAGE>

                                        Very truly yours,

                                        MERRILL LYNCH MORTGAGE
                                        INVESTORS, INC.

                                        By:
                                        Name:
                                        Title:

Acknowledged and Agreed:
U.S. BANK NATIONAL ASSOCIATION,
not in its individual capacity but solely as Trustee

By:
Name:
Title:

                                      M-5

<PAGE>

                                    EXHIBIT N

                             FORM OF ADDITION NOTICE

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

Countrywide Home Loans Servicing LP
4500 Park Granada, M.S. Ch-143
Calabasas, California 91302

Specialized Loan Servicing, LLC
3900 South Cherry Street
Englewood, Colorado 80110
Attention: [______________]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

Re:  Pooling and Servicing Agreement dated as of June 1, 2004 among Merrill
     Lynch Mortgage Investors, Inc., as depositor (the "Depositor"), Terwin
     Advisors LLC, as seller (the "Seller"), Chase Manhattan Mortgage
     Corporation, as master servicer (the "Master Servicer"), JPMorgan Chase
     Bank, as securities administrator (the "Securities Administrator") and
     backup servicer (the "Backup Servicer"), Countrywide Home Loans Servicing
     LP, as servicer ("Countrywide" or a "Servicer"), GreenPoint Mortgage
     Funding Inc., as servicer ("GreenPoint" or a "Servicer"), Specialized Loan
     Servicing, LLC, as servicer ("SLS" or a "Servicer," and together with
     Countrywide and GreenPoint, the "Servicers") and U.S. Bank National
     Association, as trustee (the "Trustee") relating to Terwin Mortgage Trust,
     Asset-Backed Certificates, Series TMTS 2004-5HE

Ladies and Gentlemen::

      Pursuant to Section 2.10 of the referenced Pooling and Servicing
Agreement, Merrill Lynch Mortgage Investors, Inc. has designated Subsequent
Mortgage Loans to be sold to the Trust Fund on [DATE], with an aggregate
principal balance of $___________________, which Subsequent Mortgage Loans have
not been rejected by the Rating Agencies pursuant to Section 2.10(e) of the
Pooling and Servicing Agreement. Capitalized terms not otherwise defined herein
have the meaning set forth in the Pooling and Servicing Agreement.

      Please acknowledge your receipt of this notice by countersigning the
enclosed copy in the space indicated below and returning it to the attention of
the undersigned.

                                                                             N-1
<PAGE>

                                    EXHIBIT O

                              FORM OF CAP CONTRACT

                             [INTENTIONALLY OMITTED]

                                                                             O-1

<PAGE>

                                    EXHIBIT P

                    OFFICER'S CERTIFICATE OF MASTER SERVICER

                                     [DATE]

Merrill Lynch Mortgage Investors, Inc.
250 Vesey Street
4 World Financial Center, 10th Floor
New York, New York 10080

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004-2477
Attention: Institutional Trust Services/Global Debt (TMTS 2004-5HE)

Re:  Pooling and Servicing Agreement dated as of June 1, 2004 among Merrill
     Lynch Mortgage Investors, Inc., as depositor (the "Depositor"), Terwin
     Advisors LLC, as seller (the "Seller"), Chase Manhattan Mortgage
     Corporation, as master servicer (the "Master Servicer"), JPMorgan Chase
     Bank, as securities administrator (the "Securities Administrator") and
     backup servicer (the "Backup Servicer"), Countrywide Home Loans Servicing
     LP, as servicer ("Countrywide" or a "Servicer"), GreenPoint Mortgage
     Funding Inc., as servicer ("GreenPoint" or a "Servicer"), Specialized Loan
     Servicing, LLC, as servicer ("SLS" or a "Servicer," and together with
     Countrywide and GreenPoint, the "Servicers") and U.S. Bank National
     Association, as trustee (the "Trustee") (the "Agreement"), relating to
     Terwin Mortgage Trust, Asset-Backed Certificates, Series TMTS 2004-5HE

     The Master Servicer hereby certifies to the Depositor, the Securities
Administrator, SLS and their respective officers, directors and affiliates,
that:

1.   Based on our knowledge, the information prepared by the Master Servicer
     and relating to the mortgage loans master serviced by the Master Servicer
     and provided by the Master Servicer to the Securities Administrator in its
     reports to the Securities Administrator is accurate and complete in all
     material respects as of the last day of the period covered by such report;

2.   Based on our knowledge, the master servicing information required to be
     provided to the Securities Administrator by the Master Servicer pursuant
     to the Agreement has been provided to the Securities Administrator;

3.   Based upon the review required under the Agreement, and except as
     disclosed in its reports, the Master Servicer as of the last day of the
     period covered by such reports has fulfilled its obligations under the
     Agreement;

4.   The Master Servicer has disclosed to its independent auditor, who issues
     the independent auditor's report on the Uniform Single Attestation Program
     for Mortgage Bankers for the Master Servicer, any significant deficiencies
     relating to the Master Servicer's compliance with minimum master servicing
     standards; and

5.   In compiling the information and making the foregoing certifications, the
     Master Servicer has relied upon information furnished to it by the
     servicers under the Agreements. The Master Servicer shall

                                                                             P-1

<PAGE>

      have no responsibility or liability for any inaccuracy in such reports
      resulting from information so provided by the servicers.

Date:

                                        Chase Manhattan Mortgage Corporation,
                                        as Master Servicer

                                        ________________________________________
                                                 Authorized Signature

                                                                             P-2

<PAGE>

                                    EXHIBIT Q

                           FORM OF CUSTODIAL AGREEMENT

                             [INTENTIONALLY OMITTED]

                                                                             Q-1

<PAGE>

                                    EXHIBIT R

                             FORM OF SERVICER REPORT

                             [INTENTIONALLY OMITTED]

                                                                             R-1exv4w0

 

WARRANT AGREEMENT BETWEEN

MANUGISTICS GROUP, INC.

AND

INTERNATIONAL BUSINESS MACHINES CORPORATION

 

 

Table of Contents

	 	 	 
	Section
	1.

	 	Exercise and Expiration of Warrant
	2.

	 	Representations
	3.

	 	Certain Agreements of the Company
	4.

	 	Antidilution Adjustments
	5.

	 	Registration Rights
	6.

	 	Mergers; Transfer of Assets
	7.

	 	Transfer, Exchange, and Replacement
	8.

	 	Notices
	9.

	 	Governing Law, Jurisdiction and Venue
	10.

	 	Miscellaneous
	

	 	Appendix A — Definitions
	

	 	Appendix B — Antidilution Provisions
	

	 	Appendix C — Registration Rights

 

 

STOCK PURCHASE WARRANT

Neither this Warrant nor the Warrant Shares as defined herein have
been registered under the Securities Act of 1933, as amended, or
any applicable state securities laws. Neither this Warrant nor
the Warrant Shares may be sold or transferred in the absence of
such registration or any exemption from such registration. Any
sale or transfer of this Warrant or the Warrant Shares must comply
with the restrictions on transfer set forth herein.

Right to Purchase 250,000 Shares of Common Stock

Dated as of March 12, 2004

Manugistics Group, Inc, a Delaware corporation (the “Company”), grants
International Business Machines Corporation, a New York corporation
(“IBM” and each of its successors and assigns, a “Holder”) a
warrant (this “Warrant”) to purchase the Warrant Shares at the Purchase
Price. Capitalized terms not otherwise defined have the definitions set forth
in Appendix A.

     1. Exercise and Expiration of Warrant.

     (a) This Warrant is immediately exercisable and will expire upon the
five year anniversary of the date hereof. “Exercise Period” shall mean
the period of time between the date hereof and the expiration of this Warrant
in accordance with the terms hereof.

     (b) This Warrant may be exercised during the Exercise Period by the
Holder, in whole or in part, by delivering this Warrant to the Company with
payment of the Purchase Price in U.S. dollars. In lieu of such cash payment,
the Holder may also exercise the Warrant by delivery to the Company of a
written notice of an election to effect a cashless exercise for Warrant Shares
pursuant to this Section 1(b) (“Cashless Exercise”). To effect a
Cashless Exercise, the Holder will surrender this Warrant for that number of
shares of Common Stock determined by multiplying the number of Warrant Shares
to which it would otherwise be entitled by a fraction, the numerator of which
shall be the difference between (i) the then current Market Price of a share of
the Common Stock on the date of exercise and (ii) the Purchase Price, and the
denominator of which shall be the then current Market Price per share of Common
Stock. In the event that this Warrant is not exercised in full immediately
prior to the end of the Exercise Period and at such time the then current
Market Price of a share of the Common Stock is greater than the Purchase Price,
this Warrant shall be deemed automatically exercised as to the remaining
Warrant Shares at such time by Cashless Exercise without the delivery of any
written notice from the Holder.

     (c) Upon exercise of this Warrant, the Company will issue to the Holder
(i) a certificate or certificates for the number of full Warrant Shares to
which the Holder shall be entitled upon such exercise plus the value of any fractional share to which the Holder would
otherwise be

 

 

entitled, and (ii) in case such exercise is in part only, a new
warrant or warrants representing the remaining Warrant Shares.

     (d) Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered pursuant to Section 1(b).

     2. Representations.

          (a) By the Holder. The Holder represents and warrants to the Company as
follows:

          (i) It is an “accredited investor” within the meaning of Rule 501 of the
Securities Act. This Warrant is acquired for the Holder’s own account for
investment purposes and not with a view to any offering or distribution within
the meaning of the Securities Act and any applicable state securities laws.
The Holder has no present intention of selling or otherwise disposing of the
Warrant or the Warrant Shares in violation of such laws; and

          (ii) The Holder has sufficient knowledge and expertise in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Company. The Holder acknowledges that it has received all
the information it considers necessary or appropriate for deciding whether to
make this investment. The Holder understands that this investment involves a
high degree of risk and could result in a substantial or complete loss of its
investment. The Holder is capable of bearing the economic risks of such
investment.

          (iii) This Warrant has been authorized by all necessary corporate action
of the Holder and constitutes a valid and legally binding obligation of the
Holder, enforceable in accordance with its terms.

The Holder acknowledges that the Company has indicated that the Warrant and the
Warrant Shares have not been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements
thereof, and that the Warrant Shares will bear a legend stating that such
securities have not been registered under the Securities Act and may not be
sold or transferred in the absence of such registration or an exemption from
such registration.

          (b) By the Company. The Company represents and warrants that:

               (i) It (A) is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization, (B) has all requisite
power and authority to conduct its business as now conducted and as presently
contemplated and to consummate the transactions contemplated hereby and (C) is
duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary.

 

 

               (ii) It has outstanding as of the date hereof but before giving effect
to this Warrant, that number of shares of Common Stock, calculated on a fully
diluted basis, giving effect to the conversion of all options, warrants, rights
and other securities convertible into, or exchangeable for, Common Stock as
shall be provided to Holder by the Company in writing as promptly as
practicable following the date hereof.

               (iii) The execution, delivery and performance by the Company of this
Warrant (A) has been duly authorized by all necessary corporate action, (B)
does not and will not contravene the Company’s charter or bylaws or any other
organizational document and (C) does not and will not contravene any applicable
law or any contractual restriction binding on or otherwise affecting the
Company or any of its properties or result in a default under any agreement or
instrument to which the Company is a party or by which the Company or its
properties may be subject.

               (iv) This Warrant has been duly executed and delivered by the Company,
and is a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, moratorium and other laws affecting the
rights of creditors generally and general principles of equity.

               (v) Assuming the accuracy of the representations made by the Holder in
Section 2(a) hereof, no authorization, consent, approval, license, exemption or
other action by, and no registration, qualification, designation, declaration
or filing with, any governmental authority is or will be necessary in
connection with the execution and delivery by the Company of this Warrant, the
issuance by the Company of the Warrant Shares, the consummation of the
transactions contemplated hereby, the performance of or compliance with the
terms and conditions hereof, or to ensure the legality, validity, and
enforceability hereof.

               (vi) The Company has reserved solely for issuance and delivery upon the
exercise of this Warrant, such number of shares of Common Stock to provide for
the exercise in full of this Warrant.

               (vii) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales of any security or solicited any offers to buy any security under
circumstances that would require registration, or the filing of a prospectus
qualifying the distribution, of this Warrant being issued hereby under the
Securities Act or cause the issuance of this Warrant to be integrated with any
prior offering of securities of the Company for purposes of the Securities Act.

     3. Certain Agreements of the Company. The Company agrees as
follows:

     (a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all
taxes, liens, claims and encumbrances.

 

 

     (b) Authorization and Reservation of Shares. During the Exercise
Period, the Company shall have duly authorized a sufficient number of shares of
Common Stock, free from preemptive rights and from any other restrictions
imposed by the Company without the consent of the Holder, to provide for the
exercise in full of this Warrant. The Company shall at all times during the
Exercise Period reserve and keep available out of such authorized but unissued
shares of Common Stock such number of shares to provide for the exercise in
full of this Warrant.

     (c) Listing. In connection with the Holder’s exercise of Registration
Rights hereunder, the Company shall use its best efforts to promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain
such listing for so long as any other shares of Common Stock shall be so
listed.

     (d) Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the Holder
of this Warrant in order to protect the exercise privilege of the Holder of
this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant.

     (e) Successors and Assigns. Except as expressly provided otherwise
herein, this Warrant will be binding upon any entity succeeding to the Company
by merger, consolidation, or acquisition of all or substantially all of the
Company’s assets.

     (f) Blue Sky Laws. The Company shall, on or before the date of issuance
of any Warrant Shares, take such actions as the Company shall reasonably
determine are necessary to qualify the Warrant Shares for, or obtain exemption
for the Warrant Shares for, sale to the Holder of this Warrant upon the
exercise hereof under applicable securities or “blue sky” laws of the states
of the United States, and shall provide written evidence of any such action so
taken to the Holder of this Warrant prior to such date; provided, however,
that the Company shall not be required to qualify as a foreign corporation or
file a general consent to service of process in any such jurisdiction.

     (g) Rule 144 Reports. For so long as the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Actthe Company
agrees to use its best efforts to take all actions reasonably necessary to
enable the Holder to sell the Registrable Securities without registration under
the Securities Act within the limitations of the exemptions provided by Rule
144 under the Securities Act, as such rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the SEC, including filing
on a timely basis all reports required to be filed by the Exchange Act. Upon
the request of the Holder, the Company shall deliver to the Holder a written
statement as to whether it has complied with such requirements.

 

 

     4. Antidilution Adjustments. The Purchase Price and the number
of Warrant Shares may be adjusted from time to time as set forth in Appendix
B.

     5. Registration Rights. The Warrant shall have the Registration
Rights set forth in Appendix C. Notwithstanding anything to the
contrary contained herein (including in Appendix C), the Holder agrees
not to exercise any of the registration rights set forth in Appendix C
at any time that it is able to sell all of its Registrable Securities pursuant
to Rule 144 of the Securities Act in any three (3) month period.

     6. Mergers; Transfer of Assets. If there shall occur any capital
reorganization or reclassification of the Company’s Common Stock (other than a
subdivision or combination as provided for in paragraph (b) of Appendix
B), or any consolidation or merger of the Company with or into another
corporation, or a transfer of all or substantially all of the assets of the
Company, then, as part of any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, lawful provision shall be
made so that the Holder of this Warrant shall have the right thereafter to
receive upon the exercise hereof the kind and amount of shares of stock or
other securities or property which such Holder would have been entitled to
receive if, immediately prior to any such reorganization, reclassification,
consolidation, merger or sale, as the case may be, such Holder had held the
number of shares of Common Stock which were then purchasable upon the exercise
of this Warrant. In any such case, appropriate adjustment (as reasonably
determined in good faith by the Board) shall be made in the application of the
provisions set forth herein with respect to the rights and interests thereafter
of the Holder of this Warrant, such that the provisions set forth herein shall
thereafter be applicable, as nearly as is reasonably practicable, in relation
to any shares of stock or other securities or property thereafter deliverable
upon the exercise of this Warrant.

     7. Transfer, Exchange, and Replacement

     (a) Transferability. (i) The Holder covenants not to transfer this
Warrant or the Warrant Shares except in compliance with this Section 7(a).
Subject to compliance with the transfer restrictions set forth in clause (ii)
of this Section 7(a), this Warrant (in whole only), the Warrant Shares (in
whole or in part) and the rights granted to the Holder hereof are freely
transferable upon surrender of this Warrant, together with an assignment form,
at the office or agency of the Company referred to in Section 8 below.

     (ii) This Warrant shall not be transferable except (a) in whole in the
event of a sale of the Holder, (b) in whole to any Affiliate of the Holder or
(c) in whole to any qualified financial institution; provided that a Holder
that is a qualified financial institution may only transfer this Warrant to
another qualified financial institution. For purposes of this Section 7,
“qualified financial institution” means a registered broker-dealer or
commercial bank organized and licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $300 million. The Holder shall not effect any transfer except pursuant
to a transaction either registered, or exempt from registration, under the
Securities Act. Prior to any transfer in reliance upon an exemption from such
registration other than Rule 144 of the Securities Act, the Holder shall
provide to the Company an opinion letter from counsel to the Holder (which
counsel may include in-house counsel), reasonably

 

 

satisfactory to the Company, opining that such transfer does not require
registration under the Securities Act. The transferee, by acceptance of this
Warrant, acknowledges that it takes such warrant subject to the terms and
conditions hereof. Until due presentment for registration of transfer on the
books of the Company, the Company may treat the registered Holder hereof as the
owner hereof for all purposes, and the Company shall not be affected by any
notice to the contrary.

     (b) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

     (c) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer or replacement as provided in this
Section 7, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes (other than securities transfer taxes) and all other
customary expenses (other than legal expenses, if any, incurred by the Holder
or transferee) and charges payable in connection with the preparation,
execution, and delivery of warrants pursuant to this Section 7.

     (d) Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
transferee and each prior owner of this Warrant.

     8. Notices. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:

	 	 	 
	If to the Company:

	 	If to IBM:
	Manugistics Group, Inc.

	 	International Business Machines
	9715 Key West Avenue

	 	Corporation
	Rockville, MD 20850

	 	New Orchard Road
	Attention: Timothy T. Smith

	 	Mail Drop 329
	General Counsel

	 	Armonk, New York 10504
	Facsimile: 301-255-3575

	 	Attention: David L. Johnson

Vice President, Corporate Development

 Facsimile: 914-499-7803

 

 

If to any other Holder, at such address as such Holder shall have provided in
writing to the Company, or at such other address as any Holder furnishes by
notice given in accordance with this Section 8.

     9. Governing Law; Jurisdiction and Venue. This Warrant shall be
governed by the laws of the State of Delaware, without regard to conflicts or
choice of law rules or principles. Each of the Company and the Holder submits
to the jurisdiction and venue of the federal and state courts of New York,
County of Westchester, to resolve all issues that may arise out of or relate to
this Warrant. The parties waive any right to a jury trial.

     10. Miscellaneous.

     (a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the Holder
hereof.

     (b) U.S. Dollars. All references in this Warrant to “dollars” or
“$” shall mean the U.S. dollar.

     (c) Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the fair market value per share of
Common Stock, as determined in good faith by the Board.

     (d) Descriptive Headings. The descriptive headings of the several
sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.

     (e) Business Day. For purposes of this Warrant, the term “business
day” means any day, other than a Saturday or Sunday or a day on which
banking institutions in New York, New York or the city and state provided in
Section 8 hereof for notices to the Company, are authorized or obligated by
law, regulation or executive order to close.

     (f) Counterparts. This agreement may be executed in counterparts, and any
such executed counterpart shall be, and shall be deemed to be, an original
instrument.

     (g) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, it shall be deemed replaced with a valid and enforceable
provision, which comes as close as possible to the economic purpose of the
invalid, void or unenforceable provision, and the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

     (h) Successors and Assigns. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.

     (i) Survival. The representations, warranties and covenants made by the
parties hereto shall survive the execution and delivery of this Agreement.

 

 

     (j) No Stockholder Rights. Prior to the exercise of this Warrant, the
Holder shall not be entitled to any rights of a stockholder with respect to the
Warrant Shares, including without limitation the right to vote the Warrant
Shares, receive dividends or other distributions thereon, or be notified of a
stockholder meeting or receive any notice or communication regarding the
business or affairs of the Company.

 

 

     IN WITNESS WHEREOF, the undersigned have executed this Warrant as of the
date first written above.

Manugistics Group, Inc.

	 	 	 
	By:

	 	/s/ Raghavan Rajaji

Name:Raghavan Rajaji

Title: Executive Vice President and
   
Chief Financial Officer

INTERNATIONAL BUSINESS MACHINES CORPORATION

	 	 	 
	By:

	 	/s/ John Gianukakis

Name: John Gianukakis

Title: Director, IGS Business Development

 

 

Appendix A — Definitions

     “Affiliate” shall mean any entity directly or indirectly controlled
by, controlling or under common control with another entity.

     “Board” shall mean the Board of Directors of the Company.

     “Cashless Exercise” shall have the meaning specified in Section
1(b) of the Warrant.

     “Company” shall have the meaning specified in the initial paragraph
of the Warrant.

     “Common Stock” shall mean the common shares of the Company.

     “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

     “Exercise Period” shall have the meaning specified in Section 1(a)
of the Warrant.

     “Holder” shall have the meaning specified in the initial paragraph
of the Warrant.

     “IBM” shall have the meaning specified in the initial paragraph of
the Warrant.

     “Market Price” shall mean the following: (i) the average of the
closing sale prices for the shares of Common Stock as reported on the
principal trading exchange or the Nasdaq National Market for the Common Stock
for the five (5) consecutive trading days immediately preceding such date, or
if no sale price is so reported for such period, the last bid price for such
period, or (ii) if the foregoing does not apply, the last sale price of such
security in the over-the-counter market on the pink sheets or bulletin board
for such security on the last trading day immediately preceding such date, or
if no sale price is so reported for such security, the average of the last bid
and ask price for such security on the last trading day immediately preceding
such date, or (iii) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined by an investment banking firm selected by the Company and
reasonably acceptable to the Holder, with the costs of the appraisal to be
borne by the Company.

     “Person” or “person” shall mean all natural persons,
corporations, business trusts, associations, companies, partnerships, joint
ventures, governments, agencies, political subdivisions and other entities.

     “Piggyback Registration Right” shall mean a right of the Holder
under Appendix C(a)

     “Purchase Price” shall mean $8.51 per share of Common Stock, as
may be adjusted from time to time pursuant to Appendix B.

 

 

     “Registrable Securities” shall mean the Warrant Shares issued or
issuable with respect to the Warrant.

     “Registration Expenses” shall mean all expenses incident to the
Company’s performance of or compliance with the registration provisions of
Appendix C herein, including without limitation (i) all fees and
expenses of compliance with federal securities and state securities laws; (ii)
all U.S. Securities and Exchange Commission and state securities laws filing
fees; (iii) all printing expenses; (iv) all fees and disbursements of counsel
for the Company; and (v) all fees and disbursements of accountants of the
Company, but excluding (i) underwriter’s discounts, selling commissions and
stock transfer taxes relating to securities sold by the Selling Holder; (ii)
filings made with the NASD and counsel fees in connection therewith; and (iii)
fees and disbursements of counsel for the Selling Holder.

     “Registration Rights” shall mean the Piggyback, Demand and S-3
registration rights set forth in Appendix C.

     “S-3 Registration Right” shall mean a right of the Holder under
Appendix C(c).

     “Securities Act” shall mean the Securities Act of 1933, as
amended.

     “Selling Holder” shall have the meaning specified in Appendix
C(d)(ii) of the Warrant.

     “Warrant” shall have the meaning specified in the initial paragraph
of the Warrant.

     “Warrant Shares” shall mean shares of Common Stock, as may be
adjusted from time to time pursuant to Appendix B.

 

 

Appendix B — Antidilution Provisions

	(a)	 	[Reserved]

     (b) Recapitalizations. If outstanding shares of the Company’s Common
Stock shall be subdivided into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. See also paragraph (c) of this Appendix B
(“Adjustment in Number of Warrant Shares”).

     (c) Adjustment in Number of Warrant Shares. When any adjustment is
required to be made in the Purchase Price, the number of Warrant Shares
purchasable upon the exercise of this Warrant shall be changed to the number
determined by dividing (i) an amount equal to the number of shares issuable
upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.

     (d) Certificate of Adjustment. When any adjustment is required to be
made pursuant to this Appendix B, the Company shall promptly mail to the
Holder a certificate setting forth the Purchase Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment. Such
certificate shall also set forth the kind and amount of stock
or other securities or property into which this Warrant shall be exercisable
following such adjustment.

     (e) Other Notices. In case at any time:

          (i) the Company shall declare any dividend upon the Common Stock payable
in shares of stock of any class or make any other distribution (other than
dividends or distributions payable in cash out of retained earnings consistent
with the Company’s past practices with respect to declaring dividends and
making distributions) to the holders of the Common Stock;

          (ii) the Company shall offer for subscription pro rata to the holders of
the Common Stock any additional shares of stock of any class or other rights;

          (iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all of its assets to, another
corporation or entity; or

          (iv) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Company;

 

 

then, in each such case, the Company shall give to the Holder (a) notice of the
date on which the books of the Company shall close or a record shall be taken
for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders
of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable estimate thereof by the Company)
when the same shall take place. Such notice shall also specify the date on
which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for
stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least thirty
(30) days prior to the record date or the date on which the Company’s books are
closed in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in
clauses (i), (ii), (iii) and (iv) above.

     (f) Certain Events. If, at any time during the Exercise Period, any
event occurs of the type contemplated by the adjustment provisions of this
Appendix B but not expressly provided for by such provisions, the
Company will give notice of such event, and the Board will make an appropriate
adjustment in the Purchase Price and the number of shares of Common Stock
acquirable upon exercise of this Warrant so that the rights of the Holder shall
be neither enhanced nor diminished by such event.

 

 

Appendix C — Registration Rights

     (a) Piggyback Registration.

          (i) Participation. If the Company elects to file a registration
statement under the Securities Act covering the offer and sale of any Common
Stock (or equity securities converted into Common Stock) in connection with any
public offering (other than a registration statement on Form S-8 or Form S-4,
or their successors, or any other form for a similar limited purpose, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation), the Company shall
give written notice thereof to the Holder at least twenty business days before
filing. The Holder shall have a Piggyback Registration Right to participate in
such offering on a pro rata basis with the Company and any other Holders upon
the giving of notice to the Company within ten business days of receipt by it
of notice from the Company. If the Holder notifies the Company of its intent to
exercise such Piggyback Registration Right, subject to (a)(ii) below, the
Company shall include in such registration statement such number of shares of
Registrable Securities as requested by the Holder. Such Registrable Securities
shall be included in the underwriting for the public offering on the same terms
and conditions as the securities otherwise being sold in such offering.

          (ii) Underwriters’ Cutback. If, in the opinion of the managing
underwriter of such offering the inclusion of all of the shares of Registrable
Securities and other Common Stock requested to be registered would be
inappropriate, then the number of shares of Registrable Securities and other
Common Stock to be included in the offering shall be reduced, with the
participation in such offering to be in the following order of priority:
(1) first, securities to be issued by the Company shall be included, and (2)
second, any other Common Stock required to be included pursuant to any demand
registration right granted to such other holder of Common Stock shall be
included, and (3) third Registrable Securities and any other Common Stock
requested to be included, on a pro rata basis (based upon the number of
registrable securities owned by the Holder and the holders of Common Stock
requesting participation in the offering), shall be included.

          (iii) Registrant Controls. The Company may decline to file a
Registration Statement after giving notice to any Holder, or withdraw a
Registration Statement after filing and after such notice, but prior to the
effectiveness thereof, provided that such registrant shall promptly notify each
Holder of Registrable Securities in writing of any such action and provided
further that such registrant shall bear all reasonable expenses incurred by
such Holder of Registrable Securities or otherwise in connection with such
withdrawn Registration Statement.

          (iv) Underwriting Agreement. In connection with any registration under
this Section (a) involving an underwriting, the Company shall not be required
to include any Registrable Shares in such registration unless the Holder
accepts the terms of the underwriting as determined by the underwriters
selected by the Company (provided that such terms must be consistent with this
Agreement and provided, further, that any

 

 

inability of the Holder to agree with the underwriters shall not restrict the
ability of the Company to proceed with the registration).

          (b) [Reserved]

          (c) Registration on Form S-3.

               (i) The Company will use its best efforts to qualify for the
registration of its securities on Form S-3 (or any successor form). Subject to
paragraph (iii) below, Holders owning or having the right to purchase a
majority of the Registrable Securities may request on one occasion by written
notice to the Company that the Company file a Registration Statement on Form
S-3 (or any successor form) for a public offering of Registrable Securities
the reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $1,000,000. The Company
shall use its best efforts to cause such Registrable Shares to be registered
for the offering on such form and to cause such Registrable Securities to be
qualified in such jurisdictions as the Holder may reasonably request;
provided, however, that the Company shall not be required to
effect more than one (1) such registration at the request of the Holders. The
Company shall prepare and file any amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all the Registrable
Securities.

               (ii) Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this section (c) during the period starting with
the date sixty (60) days prior to the Company’s good faith estimate of the date
of filing of, and ending on a date one hundred eighty (180) days following the
effective date of, a Company-initiated Registration Statement that is subject
to paragraph (a) of this Appendix C, provided that the Company is
actively employing in good faith all reasonable effort to cause such
Registration Statement to become effective.

               (iii) If the Company is requested to effect a Registration Statement on
Form S-3 and the Company furnishes to the Holders of Registrable Securities
requesting such registration a notice certified by the President or Chief
Financial Officer of the Company stating that in the good faith judgment of the
Company it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed, the Company shall have the right
to defer such filing for a period of not more than 120 days after receipt of
the request for such registration from the Holder or Holders of Registrable
Securities requesting such registration; provided that during such time the
Company may not file a registration statement (other than a registration
statement on Form S-4 or Form S-8 or a registration statement already approved
by the Board) for securities to be issued and sold for its own account or that
of anyone other than the Holder or Holders of Registrable Securities requesting
such registration.

          (d) Indemnification.

 

 

               (i) Indemnification by the Company. The Company agrees to indemnify and
hold harmless any Holder of Registrable Securities which has included
Registrable Securities in a registration statement, its officers, directors and
agents and each Person, if any, who controls such Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses
(including reasonable attorneys fees and costs of investigation) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or final prospectus relating to
the Registrable Securities or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of, or are based
upon, any such untrue statement or omission based upon information furnished in
writing to Company by the Holder of the Registrable Securities or on such
Holder’s behalf expressly for use therein; provided, that with respect to any
untrue statement or omission made in any preliminary prospectus, the indemnity
agreement contained in this paragraph shall not apply to the extent that any
such loss, claim, damage, liability or expense results from the fact that a
current copy of the prospectus was not sent or given to the person asserting
any such loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Registrable Securities concerned if it is
determined that it was the responsibility of the Holder of such Registrable
Securities to provide such person with a current copy of the prospectus and
such current copy of the prospectus would have cured the defect giving rise to
such loss, claim, damage, liability or expense. It is agreed that the
foregoing indemnity shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if such settlement is effected
without the consent of the Company. The Company also agrees to indemnify any
underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters on substantially the same basis as
that of the indemnification of the Holder of such Registrable Securities
provided in this section (d).

               (ii) Indemnification by the Holder of Registrable Securities. The Holder
of Registrable Securities, to the extent it is selling Registrable Securities
(“Selling Holder”), agrees to indemnify and hold harmless the Company,
its directors and officers and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to the Selling Holder, but only with respect to, and to the extent that,
information furnished in writing by the Selling Holder or on the Selling
Holder’s behalf expressly for use in any registration statement or final
prospectus relating to the Registrable Securities (or any amendment or
supplement thereto, or any preliminary prospectus) which contained an untrue
statement or alleged untrue statement of a material fact or omitted or
allegedly omitted to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading. It is
agreed that the foregoing indemnity shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or expense if such
settlement is effected without the consent of the Selling Holder.
Notwithstanding anything to the contrary contained

 

 

herein, the liability of the Holder hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense that is equal
to the proportion that the public offering price of the shares of Registrable
Securities sold by the Holder bears to the total public offering price of all
securities sold in such offering. The Selling Holder also agrees to indemnify
and hold harmless the underwriters on substantially the same basis of that of
the indemnification of the Company provided in the preceding subsection.

     (e) Contribution. If the indemnification provided for in this
Appendix C is unavailable to the Company, the Selling Holder or the
underwriters in respect of any losses, claims, damages, liabilities, expenses
or judgments referred to herein, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities, expenses and judgments (i) as between the Company and the Selling
Holder on the one hand and the underwriters on the other, in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Holder on the one hand and the underwriters on the other from the
offering of the Registrable Securities, or if such allocation is not permitted
by applicable law, in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Selling Holder on the one hand and of the underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages,liabilities, expenses or judgments, as well as any other relevant
equitable considerations and (ii) as between the Company on the one hand and
each Selling Holder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each Selling Holder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
the Selling Holder on the one hand and the underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company and the Selling Holder bear to the total underwriting discounts and
commissions received by the underwriters, in each case as set forth in the
table on the cover page of the prospectus. The relative fault of the Company
on the one hand and of each Selling Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party, and the party’s
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

     The Company and the Holder agree that it would not be just and equitable
if contribution pursuant to this section were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities, expenses or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this section, no
underwriter shall be required

 

 

to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission, and no Selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities of such Selling Holder were offered to the public exceeds the amount
of any damages which such Selling Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

     (f) Registration Expenses and Enforcement.

               (i) Registrations Rights. The Company shall bear all Registration
Expenses incurred in connection with Piggyback Registration Rights, the Demand
Registration Right and the S-3 Registration Right.

               (ii) Expenses of Registrant. The Company shall pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with any listing
of the securities to be registered on a securities exchange, and the fees and
expenses of any person, including special experts, retained by the Company.

               (iii) Enforcement of Registration Rights. Notwithstanding anything to
the contrary contained herein, the Company hereby agrees that each Holder of
Registrable Securities shall be entitled to specific performance of the
registration rights hereunder..

     (g) Assignment of Registration Rights. Any of the rights of the Holders
under this Appendix C, including the right to have the Company register
Registrable Securities pursuant to this Agreement, may be assigned by each
Holder to any permitted transferee if: (i) the Holder agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company after such assignment, (ii) the Company is
furnished with written notice of (A) the name and address of such transferee or
assignee, and (B) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or
assignment, the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act and applicable state securities
laws, and (iv) such transfer shall have been made in accordance with the
applicable requirements of the Warrant. The transferee, by acceptance of the
transfer of any registration rights hereunder, acknowledges that it takes such
rights subject to the terms and conditions hereof. Upon any transfer of less
than all of its Registrable Securities, the Holder retains registration rights
with respect to Registrable Securities held by it.

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