Document:

Exhibit 4.1

================================================================================

                     RESIDENTIAL ASSET FUNDING CORPORATION,
                                    Depositor

              CREDIT-BASED ASSET SERVICING AND SECURITIZATION LLC,
                                     Seller

                            LITTON LOAN SERVICING LP,
                                    Servicer

                                       and

                            THE CHASE MANHATTAN BANK,
                                     Trustee

                         POOLING AND SERVICING AGREEMENT

                          Dated as of November 1, 2000

                                 2000-CB4 Trust

         C-BASS Mortgage Loan Asset-Backed Certificates, Series 2000-CB4

================================================================================

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----

                                    ARTICLE I

                                   DEFINITIONS
<S>                   <C>                                                                              <C>
   Section 1.01.      Defined Terms......................................................................4
   Section 1.02.      Accounting........................................................................44

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

   Section 2.01.      Conveyance of Mortgage Loans......................................................44
   Section 2.02.      Acceptance by Trustee.............................................................47
   Section 2.03.      Repurchase or Substitution of Mortgage Loans by the Seller........................48
   Section 2.04.      Representations and Warranties of the Seller with Respect to the Mortgage Loans...51
   Section 2.05.      Representations, Warranties and Covenants of the Servicer.........................52
   Section 2.06.      Representations and Warranties of the Depositor...................................54
   Section 2.07.      Issuance of Certificates and the Uncertificated Regular Interests.................56
   Section 2.08.      Representations and Warranties of the Seller......................................56
   Section 2.09.      Covenants of the Seller...........................................................58

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF THE TRUST FUND

   Section 3.01.      Servicer to Act as Servicer.......................................................59
   Section 3.02.      Collection of Mortgage Loan Payments..............................................61
   Section 3.03.      Realization Upon Defaulted Mortgage Loans.........................................61
   Section 3.04.      Collection Account and Distribution Account.......................................63
   Section 3.05.      Permitted Withdrawals From the Collection Account.................................65
   Section 3.06.      Establishment of Escrow Accounts; Deposits in Escrow Accounts.....................66
   Section 3.07.      Permitted Withdrawals From Escrow Account.........................................66
   Section 3.08.      Payment of Taxes, Insurance and Other Charges; Collections Thereunder.............67
   Section 3.09.      Transfer of Accounts..............................................................68
   Section 3.10.      Maintenance of Hazard Insurance...................................................68
   Section 3.11.      Maintenance of Mortgage Impairment Insurance Policy...............................69
   Section 3.12.      Fidelity Bond, Errors and Omissions Insurance.....................................69
   Section 3.13.      Title, Management and Disposition of REO Property.................................70
</TABLE>

                                        i
<PAGE>
<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                   <C>                                                                              <C>
   Section 3.14.      Due-on-Sale Clauses; Assumption and Substitution Agreements.......................73
   Section 3.15.      Notification of Adjustments.......................................................73
   Section 3.16.      Optional and Mandatory Purchases of Mortgage Loans by Seller......................74
   Section 3.17.      Trustee to Cooperate; Release of Files............................................74
   Section 3.18.      Servicing Compensation............................................................76
   Section 3.19.      Annual Statement as to Compliance.................................................76
   Section 3.20.      Annual Independent Certified Public Accountants' Reports..........................76
   Section 3.21.      Access to Certain Documentation and Information Regarding the Mortgage Loans......77
   Section 3.22.      Reserved..........................................................................78
   Section 3.23.      Obligations of the Servicer in Respect of Compensating Interest...................78
   Section 3.24.      Obligations of the Servicer in Respect of Mortgage Interest Rates and Monthly
                         Payments.......................................................................78
   Section 3.25.      Investment of Funds in the Collection Account and the Distribution Account........78
   Section 3.26.      Liability of Servicer; Indemnification............................................80
   Section 3.27.      Reports of Foreclosure and Abandonment of Mortgaged Properties....................81
   Section 3.28.      Protection of Assets..............................................................81

                                   ARTICLE IV

                                  FLOW OF FUNDS

   Section 4.01.      Interest Distributions............................................................81
   Section 4.02.      Distributions of Principal and Monthly Excess Cashflow Amounts....................82
   Section 4.03.      Allocation of Losses..............................................................86
   Section 4.04.      Method of Distribution............................................................87
   Section 4.05.      Distributions on Book-Entry Certificates..........................................87
   Section 4.06.      Statements........................................................................87
   Section 4.07.      Remittance Reports; Advances......................................................91
   Section 4.08.      Class N Reserve Fund..............................................................92
   Section 4.09.      [Reserved]........................................................................93
   Section 4.10.      Excess Reserve Fund Account.......................................................93

                                    ARTICLE V

                                THE CERTIFICATES

   Section 5.01.      The Certificates..................................................................94
   Section 5.02.      Registration of Transfer and Exchange of Certificates.............................94
   Section 5.03.      Mutilated, Destroyed, Lost or Stolen Certificates.................................99
   Section 5.04.      Persons Deemed Owners............................................................100
   Section 5.05.      Appointment of Paying Agent......................................................100
</TABLE>

                                       ii
<PAGE>
<TABLE>
<CAPTION>
                                   ARTICLE VI

                   THE SELLER, THE SERVICER AND THE DEPOSITOR

                                                                                                        Page
                                                                                                        ----
<S>                   <C>                                                                              <C>
   Section 6.01.      Liability of the Seller, the Servicer and the Depositor..........................101
   Section 6.02.      Merger or Consolidation of, or Assumption of the Obligations of, the Seller, the
                         Servicer or the Depositor.....................................................101
   Section 6.03.      Limitation on Liability of the Servicer and Others...............................101
   Section 6.04.      Servicer Not to Resign...........................................................102
   Section 6.05.      Delegation of Duties.............................................................102

                                   ARTICLE VII

                                     DEFAULT

   Section 7.01.      Servicer Events of Termination...................................................103
   Section 7.02.      Trustee to Act; Appointment of Successor.........................................105
   Section 7.03.      Waiver of Defaults...............................................................106
   Section 7.04.      Notification to Certificateholders...............................................107
   Section 7.05.      Survivability of Servicer Liabilities............................................107

                                  ARTICLE VIII

                                   THE TRUSTEE

   Section 8.01.      Duties of Trustee................................................................107
   Section 8.02.      Certain Matters Affecting the Trustee............................................109
   Section 8.03.      Trustee Not Liable for Certificates or Mortgage Loans............................110
   Section 8.04.      Trustee May Own Certificates.....................................................111
   Section 8.05.      Seller to Pay Trustee Fees and Expenses..........................................111
   Section 8.06.      Eligibility Requirements for Trustee.............................................112
   Section 8.07.      Resignation or Removal of Trustee................................................112
   Section 8.08.      Successor Trustee................................................................113
   Section 8.09.      Merger or Consolidation of Trustee...............................................114
   Section 8.10.      Appointment of Co-Trustee or Separate Trustee....................................114
   Section 8.11.      Limitation of Liability..........................................................115
   Section 8.12.      Trustee May Enforce Claims Without Possession of Certificates....................115
   Section 8.13.      Suits for Enforcement............................................................116
   Section 8.14.      Waiver of Bond Requirement.......................................................116
   Section 8.15.      Waiver of Inventory, Accounting and Appraisal Requirement........................116
   Section 8.16.      Compliance with National Housing Act of 1934.....................................116

                                   ARTICLE IX

                     REMIC AND GRANTOR TRUST ADMINISTRATION

   Section 9.01.      REMIC Administration.............................................................117
</TABLE>

                                       iii
<PAGE>
<TABLE>
<CAPTION>

                                                                                                        Page
                                                                                                        ----
<S>                   <C>                                                                              <C>
   Section 9.02.      Prohibited Transactions and Activities...........................................120
   Section 9.03.      Indemnification with Respect to Certain Taxes and Loss of REMIC Status...........121
   Section 9.04.      REO Property.....................................................................121
   Section 9.05.      Grantor Trust Administration.....................................................122

                                    ARTICLE X

                                   TERMINATION

   Section 10.01.     Termination......................................................................123
   Section 10.02.     Additional Termination Requirements..............................................124

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

   Section 11.01.     Amendment........................................................................125
   Section 11.02.     Recordation of Agreement; Counterparts...........................................126
   Section 11.03.     Limitation on Rights of Certificateholders.......................................127
   Section 11.04.     Governing Law; Jurisdiction......................................................128
   Section 11.05.     Notices..........................................................................128
   Section 11.06.     Severability of Provisions.......................................................129
   Section 11.07.     Article and Section References...................................................129
   Section 11.08.     Notice to the Rating Agencies....................................................129
   Section 11.09.     Further Assurances...............................................................130
   Section 11.10.     Benefits of Agreement............................................................130
   Section 11.11.     Acts of Certificateholders.......................................................130
</TABLE>

<TABLE>
<CAPTION>
EXHIBITS:
--------

<S>               <C>
Exhibit A-1       Form of Class A-1F Certificates
Exhibit A-2       Form of Class A-2F Certificates
Exhibit A-3       Form of Class A-1A Certificates
Exhibit B-1       Form of Class B-1 Certificates
Exhibit B-2       Form of Class B-2 Certificates
Exhibit C-1       Form of Class R Certificates
Exhibit C-2       Form of Class M-1 Certificates
Exhibit C-3       Form of Class M-2 Certificates
Exhibit C-4       Form of Class X Certificates
Exhibit C-5       Form of Class N Certificates
Exhibit D         Mortgage Loan Schedule
Exhibit E         Form of Request for Release of Documents
Exhibit F-1       Form of Trustee's Initial Certification
Exhibit F-2       Form of Trustee's Final Certification
Exhibit F-3       Form of Receipt of Mortgage Note
</TABLE>

                                       iv
<PAGE>
<TABLE>
<CAPTION>
<S>               <C>
Exhibit G         [Reserved]
Exhibit H         Form of Lost Note Affidavit
Exhibit I         Form of ERISA Representation
Exhibit J         Form of Investment Letter
Exhibit K         Form of Class R Certificate Transfer Affidavit
Exhibit L         Form of Transferor Certificate
Exhibit M         Form of Liquidation Report
Exhibit N         [Reserved]
Exhibit O         [Reserved]
Exhibit P         [Reserved]
Exhibit Q         Form of Officer's Certificate with Respect to Prepayments
Exhibit R         [Reserved]
Exhibit S         Ineligible Foreclosure Property Loan Schedule
</TABLE>

                                        v
<PAGE>

                  This Pooling and  Servicing  Agreement is dated as of November
1, 2000 (the  "Agreement"),  among  RESIDENTIAL  ASSET FUNDING  CORPORATION,  as
depositor (the  "Depositor"),  CREDIT-BASED  ASSET SERVICING AND  SECURITIZATION
LLC,  as seller  (the  "Seller"),  LITTON LOAN  SERVICING  LP, as servicer  (the
"Servicer"), and THE CHASE MANHATTAN BANK, as trustee (the "Trustee").

                             PRELIMINARY STATEMENT:

                  The  Depositor  intends  to  sell  pass-through   certificates
(collectively, the "Certificates"),  to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
the Trust Fund created  hereunder.  The Certificates will consist of ten classes
of certificates,  designated as (i) the Class A-1F Certificates,  (ii) the Class
A-2F  Certificates,  (iii)  the  Class  A-1A  Certificates,  (iv) the  Class M-1
Certificates,  (v) the Class M-2 Certificates,  (vi) the Class B-1 Certificates,
(vii) the Class B-2  Certificates,  (viii)  the Class N  Certificates,  (ix) the
Class X Certificates, and (x) the Class R Certificates.

                  The Class A-1A  Certificates  represent (i) a Regular Interest
in REMIC 2 and (ii) the right to receive the Class A-1A LIBOR Carryover Amounts.
The Class N and Class X Certificates represent beneficial ownership of the Class
X/N  Interest,  subject to the  obligation  to pay Rate  Payments and Class A-1A
LIBOR  Carryover  Amounts.   If  the  Class  N  and  Class  X  Certificates  are
beneficially owned by different Persons,  they will be treated as interests in a
partnership that holds the Class X/N Interest for federal income tax purposes as
described in Section 9.01(n).

                  For federal income tax purposes,  the Trust Fund (exclusive of
the Class N Reserve Fund and the Excess  Reserve Fund  Account)  will consist of
two  REMICs,  REMIC1  and REMIC 2.  REMIC 1 will  consist  of all of the  assets
constituting  the Trust  Fund  (exclusive  of the  Class N Reserve  Fund and the
Excess  Reserve  Fund  Account)  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 R-1 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 "regular  interests"  in REMIC 2 and the R-2 Interest as the
single  "residual  interest" in REMIC 2. The Class R Certificate  will represent
beneficial ownership of the R-1 Interest and the R-2 Interest. All REMIC regular
and residual  interests  created  hereby will be retired on or before the Latest
Possible Maturity Date.

                  The REMIC 1 will be evidenced by the T1-Accrual  Interest (the
"Subsidiary  REMIC Accrual  Class"),  the Class T1-A-1F,  Class  T1-A-2F,  Class
T1-A-1A,  Class T1-M-1,  Class T1-M-2,  Class T1-B-1 and Class T1-B-2  Interests
(the   "Subsidiary   REMIC   Accretion   Directed   Classes"),   which  will  be
uncertificated  and  non-transferable  and are hereby designated as the "regular
interests" in REMIC 1. REMIC 1 Interests  will have the following  designations,
initial principal  balances,  pass-through  rates, and Corresponding  Classes of
REMIC 2 Certificates ("Corresponding Classes"):

<PAGE>

<TABLE>
<CAPTION>
=================================================================================================================
                       Initial Uncertificated    Uncertificated REMIC                          Latest Possible
 Class Designation       Principal Balance        1 Pass-Through Rate   Corresponding Class     Maturity Date
-----------------------------------------------------------------------------------------------------------------
<S>                  <C>                                  <C>                  <C>           <C>
T1-Accrual           (1/2 Mortgage Loan balance           (1)                   N/A          November 25, 2031
                     plus the
                     Overcollateralization
                     Amount)
-----------------------------------------------------------------------------------------------------------------
T1-A-1F              1/2 Corresponding REMIC 2            (1)                  A-1F          April 25, 2013
                     Class balance
-----------------------------------------------------------------------------------------------------------------
T1-A-2F              1/2 Corresponding REMIC 2            (1)                  A-2F          November 25, 2031
                     Class balance
-----------------------------------------------------------------------------------------------------------------
T1-A-1A              1/2 Corresponding REMIC 2            (1)                  A-1A          February 25, 2030
                     Class balance
-----------------------------------------------------------------------------------------------------------------
T1-M-1               1/2 Corresponding REMIC 2            (1)                   M-1          November 25, 2031
                     Class balance
-----------------------------------------------------------------------------------------------------------------
T1-M-2               1/2 Corresponding REMIC 2            (1)                   M-2          November 25, 2031
                     Class balance
-----------------------------------------------------------------------------------------------------------------
T1-B-1               1/2 Corresponding REMIC 2            (1)                   B-1          November 25, 2031
                     Class balance
-----------------------------------------------------------------------------------------------------------------
T1-B-2               1/2 Corresponding REMIC 2            (1)                   B-2          November 25, 2031
                     Class balance
=================================================================================================================
</TABLE>

(1) Calculated pursuant to the definition of Weighted Average Net Mortgage Rate.

                  On  each  Distribution  Date,  50%  of  the  increase  in  the
Overcollateralization  Amount  will be payable as a reduction  of the  principal
balances of the Subsidiary  REMIC  Accretion  Directed  Classes (each such Class
will  be  reduced  by  an  amount   equal  to  50%  of  any   increase   in  the
Overcollateralization  Amount  that  is  attributable  to  a  reduction  in  the
principal balance of its  Corresponding  Class) and will be accrued and added to
the principal  balance of the Subsidiary  REMIC Accrual  Class.  All payments of
scheduled principal and prepayments of principal generated by the Mortgage

                                       2
<PAGE>

Loans shall be allocated 50% to the Subsidiary  REMIC Accrual Class,  and 50% to
the Subsidiary  REMIC Accretion  Directed Classes  (principal  payments shall be
allocated among such Subsidiary  REMIC Accretion  Directed  Classes in an amount
equal  to  50%  of  the  principal   amounts   allocated  to  their   respective
Corresponding Classes), until paid in full. Notwithstanding the above, principal
payments  allocated to the Class X/N Interest  that result in a reduction in the
Overcollateralization  Amount shall be allocated to the Subsidiary REMIC Accrual
Class (until paid in full).  Realized  Losses shall be applied so that after all
distributions  have  been  made  on each  Distribution  Date  (i) the  principal
balances of each of the Subsidiary REMIC Accretion  Directed Classes is equal to
50% of the  principal  balance  of  their  Corresponding  Class,  and  (ii)  the
Subsidiary  REMIC  Accrual  Class  is equal  to 50% of the  aggregate  principal
balance of the Mortgage Loans plus the Overcollateralization Amount.

                  The  following  table  sets forth (or  describes)  the REMIC 2
Class  designation,  Pass-Through  Rate,  Original Class  Certificate  Principal
Balance or Original  Class X/N Notional  Amount and Assumed Final  Maturity Date
for each Class of  Certificates  comprising the interests in the REMIC 2 created
hereunder each of which,  except the Class R-2 Interest,  is hereby designated a
REMIC regular interest for federal income tax purposes:

<TABLE>
<CAPTION>
=============================================================================================================
                                  Original Class
                             Certificate Principal or                               Assumed Final Maturity
     Class Designation            Notional Amount           Pass-Through Rate                Dates
-------------------------------------------------------------------------------------------------------------
<S>                                   <C>                        <C>               <C>
           A-1F                       $34,480,000                7.055%(1)         April 25, 2013
-------------------------------------------------------------------------------------------------------------
           A-2F                       $18,820,000                7.170%(2)         November 25, 2031
-------------------------------------------------------------------------------------------------------------
           A-1A                       $81,771,000                  (3)             February 25, 2030
-------------------------------------------------------------------------------------------------------------
            M-1                       $11,531,000                7.565%(4)         November 25, 2031
-------------------------------------------------------------------------------------------------------------
            M-2                        $7,825,000                7.915%(5)         November 25, 2031
-------------------------------------------------------------------------------------------------------------
            B-1                        $4,942,000                8.705%(6)         November 25, 2031
-------------------------------------------------------------------------------------------------------------
            B-2                        $2,471,000                8.900%(7)         November 25, 2031
-------------------------------------------------------------------------------------------------------------
            X/N                      $         (8)                 (8)             November 25, 2031
-------------------------------------------------------------------------------------------------------------
           Total                     $161,840,000(9)               N/A                        N/A
=============================================================================================================
</TABLE>

(1)    Interest will accrue on the Class A-1F Certificates  during each Interest
       Accrual  Period  at a rate  equal to the least  of:  (i) the  Class  A-1F
       Pass-Through  Rate,  (ii) the  Group 1 Net WAC and (iii) the Pool Cap for
       each Distribution Date.

(2)    Interest  will accrue on the Class A-2F  Certificates  at a rate equal to
       the least of: (i) the Class A-2F Pass-Through  Rate, (ii) the Group 1 Net
       WAC and (iii) the Pool Cap for such Distribution Date.

(3)    Interest  will accrue on the Class A-1A  Certificates  at a rate equal to
       the least of: (i) the Class A-1A Pass-Through  Rate, (ii) the Group 2 Net
       WAC and (iii) the Pool Cap for such  Distribution  Date.  The rates under
       clause (i) and (ii) shall be multiplied  by a fraction,  the numerator of
       which is the actual number of days in the Interest Accrual Period and the
       denominator of which is 30 to convert such rates to the equivalent of one
       based on twelve 30 day months.

(4)    Interest will accrue on the Class M-1 Certificates at a rate equal to the
       lesser of: (i) the Class M-1 Pass-Through Rate, and (ii) the Pool Cap for
       such Distribution Date.

                                       3
<PAGE>

(5)    Interest will accrue on the Class M-2 Certificates at a rate equal to the
       lesser of: (i) the Class M-2 Pass-Through  Rate and (ii) the Pool Cap for
       such Distribution Date.

(6)    Interest will accrue on the Class B-1 Certificates at a rate equal to the
       lesser of: (i) the Class B-1 Pass-Through  Rate and (ii) the Pool Cap for
       such Distribution Date.

(7)    Interest will accrue on the Class B-2 Certificates at a rate equal to the
       lesser of: (i) the Class B-2 Pass-Through  Rate and (ii) the Pool Cap for
       such Distribution Date.

(8)    The  Class X/N  Interest  will have no  principal  balance  and will bear
       interest at its  respective  Class X  Pass-Through  Rate on its Class X/N
       Notional Amount.  The Class X Certificates are hereby designated as REMIC
       "regular  interests"  for  federal  income  tax  purposes.  The Class X/N
       Interest  will  also  be  entitled  to  principal  in the  amount  of the
       Overcollateralization  Release  Amount  as  part of the  distribution  of
       Monthly Excess Cashflow Amounts in conformity with Section 4.02(b).

(9)    Exclusive of the Class X/N Notional Amount.

                  The Class R-2 Interest is hereby  designated as the sole class
of residual  interest in the REMIC 2. The Class R  Certificates  will  represent
beneficial ownership of both the Class R-1 Interest and the Class R-2 Interest.

                                   ARTICLE I

                                   DEFINITIONS

                  Section 1.01. Defined Terms.

                  Whenever  used  in  this  Agreement  or  in  the   Preliminary
Statement,  the  following  words and  phrases,  unless  the  context  otherwise
requires,  shall have the meanings  specified in this Article.  Unless otherwise
specified,  interest on the Class A-1F,  Class A-2F, Class M-1, Class M-2, Class
B-1,  Class B-2 and Class N  Certificates  and on the  REMIC  Regular  Interests
(other than the Class T4-A1A  Interests)  will be  calculated  on the basis of a
360-day year  consisting  of twelve  30-day  months.  Interest on the Class A-1A
Certificates  and on the Class T4-A1A  Interests will be calculated on the basis
of the  actual  number of days in the  related  Interest  Accrual  Period  and a
360-day year.

                  Many of the defined  terms listed below may apply to both Loan
Groups and are sometimes  used in this  Agreement to refer to a particular  Loan
Group by the adjectival use of the words "Group 1" and "Group 2."

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

                  "60+ Day Delinquent  Loan": Each Mortgage Loan with respect to
which  any  portion  of a  Monthly  Payment  is, as of the last day of the prior
Collection  Period,  two months or more past due (other than a Reperforming  60+
Day Delinquent  Loan),  each Mortgage Loan in foreclosure,  all REO Property and
each Mortgage Loan for which the  Mortgagor has filed for  bankruptcy  after the
Closing Date.

                                       4
<PAGE>

                  "Account":  Any of the Collection Account, Excess Reserve Fund
Account, Class N Reserve Fund and Distribution Account.

                  "Accrued   Certificate   Interest":   With   respect  to  each
Distribution  Date and Class of  Certificates,  an amount  equal to the interest
accrued at the applicable rate set forth or described opposite such Class in the
table in the Preliminary Statement during the related Interest Accrual Period on
the  Certificate  Principal  Balance  (or  Notional  Amount)  of such  Class  of
Certificates, reduced by such Class's Interest Percentage of Relief Act Interest
Shortfalls for such Distribution Date.

                  "Actuarial  Mortgage  Loan":  Any  Mortgage  Loan other than a
Simple Interest Mortgage Loan.

                  "Adjustment Date": With respect to each Group 2 Mortgage Loan,
each adjustment date, on which the Mortgage  Interest Rate of a Group 2 Mortgage
Loan changes  pursuant to the related  Mortgage Note. The first  Adjustment Date
following  the Cut-Off Date as to each Group 2 Mortgage Loan is set forth in the
Mortgage Loan Schedule.

                  "Advance": As to any Actuarial Mortgage Loan, any advance made
by the Servicer in respect of any Distribution Date pursuant to Section 4.07.

                  "Adverse REMIC Event":  As defined in Section 9.01(f) hereof.

                  "Affiliate":  With  respect to any  Person,  any other  Person
controlling,  controlled  by or under  common  control  with  such  Person.  For
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 "controlling" and "controlled"
shall have meanings correlative to the foregoing.

                  "Agency Insurance Agreements": Collectively, the FHA Insurance
Contracts and VA Guaranty Agreements.

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

                  "Applicable  Regulations":   As  to  any  Mortgage  Loan,  all
federal,  state and local  laws,  statutes,  rules  and  regulations  applicable
thereto,  including  with respect to each FHA Loan the FHA  Regulations  and the
related  FHA  Insurance  Contract  and  with  respect  to each  VA  Loan  the VA
Regulations and the related VA Guaranty Agreement.

                  "Applied   Realized  Loss   Amount":   With  respect  to  each
Distribution  Date, the excess,  if any, of (a) the aggregate of the Certificate
Principal Balances of the Certificates (after giving effect to all distributions
on such  Distribution  Date)  over  (b) the  Pool  Balance  as of the end of the
related Collection Period.

                  "Arrearage":  With respect to a Delinquent  Mortgage Loan, the
total amount of scheduled  monthly payments due thereon on or before the Cut-Off
Date that

                                       5
<PAGE>

were not received  prior to the Cut-Off Date but for which advances of principal
and  interest  were made,  plus any  unreimbursed  Servicing  Advances as of the
Cut-Off Date.

                  "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.

                  "Assumed   Final   Maturity   Date":   As  to  each  Class  of
Certificates, the date set forth as such in the Preliminary Statement.

                  "Available  Funds":  As to any  Distribution  Date,  an amount
equal to the excess of (i) the sum of (a) the aggregate of the Monthly  Payments
due on the related Due Date and  received by the Trustee one  Business Day prior
to the related Distribution Date, (b) Liquidation Proceeds,  Insurance Proceeds,
Principal Prepayments,  Substitution  Adjustment Amounts, the Purchase Price for
any  repurchased  Mortgage  Loan,  the  Termination  Price  with  respect to the
termination of the Trust pursuant to Section 10.01 hereof and other  unscheduled
recoveries of principal and interest (excluding prepayment penalties and amounts
received in respect of  Arrearages)  in respect of the Mortgage Loans during the
related  Prepayment Period, (c) the aggregate of any amounts received in respect
of an  REO  Property  withdrawn  from  any  REO  Account  and  deposited  in the
Collection Account for such Distribution Date, (d) any Compensating Interest for
such  Distribution  Date,  and (e) the  aggregate  of any  Advances  made by the
Servicer  for  such   Distribution  Date  over  (ii)  the  sum  of  (a)  amounts
reimbursable  or payable to the Servicer  pursuant to Section  3.05,  (b) Stayed
Funds,  (c) the  Servicing  Fee,  (d) the  mortgage  insurance  premiums and (e)
amounts deposited in the Collection Account or the Distribution  Account, as the
case may be, in error.

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

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

                  "Bankruptcy  Code":  Title 11 of the United  States  Code,  as
amended.

                  "Book-Entry Certificates":  Any of the Certificates that shall
be  registered in the name of the  Depository  or its nominee,  the ownership of
which is  reflected on the books of the  Depository  or on the books of a Person
maintaining  an  account  with  the  Depository  (directly,   as  a  "Depository
Participant",  or indirectly,  as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.02 hereof). On the Closing
Date, the Class A-1F,  Class A-2F,  Class A-1A,  Class M-1, Class M-2, Class B-1
and Class B-2 Certificates shall be Book-Entry Certificates.

                                       6
<PAGE>

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

                  "Certificate": Any Regular Certificate or Class R Certificate.

                  "Certificate Custodian":  Initially, The Chase Manhattan Bank;
thereafter  any other  Certificate  Custodian  acceptable to the  Depository and
selected by the Trustee.

                  "Certificate   Owner":   With   respect  to  each   Book-Entry
Certificate, any beneficial owner thereof.

                  "Certificate Principal Balance":  With respect to any Class of
Certificates  (other than the Class N, Class X and Class R Certificates) and any
Distribution  Date,  will be equal to the Original Class  Certificate  Principal
Balance reduced by the sum of (i) all amounts actually distributed in respect of
principal  of such  Class on all  prior  Distribution  Dates  and  (ii)  Applied
Realized  Loss  Amounts  allocated  thereto.  The  Class N,  Class X and Class R
Certificates do not have a Certificate Principal Balance.

                  "Certificate  Register"  and  "Certificate   Registrar":   The
register maintained and registrar appointed pursuant to Section 5.02 hereof.

                  "Certificateholder"  or  "Holder":  The Person in whose name a
Certificate  is  registered  in  the   Certificate   Register,   except  that  a
Disqualified  Organization or Non-U.S. Person shall not be a Holder of a Class R
Certificate  for any purpose  hereof and that a Non-U.S.  Person  shall not be a
Holder of a Class N Certificate or a Class X Certificate for any purpose hereof.

                  "Class": Collectively, Certificates or REMIC Regular Interests
which have the same priority of payment and bear the same class  designation and
the form of which is identical  except for variation in the Percentage  Interest
evidenced thereby.

                  "Class A-1A Certificate  Margin":  For each  Distribution Date
(i) on or prior to the  Optional  Termination  Date,  0.32% per annum,  and (ii)
following the Optional Termination Date, 0.64% per annum.

                  "Class A-1A LIBOR Carryover  Amount":  If on any  Distribution
Date, the Accrued Certificate  Interest for the Class A-1A Certificates is based
upon the Class A-1A Net Funds Cap,  the excess of (i) the amount of interest the
Class A-1A Certificates would have been entitled to receive on such Distribution
Date based on the Class A-1A Pass-Through Rate, over (ii) the amount of interest
the Class A-1A  Certificates  received on such  Distribution  Date based on such
Class A-1A Net Funds Cap,  together  with the unpaid  portion of any such excess
from  prior  Distribution  Dates  (and  interest  accrued  thereon  at the  then
applicable Class A-1A Pass-Through Rate).

                  "Class A-1A Net Funds Cap":  With respect to any  Distribution
Date,  the product of (i) the average of the Net Mortgage  Interest Rates of the
Group 2 Mortgage

                                       7
<PAGE>

Loans,  weighted on the basis of their Principal Balances as of the first day of
the related  Collection Period (or, in the case of the first  Distribution Date,
the Cut-Off Date),  each  expressed on the basis of an assumed  360-day year and
the actual number of days elapsed during the related  Interest  Accrual  Period,
and (ii) the Pool Balance divided by the aggregate Certificate Principal Balance
of the Offered Certificates.

                  "Class A-1A Pass-Through  Rate": For each  Distribution  Date,
LIBOR  as  of  the  related  LIBOR  Determination  Date,  plus  the  Class  A-1A
Certificate Margin.

                  "Class  A-1A REMIC  Pass-Through  Rate":  The least of (a) the
Class A-1A Pass-Through Rate, (b) the Weighted Average Net Mortgage Rate and (c)
the Weighted  Average Group 2 Net Mortgage Rate. The rate in clauses (a) and (c)
shall be multiplied  by a fraction,  the numerator of which is the actual number
of days in the Interest  Accrual  Period and the  denominator  of which is 30 to
convert such rates to the equivalent of one based on twelve 30-day months.

                  "Class A-1F Net Funds Cap":  With respect to any  Distribution
Date,  the product of (i) the average of the Net Mortgage  Interest Rates of the
Group 1 Mortgage Loans,  weighted on the basis of their Principal Balances as of
the first day of the  related  Collection  Period  (or, in the case of the first
Distribution  Date, the Cut-Off Date),  and (ii) the Pool Balance divided by the
aggregate Certificate Principal Balance of the Offered Certificates.

                  "Class A-1F  Pass-Through  Rate": For each  Distribution  Date
7.055% per annum.

                  "Class  A-1F REMIC  Pass-Through  Rate":  The least of (a) the
Class A-1F Pass-Through Rate, (b) the Weighted Average Net Mortgage Rate and (c)
the Weighted Average Group 1 Net Mortgage Rate.

                  "Class A-2F Net Funds Cap":  With respect to any  Distribution
Date,  the product of (i) the average of the Net Mortgage  Interest Rates of the
Group 1 Mortgage Loans,  weighted on the basis of their Principal Balances as of
the first day of the  related  Collection  Period  (or, in the case of the first
Distribution  Date, the Cut-Off Date),  and (ii) the Pool Balance divided by the
aggregate Certificate Principal Balance of the Offered Certificates.

                  "Class A-2F Pass-Through Rate": For each Distribution Date (i)
on or  prior  to the  Optional  Termination  Date,  7.170%  per  annum  and (ii)
following the Optional Termination Date, 7.670% per annum.

                  "Class  A-2F REMIC  Pass-Through  Rate":  The least of (a) the
Class A-2F Pass-Through Rate, (b) the Weighted Average Net Mortgage Rate and (c)
the Weighted Average Group 1 Net Mortgage Rate.

                  "Class A Certificate": Any one of the Certificates with an "A"
designated  on the face  thereof  substantially  in the form  annexed  hereto as
Exhibits A-1, A-2 and A-

                                       8
<PAGE>

3,  executed  by the  Trustee  on  behalf of the  Trust  and  authenticated  and
delivered by the Trustee,  representing  the right to distributions as set forth
herein and therein.

                  "Class A Certificateholders": Collectively, the Holders of the
Class A Certificates.

                  "Class A Interest Carry Forward Amount":  For any Distribution
Date,  the sum of the Interest Carry Forward  Amounts for the Class A-1F,  Class
A-2F and Class A-1A Certificates for such Distribution Date.

                  "Class   A   Principal   Distribution   Amount":   As  of  any
Distribution  Date (a) prior to the  Stepdown  Date or with  respect  to which a
Trigger Event is in effect, the lesser of (i) 100% of the Principal Distribution
Amount and (ii) the sum of the Certificate Principal Balances of the Class A-1F,
Class A-2F and Class A-1A Certificates and (b) on or after the Stepdown Date and
as long as a Trigger  Event is not in  effect,  the excess of (x) the sum of the
Certificate  Principal  Balances  of the Class  A-1F,  Class A-2F and Class A-1A
Certificates  immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 64.0% and (ii) the Pool Balance as of the last day of the
related  Collection  Period  and (B) the Pool  Balance as of the last day of the
related  Collection  Period  minus  the  product  of (i) 0.50% and (ii) the Pool
Balance on the Cut-Off Date.

                  "Class B-1 Applied Realized Loss Amount":  As to the Class B-1
Certificates and as of any Distribution  Date, the lesser of (x) the Certificate
Principal  Balance  thereof (after taking into account the  distribution  of the
Principal  Distribution  Amount  on such  Distribution  Date,  but  prior to the
application of the Applied  Realized Loss Amount,  if any, on such  Distribution
Date) and (y) the  excess of (i) the  Applied  Realized  Loss  Amount as of such
Distribution  Date over (ii) the Class B-2  Applied  Realized  Loss Amount as of
such Distribution Date.

                  "Class B-1  Certificate":  Any one of the Certificates  with a
"B-1" designated on the face thereof substantially in the form annexed hereto as
Exhibit  B-1,  executed by the Trustee on behalf of the Trust and  authenticated
and delivered by the Trustee,  representing  the right to  distributions  as set
forth herein and therein.

                  "Class  B-1  Certificateholder":  Any  Holder  of a Class  B-1
Certificate.

                  "Class B-1  Pass-Through  Rate": For each  Distribution  Date,
8.705%, per annum.

                  "Class  B-1  Principal   Distribution   Amount":   As  of  any
Distribution  Date on or after the Stepdown  Date and as long as a Trigger Event
is not in effect,  the  excess of (x) the sum of (i) the sum of the  Certificate
Principal  Balances  of the Class A-1A,  Class A-1F and Class A-2F  Certificates
(after  taking into  account  the payment of the Class A Principal  Distribution
Amount on such Distribution Date), (ii) the Certificate Principal Balance of the
Class M-1  Certificates  (after taking into account the payment of the Class M-1
Principal  Distribution Amount on such Distribution Date), (iii) the Certificate
Principal  Balance of the Class M-2 Certificates  (after taking into account the
payment  of the Class M-2  Principal  Distribution  Amount on such  Distribution
Date) and

                                       9
<PAGE>

(iv) the Certificate Principal Balance of the Class B-1 Certificates immediately
prior to such  Distribution  Date over (y) the lesser of (A) the  product of (i)
93.50% and (ii) the Pool  Balance as of the last day of the  related  Collection
Period  and (B) the Pool  Balance as of the last day of the  related  Collection
Period minus the product of 0.50% and the Pool Balance on the Cut-Off Date.

                  "Class B-1 Realized Loss Amortization Amount": As to the Class
B-1 Certificates  and as of any Distribution  Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class B-1 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess  Cashflow  Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (xi) hereof, in each case
for such Distribution Date.

                  "Class B-1 REMIC  Pass-Through  Rate": The lesser of the Class
B-1 Pass-Through Rate and the Weighted Average Net Mortgage Rate.

                  "Class B-2 Applied Realized Loss Amount":  As to the Class B-2
Certificates and as of any Distribution  Date, the lesser of (x) the Certificate
Principal  Balance  thereof (after taking into account the  distribution  of the
Principal  Distribution  Amount  on such  Distribution  Date,  but  prior to the
application of the Applied  Realized Loss Amount,  if any, on such  Distribution
Date) and (y) the Applied Realized Loss Amount as of such Distribution Date.

                  "Class B-2  Certificate":  Any one of the Certificates  with a
"B-2" designated on the face thereof substantially in the form annexed hereto as
Exhibit  B-2,  executed by the Trustee on behalf of the Trust and  authenticated
and delivered by the Trustee,  representing  the right to  distributions  as set
forth herein and therein.

                  "Class  B-2  Certificateholder":  Any  Holder  of a Class  B-2
Certificate.

                  "Class B-2  Pass-Through  Rate": For each  Distribution  Date,
8.900%, per annum.

                  "Class  B-2  Principal   Distribution   Amount":   As  of  any
Distribution  Date on or after the Stepdown  Date and as long as a Trigger Event
is not in effect,  the  excess of (x) the sum of (i) the sum of the  Certificate
Principal  Balances  of the Class A-1A,  Class A-1F and Class A-2F  Certificates
(after  taking into  account  the payment of the Class A Principal  Distribution
Amount on such Distribution Date), (ii) the Certificate Principal Balance of the
Class M-1  Certificates  (after taking into account the payment of the Class M-1
Principal  Distribution Amount on such Distribution Date), (iii) the Certificate
Principal  Balance of the Class M-2 Certificates  (after taking into account the
payment  of the Class M-2  Principal  Distribution  Amount on such  Distribution
Date),  (iv) the  Certificate  Principal  Balance of the Class B-1  Certificates
(after taking into account the payment of the Class B-1  Principal  Distribution
Amount on such Distribution  Date) and (v) the Certificate  Principal Balance of
the Class B-2 Certificates  immediately prior to such Distribution Date over (y)
the lesser of (A) the product of (i) 96.50% and (ii) the Pool  Balance as of the
last day of the related Collection Period and (B) the Pool Balance

                                       10
<PAGE>

as of the last day of the related  Collection  Period minus the product of 0.50%
and the Pool Balance on the Cut-Off Date.

                  "Class B-2 Realized Loss Amortization Amount": As to the Class
B-2 Certificates  and as of any Distribution  Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class B-2 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess  Cashflow  Amount over (ii) the sum
of the amounts  described in Section  4.02(b)(i)  through (xiv) hereof,  in each
case for such Distribution Date.

                  "Class B-2 REMIC  Pass-Through  Rate": The lesser of the Class
B-2 Pass-Through Rate and the Weighted Average Net Mortgage Rate.

                  "Class M-1 Applied Realized Loss Amount":  As to the Class M-1
Certificates and as of any Distribution  Date, the lesser of (x) the Certificate
Principal  Balance  thereof (after taking into account the  distribution  of the
Principal  Distribution  Amount  on such  Distribution  Date,  but  prior to the
application  of the Class M-1  Applied  Realized  Loss  Amount,  if any, on such
Distribution Date) and (y) the excess of (i) the Applied Realized Loss Amount as
of such  Distribution  Date over (ii) the sum of the Class M-2 Applied  Realized
Loss  Amount,  the Class B-1  Applied  Realized  Loss  Amount  and the Class B-1
Applied Realized Loss Amount, in each case as of such Distribution Date.

                  "Class M-1  Pass-Through  Rate": For each  Distribution  Date,
7.565% per annum.

                  "Class  M-1  Principal   Distribution   Amount":   As  of  any
Distribution  Date on or after the Stepdown  Date and as long as a Trigger Event
is not in  effect,  the excess of (x) the sum of (i) the  Certificate  Principal
Balances of the Class A-1A, Class A-1F and Class A-2F Certificates (after taking
into  account the payment of the Class A Principal  Distribution  Amount on such
Distribution  Date) and (ii) the Certificate  Principal Balance of the Class M-1
Certificates  immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 78.0% and (ii) the Pool Balance as of the last day of the
related  Collection  Period  and (B) the Pool  Balance as of the last day of the
related Collection Period minus the product of 0.50% and the Pool Balance on the
Cut-Off Date.

                  "Class M-1 Realized Loss Amortization Amount": As to the Class
M-1 Certificates  and as of any Distribution  Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-1 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess  Cashflow  Amount over (ii) the sum
of the amounts described in Section  4.02(b)(i) through (v) hereof, in each case
for such Distribution Date.

                  "Class M-1 REMIC  Pass-Through  Rate": The lesser of the Class
M-1 Pass-Through Rate and the Weighted Average Net Mortgage Rate.

                  "Class M-2 Applied Realized Loss Amount":  As to the Class M-2
Certificates and as of any Distribution  Date, the lesser of (x) the Certificate
Principal  Balance  thereof (after taking into account the  distribution  of the
Principal  Distribution  Amount  on such  Distribution  Date,  but  prior to the
application  of the Class M-2  Applied  Realized  Loss  Amount,  if any, on such
Distribution Date) and (y) the excess of (i) the

                                       11
<PAGE>

related Applied Realized Loss Amount as of such  Distribution Date over (ii) the
sum of the Class B-1  Applied  Realized  Loss  Amount and the Class B-2  Applied
Realized Loss Amount, in each case, as of such Distribution Date.

                  "Class M-2  Pass-Through  Rate": For each  Distribution  Date,
7.915% per annum.

                  "Class  M-2  Principal   Distribution   Amount":   As  of  any
Distribution  Date on or after the Stepdown  Date and as long as a Trigger Event
is not in  effect,  the excess of (x) the sum of (i) the  Certificate  Principal
Balances of the Class A-1A, Class A-1F and Class A-2F Certificates (after taking
into  account the payment of the Class A Principal  Distribution  Amount on such
Distribution  Date),  (ii) the  Certificate  Principal  Balance of the Class M-1
Certificates  (after  taking into account the payment of the Class M-1 Principal
Distribution  Amount  on such  Distribution  Date)  and  (iii)  the  Certificate
Principal  Balance  of the  Class  M-2  Certificates  immediately  prior to such
Distribution  Date over (y) the lesser of (A) the  product of (i) 87.5% and (ii)
the Pool Balance as of the last day of the related Collection Period and (B) the
Pool  Balance  as of the last day of the  related  Collection  Period  minus the
product of 0.50% and the Pool Balance on the Cut-Off Date.

                  "Class M-2 Realized Loss Amortization Amount": As to the Class
M-2 Certificates  and as of any Distribution  Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-2 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess  Cashflow  Amount over (ii) the sum
of the amounts  described in Section  4.02(b)(i)  through (viii) hereof, in each
case for such Distribution Date.

                  "Class M-2 REMIC  Pass-Through  Rate": The lesser of the Class
M-2 Pass-Through Rate and the Weighted Average Net Mortgage Rate.

                  "Class N Certificate":  Any one of the Certificates with a "N"
designated  on the face  thereof  substantially  in the form  annexed  hereto as
Exhibit  C-5,  executed by the Trustee on behalf of the Trust and  authenticated
and delivered by the Trustee,  representing  the right to  distributions  as set
forth herein and therein.  The Class N Certificate  shall not be designated as a
REMIC Regular Interest.

                  "Class N Excess Release Amount":  For any  Distribution  Date,
the excess of (i) the Required Class N Reserve Fund Balance over (ii) the amount
on deposit in the Class N Reserve Fund.

                  "Class N Notional  Amount":  On any  Distribution  Date,  with
respect to the Class N  Certificates,  an amount equal to the  Original  Class N
Notional  Amount  reduced  by the  aggregate  distributions  made to the Class N
Certificates pursuant to Sections 4.02(b)(xix) and (xxi).

                  "Class N Pass-Through Rate": For each Distribution Date, 9.00%
per annum.

                                       12
<PAGE>

                  "Class N Reserve Fund": The separate  account,  held in trust,
created and maintained by the Trustee pursuant to Section 4.08(a) in the name of
the  Trustee for the benefit of the Class N  Certificateholders  and  designated
"The Chase  Manhattan  Bank in trust for registered  Holders of 2000-CB4  Trust,
C-BASS Mortgage Loan Asset-Backed Certificates, Series 2000-CB4, Class N."

                  "Class R Certificate": The Class R Certificate executed by the
Trustee  on  behalf  of  the  Trust,  and  authenticated  and  delivered  by the
Certificate  Registrar,  substantially in the form annexed hereto as Exhibit C-1
and evidencing the ownership of the Residual  Interest.  The Class R Certificate
represents the ownership of the Class R-1 Interest, and Class R-2 Interest.

                  "Class R-1 Interest":  The uncertificated residual interest in
REMIC 1.

                  "Class R-2 Interest":  The uncertificated residual interest in
REMIC 2.

                  "Class X Certificate":  Any one of the Class X Certificates as
designated  on the face  thereof  substantially  in the form  annexed  hereto as
Exhibit  C-3,  executed by the Trustee on behalf of the Trust and  authenticated
and delivered by the Trustee,  representing  the right to  distributions  as set
forth herein and therein.  The Class X Certificate  shall not be designated as a
REMIC Regular Interest.

                  "Class X/N Interest  Pass-Through Rate": The Pass-Through Rate
in  respect of the Class X/N  Interest  for any  Distribution  Date equal to the
excess of (i) the Weighted  Average Net  Mortgage  Rate over (ii) the product of
(A) two and (B) the weighted average  Pass-Through  Rate of the Subsidiary REMIC
Regular Interests,  where the Subsidiary REMIC Accrual Class is subject to a cap
of zero and each Subsidiary  REMIC Accretion  Directed Class is subject to a cap
equal to the REMIC Pass-Through Rate on its Corresponding Class. For purposes of
the  foregoing  calculation  the Class  A-1A  REMIC  Pass-Through  Rate shall be
multiplied by a fraction, the numerator of which is the actual number of days in
the Interest  Accrual Period and the  denominator of which is 30 so as to adjust
it to a rate that consists of twelve 30 day accrual  periods and a 360-day year.
The initial  Weighted  Average Net Mortgage Rate for this purposes  shall be the
rate  necessary  to allow the Class X/N  Interest to absorb the interest for the
first  Interest  Accrual  Period in excess of the  interest due on other REMIC 2
interests.

                  "Class X/N Interest":  An uncertificated interest in the Trust
held by the  Trustee  on  behalf  of the  holders  of the  Class  X and  Class N
Certificates, representing the REMIC 2 Components in the aggregate, and which is
entitled to all  distributions  in respect of the REMIC 2  Components  and which
distributions  shall  first be used to pay the  amount of any Class  A-1A  LIBOR
Carryover Amounts pursuant to Sections 4.02(b)(xvi) and 4.02(e) or Rate Payments
pursuant to Section 4.02(d).

                  "Class X/N Notional  Amount":  On any Distribution  Date, with
respect to the Class X/N  Interest,  an amount equal to the  Original  Class X/N
Notional Amount reduced by the aggregate of distributions  made on the Class X/N
Interest.

                                       13
<PAGE>

                  "Class  X   Distributable   Amount":   With   respect  to  any
Distribution  Date, the excess of (i) the aggregate of amounts  distributable on
the Class X/N Interest for such  Distribution  Date,  over (ii) the aggregate of
amounts distributable to the Class N Certificates pursuant to Section 4.02(b).

                  "Closing Date":  December  13, 2000.

                  "Code":  The  Internal  Revenue  Code  of  1986,  as it may be
amended from time to time.

                  "Collection  Account":  The  account or  accounts  created and
maintained  by the Servicer  pursuant to Section  3.04,  which shall be entitled
"Litton Loan Servicing LP, as Servicer for The Chase Manhattan Bank, as Trustee,
in trust  for  registered  Holders  of  2000-CB4  Trust,  C-BASS  Mortgage  Loan
Asset-Backed  Certificates,  Series  2000-CB4",  and which  must be an  Eligible
Account.

                  "Collection  Period":  With respect to any Distribution  Date,
the period  from the second day of the  calendar  month  preceding  the month in
which such  Distribution Date occurs through the first day of the month in which
such Distribution Date occurs.

                  "Combined  Loan-to-Value  Ratio":  As of any date and Mortgage
Loan,  the fraction,  expressed as a  percentage,  the numerator of which is the
Principal Balance of the Mortgage Loan plus the principal balance of any related
senior  mortgage loan, and the  denominator of which is the Value of the related
Mortgaged Property.

                  "Compensating Interest":  As defined in Section 3.23 hereof.

                  "Condemnation  Proceeds": All awards or settlements in respect
of a taking of a Mortgaged  Property by exercise of the power of eminent  domain
or condemnation.

                  "Conventional  Mortgage  Loan":  Any  Mortgage  Loan  that  is
neither an FHA Loan nor a VA Loan.

                  "Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular  time its corporate  trust business in
connection with this Agreement shall be  administered,  which office at the date
of the  execution of this  instrument  is located at 450 West 33rd Street,  14th
Floor, New York, New York 10001,  Attention:  Structured Finance,  C-BASS Series
2000-CB4,  or at such other  address as the Trustee may  designate  from time to
time by notice to the  Certificateholders,  the Depositor,  the Servicer and the
Seller.

                  "Custodial  Agreement":  The Custodial Agreement,  dated as of
November 1, 2000, among the Trustee, the Servicer and the Custodian, as the same
may be amended or supplemented pursuant to the terms thereof.

                                       14
<PAGE>

                  "Custodian":  Bank One Trust Company, N.A., a national banking
association,  or any successor  custodian appointed pursuant to the terms of the
Custodial Agreement.

                  "Cut-Off Date":  November 1, 2000.

                  "Cut-Off Date Aggregate Principal  Balance":  The aggregate of
the Cut-Off Date Principal Balances of the Mortgage Loans.

                  "Cut-Off Date Principal Balance": With respect to any Mortgage
Loan,  the  unpaid  principal  balance  thereof  as of the  Cut-Off  Date  after
application  of funds  received or advanced on or before such date (or as of the
applicable date of substitution with respect to an Eligible  Substitute Mortgage
Loan).

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

                  "Defective  Mortgage  Loan": A Mortgage Loan replaced or to be
replaced by one or more Eligible Substitute Mortgage Loans.

                  "Deferred  Interest":   With  respect  to  any  Mortgage  Loan
identified on the Mortgage Loan Schedule as having the  possibility  of negative
amortization,  the  current  portion  of  interest  not  currently  paid  by the
Mortgagor that is added to the principal balance of such Mortgage Loan.

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

                  "Definitive  Certificates":  As  defined  in  Section  5.02(c)
hereof.

                  "Delinquent":  Any Mortgage Loan, the Monthly Payment due on a
Due Date with respect to which such monthly  payment is not made by the close of
business on the next scheduled Due Date for such Mortgage Loan.

                  "Depositor":  Residential Asset Funding  Corporation,  a North
Carolina corporation, or any successor in interest.

                  "Depository":  The initial  depository shall be The Depository
Trust Company, whose nominee 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.

                                       15
<PAGE>

                  "Depository   Agreement":   With  respect  to  any  Book-Entry
Certificates,  the agreement  among the  Depositor,  the Trustee and the initial
Depository, to be dated on or about the Closing Date.

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

                  "Determination  Date": With respect to any Distribution  Date,
the 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 preceding such
10th day.

                  "Directly  Operate":  With  respect to any REO  Property,  the
furnishing or rendering of services to the tenants  thereof,  the  management or
operation of such REO Property,  the holding of such REO Property  primarily for
sale to customers,  the performance of any construction  work thereon or any use
of such REO  Property in a trade or business  conducted  by the Trust other than
through an Independent Contractor;  provided,  however, that the Trustee (or the
Servicer on behalf of the Trustee)  shall not be considered to Directly  Operate
an REO  Property  solely  because the Trustee (or the  Servicer on behalf of the
Trustee)  establishes  rental  terms,  chooses  tenants,  enters  into or renews
leases,  deals with taxes and  insurance,  or makes  decisions  as to repairs or
capital expenditures with respect to such REO Property.

                  "Disqualified  Organization":  A  "disqualified  organization"
under Section 860E of the Code,  which as of the Closing Date is any of: (i) the
United States, any state or political subdivision thereof, any possession of the
United States, any foreign government,  any international  organization,  or any
agency or instrumentality of any of the foregoing,  (ii) any organization (other
than a  cooperative  described  in Section 521 of the Code) which is exempt from
the tax imposed by Chapter 1 of the Code unless such  organization is subject to
the tax imposed by Section 511 of the Code, (iii) any organization  described in
Section 1381(a)(2)(C) of the Code, or (iv) any other Person so designated by the
Trustee  based  upon an Opinion of Counsel  provided  by  nationally  recognized
counsel to the Trustee  that the holding of an  ownership  interest in a Class R
Certificate  by such  Person may cause the Trust  Fund or any  Person  having an
ownership  interest in any Class of  Certificates  (other  than such  Person) to
incur  liability  for any  federal  tax  imposed  under the Code that  would not
otherwise be imposed but for the transfer of an ownership  interest in the Class
R  Certificate  to  such  Person.  A  corporation  will  not  be  treated  as an
instrumentality  of the United  States or of any state or political  subdivision
thereof if all of its  activities are subject to tax and a majority of its board
of directors is not selected by a governmental  unit. The term "United  States",
"state" and  "international  organization"  shall have the meanings set forth in
Section 7701 of the Code.

                  "Distribution  Account": The trust account or accounts created
and  maintained  by the  Trustee  pursuant  to Section  3.04(b)  which  shall be
entitled  "Distribution  Account, The Chase Manhattan Bank, as Trustee, in trust
for the registered

                                       16
<PAGE>

Holders of 2000-CB4  Trust,  C-BASS  Mortgage  Loan  Asset-Backed  Certificates,
Series 2000-CB4" and which must be an Eligible Account.

                  "Distribution Date": The 25th day of any calendar month, or if
such 25th day is not a Business Day, the Business Day immediately following such
25th day, commencing in December 2000.

                  "Due  Date":  With  respect  to  each  Mortgage  Loan  and any
Distribution Date, the day of the calendar month in which such Distribution Date
occurs on which the Monthly Payment for such Mortgage Loan was due, exclusive of
any grace period.

                  "Eligible  Account":   Any  of  (i)  an  account  or  accounts
maintained  with a federal or state  chartered  depository  institution or trust
company the short-term unsecured debt obligations of which (or, in the case of a
depository  institution  or trust company that is the principal  subsidiary of a
holding  company,  the  short-term  unsecured  debt  obligations of such holding
company) are rated "A-1" (or the  equivalent) by each of the Rating  Agencies at
the time any  amounts are held on deposit  therein,  (ii) an account or accounts
the deposits in which are fully  insured by the FDIC (to the limits  established
by such  corporation),  the  uninsured  deposits in which  account are otherwise
secured  such that,  as  evidenced  by an Opinion  of Counsel  delivered  to the
Trustee and to each Rating Agency, the Certificateholders will have a claim with
respect to the funds in such  account or a  perfected  first  priority  security
interest   against  such  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,  (iii) a  trust  account  or  accounts  maintained  with  the  trust
department  of a federal or state  chartered  depository  institution,  national
banking association or trust company acting in its fiduciary capacity or (iv) an
account  otherwise  acceptable  to  each  Rating  Agency  without  reduction  or
withdrawal of their then current  ratings of the  Certificates as evidenced by a
letter  from each  Rating  Agency to the  Trustee.  Eligible  Accounts  may bear
interest.

                  "Eligible   Substitute   Mortgage   Loan":   A  mortgage  loan
substituted  for a  Defective  Mortgage  Loan  pursuant  to the  terms  of  this
Agreement which must, on the date of such substitution,  (i) have an outstanding
principal balance,  after application of all scheduled payments of principal and
interest due during or prior to the month of substitution, not in excess of, and
not more than 5% less than, the outstanding  principal  balance of the Defective
Mortgage  Loan as of the  Due  Date  in the  calendar  month  during  which  the
substitution occurs, (ii) have a Mortgage Interest Rate, with respect to a Group
1 Mortgage  Loan,  not less than the  Mortgage  Interest  Rate of the  Defective
Mortgage  Loan and not more than 1% in excess of the Mortgage  Interest  Rate of
such Defective  Mortgage Loan,  (iii) if a Group 2 Mortgage Loan, have a Maximum
Loan Rate not less than the Maximum Loan Rate for the Defective  Mortgage  Loan,
(iv) if a Group 2  Mortgage  Loan,  have a  Minimum  Loan Rate not less than the
Minimum  Loan Rate of the  Defective  Mortgage  Loan,  (v) if a Group 2 Mortgage
Loan,  have a Gross  Margin  equal to or  greater  than the Gross  Margin of the
Defective Mortgage Loan, (vi) if a Group 2 Mortgage Loan, have a next Adjustment
Date not more  than  two  months  later  than  the next  Adjustment  Date on the
Defective Mortgage Loan, except in the case of any

                                       17
<PAGE>

Mortgage  Loan which has an  Arrearage  due to the  application  of any  related
forbearance  plan with respect to such  Mortgage  Loan,  an Eligible  Substitute
Mortgage Loan must have all Adjustment  Dates occurring during the same Interest
Accrual  Period  during  which  Adjustment  Dates  occur  with  respect  to  the
substituted  Mortgage Loan,  (vii) have a remaining term to maturity not greater
than (and not more than one year less than) that of the Defective Mortgage Loan,
(viii)  be  current  as of the  date  of  substitution,  (ix)  have  a  Combined
Loan-to-Value  Ratio as of the date of  substitution  equal to or lower than the
Combined Loan-to-Value Ratio of the Defective Mortgage Loan as of such date, (x)
have a risk grading  determined by the Seller at least equal to the risk grading
assigned on the Defective  Mortgage Loan, (xi) have been  reunderwritten  by the
Seller in accordance with the same  underwriting  criteria and guidelines as the
Defective  Mortgage Loan and (xii) conform to each  representation  and warranty
set forth in Section 2.04 hereof  applicable to the Defective  Mortgage Loan. In
the  event  that one or more  mortgage  loans  are  substituted  for one or more
Defective  Mortgage Loans,  the amounts  described in clause (i) hereof shall be
determined on the basis of aggregate principal  balances,  the Mortgage Interest
Rates  described  in clause  (ii)  hereof  shall be  determined  on the basis of
weighted average Mortgage Interest Rates, the risk gradings  described in clause
(x) hereof shall be satisfied as to each such mortgage loan, the terms described
in clause  (vii)  hereof shall be  determined  on the basis of weighted  average
remaining  term to maturity,  the  Combined  Loan-to-Value  Ratios  described in
clause (ix) hereof shall be satisfied as to each such mortgage loan and,  except
to the extent  otherwise  provided in this  sentence,  the  representations  and
warranties  described  in  clause  (xii)  hereof  must be  satisfied  as to each
Eligible Substitute Mortgage Loan or in the aggregate, as the case may be.

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

                  "ERISA-Restricted  Certificates":  Any of the Class M-1, Class
M-2, Class B-1, Class B-2, Class N, Class X and Class R Certificates.

                  "Escrow   Account":   The  account  or  accounts  created  and
maintained pursuant to Section 3.06.

                  "Escrow  Payments":  The amounts  constituting  ground  rents,
taxes,  assessments,  water rates, mortgage insurance premiums,  fire and hazard
insurance  premiums and other payments  required to be escrowed by the Mortgagor
with the mortgagee pursuant to any Mortgage Loan.

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

                  "Excess Reserve Fund Account":  The separate account,  held in
trust,  created and  maintained  by the Trustee  pursuant to Section 4.10 in the
name of the  Trustee for the  benefit of the Class A-1A  Certificateholders  and
designated "The Chase  Manhattan Bank in trust for registered  Holders of C-BASS
Mortgage  Loan  Asset-Backed  Certificates,  Series  2000-CB4,  Class A-1A." The
Excess Reserve Fund Account is not an asset of either REMIC 1 or REMIC 2.

                                       18
<PAGE>

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

                  "Extended Period":  As defined in Section 9.04(b).

                  "Extra Principal  Distribution Amount": As of any Distribution
Date, the lesser of (x) the Monthly Excess Interest Amount for such Distribution
Date and (y) the Overcollateralization Deficiency for such Distribution Date.

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

                  "FHA":  The Federal Housing  Administration,  an agency within
HUD.

                  "FHA  Approved   Mortgagee":   Those  institutions  which  are
approved  by FHA to act as  servicer  and  mortgagee  of record  pursuant to FHA
Regulations.

                  "FHA Insurance  Contract" or "FHA Insurance":  The contractual
obligation  of FHA  respecting  the  insurance  of an FHA Loan  pursuant  to the
National Housing Act, as amended.

                  "FHA  Loan":  A Mortgage  Loan which is the  subject of an FHA
Insurance Contract as evidenced by a Mortgage Insurance Certificate.

                  "FHA  Regulations":  Regulations  promulgated by HUD under the
National Housing Act, codified in 24 Code of Federal Regulations,  and other HUD
issuances  relating to FHA Loans,  including the related  handbooks,  circulars,
notices and mortgagee letters.

                  "FHLMC":   Federal  Home  Loan  Mortgage  Corporation  or  any
successor thereto.

                  "Fidelity  Bond":  Shall have the meaning  assigned thereto in
Section 3.12.

                  "Final Recovery Determination":  With respect to any defaulted
Mortgage  Loan or any REO Property  (other than a Mortgage  Loan or REO Property
purchased  by the  Seller or the  Servicer  pursuant  to or as  contemplated  by
Section 2.03 or 10.01), a determination  made by the Servicer that all Insurance
Proceeds,  Liquidation  Proceeds  and other  payments  or  recoveries  which the
Servicer,  in  its  reasonable  good  faith  judgment,  expects  to  be  finally
recoverable  in respect  thereof  have been so  recovered.  The  Servicer  shall
maintain  records,  prepared  by a  Servicing  Officer,  of each Final  Recovery
Determination made thereby.

                  "Fitch": "Fitch, Inc. and its successors,  and if such company
shall for any reason no longer  perform the  functions  of a  securities  rating
agency,  "Fitch"  shall be deemed to refer to any other  "nationally  recognized
statistical  rating  organization" as set forth on the most current list of such
organizations released by the Securities and Exchange Commission.

                                       19
<PAGE>

                  "FNMA":  Fannie Mae or any successor thereto.

                  "Foreclosure  Price":  The amount  reasonably  expected  to be
received  from the sale of the related  Mortgaged  Property  net of any expenses
associated with foreclosure proceedings.

                  "Grantor Trust":  That portion of the Trust exclusive of REMIC
1 and REMIC 2 which holds the Class N Reserve  Fund and the Excess  Reserve Fund
Account.

                  "Gross  Margin":  With respect to each Group 2 Mortgage  Loan,
the fixed percentage set forth in the related Mortgage Note that is added to the
Index  on each  Adjustment  Date in  accordance  with the  terms of the  related
Mortgage  Note used to determine  the Mortgage  Interest  Rate for such Mortgage
Loan.

                  "Group 1 Loan  Balance":  As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group 1 as of such date.

                  "Group 1 Mortgage Loan":  A Mortgage Loan in Loan Group 1.

                  "Group 1 Net WAC":  The average of the Net  Mortgage  Interest
Rates of the Group 2 Mortgage  Loans,  weighted on the basis of their  Principal
Balances as of the first day of the related  Collection  Period (or, in the case
of the first  Distribution  Date, the Cut-off Date), each expressed on the basis
of an assumed  360-day  year and the actual  number of days  elapsed  during the
related Interest Accrual Period.

                  "Group  1   Principal   Percentage":   With   respect  to  any
Distribution Date and the Class A-1F and Class A-2F Certificates, the percentage
equivalent  of a fraction,  the  numerator  of which is the amount of  principal
collections (including any principal advanced by the Servicer) allocable to Loan
Group 1 for the related  Collection Period or Prepayment  Period, as applicable,
and the denominator of which is the amount of principal  collections  (including
any principal advanced by the Servicer) allocable to Loan Group 1 and Loan Group
2 for the related Collection Period or Prepayment Period, as applicable.

                  "Group 2 Loan  Balance":  As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group 2 as of such date.

                  "Group 2 Mortgage Loan":  A Mortgage Loan in Loan Group 2.

                  "Group 2 Net WAC":  The average of the Net  Mortgage  Interest
Rates of the Group 1 Mortgage  Loans,  weighted on the basis of their  Principal
Balances as of the first day of the related  Collection  Period (or, in the case
of the first Distribution Date, the Cut-off Date).

                   "Group  2  Principal   Percentage":   With   respect  to  any
Distribution Date and the Class A-1A Certificates,  the percentage equivalent of
a  fraction,  the  numerator  of which is the  amount of  principal  collections
(including any principal advanced by the Servicer) allocable to Loan Group 2 for
the related  Collection  Period or Prepayment  Period,  as  applicable,  and the
denominator  of which is the  amount of  principal  collections  (including  any
principal  advanced by the Servicer)  allocable to Loan Group 1 and Loan Group 2
for the related Collection Period or Prepayment Period, as applicable.

                   "HUD":  The United  States  Department  of Housing  and Urban
Development,  or  any  successor  thereto  and  including  the  Federal  Housing
Commissioner  and  the  Secretary  of  Housing  and  Urban   Development   where
appropriate under the FHA Regulations.

                  "Independent": When used with respect to any specified Person,
any such Person who (i) is in fact  independent of the  Depositor,  the Servicer
and their respective

                                       20
<PAGE>

Affiliates,  (ii) does not have any direct financial interest in or any material
indirect  financial  interest in the  Depositor or the Servicer or any Affiliate
thereof,  and (iii) is not  connected  with the Depositor or the Servicer or any
Affiliate  thereof as an  officer,  employee,  promoter,  underwriter,  trustee,
partner,  director or Person performing  similar functions;  provided,  however,
that a Person shall not fail to be  Independent of the Depositor or the Servicer
or any Affiliate  thereof merely because such Person is the beneficial  owner of
1% or less of any Class of securities issued by the Depositor or the Servicer or
any Affiliate thereof, as the case may be.

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

                  "Index":  With respect to each Group 2 Mortgage  Loan and with
respect to each related  Adjustment  Date, the index as specified in the related
Mortgage Note.

                  "Ineligible  Foreclosure  Property  Loan":  Any Mortgage  Loan
listed on the  Ineligible  Foreclosure  Property Loan Schedule as of the Closing
Date and for which  there is no written  agreement  modifying  such  Mortgagor's
obligation to make payments under the Mortgage Loan.

                  "Ineligible Foreclosure Property Loan Schedule": The schedule,
attached  hereto as Exhibit S, of Ineligible  Foreclosure  Property  Loans to be
prepared by the Seller.

                  "Initial Certificate  Principal Balance":  With respect to any
Certificate of a Class other than a Class N, Class X or Class R Certificate, the
amount designated "Initial Certificate Principal Balance" on the face thereof.

                  "Initial  Notional  Amount":  With  respect  to  any  Class  N
Certificate,  the  amount  designated  "Initial  Notional  Amount"  on the  face
thereof.

                  "Initial Overcollateralization Amount":  $2,882,627.22.

                                       21
<PAGE>

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

                  "Interest  Accrual  Period":  With respect to any Distribution
Date and (i) with respect to the Class A-1F,  A-2F,  Class M-1, Class M-2, Class
B-1,  Class  B-2 and  Class  N  Certificates  and any  Class  of  REMIC  Regular
Interests,  the calendar  month  immediately  preceding  the month in which such
Distribution Date occurs,  and (ii) with respect to the Class A-1A Certificates,
the period from the preceding  Distribution Date to the day prior to the current
Distribution  Date (or, in the case of the first  Distribution  Date, the period
from the Closing Date through December 25, 2000).

                  "Interest Carry Forward Amount": For any Class of Certificates
(other than the Class X, Class N and Class R Certificates)  and any Distribution
Date, the sum of (a) the excess, if any, of the Accrued Certificate Interest and
any Interest  Carry Forward  Amount for the prior  Distribution  Date,  over the
amount in respect of interest  actually  distributed on such Class on such prior
Distribution Date and (b) interest on such excess at the applicable Pass-Through
Rate (x) with respect to the Class A-1F, Class A-2F, Class M-1, Class M-2, Class
B-1 and Class B-2  Certificates,  on the basis of a 360-day year  consisting  of
twelve 30-day months, and (y) with respect to the Class A-1A  Certificates,  for
the  actual  number of days  elapsed  since the  prior  Distribution  Date and a
360-day year.

                  "Interest   Percentage":   With   respect   to  any  Class  of
Certificates  and any  Distribution  Date,  the  ratio  (expressed  as a decimal
carried to six places) of the Accrued Certificate Interest for such Class to the
sum of the  Accrued  Certificate  Interest  for all  Classes,  in each case with
respect to such Distribution Date.

                  "Interest  Remittance  Amount":  As of any Determination Date,
the sum, without duplication,  of (i) all interest due and collected or advanced
with respect to the related  Collection  Period on the Mortgage  Loans (less the
Servicing Fee, mortgage insurance premiums,  amounts available for reimbursement
of  Advances  and  Servicing  Advances  pursuant  to Section  3.05 and  expenses
reimbursable  pursuant to Section 6.03), (ii) all Compensating  Interest paid by
the Servicer on such  Determination  Date with respect to the Mortgage Loans and
(iii) the portion of any payment in connection with any  substitution,  Purchase
Price,  Termination Price or Net Liquidation  Proceeds relating to interest with
respect to the Mortgage Loans received during the related Prepayment Period.

                  "Late  Collections":  With respect to any Mortgage  Loan,  all
amounts received subsequent to the Determination Date immediately  following any
related  Collection  Period,  whether as late payments of Monthly Payments or as
Insurance  Proceeds,  Liquidation  Proceeds or otherwise,  which  represent late
payments or collections of principal  and/or interest due (without regard to any
acceleration of

                                       22
<PAGE>

payments  under the related  Mortgage and  Mortgage  Note) but  delinquent  on a
contractual basis for such Collection Period and not previously recovered.

                  "Latest  Possible  Maturity Date":  The  Distribution  Date in
November 25, 2031.

                  "LIBOR":  With respect to each Interest  Accrual  Period,  the
rate  determined by the Trustee on the related LIBOR  Determination  Date on the
basis of the offered rate for one-month United States dollar  deposits,  as such
rate appears on the Telerate Page 3750,  as of 11:00 a.m.  (London time) on such
LIBOR  Determination  Date.  If no  such  quotations  are  available  on a LIBOR
Determination  Date,  LIBOR for the  related  Interest  Accrual  Period  will be
established by the Trustee as follows:

                  (i)      If  on  such  LIBOR  Determination  Date  two or more
Reference Banks provide such offered quotations,  LIBOR for the related Interest
Accrual Period shall be the arithmetic mean of such offered quotations  (rounded
upwards if necessary to the nearest whole multiple of 0.001%);

                  (ii)     If  on such LIBOR  Determination  Date fewer than two
Reference Banks provide such offered quotations,  LIBOR for the related Interest
Accrual Period shall be the  arithmetic  mean of the rates quoted by one or more
major banks in New York City,  selected by the Trustee after  consultation  with
the  Servicer,  as of 11:00 A.M.,  New York City time, on such date for loans in
U.S.  Dollars  to  leading  European  banks for a period of one month in amounts
approximately equal to the aggregate Certificate Principal Balances of the Class
A-1F and Class A-1A Certificates; and

                  (iii)    If no such quotations can be obtained,  LIBOR for the
related Interest Accrual Period shall be LIBOR for the prior Distribution Date.

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

                  "LIBOR  Determination  Date":  With  respect to the Class A-1A
Certificates, (i) for the first Distribution Date, the second LIBOR Business Day
preceding the Closing Date and (ii) for each subsequent  Distribution  Date, the
second LIBOR Business Day prior to the immediately preceding Distribution Date.

                  "Liquidated  Mortgage Loan": As to any Distribution  Date, any
Mortgage  Loan in respect of which the Servicer has  determined,  in  accordance
with the servicing  procedures  specified  herein,  as of the end of the related
Prepayment Period, that all Liquidation Proceeds and Insurance Proceeds which it
expects to recover  with  respect to the  liquidation  of the  Mortgage  Loan or
disposition of the related REO Property have been recovered.

                  "Liquidation Event": With respect to any Mortgage Loan, any of
the  following  events:  (i) such  Mortgage  Loan is paid in full;  (ii) a Final
Recovery  Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is

                                       23
<PAGE>

removed from the Trust Fund by reason of its being  purchased,  sold or replaced
pursuant to or as contemplated by Section 2.03 or Section 10.01. With respect to
any  REO  Property,  either  of  the  following  events:  (i) a  Final  Recovery
Determination  is made as to such REO  Property;  or (ii) such REO  Property  is
removed from the Trust Fund by reason of its being sold or purchased pursuant to
Section 3.13 or Section 10.01.

                  "Liquidation   Proceeds":   The  amount  (other  than  amounts
received in respect of the rental of any REO Property prior to REO  Disposition)
received by the Servicer in connection with (i) the taking of all or a part of a
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) the liquidation of a defaulted  Mortgage Loan by means of a trustee's sale,
foreclosure sale or otherwise.

                  "Liquidation  Report": The report with respect to a Liquidated
Mortgage Loan in such form and  containing  such  information as is agreed to by
the Servicer and the Trustee and substantially in the form of Exhibit M attached
hereto.

                  "Loan  Group":  Either  Loan  Group 1 or Loan  Group 2, as the
context requires.

                  "Loan Group  Balance":  Either the Group 1 Loan Balance or the
Group 2 Loan Balance, as applicable.

                  "Loan Group 1": The pool of Mortgage  Loans  identified in the
Mortgage Loan Schedule as having been assigned to Sub-group 1A and Sub-group 1B.

                  "Loan Group 2": The pool of Mortgage  Loans  identified in the
Mortgage Loan Schedule as having been assigned to Loan Group 2.

                  "Loan Guaranty  Certificate":  The certificate evidencing a VA
Guaranty Agreement.

                  "Losses":  As defined in Section 9.03.

                  "Lost Note Affidavit": With respect to any Mortgage Loan as to
which the original  Mortgage Note has been permanently lost or destroyed and has
not been  replaced,  an affidavit from the Seller  certifying  that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related  Mortgage  Note and  indemnifying  the Trust  against any loss,  cost or
liability  resulting from the failure to deliver the original  Mortgage Note) in
the form of Exhibit H hereto.

                  "Majority  Certificateholders":  The  Holders of  Certificates
evidencing at least 51% of the Voting Rights.

                  "Majority Class R Certificateholders":  The Holders of Class R
Certificates  evidencing  at  least a 51%  Percentage  Interest  in the  Class R
Certificates.

                                       24
<PAGE>

                  "Maximum  Loan  Rate":  With  respect to each Group 2 Mortgage
Loan,  the  percentage  set forth in the  related  Mortgage  Note as the maximum
Mortgage Interest Rate thereunder.

                  "Minimum  Loan  Rate":  With  respect to each Group 2 Mortgage
Loan,  the  percentage  set forth in the  related  Mortgage  Note as the minimum
Mortgage Interest Rate thereunder.

                  "Monthly  Excess  Cashflow  Amount":  The  sum of the  Monthly
Excess Interest Amount,  the  Overcollateralization  Release Amount and (without
duplication)  any portion of the Principal  Distribution  Amount remaining after
principal distributions on the Offered Certificates.

                  "Monthly  Excess  Interest  Amount":   With  respect  to  each
Distribution  Date, the amount, if any, by which the Interest  Remittance Amount
for such  Distribution  Date exceeds the aggregate  amount  distributed  on such
Distribution Date pursuant to paragraphs (i) through (vi) under Section 4.01.

                  "Monthly  Payment":  With  respect to any Mortgage  Loan,  the
scheduled  monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined:  (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without  giving effect to any extension  granted or agreed to by
the Servicer  pursuant to Section 3.01; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.

                  "Moody's":   Moody's   Investors   Services,   Inc.   and  its
successors,  and if such  company  shall for any  reason no longer  perform  the
functions of a securities  rating agency,  "Moody's" shall be deemed to refer to
any other "nationally  recognized  statistical rating organization" as set forth
on the most current list of such  organizations  released by the  Securities and
Exchange Commission.

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

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

                  "Mortgage Insurance  Certificate":  The certificate evidencing
an FHA Insurance Contract.

                  "Mortgage  Interest Rate": With respect to each Mortgage Loan,
the annual rate at which  interest  accrues on such  Mortgage  Loan from time to
time in accordance with the provisions of the related  Mortgage Note, which rate
(i) in the case of

                                       25
<PAGE>

each Group 1 Mortgage  Loan shall  remain  constant at the rate set forth in the
Mortgage  Loan  Schedule as the  Mortgage  Interest  Rate in effect  immediately
following  the Cut-Off  Date and (ii) in the case of each Group 2 Mortgage  Loan
(A) as of any date of  determination  until the first  Adjustment Date following
the Cut-Off  Date shall be the rate set forth in the Mortgage  Loan  Schedule as
the Mortgage Interest Rate in effect immediately  following the Cut-Off Date and
(B) as of any date of determination  thereafter shall be the rate as adjusted on
the most recent Adjustment Date, to equal the sum, rounded to the nearest 0.125%
as provided in the Mortgage  Note, of the Index,  determined as set forth in the
related  Mortgage Note, plus the related Gross Margin subject to the limitations
set forth in the related  Mortgage Note. With respect to each Mortgage Loan that
becomes  an REO  Property,  as of any date of  determination,  the  annual  rate
determined in accordance with the immediately  preceding sentence as of the date
such Mortgage Loan became an REO Property.

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

                  "Mortgage Loan Purchase Agreement":  The agreement between the
Seller and the Depositor,  dated as of November 1, 2000,  regarding the transfer
of the Mortgage Loans by the Seller to or at the direction of the Depositor.

                  "Mortgage Loan  Schedule":  As of any date (i) with respect to
the Mortgage  Loans,  the list of such Mortgage Loans included in the Trust Fund
on such date, separately  identifying the Group 1 Mortgage Loans and the Group 2
Mortgage  Loans,  attached hereto as Exhibit D. The Mortgage Loan Schedule shall
be prepared  by the Seller and shall set forth the  following  information  with
respect to each Mortgage Loan:

                  (1)      the Seller's Mortgage Loan identifying number;

                  (2)      the  city,  state,  and  zip  code  of the  Mortgaged
Property;

                  (3)      the  type of Residential  Dwelling  constituting  the
Mortgaged   Property  or  a  designation  that  the  Mortgaged   Property  is  a
multi-family property;

                  (4)      the  occupancy  status of the  Mortgaged  Property at
origination;

                  (5)      the original months to maturity;

                  (6)      the date of origination;

                  (7)      the first payment date;

                  (8)      the stated maturity date;

                  (9)      the stated remaining months to maturity;

                                       26
<PAGE>

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

                  (11)     the Principal Balance of each Mortgage Loan as of the
Cut-Off Date;

                  (12)     the  Arrearage of the Mortgage Loan as of the Cut-Off
Date;

                  (13)     the Mortgage Interest Rate of the Mortgage Loan as of
the Cut-Off Date;

                  (14)     the  current  principal  and interest  payment of the
Mortgage Loan as of the Cut-Off Date;

                  (15)     the contractual interest paid to date of the Mortgage
Loan;

                  (16)     if  the  Mortgage  Loan  is not  owner-financed,  the
Combined Loan-to-Value Ratio at origination;

                  (17)     a code indicating the loan performance  status of the
Mortgage Loan as of the Cut-Off Date;

                  (18)     a  code  indicating  whether the  Mortgage  Loan is a
Simple Interest Mortgage Loan or an Actuarial Mortgage Loan;

                  (19)     a code indicating  whether the Mortgaged  Property is
in bankruptcy or in its forbearance period as of the Cut-Off Date;

                  (20)     a  code  indicating  whether  the  Mortgage  Loan  is
conventional, insured by the FHA or guaranteed by the VA;

                  (21)     a  code  indicating the Index that is associated with
such Mortgage Loan;

                  (22)     the Gross Margin;

                  (23)     the Periodic Rate Cap;

                  (24)     the Minimum Loan Rate;

                  (25)     the Maximum Loan Rate;

                  (26)     a  code  indicating  whether the Mortgage  Loan has a
prepayment penalty and the type of prepayment penalty;

                  (27)     the  first Adjustment Date immediately  following the
Cut-Off Date;

                  (28)     the rate adjustment frequency;

                  (29)     the payment adjustment frequency;

                                       27
<PAGE>

                  (30)     a  code  indicating  whether  the  Mortgage  Loan  is
owner-financed; and

                  (31)     a  code  indicating  whether the  Mortgage  Loan is a
second lien.

                  The  Mortgage  Loan  Schedule  shall set  forth the  following
information,  as of the Cut-Off Date,  with respect to the Mortgage Loans in the
aggregate  and for each Loan Group:  (1) the number of Mortgage  Loans;  (2) the
current  Principal  Balance of the  Mortgage  Loans;  (3) the  weighted  average
Mortgage  Interest  Rate of the Mortgage  Loans;  and (4) the  weighted  average
maturity of the Mortgage Loans. The Mortgage Loan Schedule shall be amended from
time to time by the Seller in accordance  with the provisions of this Agreement.
With respect to any Eligible  Substitute Mortgage Loan, Cut-Off Date shall refer
to the related  Cut-Off Date for such  Mortgage  Loan,  determined in accordance
with the definition of Cut-Off Date herein.

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

                  "Mortgage  Pool":  The pool of Mortgage  Loans,  identified on
Exhibit D from time to time, and any REO Properties acquired in respect thereof.

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

                  "Mortgagor":  The obligor on a Mortgage Note.

                  "Net Excess Spread":  With respect to any  Distribution  Date,
the fraction,  expressed as a percentage, the numerator of which is equal to the
amount,  if any, by which (a) the product of (i) the Pool  Balance as of the end
of the  related  Collection  Period  and (ii) the  weighted  average  of the Net
Mortgage Rates exceeds (b) the Interest  Remittance Amount for such Distribution
Date,  and the  denominator  of which is the product of (x) the Pool Balance and
(y) the actual number of days in the related  Interest Accrual Period divided by
360.

                  "Net  Liquidation  Proceeds":  With respect to any  Liquidated
Mortgage Loan or any other disposition of related Mortgaged Property  (including
REO  Property)  the related  Liquidation  Proceeds  net of  Advances,  Servicing
Advances,  Servicing  Fees and any  other  accrued  and  unpaid  servicing  fees
received and retained in connection  with the  liquidation of such Mortgage Loan
or Mortgaged Property.

                  "Net  Mortgage  Interest  Rate":  With respect to any Mortgage
Loan,  the Mortgage  Interest  Rate borne by such Mortgage Loan minus the sum of
the (i)  Expense  Fee Rate and (ii)  the rate at which  the  mortgage  insurance
premium, if any, is calculated.

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

                                       28
<PAGE>

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

                  "Non-U.S.  Person":  Any Person other than a U.S.  Person.

                  "Notional  Amount":  Either the Class N Notional Amount or the
Class X/N Notional Amount, as applicable.

                  "Offered  Certificates":  The Class A-1A,  Class  A-1F,  Class
A-2F, Class M-1, Class M-2, Class B-1 and Class B-2 Certificates.

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

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

                  "Optional  Termination  Date": The first  Distribution Date on
which the Seller may opt to  terminate  the  Mortgage  Pool  pursuant to Section
10.01.

                  "Original Class N Notional Amount": The Notional Amount of the
Class N Certificates on the Closing Date which shall be $7,290,000.00.

                  "Original Class X/N Notional  Amount":  The Notional Amount of
the Class X/N Interest on the Closing Date, as set forth  opposite such Class in
the Preliminary Statement.

                  "Original Class Certificate  Principal Balance":  With respect
to each Class of Certificates,  the Certificate Principal Balance thereof on the
Closing Date, as set forth  opposite  such Class in the  Preliminary  Statement,
except with respect to the Class N, Class X and Class R Certificates, which have
an Original Class Certificate Principal Balance of zero.

                  "Overcollateralization  Amount":  As of any Distribution Date,
the  excess,  if  any,  of  (x)  the  Pool  Balance  as of the  last  day of the
immediately  preceding  Collection  Period  over (y) the  aggregate  Certificate
Principal  Balances of all Classes of Offered  Certificates  (after  taking into
account all distributions of principal on such Distribution Date).

                  "Overcollateralization  Deficiency":  As of  any  Distribution
Date, the excess, if any, of (x) the Targeted  Overcollateralization  Amount for
such Distribution

                                       29
<PAGE>

Date  over (y) the  Overcollateralization  Amount  for such  Distribution  Date,
calculated  for this purpose  after  taking into  account the  reduction on such
Distribution  Date of the  Certificate  Principal  Balances  of all  Classes  of
Offered   Certificates   resulting  from  the   distribution  of  the  Principal
Distribution  Amount (but not the Extra Principal  Distribution  Amount) on such
Distribution  Date,  but prior to taking into account any Applied  Realized Loss
Amounts on such Distribution Date.

                  "Overcollateralization  Release  Amount":  With respect to any
Distribution  Date after the  Stepdown  Date on which a Trigger  Event is not in
effect, the lesser of (x) the Principal  Remittance Amount for such Distribution
Date and (y) the  excess,  if any, of (i) the  Overcollateralization  Amount for
such Distribution Date, assuming that 100% of the Principal Remittance Amount is
applied as a principal payment on the Offered  Certificates on such Distribution
Date, over (ii) the Targeted  Overcollateralization Amount for such Distribution
Date.

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

                  "Pass-Through  Rate": Any of the Class A-1A Pass-Through Rate,
the Class A-1F Pass-Through  Rate, the Class A-2F  Pass-Through  Rate, the Class
M-1  Pass-Through   Rate,  the  Class  M-2  Pass-Through  Rate,  the  Class  B-1
Pass-Through  Rate,  the Class B-2  Pass-Through  Rate,  the Class X/N  Interest
Pass-Through Rate and the Class N Pass-Through Rate.

                  "Paying Agent": Any paying agent appointed pursuant to Section
5.05.

                  "Percentage Interest":  With respect to any Certificate (other
than a Class N, Class X or Class R  Certificate),  a  fraction,  expressed  as a
percentage, the numerator of which is the Initial Certificate Principal Balance,
as the case may be, represented by such Certificate and the denominator of which
is the Original Class  Certificate  Principal Balance of the related Class. With
respect to a Class N Certificate,  the undivided percentage interest obtained by
dividing  the Initial  Notional  Amount  evidenced  by such  Certificate  by the
Original  Class N Notional  Amount of such Class.  With  respect to a Class X or
Class R Certificate,  the portion of the Class evidenced thereby, expressed as a
percentage, as stated on the face of such Certificate;  provided,  however, that
the sum of all such percentages for each such Class totals 100%.

                  "Periodic  Rate  Cap":  With  respect to each Group 2 Mortgage
Loan and any  Adjustment  Date therefor,  the fixed  percentage set forth in the
related  Mortgage  Note,  which is the  maximum  amount  by which  the  Mortgage
Interest Rate for such Mortgage Loan may increase or decrease (without regard to
the Maximum Loan Rate or the Minimum Loan Rate) on such Adjustment Date from the
Mortgage Interest Rate in effect immediately prior to such Adjustment Date.

                                       30
<PAGE>

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

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

                  (ii)     (A)  demand and time  deposits  in,  certificates  of
deposit  of,  bankers'  acceptances  issued  by or  federal  funds  sold  by any
depository  institution  or trust  company  (including  the Trustee or its agent
acting in their respective commercial capacities) incorporated under the laws of
the United States of America or any state thereof and subject to supervision and
examination by federal and/or state authorities, so long as, at the time of such
investment  or  contractual  commitment  providing  for  such  investment,  such
depository  institution or trust company or its ultimate parent has a short-term
uninsured debt rating in one of the two highest  available rating  categories of
S&P and Moody's and the highest  available rating category of Fitch and provided
that each such investment has an original  maturity of no more than 365 days and
(B) any other  demand or time deposit or deposit  which is fully  insured by the
FDIC;

                  (iii)    repurchase  obligations  with a term not to exceed 30
days with respect to any security described in clause (i) above and entered into
with a depository  institution or trust company (acting as principal) rated A or
higher by S&P and Fitch and A1 or higher by  Moody's;  provided,  however,  that
collateral  transferred  pursuant to such  repurchase  obligation must be of the
type  described  in clause  (i) above  and must (A) be valued  daily at  current
market prices plus accrued interest or (B) pursuant to such valuation, be equal,
at all times,  to 105% of the cash  transferred  by the Trustee in exchange  for
such  collateral  and (C) be  delivered  to the  Trustee  or, if the  Trustee is
supplying  the  collateral,  an agent  for the  Trustee,  in such a manner as to
accomplish  perfection of a security interest in the collateral by possession of
certificated securities;

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

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

                                       31
<PAGE>

                  (vi)     units  of money  market  funds  registered  under the
Investment Company Act of 1940 including funds managed or advised by the Trustee
or an affiliate  thereof  having the highest  rating  category by the applicable
Rating Agency; and

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

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

                  "Permitted   Transferee":   Any   transferee   of  a  Residual
Certificate other than a Disqualified Organization or a Non-U.S. Person.

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

                  "Pool Balance": As of any date of determination, the aggregate
Principal Balance of the Mortgage Loans.

                  "Pool Cap": With respect to any Distribution Date, the product
of (i) the average of the Net Mortgage  Interest  Rates of the  Mortgage  Loans,
weighted  on the basis of their  Principal  Balances  as of the first day of the
related  Collection Period (or, in the case of the first  Distribution Date, the
Cut-Off Date),  and (ii) the Pool Balance  divided by the aggregate  Certificate
Principal Balance of the Offered Certificates.

                  "Prepayment  Assumption":  Prepayment Scenario IV as set forth
in the Prospectus Supplement.

                  "Prepayment   Interest   Shortfall":   With   respect  to  any
Distribution Date, for each Mortgage Loan that was during the related Prepayment
Period the  subject of a  Principal  Prepayment  in full that was applied by the
Servicer  to reduce  the  outstanding  principal  balance of such loan on a date
preceding  the related Due Date,  an amount equal to interest at the  applicable
Mortgage  Interest  Rate (net of the  Servicing  Fee Rate) on the amount of such
Principal  Prepayment for the number of days commencing on the date on which the
prepayment  is  applied  and  ending on the last day of the  related  Prepayment
Period.

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

                                       32
<PAGE>

                  "Primary  Insurance  Policy":  Each policy of primary guaranty
mortgage  insurance issued by a Qualified  Insurer in effect with respect to any
Mortgage  Loan,  or any  replacement  policy  therefor  obtained by the Servicer
pursuant to Section 3.08.

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

                  "Principal  Distribution Amount": As to any Distribution Date,
the sum of (i) the Principal  Remittance  Amount minus, for  Distribution  Dates
occurring on and after the Stepdown Date and for which a Trigger Event is not in
effect,  the  Overcollateralization  Release Amount,  if any, and (ii) the Extra
Principal Distribution Amount, if any.

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

                  "Principal   Remittance   Amount":   With   respect   to   any
Distribution  Date,  to the extent of funds  available  therefor,  the sum (less
amounts available for reimbursement of Advances and Servicing  Advances pursuant
to Section 3.05 and expenses reimbursable pursuant to Section 6.03) of: (i) each
payment of principal on a Mortgage Loan due during the related Collection Period
and received by the Servicer on or prior to the related  Determination Date, and
any  Advances  with  respect  thereto,  (ii)  all  full  and  partial  Principal
Prepayments received by the Servicer during the related Prepayment Period, (iii)
the Net Liquidation  Proceeds  allocable to principal  actually collected by the
Servicer during the related  Prepayment  Period,  (iv) with respect to Defective
Mortgage Loans repurchased with respect to such Prepayment  Period,  the portion
of the Purchase Price allocable to principal,  (v) any  Substitution  Adjustment
Amounts  received  on or prior to the  previous  Determination  Date and not yet
distributed  and  (vi) on the  Distribution  Date on  which  the  Trust is to be
terminated  in  accordance  with  Section  10.01  hereof,  that  portion  of the
Termination Price in respect of principal.

                  "Private Certificates":  Any of the Class N, Class X and Class
R Certificates.

                  "Property Insurance  Proceeds":  Proceeds of any title policy,
hazard policy or other insurance  policy covering a Mortgage Loan, to the extent
such proceeds are

                                       33
<PAGE>

received by the  Servicer  and are not to be applied to the  restoration  of the
related  Mortgaged  Property or released to the Mortgagor in accordance with the
Servicer's  servicing  procedures,  subject to the terms and  conditions  of the
related Mortgage Note and Mortgage.

                  "Prospectus  Supplement":  That certain Prospectus  Supplement
dated  December  7,  2000  relating  to  the  public  offering  of  the  Offered
Certificates.

                  "Purchase  Price":  With respect to any  Mortgage  Loan or REO
Property to be  purchased  pursuant  to or as  contemplated  by Section  2.03 or
10.01,  and as confirmed by an  Officers'  Certificate  from the Servicer to the
Trustee, an amount equal to the sum of (i) 100% of the Principal Balance thereof
as of the date of purchase  (or such other price as provided in Section  10.01),
(ii) in the case of (x) a Mortgage  Loan,  accrued  interest  on such  Principal
Balance at the  applicable  Mortgage  Interest  Rate in effect from time to time
from the Due Date as to which  interest  was last  covered  by a payment  by the
Mortgagor or an Advance by the Servicer,  which payment or Advance had as of the
date of purchase been distributed  pursuant to Section 4.01,  through the end of
the  calendar  month in which the  purchase  is to be  effected,  and (y) an REO
Property, its fair market value, determined in good faith by the Servicer, (iii)
any unreimbursed  Servicing  Advances and Advances and any unpaid Servicing Fees
and Special Servicing Fees allocable to such Mortgage Loan or REO Property, (iv)
any amounts previously  withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Section 3.13, and (v) in the case of a
Mortgage  Loan  required  to be  purchased  pursuant to Section  2.03,  expenses
reasonably  incurred or to be incurred by the Servicer or the Trustee in respect
of the breach or defect giving rise to the purchase obligation.

                  "Qualified Insurer":  Any insurance company acceptable to FNMA
or FHLMC.

                  "Rate  Payment":  With respect to any  Distribution  Date, the
excess,  if  any,  of  Accrued  Certificate  Interest  on  a  Class  of  Offered
Certificates  over the  amount of  interest  accrued  for the same  period  with
respect to the REMIC 2 Regular  Interest with the same  alphabetical  or numeric
Class  designation,  together  with 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 of Certificates).

                  "Rating Agency or Rating Agencies": Moody's, Fitch and S&P, or
their respective successors.  If such agencies or their successors are no longer
in existence,  "Rating Agencies" shall be such nationally recognized statistical
rating organizations as set forth on the most current list of such organizations
released  by the  Securities  and  Exchange  Commission  and  designated  by the
Depositor,  notice of which  designation  shall be given to the  Trustee and the
Servicer.

                  "Realized Loss":  With respect to a Liquidated  Mortgage Loan,
the amount by which the remaining unpaid principal  balance of the Mortgage Loan
exceeds

                                       34
<PAGE>

the amount of Net Liquidation  Proceeds applied to the principal  balance of the
related Mortgage Loan.

                  "Realized  Loss  Amortization  Amount":  Any of the  Class M-1
Realized Loss  Amortization  Amount,  the Class M-2 Realized  Loss  Amortization
Amount,  the Class  B-1  Realized  Loss  Amortization  Amount  and the Class B-2
Realized Loss Amortization Amount.

                  "Record Date": With respect to all of the Certificates (except
for the Class A-1A Certificates), the last Business Day of the month immediately
preceding  the month in which  the  related  Distribution  Date  occurs  (or the
Closing Date, in the case of the first  Distribution  Date). With respect to the
Class  A-1A   Certificates,   the  Business  Day   immediately   preceding  such
Distribution Date; provided, however, that if any Class A-1A Certificate becomes
a Definitive Certificate, the Record Date for such Certificate shall be the last
Business Day of the month  immediately  preceding the month in which the related
Distribution Date occurs.

                  "Reference  Banks":  Those banks (i) with an established place
of business in London,  England,  (ii) not controlling,  under the control of or
under common control with the Depositor or the Trustee,  (iii) whose  quotations
appear on the Telerate Page 3750 on the relevant  LIBOR  Determination  Date and
(iv) which have been designated as such by the Trustee; provided,  however, that
if fewer than two of such banks  provide a LIBOR rate,  then any  leading  banks
selected  by the  Trustee  which are engaged in  transactions  in United  States
dollar deposits in the international Eurocurrency market.

                  "Regular  Certificate":  Any of the Offered Certificates,  the
Class N Certificates and the Class X Certificates.

                  "Related  Documents":  With respect to any Mortgage  Loan, the
related Mortgage Notes, Mortgages and other related documents.

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

                  "Relief  Act   Interest   Shortfall":   With  respect  to  any
Distribution  Date, for any Mortgage Loan with respect to which there has been a
reduction in the amount of interest  collectible  thereon for the most  recently
ended  Collection  Period as a result of the  application of the Relief Act, the
amount by which (i)  interest  collectible  on such  Mortgage  Loan  during such
Collection  Period is less  than  (ii) one  month's  interest  on the  Principal
Balance of such  Mortgage  Loan at the Mortgage  Interest Rate for such Mortgage
Loan before giving effect to the application of the Relief Act.

                  "Remaining Initial  Overcollateralization  Amount":  As of any
Distribution  Date,  an amount  equal to (a) the  Initial  Overcollateralization
Amount  minus  (b)  the  sum of (i) any  Overcollateralization  Release  Amounts
distributed and (ii) Realized Losses allocated to the REMIC 2 Regular Interests.

                                       35
<PAGE>

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

                  "REMIC 1 Regular  Interests":  The Class T1-Accrual  Interest,
Class T1-A-1F  Interest,  Class T1-A-1A Interest,  Class T1-A2F Interest,  Class
T1-M-1 Interest,  Class T1-M-2 Interest,  Class T1-B-1 Interest and Class T1-B-2
Interest.

                  "REMIC 2  Regular  Interests":  The Class  A-1F  Certificates,
Class A-2F Certificates,  Class A-1A Certificates, Class M-1 Certificates, Class
M-2 Certificates,  Class B-1 Certificates,  Class B-2 Certificates and Class X/N
Interest.

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

                  "REMIC  Regular  Interest":  As  defined  in  the  Preliminary
Statement.

                  "Remittance  Report":  A report  prepared by the  Servicer and
delivered to the Trustee pursuant to Section 4.07.

                  "Rents from Real Property":  With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code.

                  "REO  Account":  The  account or  accounts  maintained  by the
Servicer in respect of an REO Property pursuant to Section 3.13.

                  "REO  Disposition":  The sale or other  disposition  of an REO
Property on behalf of the Trust Fund.

                  "REO  Principal   Amortization":   With  respect  to  any  REO
Property,  for any calendar  month,  the  aggregate  of all amounts  received in
respect of such REO Property during such calendar month,  whether in the form of
rental income, sale proceeds (including, without limitation, that portion of the
Termination  Price paid in  connection  with a purchase  of all of the  Mortgage
Loans and REO Properties pursuant to Section 10.01 that is allocable to such REO
Property) or otherwise,  net of any portion of such amounts (i) payable pursuant
to Section 3.13 in respect of the proper  operation,  management and maintenance
of such REO Property or (ii) payable or reimbursable to the Servicer pursuant to
Section 3.13 for unpaid  Servicing Fees in respect of the related  Mortgage Loan
and unreimbursed Servicing Advances and Advances in respect of such REO Property
or the related Mortgage Loan.

                  "REO Property":  A Mortgaged Property acquired by the Servicer
on behalf of the Trust Fund through  foreclosure or deed-in-lieu of foreclosure,
as described in Section 3.13.

                  "Re-Performing  60+ Day Delinquent  Loan":  Each Mortgage Loan
with  respect to which,  as of any date of  determination,  (x) any portion of a
Monthly Payment

                                       36
<PAGE>

is, as of the last day of the prior Collection  Period,  two months or more past
due and (y) with respect to which the mortgagor has made three Monthly  Payments
within the three calendar months  preceding such date of  determination.  To the
extent  that,  as of any date of  determination,  more than 10% of the  Mortgage
Loans  (measured  by scheduled  principal  balance)  are  Re-Performing  60+ Day
Delinquent Loans, the  Re-Performing 60+ Day Delinquent Loans  constituting such
excess shall be deemed to be 60+ Day Delinquent Loans.

                  "Re-performance  Test":  The  following  criteria one of which
must be met for a Mortgage Loan to qualify as a Re-performing Mortgage Loan: (1)
the Mortgagor has made at least three  aggregate  Monthly  Payments in the three
calendar months  preceding the Cut-Off Date  (regardless of either the timing of
receipt of such payments or the payment history of such loans prior to August 1,
2000), or (2) the Mortgagor has made at least four aggregate Monthly Payments in
the four calendar  months  preceding the Cut-Off Date  (regardless of either the
timing of receipt of such payments or the payment history of such loans prior to
July 1, 2000),  or (3) the  Mortgagor has made at least five  aggregate  Monthly
Payments in the five calendar months  preceding the Cut-Off Date  (regardless of
either the timing of receipt of such  payments  or the  payment  history of such
loans prior to June 1, 2000).

                  "Re-performing  Mortgage  Loan":  A  Mortgage  Loan  which has
defaulted in the past and which is at least 90 days  Delinquent  with respect to
certain  Monthly  Payments but which  satisfies one of the  Re-Performance  Test
criteria.

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

                  "Required Class N Reserve Fund Balance":  For the Distribution
Date  occurring  in December,  2000 an amount  equal to the Accrued  Certificate
Interest for the Class N Certificates  for the related  Interest Accrual Period.
For the  Distribution  Date  occurring  in January,  2001 an amount equal to two
times the Accrued  Certificate  Interest  for the Class N  Certificates  for the
related  Interest  Accrual  Period.  For  the  Distribution  Date  occurring  in
February,  2001 an amount equal to three times the Accrued Certificate  Interest
for the Class N Certificates for the related  Interest  Accrual Period.  For the
Distribution  Date  occurring  in March,  2001 an amount equal to four times the
Accrued  Certificate  Interest  for the  Class N  Certificates  for the  related
Interest Accrual Period.  For the Distribution  Date occurring in April, 2001 an
amount  equal to five times the  Accrued  Certificate  Interest  for the Class N
Certificates for the related Interest Accrual Period.  For the Distribution Date
occurring in May,  2001 and for each  Distribution  Date  thereafter,  an amount
equal to six times the Accrued  Certificate  Interest  for the related  Interest
Accrual Period.

                  "Required  Class N Reserve Fund Deposit":  With respect to any
Distribution Date, the amount, if any, by which (i) the Required Class N Reserve
Fund  Balance for such  Distribution  Date exceeds (ii) the amount on deposit in
the Class N Reserve Fund immediately prior to such date.

                                       37
<PAGE>

                  "Required  Excess Reserve Fund Balance":  An amount  initially
equal to $5,000 and thereafter as calculated pursuant to Section 4.10.

                  "Required  Excess Reserve Fund  Deposit":  With respect to any
Distribution  Date occurring  between the Closing Date and the Distribution Date
on which the  amount on  deposit in the  Excess  Reserve  Fund first  equals the
Required  Excess  Reserve  Fund  Balance,  the amount,  if any, by which (i) the
Required  Excess Reserve Fund Balance  exceeds (ii) the amount on deposit in the
Excess Reserve Fund immediately prior to such date.

                  "Residential  Dwelling":  Any  one  of  the  following:  (i) a
one-family  dwelling,  (ii) a two- to four-family  dwelling,  (iii) a one-family
dwelling unit in a FNMA eligible condominium project, (iv) a one-family dwelling
in a planned unit development,  which is not a co-operative,  or (v) a mobile or
manufactured home (as defined in 42 United States Code, Section 5402(6)).

                  "Residual Certificate":  The Class R Certificates.

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

                  "Responsible Officer":  When used with respect to the Trustee,
any officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice  President,  Assistant Vice  President,  Trust  Officer,  any
Assistant  Secretary,  any trust  officer or any other  officer  of the  Trustee
customarily  performing functions similar to those performed by any of the above
designated  officers  and in each  case  having  direct  responsibility  for the
administration of this Agreement.

                  "S&P":  Standard & Poor's Ratings Services and its successors,
and if such company  shall for any reason no longer  perform the  functions of a
securities  rating  agency,  "S&P"  shall  be  deemed  to  refer  to  any  other
"nationally recognized statistical rating organization" as set forth on the most
current  list of such  organizations  released by the  Securities  and  Exchange
Commission.

                  "Seller": Credit-Based Asset Servicing and Securitization LLC,
or its successor in interest,  in its capacity as seller under the Mortgage Loan
Purchase Agreement.

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

                  "Senior  Enhancement  Percentage":  For any Distribution Date,
the percentage obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal   Balances   of   the   Subordinated   Certificates   and   (ii)   the
Overcollateralization  Amount,  in each  case  after  taking  into  account  the
distribution of the Principal  Distribution  Amount on such Distribution Date by
(y) the Pool Balance as of the last day of the related Collection Period.

                                       38
<PAGE>

                  "Senior  Specified  Enhancement  Percentage":  On any  date of
determination thereof, 36.00%.

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

                  "Servicer Affiliate": A Person (i) controlling,  controlled by
or under  common  control with the Servicer or which is 50% or more owned by the
Servicer and (ii) which is qualified to service residential mortgage loans.

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

                  "Servicer  Remittance  Date": With respect to any Distribution
Date, one Business Day prior to such Distribution Date.

                  "Servicing Advances": All customary,  reasonable and necessary
"out of pocket" costs and expenses  incurred by the Servicer in the  performance
of its servicing obligations, including, but not limited to, the cost of (i) the
preservation,  restoration  and protection of the Mortgaged  Property,  (ii) any
enforcement  or  judicial  proceedings,   including   foreclosures,   (iii)  the
management  and  liquidation  of the REO Property and (iv)  compliance  with the
obligations under Section 3.08.

                  "Servicing Fee": With respect to each Mortgage Loan (including
each REO  Property) and for any calendar  month,  an amount equal to one month's
interest  (or in the  event of any  payment  of  interest  which  accompanies  a
Principal  Prepayment in full made by the Mortgagor  during such calendar month,
interest  for the number of days  covered by such  payment of  interest)  at the
Servicing  Fee Rate on the same  principal  amount  on  which  interest  on such
Mortgage Loan accrues for such calendar month.

                  "Servicing  Fee Rate":  With  respect to each  Mortgage  Loan,
0.50% per annum.

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

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

                  "Servicing  Standard":  Shall mean the  standards set forth in
Section 3.01.

                  "Simple Interest  Method":  The method of allocating a payment
to principal and interest, pursuant to which the portion of such payment that is
allocated to

                                       39
<PAGE>

interest is equal to the product of the fixed rate of interest multiplied by the
unpaid  principal  balance  multiplied  by the period of time elapsed  since the
preceding  payment of  interest  was made and  divided by either 360 or 365,  as
specified in the related  Mortgage  Note,  and the  remainder of such payment is
allocated to principal.

                  "Simple Interest Mortgage Loan": Any Mortgage Loan under which
the portion of a payment  allocable  to interest and the portion of such payment
allocable to principal is  determined  in  accordance  with the Simple  Interest
Method.

                  "Special  Servicing  Fee":  With respect to each Mortgage Loan
(except a Re-performing  Mortgage Loan) that is delinquent 90 or more days, $150
per month  payable until the earlier of (i) 18  consecutive  months and (ii) the
Delinquency status of such Mortgage Loan has been reduced to less than 90 days.

                  "Startup Day":  As defined in Section 9.01(b) hereof.

                  "Stayed  Funds":  Any  payment  required  to be made under the
terms of the  Certificates  and this  Agreement but which is not remitted by the
Servicer  because  the  Servicer  is  the  subject  of a  proceeding  under  the
Bankruptcy  Code and the making of such  remittance is prohibited by Section 362
of the Bankruptcy Code.

                  "Stepdown  Date":  The  later to occur of (x) the  earlier  to
occur of (A) the  Distribution  Date in December  2003 and (B) the  Distribution
Date on  which  the  aggregate  Certificate  Principal  Balance  of the  Class A
Certificates  is reduced to zero, and (y) the first  Distribution  Date on which
the Senior  Enhancement  Percentage (after taking into account  distributions of
principal  on such  Distribution  Date) is  greater  than or equal to the Senior
Specified Enhancement Percentage.

                  "Sub-group":  Either Sub-group 1A or Sub-group 1B.

                  "Sub-group  1A": The pool of Mortgage Loans  identified in the
Mortgage Loan Schedule as having been assigned to Sub-group 1A.

                  "Sub-group  1B": The pool of Mortgage Loans  identified in the
Mortgage Loan Schedule as having been assigned to Sub-group 1B.

                  "Subordinated  Certificates":  The Class M-1, Class M-2, Class
B-1, Class B-2, Class N, Class X and Class R Certificates.

                  "Subsequent   Overcollateralization   Amount":   As   of   any
Distribution  Date,  after the  application  of  principal  payments and Applied
Realized  Loss  Amounts,  an amount equal to the excess,  if any of (a) the Pool
Balance over (b) the sum of (i) the Certificate  Principal Balance of each Class
of Offered  Certificates  and (ii) the Remaining  Initial  Overcollateralization
Amount.

                  "Substitution   Adjustment  Amount":  As  defined  in  Section
2.03(d) hereof.

                  "Targeted    Overcollateralization    Amount":   As   of   any
Distribution  Date,  (x) prior to the Stepdown  Date,  1.75% of the initial Pool
Balance and (y) on and after the Stepdown  Date,  the lesser of (i) 1.75% of the
initial Pool Balance and (ii) the greater of (A) 3.50% of the Pool Balance as of
the last day of the related  Collection Period and (B) 0.50% of the initial Pool
Balance.

                                       40
<PAGE>

                  "Tax  Matters  Person":   The  tax  matters  person  appointed
pursuant to Section 9.01(e) hereof.

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

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

                  "Termination Price":  As defined in Section 10.01(a) hereof.

                  "Trigger Event": With respect to any Distribution Date, if (i)
the six-month  rolling average of 60+ Day Delinquent Loans equals or exceeds 45%
of  the  Senior  Enhancement  Percentage;  provided,  that  if  the  Certificate
Principal Balance of the Senior Certificates has been reduced to zero, a Trigger
Event will have occurred if the six-month  rolling average of 60+ Day Delinquent
Loans  equals or exceeds 20% or (ii) the  aggregate  amount of  Realized  Losses
incurred  since the Cut-Off Date through the last day of the related  Collection
Period divided by the initial Pool Balance  exceeds the  applicable  percentages
set forth below with respect to such Distribution Date:

<TABLE>
<CAPTION>
                  DISTRIBUTION DATE OCCURRING IN                          PERCENTAGE

                  <S>                                                          <C>
                  December 2003 through November 2004                          2.75%
                  December 2004 through November 2005                          3.50%
                  December 2005 through November 2006                          4.00%
                  December 2006 and thereafter                                 4.50%
</TABLE>

                  "Trust":  2000-CB4 Trust, the trust created hereunder.

                  "Trust Fund":  The segregated  pool of assets subject  hereto,
constituting the primary trust created hereby and to be administered  hereunder,
with  respect to a portion  of which two REMIC  elections  are to be made,  such
entire Trust Fund  consisting  of: (i) such Mortgage  Loans as from time to time
are  subject  to this  Agreement,  together  with the  Mortgage  Files  relating
thereto,  and together with all collections  thereon and proceeds thereof,  (ii)
any REO Property,  together with all collections  thereon and proceeds  thereof,
(iii)  the  Trustee's  rights  with  respect  to the  Mortgage  Loans  under all
insurance policies required to be maintained  pursuant to this Agreement and any
proceeds thereof,  (iv) the Depositor's  rights under the Mortgage Loan Purchase
Agreement

                                       41
<PAGE>

(including  any  security  interest  created  thereby)  and (v)  the  Collection
Account,  the Distribution  Account, the Excess Reserve Fund Account and any REO
Account  and such assets that are  deposited  therein  from time to time and any
investments  thereof,  together  with any and all income,  proceeds and payments
with respect thereto.  Notwithstanding  the foregoing,  however,  the Trust Fund
specifically  excludes  all  payments and other  collections  of  principal  and
interest representing Arrearage.

                  "Trustee":  The  Chase  Manhattan  Bank,  a New  York  banking
corporation, or any successor Trustee appointed as herein provided.

                  "Trustee  Fee":  With respect to any  Distribution  Date,  the
product of (x)  one-twelfth of the Trustee Fee Rate and (y) the aggregate of the
Principal  Balances of all  Mortgage  Loans as of the opening of business on the
first day of the  related  Collection  Period,  subject  to a minimum  amount of
$7,500 per annum.

                  "Trustee  Fee Rate":  With respect to any  Distribution  Date,
0.0125% per annum.

                  "Underwriters": First Union Securities, Inc. and Bear, Stearns
& Co. Inc., as underwriters with respect to the Offered Certificates.

                  "United  States  Person"  or "U.S.  Person":  (i) A citizen or
resident of the United States,  (ii) a corporation,  partnership or other entity
treated as a corporation  or  partnership  for United States  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)  and in the case of a partnership  to
which any REMIC residual interest is being transferred,  all persons that own an
interest in such partnership either directly or through any entity that is not a
corporation  for United  States  federal  income tax purposes and required to be
United  States  Persons or (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 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 a U.S. Person.

                  "Unpaid  Realized Loss Amount":  For any Class B-1, Class B-2,
Class M-1 and Class M-2 Certificates and as to any Distribution Date, the excess
of (x) the aggregate Applied Realized Loss Amounts applied respect to such Class
for  all  prior   Distribution  Dates  over  (y)  the  aggregate  Realized  Loss
Amortization  Amounts  with  respect  to such  Class for all prior  Distribution
Dates.

                  "VA":  The United States Department of Veterans Affairs.

                  "VA Approved Lender": Those institutions which are approved by
the VA to act as servicer and mortgagee of record pursuant to VA Regulations.

                                       42
<PAGE>

                  "VA  Guaranty  Agreements":  With  respect  to a VA Loan,  the
agreements evidencing the guaranty of such Mortgage Loan by the VA.

                  "VA Loan":  A Mortgage Loan guaranteed by the VA.

                  "VA Regulations":  Any and all regulations  promulgated by the
VA under the Servicemen's Readjustment Act of 1944, as amended.

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

                  "Voting  Rights":  The portion of the voting  rights of all of
the  Certificates  which is  allocated  to any  Certificate.  The Voting  Rights
allocated among Holders of the Offered  Certificates  shall be 98%, and shall be
allocated  among each such  Class  according  to the  fraction,  expressed  as a
percentage,  the  numerator  of which  is the  aggregate  Certificate  Principal
Balance  of all  the  Certificates  of  such  Class  then  outstanding  and  the
denominator of which is the aggregate  Certificate  Principal Balance of all the
Offered Certificates then outstanding.  The Voting Rights allocated to each such
Class of Certificates shall be allocated among all holders of each such Class in
proportion   to  the   outstanding   Certificate   Principal   Balance  of  such
Certificates;  provided, however, that any Certificate registered in the name of
the Servicer, the Depositor or the Trustee or any of their respective affiliates
shall not be included in the calculation of Voting Rights. The percentage of all
the Voting Rights  allocated among the Holders of the Class X Certificate  shall
be 2%. The Class N and Class R Certificates shall have no Voting Rights.

                  "Weighted  Average  Group 1 Net Mortgage  Rate":  The weighted
average  (based  on  Principal  Balance  as of the  first  day  of  the  related
Collection  Period or, in the case of the first  Distribution  Date, the Cut-Off
Date)  of the  Net  Mortgage  Interest  Rates  of the  Group 1  Mortgage  Loans,
expressed  as an  annual  rate and  calculated  on the  basis of  twelve  months
consisting of 30 days each and a 360-day year.

                  "Weighted  Average  Group 2 Net Mortgage  Rate":  The weighted
average  (based  on  Principal  Balance  as of the  first  day  of  the  related
Collection  Period or, in the case of the first  Distribution  Date, the Cut-Off
Date)  of the  Net  Mortgage  Interest  Rates  of the  Group 2  Mortgage  Loans,
expressed  as an  annual  rate and  calculated  on the  basis of  twelve  months
consisting of 30 days each and a 360-day year.

                  "Weighted  Average Net Mortgage  Rate":  The weighted  average
(based on Principal Balance as of the first day of the related Collection Period
or, in the case of the first  Distribution  Date,  the Cut-Off  Date) of the Net
Mortgage  Interest Rates of the Mortgage Loans,  expressed as an annual rate and
calculated  on the  basis of  twelve  months  consisting  of 30 days  each and a
360-day year.

                                       43
<PAGE>

                  "Written Order to Authenticate":  A written order by which the
Depositor directs the Trustee to issue the Certificates.

                  Section 1.02. Accounting.

                  Unless  otherwise  specified  herein,  for the  purpose of any
definition  or  calculation,   whenever  amounts  are  required  to  be  netted,
subtracted or added or any  distributions are taken into account such definition
or calculation and any related  definitions or calculations  shall be determined
without duplication of such functions.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

                  Section 2.01. Conveyance of Mortgage Loans.

                  The  Depositor,  concurrently  with the execution and delivery
hereof,  does hereby  transfer,  assign,  set over and  otherwise  convey to the
Trustee  without  recourse  for the  benefit of the  Certificateholders  all the
right,  title and interest of the  Depositor,  including  any security  interest
therein  for the  benefit of the  Depositor,  in and to (i) each  Mortgage  Loan
identified on the Mortgage  Loan  Schedule,  including the related  Cut-Off Date
Principal Balance,  all interest accruing thereon after the Cut-Off Date and all
collections  in respect of interest and  principal  due after the Cut-Off  Date;
(ii) property  which secured each such Mortgage Loan and which has been acquired
by  foreclosure  or deed  in lieu of  foreclosure;  (iii)  its  interest  in any
insurance policies in respect of the Mortgage Loans; (iv) all proceeds of any of
the foregoing;  (v) the rights of the Depositor under the Mortgage Loan Purchase
Agreement,  and (vi) all other  assets  included  or to be included in the Trust
Fund;  provided,  however, so long as the Servicer is an FHA Approved Mortgagee,
the  Commissioner  of HUD shall have no obligation to recognize or deal with any
person other than the Servicer with respect to FHA  Insurance.  Such  assignment
includes all interest and principal  due to the Depositor or the Servicer  after
the Cut-Off Date with respect to the Mortgage Loans.

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

                  (i)      the original  Mortgage Note,  endorsed  either (A) in
                           blank or (B) in the following form: "Pay to the order
                           of The Chase  Manhattan  Bank,  as Trustee  under the
                           Pooling and Servicing Agreement, dated as of November
                           1,  2000,  among  Credit-Based  Asset  Servicing  and
                           Securitization   LLC,   Residential   Asset   Funding
                           Corporation,  Litton Loan  Servicing LP and The Chase
                           Manhattan  Bank,  C-BASS  Mortgage Loan  Asset-Backed
                           Certificates,  Series 2000-CB4, without recourse", or
                           with respect to any lost Mortgage

                                       44
<PAGE>

                           Note, an original Lost Note Affidavit,  together with
                           a copy of the related Mortgage Note;

                  (ii)     the  original  Mortgage  with  evidence of  recording
                           thereon, and the original recorded power of attorney,
                           if the Mortgage  was executed  pursuant to a power of
                           attorney,  with evidence of recording  thereon or, if
                           such Mortgage or power of attorney has been submitted
                           for  recording  but has not  been  returned  from the
                           applicable public recording office,  has been lost or
                           is not otherwise  available,  a copy of such Mortgage
                           or power of attorney,  as the case may be,  certified
                           to be a  true  and  complete  copy  of  the  original
                           submitted for recording;

                  (iii)    an  original  Assignment  of  Mortgage,  in form  and
                           substance  acceptable  for  recording.  The  Mortgage
                           shall be assigned  either (A) in blank or (B) to "The
                           Chase  Manhattan  Bank,  as Trustee under the Pooling
                           and  Servicing  Agreement,  dated as of  November  1,
                           2000,   among   Credit-Based   Asset   Servicing  and
                           Securitization   LLC,   Residential   Asset   Funding
                           Corporation,  Litton Loan  Servicing LP and The Chase
                           Manhattan  Bank,  C-BASS  Mortgage Loan  Asset-Backed
                           Certificates, Series 2000-CB4, without recourse";

                  (iv)     an original  copy of any  intervening  assignment  of
                           Mortgage showing a complete chain of assignments;

                  (v)      the  original or a certified  copy of lender's  title
                           insurance policy;

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

                  (vii)    for each FHA Loan,  the original  Mortgage  Insurance
                           Certificate;

                  (viii)   for  each  VA  Loan,   the  original   Loan  Guaranty
                           Certificate;

                  (ix)     [Reserved]; and

                  (x)      the  original,  or a certified  copy of the,  Primary
                           Insurance Policy.

                  The  Trustee  agrees  to  execute  and  deliver  (or cause the
Custodian  to execute and  deliver) to the  Depositor on or prior to the Closing
Date an  acknowledgment  of  receipt  of the  original  Mortgage  Note (with any
exceptions noted), substantially in the form attached as Exhibit F-3 hereto.

                  The Seller or  Servicer  shall  within 90 days  following  the
Closing  Date,  with  respect  to each  Mortgage  Loan  that is  subject  to the
provisions of the Homeownership and Equity Protection Act of 1994 place a legend
on the original  Mortgage Note indicating the  satisfaction of the provisions of
such Act and the

                                       45
<PAGE>

regulations issued  thereunder,  to the effect that the Mortgage Loan is subject
to special truth in lending rules.

                  The Servicer shall promptly (and in no event later than thirty
days  following the Closing Date) submit or cause to be submitted for recording,
at the Servicer's expense and at no expense to the Trust Fund or the Trustee, in
the  appropriate  public  office  for real  property  records,  each  Assignment
referred to in  Sections  2.01(iii)  and (iv) above.  In the event that any such
Assignment  is lost or  returned  unrecorded  because of a defect  therein,  the
Seller shall promptly prepare or cause to be prepared a substitute Assignment or
cure or cause to be cured such defect,  as the case may be, and thereafter cause
each such Assignment to be duly recorded.

                  If any of the documents referred to in Section 2.01(ii), (iii)
or (iv) above has as of the Closing Date been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y) has
been lost or such public  recording  office has  retained  the  original of such
document,  the  obligations  of the Seller to deliver  such  documents  shall be
deemed to be  satisfied  upon (1)  delivery to the Trustee or the  Custodian  no
later than the Closing Date,  of a copy of each such  document  certified by the
Seller in the case of (x) above or the applicable public recording office in the
case of (y)  above  to be a true  and  complete  copy of the  original  that was
submitted  for  recording  and (2) if  such  copy is  certified  by the  Seller,
delivery to the  Trustee or the  Custodian,  promptly  upon  receipt  thereof of
either the  original  or a copy of such  document  certified  by the  applicable
public  recording  office to be a true and complete  copy of the  original.  The
Seller shall  deliver or cause to be  delivered to the Trustee or the  Custodian
promptly  upon  receipt  thereof any other  documents  constituting  a part of a
Mortgage  File received with respect to any Mortgage  Loan,  including,  but not
limited to, any original  documents  evidencing an assumption or modification of
any Mortgage Loan.

                  Upon   discovery  or  receipt  of  notice  of  any  materially
defective  document in, or that a document is missing from, a Mortgage File, the
Seller shall have 120 days to cure such defect or 150 days following the Closing
Date, in the case of missing  Mortgages or  Assignments  or deliver such missing
document  to the  Trustee or the  Custodian.  If the  Seller  does not cure such
defect or deliver such  missing  document  within such time  period,  the Seller
shall either  repurchase or substitute for such Mortgage Loan in accordance with
Section 2.03.

                  The Seller shall cause the  Assignments of Mortgage which were
delivered in blank to be completed and shall cause all  Assignments  referred to
in Section  2.01(iii) hereof and, to the extent  necessary,  in Section 2.01(iv)
hereof  to be  recorded;  provided,  however,  the  Seller  need not cause to be
recorded any  Assignment  which relates to a Mortgage  Loan in any  jurisdiction
under the laws of which, as evidenced by an Opinion of Counsel  delivered by the
Seller  to the  Trustee  and  the  Rating  Agencies,  the  recordation  of  such
assignment  is not  necessary to protect the  Trustee's  interest in the related
Mortgage  Loan.  The Seller  shall be required to deliver such  assignments  for
recording  within 30 days of the  Closing  Date.  The Seller  shall  furnish the
Trustee,  or its designated  agent,  with a copy of each  assignment of Mortgage
submitted  for  recording.  In the  event  that any such  Assignment  is lost or
returned unrecorded because of a defect therein, the

                                       46
<PAGE>

Seller shall promptly have a substitute  Assignment prepared or have such defect
cured, as the case may be, and thereafter  cause each such Assignment to be duly
recorded.  In the event that any  Mortgage  Note is  endorsed in blank as of the
Closing Date,  promptly  following the Closing Date the Seller shall cause to be
completed such  endorsements  "Pay to the order of The Chase  Manhattan Bank, as
Trustee under the Pooling and Servicing Agreement, dated as of November 1, 2000,
among  Credit-Based Asset Servicing and  Securitization  LLC,  Residential Asset
Funding  Corporation,  Litton Loan  Servicing LP and The Chase  Manhattan  Bank,
C-BASS  Mortgage  Loan  Asset-Backed  Certificates,   Series  2000-CB4,  without
recourse."

                  The  Depositor  herewith  delivers  to the Trustee an executed
copy of the Mortgage Loan Purchase Agreement.

                  Section 2.02. Acceptance by Trustee.

                  The  Trustee  acknowledges  the  receipt  of,  subject  to the
provisions  of Section  2.01 and subject to the review  described  below and any
exceptions  noted on the exception report described in the next paragraph below,
the documents referred to in Section 2.01 above and all other assets included in
the  definition  of "Trust Fund" and  declares  that it holds and will hold such
documents and the other documents  delivered to it constituting a Mortgage File,
and that it holds or will hold all such assets and such other assets included in
the definition of "Trust Fund" in trust for the exclusive use and benefit of all
present and future Certificateholders.

                  The Trustee agrees, for the benefit of the Certificateholders,
to review (or cause the  Custodian to review) each  Mortgage File within 60 days
after the Closing Date (or,  with respect to any  document  delivered  after the
Startup  Day,  within  60 days of  receipt  and with  respect  to any  Qualified
Substitute Mortgage, within 60 days after the assignment thereof) and to certify
in  substantially  the form  attached  hereto as  Exhibit  F-1 that,  as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any  Mortgage  Loan  specifically  identified  in the  exception
report  annexed  thereto as not being  covered by such  certification),  (i) all
documents required to be delivered to it pursuant Section 2.01 of this Agreement
are in its possession, (ii) such documents have been reviewed by it and have not
been mutilated, damaged or torn and relate to such Mortgage Loan and (iii) based
on its  examination  and only as to the foregoing,  the information set forth in
the Mortgage Loan Schedule  that  corresponds  to items (1), (2), (3), (5), (13)
and (26) (in the case of (26), only as to whether there is a prepayment penalty)
of the Mortgage Loan Schedule accurately  reflects  information set forth in the
Mortgage File. It is herein  acknowledged  that, in conducting such review,  the
Trustee (or the  Custodian,  as  applicable)  is under no duty or  obligation to
inspect,  review or examine any such  documents,  instruments,  certificates  or
other papers to determine that they are genuine, enforceable, or appropriate for
the  represented  purpose or that they have  actually been recorded or that they
are other than what they purport to be on their face.

                  Prior to the  first  anniversary  date of this  Agreement  the
Trustee  shall  deliver (or cause the Custodian to deliver) to the Depositor and
the Servicer a final

                                       47
<PAGE>

certification  in  the  form  annexed  hereto  as  Exhibit  F-2  evidencing  the
completeness  of the  Mortgage  Files,  with  any  applicable  exceptions  noted
thereon.

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

                  The Depositor and the Trustee  intend that the  assignment and
transfer  herein  contemplated  constitute a sale of the Mortgage  Loans and the
Related Documents,  conveying good title thereto free and clear of any liens and
encumbrances,  from the  Depositor to the Trustee and that such  property not be
part of the Depositor's  estate or property of the Depositor in the event of any
insolvency by the Depositor.  In the event that such conveyance is deemed to be,
or to be made as security  for, a loan,  the parties  intend that the  Depositor
shall be deemed to have  granted  and does  hereby  grant to the Trustee a first
priority  perfected security interest in all of the Depositor's right, title and
interest in and to the Mortgage Loans and the Related  Documents,  and that this
Agreement shall constitute a security agreement under applicable law.

                  Section 2.03.  Repurchase or Substitution of Mortgage Loans by
the Seller.

                  (a)  Upon  discovery  or  receipt  of  written  notice  of any
materially defective document in, or that a document is missing from, a Mortgage
File or of the breach by the Seller of any representation,  warranty or covenant
under the Mortgage Loan Purchase  Agreement or in Section 2.04 in respect of any
Mortgage Loan which materially adversely affects the value of such Mortgage Loan
or  the  interest  therein  of  the  Certificateholders,  the  Trustee  (or  the
Custodian,  as applicable)  shall promptly notify the Seller and the Servicer of
such defect, missing document or breach and request that the Seller deliver such
missing  document  or cure such  defect or  breach  within  120 days or 150 days
following the Closing Date, in the case of missing Mortgages or Assignments from
the date the Seller was notified of such missing document, defect or breach, and
if the Seller  does not  deliver  such  missing  document or cure such defect or
breach in all material  respects  during such period,  the Trustee shall enforce
the Seller's obligation under the Mortgage Loan Purchase Agreement and cause the
Seller to  repurchase  such  Mortgage  Loan from the Trust Fund at the  Purchase
Price on or prior to the Determination Date following the expiration of such 120
day period (subject to Section  2.03(e));  provided that, in connection with any
such breach that could not reasonably have been cured within such 120 day or 150
day period,  if the Seller shall have  commenced to cure such breach within such
120 day or 150 day period, the Seller shall

                                       48
<PAGE>

be permitted to proceed thereafter diligently and expeditiously to cure the same
within  the  additional   period  provided  under  the  Mortgage  Loan  Purchase
Agreement.  The  Purchase  Price  for the  repurchased  Mortgage  Loan  shall be
deposited in the Collection  Account,  and the Trustee,  upon receipt of written
certification from the Servicer of such deposit, shall release to the Seller the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment,  in each case without recourse, as the Seller shall furnish to it
and as shall be  necessary  to vest in the Seller  any  Mortgage  Loan  released
pursuant hereto and the Trustee shall have no further responsibility with regard
to such  Mortgage  File.  In lieu of  repurchasing  any  such  Mortgage  Loan as
provided  above,  the Seller may cause such Mortgage Loan to be removed from the
Trust  Fund (in  which  case it shall  become a  Defective  Mortgage  Loan)  and
substitute  one or more  Eligible  Substitute  Mortgage  Loans in the manner and
subject to the  limitations set forth in Section  2.03(d).  It is understood and
agreed  that  the  obligation  of the  Seller  to cure or to  repurchase  (or to
substitute for) any Mortgage Loan as to which a document is missing,  a material
defect  in a  constituent  document  exists  or as to which  such a  breach  has
occurred and is continuing  shall  constitute the sole remedy against the Seller
respecting such omission, defect or breach available to the Trustee on behalf of
the Certificateholders.

                  (b)  A  Mortgage   Loan  that  has  an  Arrearage   cannot  be
substituted for a Mortgage Loan that does not have an Arrearage.

                  (c) Within 90 days of the earlier of discovery by the Servicer
or  receipt  of  notice by the  Servicer  of the  breach of any  representation,
warranty or covenant of the Servicer set forth in Section 2.05 which  materially
and adversely  affects the interests of the  Certificateholders  in any Mortgage
Loan, the Servicer shall cure such breach in all material respects.

                  (d) Any substitution of Eligible Substitute Mortgage Loans for
Defective Mortgage Loans made pursuant to Section 2.03(a) must be effected prior
to the last  Business Day that is within two years after the Closing Date. As to
any  Defective  Mortgage  Loan for  which the  Seller  substitutes  an  Eligible
Substitute  Mortgage Loan or Loans, such  substitution  shall be effected by the
Seller delivering to the Trustee,  for such Eligible Substitute Mortgage Loan or
Loans, the Mortgage Note, the Mortgage,  the Assignment to the Trustee, and such
other documents and agreements,  with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers'  Certificate providing that
each such Eligible Substitute Mortgage Loan satisfies the definition thereof and
specifying the Substitution  Adjustment  Amount (as described below), if any, in
connection with such  substitution.  The Trustee shall  acknowledge  receipt for
such Eligible  Substitute  Mortgage Loan or Loans and,  within ten Business Days
thereafter, shall review such documents as specified in Section 2.02 and deliver
to the  Servicer,  with respect to such  Eligible  Substitute  Mortgage  Loan or
Loans, a certification substantially in the form attached hereto as Exhibit F-1,
with any applicable  exceptions  noted  thereon.  Within one year of the date of
substitution,  the  Trustee  shall  deliver  to  the  Servicer  a  certification
substantially  in the form of Exhibit F-2 hereto with  respect to such  Eligible
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Eligible Substitute

                                       49
<PAGE>

Mortgage Loans in the month of  substitution  are not part of the Trust Fund and
will be retained by the Seller. For the month of substitution,  distributions to
Certificateholders  will reflect the  collections  and  recoveries in respect of
such  Defective  Mortgage Loan in the Collection  Period  preceding the month of
substitution  and the  Depositor  or the  Seller,  as the  case  may  be,  shall
thereafter be entitled to retain all amounts subsequently received in respect of
such Defective Mortgage Loan. The Seller shall give or cause to be given written
notice to the  Certificateholders  that such substitution has taken place, shall
amend the  Mortgage  Loan  Schedule  to reflect  the  removal of such  Defective
Mortgage  Loan  from the terms of this  Agreement  and the  substitution  of the
Eligible  Substitute  Mortgage  Loan or Loans and  shall  deliver a copy of such
amended  Mortgage Loan  Schedule to the Trustee.  Upon such  substitution,  such
Eligible Substitute Mortgage Loan or Loans shall constitute part of the Mortgage
Pool and shall be subject in all respects to the terms of this Agreement and, in
the case of a  substitution  effected by the Seller,  the Mortgage Loan Purchase
Agreement,  including,  in the case of a substitution effected by the Seller all
applicable  representations and warranties thereof included in the Mortgage Loan
Purchase Agreement and all applicable representations and warranties thereof set
forth in Section 2.04, in each case as of the date of substitution.

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

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

                  (e) Upon discovery by the Seller,  the Servicer or the Trustee
that any Mortgage  Loan does not  constitute a "qualified  mortgage"  within the
meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall
within two Business Days give written notice  thereof to the other  parties.  In
connection therewith, the Seller shall repurchase or, subject to the limitations
set forth in Section 2.03(d), substitute one or

                                       50
<PAGE>

more Eligible Substitute Mortgage Loans for the affected Mortgage Loan within 90
days of the earlier of  discovery or receipt of such notice with respect to such
affected  Mortgage  Loan. In addition,  upon  discovery  that a Mortgage Loan is
defective in a manner that would cause it to be a "defective  obligation" within
the meaning of Treasury  regulations  relating to REMICs,  the Seller shall cure
the defect or make the required  purchase or  substitution no later than 90 days
after the discovery of the defect.  Any such repurchase or substitution shall be
made in the same manner as set forth in Section 2.03(a),  if made by the Seller.
The  Trustee  shall  reconvey  to the Seller the  Mortgage  Loan to be  released
pursuant hereto in the same manner, and on the same terms and conditions,  as it
would a Mortgage Loan repurchased for breach of a representation or warranty.

                  Notwithstanding anything to the contrary contained herein, the
parties hereto acknowledge that the functions of the Trustee with respect to the
custody,  acceptance,  inspection  and release of the Mortgage Files pursuant to
Sections 2.01, 2.02 and 2.03 and preparation and delivery of the  certifications
in the form of Exhibit  F-1,  Exhibit F-2 and Exhibit F-3 shall be  performed by
the Custodian  pursuant to the terms and conditions of the Custodial  Agreement.
The fees and expenses of the Custodian shall be paid by the Servicer.

                  Section  2.04.  Representations  and  Warranties of the Seller
with Respect to the Mortgage Loans.

                  The Seller hereby  represents  and warrants to the Trustee for
the benefit of the Certificateholders  that as of the Closing Date or as of such
other date specifically provided herein:

                  (a) The  representations  and  warranties  made by the  Seller
pursuant to Section  3.01 of the Mortgage  Loan  Purchase  Agreement  are hereby
being made to the Trustee and are true and correct as of the Closing Date.

                  (b) Any written  agreement between the Mortgagor in respect of
a Mortgage Loan and the Servicer  modifying such Mortgagor's  obligation to make
payments  under the  Mortgage  Loan (such  modified  Mortgage  Loan, a "Modified
Mortgage Loan") involved the application of the Seller's underwriting  standards
or some  assessment of the  Mortgagor's  ability to repay the Modified  Mortgage
Loan.

                  With respect to the  representations  and warranties set forth
in this Section  2.04 that are made to the best of the Seller's  knowledge or as
to which the Seller has no knowledge, if it is discovered by the Depositor,  the
Seller,  the Servicer or the Trustee that the  substance of such  representation
and warranty is inaccurate and such inaccuracy  materially and adversely affects
the  value  of  the  related  Mortgage  Loan  or  the  interest  therein  of the
Certificateholders  then,  notwithstanding  the Seller's lack of knowledge  with
respect to the substance of such representation and warranty being inaccurate at
the time the  representation  or warranty  was made,  such  inaccuracy  shall be
deemed a breach of the applicable representation or warranty.

                                       51
<PAGE>

                  Upon discovery by the Depositor,  the Seller,  the Servicer or
the Trustee of a breach of any of the representations  and warranties  contained
in this Section that materially and adversely  affects the value of any Mortgage
Loan or the interest therein of the  Certificateholders,  the party  discovering
the breach shall give prompt  written notice to the others and in no event later
than two Business  Days from the date of such  discovery.  Within ninety days of
its  discovery  or its  receipt  of notice  of any such  missing  or  materially
defective  documentation or any such breach of a representation or warranty, the
Seller  shall  promptly  deliver  such  missing  document or cure such defect or
breach in all material respects, or in the event such defect or breach cannot be
cured,  the Seller  shall  repurchase  the affected  Mortgage  Loan or cause the
removal of such Mortgage Loan from the Trust Fund and  substitute  for it one or
more Eligible  Substitute  Mortgage  Loans,  in either case, in accordance  with
Section 2.03.

                  It is  understood  and  agreed  that the  representations  and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee  and shall  inure to the benefit of the  Certificateholders
notwithstanding  any restrictive or qualified  endorsement or assignment.  It is
understood  and agreed that the  obligations  of the Seller set forth in Section
2.03(a) to cure,  substitute  for or  repurchase a Mortgage Loan pursuant to the
Mortgage Loan Purchase  Agreement  constitute the sole remedies available to the
Certificateholders  or to the Trustee on their behalf respecting a breach of the
representations and warranties contained in this Section 2.04.

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

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

                  (i) The Servicer is duly organized,  validly existing,  and in
         good standing under the laws of the  jurisdiction  of its formation and
         has all licenses  necessary to ensure the enforceability or validity of
         each Mortgage Loan and to carry on its business as now being conducted,
         except for such  licenses,  certificates  and  permits  the  absence of
         which,  individually  or in the  aggregate,  would not have a  material
         adverse  effect on the ability of the  Servicer to conduct its business
         as it is presently conducted;  the Servicer has the power and authority
         to execute  and deliver  this  Agreement  and to perform in  accordance
         herewith;  the  execution,  delivery and  performance of this Agreement
         (including all instruments of transfer to be delivered pursuant to this
         Agreement)  by the Servicer and the  consummation  of the  transactions
         contemplated  hereby  have  been  duly  and  validly  authorized;  this
         Agreement  evidences the valid,  binding and enforceable  obligation of
         the   Servicer,   subject   to   applicable   bankruptcy,   insolvency,
         reorganization,   moratorium  or  other  similar  laws   affecting  the
         enforcement of creditors' rights generally; and all requisite corporate
         action has been taken by the Servicer to make this Agreement  valid and
         binding upon the Servicer in accordance with its terms;

                                       52
<PAGE>

                  (ii) The consummation of the transactions contemplated by this
         Agreement  are in the  ordinary  course of business of the Servicer and
         will  not  result  in  the  breach  of any  term  or  provision  of the
         certificate of formation or the  partnership  agreement of the Servicer
         or result in the breach of any term or provision  of, or conflict  with
         or  constitute  a default  under or result in the  acceleration  of any
         obligation under, any agreement,  indenture or loan or credit agreement
         or other  instrument  to which the Servicer or its property is subject,
         or  result  in the  violation  of any  law,  rule,  regulation,  order,
         judgment or decree to which the Servicer or its property is subject;

                  (iii)  The   Servicer  is  an  approved   seller/servicer   of
         conventional  mortgage loans for FNMA, and is an FHA Approved Mortgagee
         in good standing to service mortgages,  is a VA Approved Lender and has
         not been  suspended as a mortgagee or servicer by the FHA or VA and has
         the facilities,  procedures and experienced personnel necessary for the
         sound  servicing  of  mortgage  loans of the same type as the  Mortgage
         Loans. The Servicer is, and shall remain for as long as it is servicing
         the  Mortgage  Loans  hereunder,  in good  standing  as a FHA  Approved
         Mortgagee and a VA Approved  Lender and to service  mortgage  loans for
         HUD,  FNMA or  FHLMC,  and no event  has  occurred,  including  but not
         limited  to a  change  in  insurance  coverage,  which  would  make the
         Servicer unable to comply with HUD, FNMA,  FHLMC, FHA or VA eligibility
         requirements  or which would require  notification to any of HUD, FNMA,
         FHLMC, FHA or VA;

                  (iv)  This  Agreement,   and  all  documents  and  instruments
         contemplated  hereby which are executed and  delivered by the Servicer,
         constitute and will constitute valid, legal and binding  obligations of
         the Servicer,  enforceable in accordance with their  respective  terms,
         except  as  the  enforcement  thereof  may  be  limited  by  applicable
         bankruptcy laws and general principles of equity;

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

                  (vi) There is no action,  suit,  proceeding  or  investigation
         pending or, to its  knowledge,  threatened  against the Servicer  that,
         either  individually  or in the  aggregate,  may result in any material
         adverse  change  in  the  business,  operations,  financial  condition,
         properties or assets of the Servicer,  or in any material impairment of
         the  right  or  ability  of the  Servicer  to  carry  on  its  business
         substantially  as now  conducted,  or in any material  liability on the
         part of the Servicer,  or that would draw into question the validity or
         enforceability  of this Agreement or of any action taken or to be taken
         in connection with the obligations of the Servicer contemplated herein,
         or that  would be  likely  to  impair  materially  the  ability  of the
         Servicer to perform under the terms of this Agreement;

                  (vii)  No   consent,   approval  or  order  of  any  court  or
         governmental agency or body is required for the execution, delivery and
         performance  by the Servicer of or compliance by the Servicer with this
         Agreement or the consummation of the

                                       53
<PAGE>

         transactions contemplated by this Agreement,  except for such consents,
         approvals,  authorizations and orders, if any, that have been obtained;
         and

                  (viii) Neither this Agreement nor any information, certificate
         of an officer,  statement  furnished in writing or report  delivered to
         the  Trustee  by the  Servicer  in  connection  with  the  transactions
         contemplated  hereby contains or will contain any untrue statement of a
         material fact or omits or will omit to state a material fact  necessary
         in order  to make the  statements  contained  therein,  in light of the
         circumstances under which they were made, not misleading.

                  It  is  understood   and  agreed  that  the   representations,
warranties  and covenants set forth in this Section 2.05 shall survive  delivery
of the  Mortgage  Files to the  Trustee  and shall  inure to the  benefit of the
Trustee, the Depositor and the Certificateholders.  Upon discovery by any of the
Depositor,  the  Servicer,  the Seller or the  Trustee of a breach of any of the
foregoing  representations,   warranties  and  covenants  which  materially  and
adversely affects the value of any Mortgage Loan or the interests therein of the
Certificateholders,  the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following  such  discovery)
to the other parties hereto.

                  Section 2.06. Representations and Warranties of the Depositor.

                  The  Depositor  represents  and  warrants to the Trust and the
Trustee on behalf of the Certificateholders as follows:

                  (i) This  agreement  constitutes  a legal,  valid and  binding
         obligation  of the  Depositor,  enforceable  against the  Depositor  in
         accordance with its terms,  except as enforceability  may be limited by
         applicable bankruptcy, insolvency, reorganization,  moratorium or other
         similar laws now or hereafter in effect  affecting the  enforcement  of
         creditors' rights in general and except as such  enforceability  may be
         limited  by  general  principles  of equity  (whether  considered  in a
         proceeding at law or in equity);

                  (ii)  Immediately  prior  to the sale  and  assignment  by the
         Depositor to the Trustee on behalf of the Trust of each Mortgage  Loan,
         the  Depositor  had good and  marketable  title to each  Mortgage  Loan
         (insofar as such title was conveyed to it by the Seller)  subject to no
         prior lien, claim, participation interest, mortgage, security interest,
         pledge, charge or other encumbrance or other interest of any nature;

                  (iii) As of the Closing Date,  the  Depositor has  transferred
         all right,  title  interest  in the  Mortgage  Loans to the  Trustee on
         behalf of the Trust;

                  (iv) The Depositor has not  transferred  the Mortgage Loans to
         the Trustee on behalf of the Trust with any intent to hinder,  delay or
         defraud any of its creditors;

                                       54
<PAGE>

                  (v) The  Depositor has been duly  incorporated  and is validly
         existing as a corporation  in good standing under the laws of the State
         of Delaware,  with full corporate power and authority to own its assets
         and conduct its business as presently being conducted;

                  (vi) The  Depositor  is not in  violation  of its  articles of
         incorporation or by-laws or in default in the performance or observance
         of any material obligation,  agreement, covenant or condition contained
         in any contract,  indenture,  mortgage, loan agreement,  note, lease or
         other  instrument  to which the  Depositor is a party or by which it or
         its properties may be bound, which default might result in any material
         adverse  changes  in the  financial  condition,  earnings,  affairs  or
         business of the  Depositor  or which  might  materially  and  adversely
         affect the properties or assets, taken as a whole, of the Depositor;

                  (vii)  The  execution,   delivery  and   performance  of  this
         Agreement by the Depositor,  and the  consummation of the  transactions
         contemplated  thereby,  do not and will not result in a material breach
         or violation of any of the terms or provisions of, or, to the knowledge
         of the Depositor,  constitute a default under, any indenture, mortgage,
         deed of trust, loan agreement or other agreement or instrument to which
         the Depositor is a party or by which the Depositor is bound or to which
         any of the  property or assets of the  Depositor  is subject,  nor will
         such actions  result in any violation of the provisions of the articles
         of  incorporation  or by-laws of the  Depositor  or, to the best of the
         Depositor's knowledge without independent investigation, any statute or
         any order,  rule or regulation of any court or  governmental  agency or
         body having jurisdiction over the Depositor or any of its properties or
         assets (except for such conflicts, breaches, violations and defaults as
         would  not  have  a  material  adverse  effect  on the  ability  of the
         Depositor to perform its obligations under this Agreement);

                  (viii) To the best of the  Depositor's  knowledge  without any
         independent investigation, no consent, approval, authorization,  order,
         registration  or  qualification  of or with any  court or  governmental
         agency  or body of the  United  States  or any  other  jurisdiction  is
         required for the issuance of the  Certificates,  or the consummation by
         the Depositor of the other transactions contemplated by this Agreement,
         except  such  consents,  approvals,  authorizations,  registrations  or
         qualifications  as (a) may be required  under State  securities or Blue
         Sky laws, (b) have been previously obtained or (c) the failure of which
         to obtain would not have a material  adverse effect on the  performance
         by  the  Depositor  of  its  obligations  under,  or  the  validity  or
         enforceability of, this Agreement; and

                  (ix)  There  are no  actions,  proceedings  or  investigations
         pending  before or, to the  Depositor's  knowledge,  threatened  by any
         court,  administrative  agency or other tribunal to which the Depositor
         is a party or of which any of its properties is the subject:  (a) which
         if determined  adversely to the Depositor would have a material adverse
         effect on the business, results of operations or financial condition of
         the  Depositor;  (b) asserting the  invalidity of this Agreement or the
         Certificates;  (c) seeking to prevent the issuance of the  Certificates
         or the  consummation  by  the  Depositor  of  any  of the  transactions
         contemplated  by this

                                       55
<PAGE>

         Agreement, as the case may be; (d) which might materially and adversely
         affect the  performance by the Depositor of its  obligations  under, or
         the validity or enforceability of, this Agreement.

                  Section 2.07.  Issuance of Certificates and the Uncertificated
Regular Interests.

                  The Trustee  acknowledges the assignment to it of the Mortgage
Loans and the delivery to it (or the  Custodian,  as bailee and Custodian of the
Trustee) of the Mortgage  Files,  subject to the provisions of Sections 2.01 and
2.02,  together with the  assignment  to it of all other assets  included in the
Trust  Fund,  receipt of which is hereby  acknowledged.  Concurrently  with such
assignment and delivery and in exchange therefor,  the Trustee,  pursuant to the
Written  Order to  Authenticate  executed  by an officer of the  Depositor,  has
executed, authenticated and delivered to or upon the order of the Depositor, the
Certificates (other than the Class X and Class R Certificates) in minimum dollar
denominations  of $25,000 and integral  dollar  multiples  of $1 in excess.  The
Class  N,  Class X and  Class  R  Certificates  are  issuable  only  in  minimum
Percentage  Interests  of 10%.  The  Trustee  acknowledges  the  issuance of the
uncertificated  REMIC 1 Regular Interests and the uncertificated REMIC 2 Regular
Interests and declares  that it holds such regular  interests as assets of REMIC
2.  The  Trustee  acknowledges  the  issuance  of  the  uncertificated  REMIC  2
Components  and the Class X/N  Interest,  and declares that it holds the same as
assets of the Grantor  Trust on behalf of the Holders of the Class N and Class X
Certificates.  The interests evidenced by the Certificates constitute the entire
beneficial ownership interest in the Trust Fund.

                  Section 2.08. Representations and Warranties of the Seller.

                  The Seller hereby represents and warrants to the Trust and the
Trustee on behalf of the Certificateholders that as of the Closing Date or as of
such date specifically provided herein:

                  (i) The Seller is duly organized, validly existing and in good
         standing as a limited  liability company under the laws of the State of
         Delaware  and has the  power and  authority  to own its  assets  and to
         transact the business in which it is currently  engaged.  The Seller is
         duly  qualified  to  do  business  and  is in  good  standing  in  each
         jurisdiction in which the character of the business transacted by it or
         properties  owned or leased by it requires  such  qualification  and in
         which the failure to so qualify would have a material adverse effect on
         (a) its business, properties, assets or condition (financial or other),
         (b) the  performance of its obligations  under this Agreement,  (c) the
         value or  marketability  of the Mortgage  Loans,  or (d) its ability to
         foreclose on the related Mortgaged Properties.

                  (ii) The Seller has the power and authority to make,  execute,
         deliver  and  perform  this  Agreement  and  to  consummate  all of the
         transactions  contemplated hereunder and has taken all necessary action
         to authorize the execution, delivery and performance of this Agreement.
         When executed and

                                       56
<PAGE>

         delivered, this Agreement will constitute the Seller's legal, valid and
         binding obligations enforceable in accordance with its terms, except as
         enforcement of such terms may be limited by (1) bankruptcy, insolvency,
         reorganization,  receivership, moratorium or similar laws affecting the
         enforcement of creditors'  rights  generally and by the availability of
         equitable  remedies,  (2)  general  equity  principles  (regardless  of
         whether such  enforcement is considered in a proceeding in equity or at
         law) or (3) public  policy  considerations  underlying  the  securities
         laws,  to  the  extent  that  such  policy   considerations  limit  the
         enforceability  of the  provisions of this  Agreement  which purport to
         provide indemnification from securities laws liabilities.

                  (iii) The Seller holds all  necessary  licenses,  certificates
         and permits from all governmental  authorities necessary for conducting
         its business as it is presently  conducted,  except for such  licenses,
         certificates  and permits the absence of which,  individually or in the
         aggregate,  would not have a material  adverse effect on the ability of
         the Seller to conduct its business as it is presently conducted.  It is
         not  required to obtain the consent of any other party or any  consent,
         license, approval or authorization from, or registration or declaration
         with, any governmental  authority,  bureau or agency in connection with
         the execution,  delivery,  performance,  validity or  enforceability of
         this  Agreement,  except  for such  consents,  licenses,  approvals  or
         authorizations,  or  registrations  or  declarations as shall have been
         obtained or filed, as the case may be, prior to the Closing Date.

                  (iv) The execution, delivery and performance of this Agreement
         by the  Seller  will not  conflict  with or result  in a breach  of, or
         constitute  a default  under,  any  provision  of any  existing  law or
         regulation or any order or decree of any court applicable to the Seller
         or any of its  properties  or any  provision  of its Limited  Liability
         Company Agreement, or constitute a material breach of, or result in the
         creation or imposition of any lien,  charge or encumbrance  upon any of
         its properties pursuant to any mortgage,  indenture,  contract or other
         agreement to which it is a party or by which it may be bound.

                  (v) No certificate of an officer,  written statement or report
         delivered  pursuant  to the terms  hereof by the  Seller  contains  any
         untrue statement of a material fact or omits to state any material fact
         necessary to make the certificate, statement or report not misleading.

                  (vi) The  transactions  contemplated  by this Agreement are in
         the ordinary course of the Seller's business.

                  (vii) The Seller is not insolvent, nor will the Seller be made
         insolvent by the transfer of the Mortgage Loans to the  Depositor,  nor
         is the Seller aware of any pending insolvency.

                  (viii) The Seller is not in  violation  of, and the  execution
         and delivery of this Agreement by it and its performance and compliance
         with the terms of this

                                       57
<PAGE>

         Agreement  will not constitute a violation with respect to any order or
         decree of any court, or any order or regulation of any federal,  state,
         municipal or governmental agency having  jurisdiction,  which violation
         would materially and adversely affect the Seller's condition (financial
         or  otherwise)  or  operations  or any of the Seller's  properties,  or
         materially  and adversely  affect the  performance of any of its duties
         hereunder.

                  (ix)  There  are  no  actions  or  proceedings   against,   or
         investigations of, the Seller pending or, to its knowledge, threatened,
         before any court,  administrative agency or other tribunal (i) that, if
         determined adversely, would prohibit the Seller from entering into this
         Agreement,  (ii)  seeking to  prevent  the  consummation  of any of the
         transactions   contemplated   by  this  Agreement  or  (iii)  that,  if
         determined adversely, would prohibit or materially and adversely affect
         the Seller's performance of any of its respective obligations under, or
         the validity or enforceability of, this Agreement.

                  (x) The  Seller did not  transfer  the  Mortgage  Loans to the
         Depositor  with any  intent  to  hinder,  delay or  defraud  any of its
         creditors.

                  (xi) The Seller  acquired  title to the Mortgage Loans in good
         faith, without notice of any adverse claims.

                  (xii) The transfer,  assignment and conveyance of the Mortgage
         Notes and the  Mortgages by the Seller to the Depositor are not subject
         to the bulk transfer laws or any similar statutory provisions in effect
         in any applicable jurisdiction.

                  Section 2.09. Covenants of the Seller.

                  (a) The Seller hereby  covenants  that except for the transfer
hereunder,  the Seller  will not sell,  pledge,  assign or transfer to any other
Person,  or  grant,  create,  incur,  assume  or suffer to exist any lien on any
Mortgage Loan, or any interest therein;  the Seller will notify the Trustee,  as
assignee of the  Depositor,  of the  existence of any lien on any Mortgage  Loan
immediately upon discovery thereof,  and the Seller will defend the right, title
and interest of the Trust,  as assignee of the  Depositor,  in, to and under the
Mortgage Loans,  against all claims of third parties  claiming  through or under
the Seller;  provided,  however, that nothing in this Section 2.09 shall prevent
or be deemed to  prohibit  the Seller  from  suffering  to exist upon any of the
Mortgage  Loans  any  liens  for  municipal  or  other  local  taxes  and  other
governmental charges if such taxes or governmental charges shall not at the time
be due and payable or if the Seller shall  currently be contesting  the validity
thereof in good faith by appropriate proceedings and shall have set aside on its
books adequate reserves with respect thereto.

                  (b)  The  Seller  hereby  covenants  that  neither  it nor any
Affiliate  of the Seller  will  directly  solicit  any  Mortgagor  hereunder  to
refinance the related Mortgage Loan. For the purposes of the foregoing,  neither
the Seller nor any  Affiliate of the Seller shall be deemed to directly  solicit
any Mortgagor if the Seller responds to a request from

                                       58
<PAGE>

a Mortgagor  regarding a  refinancing  or if the  Mortgagor  receives  marketing
materials which are generally disseminated.

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF THE TRUST FUND

                  Section 3.01. Servicer to Act as Servicer.

                  The Servicer, as independent contract servicer,  shall service
and  administer  the Mortgage  Loans in accordance  with this  Agreement and the
normal and usual standards of practice of prudent mortgage servicers,  and shall
have full power and authority,  acting alone,  to do or cause to be done any and
all  things in  connection  with such  servicing  and  administration  which the
Servicer may deem necessary or desirable and  consistent  with the terms of this
Agreement  including,  in the case of FHA Loans and VA Loans, taking all actions
that a mortgagee  is  permitted or required to take by the FHA or the VA, as the
case may be (the "Servicing Standards").

                  Consistent with the terms of this Agreement,  the Servicer may
waive,  modify  or  vary  any  term  of any  Mortgage  Loan  or  consent  to the
postponement  of strict  compliance  with any such term or in any  manner  grant
indulgence  to  any  Mortgagor  if in  the  Servicer's  reasonable  and  prudent
determination  such waiver,  modification,  postponement  or  indulgence  is not
materially  adverse  to the  Certificateholders;  provided,  however,  that  the
Servicer shall not make future  advances and (unless the Mortgagor is in default
with  respect to the  Mortgage  Loan or such  default is, in the judgment of the
Servicer,  imminent) the Servicer shall not permit any modification with respect
to any Mortgage Loan that would (i) change the Mortgage  Interest Rate, defer or
forgive the payment  thereof of any principal or interest  payments,  reduce the
outstanding principal amount (except for actual payments of principal) or extend
the final maturity date with respect to such Mortgage Loan,  (ii) in the case of
FHA  Loans  and VA Loans,  affect  the FHA  Insurance  Contract  or VA  Guaranty
Agreement,  as the case may be, with respect to such Mortgage Loan, (iii) affect
adversely  the  status  of any  REMIC as a REMIC or (iv)  cause  any REMIC to be
subject to a tax on "prohibited transactions" or "contributions" pursuant to the
REMIC Provisions.  Notwithstanding the foregoing,  the Servicer shall not permit
any modification with respect to any Mortgage Loan that would both (x) effect an
exchange or reissuance of such  Mortgage Loan under Section  1.860G-2(b)  of the
Treasury Regulations and (y) cause any REMIC constituting part of the Trust Fund
to fail to qualify  as a REMIC  under the Code or the  imposition  of any tax on
"prohibited  transactions"  or  "contributions"  after the Startup Day under the
REMIC Provisions. Without limiting the generality of the foregoing, the Servicer
shall continue, and is hereby authorized and empowered to execute and deliver on
behalf  of  itself,  and  the  Trustee,   all  instruments  of  satisfaction  or
cancellation,  or of partial or full release, discharge and all other comparable
instruments,  with  respect  to the  Mortgage  Loans  and  with  respect  to the
Mortgaged Property.  The Servicer shall make all required Servicing Advances and
shall service and administer the Mortgage  Loans in accordance  with  Applicable
Regulations,  and shall  provide to the  Mortgagor  any  reports  required to be

                                       59
<PAGE>

provided to them thereby.  If reasonably  required by the Servicer,  the Trustee
shall  furnish  the  Servicer  with any powers of attorney  and other  documents
necessary or  appropriate  to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.

                  In servicing  and  administering  FHA Loans and VA Loans,  the
Servicer  shall  comply  strictly  with  the  National   Housing  Act,  the  FHA
Regulations,  the  Servicemen's  Readjustment  Act  and the VA  Regulations  and
administrative  guidelines issued thereunder or pursuant thereto (insofar as the
same  apply to any  Mortgage  Loan)  and,  to the  extent  permitted  hereunder,
promptly discharge all of the obligations of the mortgagee  thereunder and under
each Mortgage  including the timely giving of notices,  the essence hereof being
that the full benefits of each FHA Insurance  Contract and VA Guaranty Agreement
inure to the Trustee, on behalf of the Certificateholders.

                  In  servicing  and   administering  the  Mortgage  Loans,  the
Servicer shall employ procedures  including  collection  procedures and exercise
the same care  that it  customarily  employs  and  exercises  in  servicing  and
administering  mortgage  loans for its own account giving due  consideration  to
accepted mortgage servicing practices of prudent lending  institutions,  the FHA
Insurance Contracts and the VA Guaranty  Agreements,  where applicable,  and the
Certificateholders' reliance on the Servicer.

                  The  Servicer  shall give prompt  notice to the Trustee of any
action,  of which the  Servicer  has  actual  knowledge,  to (i)  assert a claim
against the Trust Fund or (ii) assert jurisdiction over the Trust Fund.

                  Notwithstanding anything in this Agreement to the contrary, in
the event of a Principal Prepayment in full of a Mortgage Loan, the Servicer may
not waive any prepayment penalty or portion thereof required by the terms of the
related Mortgage Note unless (i) the Servicer  determines that such waiver would
maximize  recovery of Liquidation  Proceeds for such Mortgage Loan,  taking into
account the value of such  prepayment  penalty,  or (ii) (A) the  enforceability
thereof is limited (1) by bankruptcy, insolvency,  moratorium,  receivership, or
other  similar  law  relating  to  creditors'  rights  generally  or (2)  due to
acceleration in connection with a foreclosure or other involuntary  payment,  or
(B) the  enforceability is otherwise limited or prohibited by applicable law. In
the event of a Principal  Prepayment in full with respect to any Mortgage  Loan,
the Servicer shall deliver to the Trustee an Officer's Certificate substantially
in the form of  Exhibit Q no later than the third  Business  Day  following  the
immediately   succeeding   Determination  Date  with  a  copy  to  the  Class  X
Certificateholder.  If the  Servicer  has  waived or does not  collect  all or a
portion of a prepayment  penalty relating to a Principal  Prepayment in full due
to any action or omission of the  Servicer,  other than as provided  above,  the
Servicer shall, within 90 days of the date on which the Principal  Prepayment in
full is  remitted  to the  Trustee,  deliver to the  Trustee  the amount of such
prepayment penalty (or such portion thereof as had been waived for deposit) into
the  Distribution  Account for distribution in accordance with the terms of this
Agreement.

                  With respect to each  Mortgage  Loan which is the subject of a
Principal  Prepayment in full,  the Trustee  shall verify  whether such Mortgage
Loan was identified

                                       60
<PAGE>

on the Mortgage Loan  Schedule as being subject to a prepayment  penalty and, if
such  Mortgage  Loan is so  identified,  whether  the  amount of the  prepayment
penalty  remitted by the Servicer  (including  any amounts to be remitted by the
Servicer pursuant to the last sentence of the preceding  paragraph),  if any, is
consistent  with the amount of the prepayment  penalty set forth in the Mortgage
Loan  Schedule.  In the event  that the  Trustee  determines  that a  prepayment
penalty received with respect to a Principal  Prepayment in full is inconsistent
with the  prepayment  penalty set forth in the  Mortgage  Loan  Schedule for the
related Mortgage Loan and such inconsistency results in the receipt of a reduced
prepayment  penalty,  the  Trustee  shall  provide  notice to the Seller of such
inconsistency.  Within 90 days of receipt of such notice, the Seller shall remit
to the Trustee for deposit in the  Distribution  Account an amount  equal to the
difference  between  the  amount of the  prepayment  penalties  received  by the
Trustee and the amount of the prepayment penalties determined in accordance with
the description  thereof set forth in the Mortgage Loan Schedule for the related
Mortgage Loans.

                  The Trustee shall prepare and deliver to the Depositor and the
owner of the Class N and Class X  Certificates,  on a monthly basis, a statement
setting forth the amounts due and received with respect to prepayment penalties.

                  Section 3.02. Collection of Mortgage Loan Payments.

                  Continuously  from the date  hereof  until the  principal  and
interest on all Mortgage  Loans are paid in full,  the Servicer will  diligently
collect all payments due under each Mortgage Loan when the same shall become due
and payable and shall,  to the extent such  procedures  shall be consistent with
this  Agreement and the terms and  provisions of any related  Primary  Insurance
Policy and  Applicable  Regulations,  follow such  collection  procedures  as it
follows with respect to mortgage loans comparable to the Mortgage Loans and held
for  its  own  account.   Further,  the  Servicer  will  take  special  care  in
ascertaining  and  estimating  annual ground rents,  taxes,  assessments,  water
rates, fire and hazard insurance premiums,  mortgage insurance premiums, and all
other charges that, as provided in the Mortgage,  will become due and payable to
that end that the  installments  payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.

                  Section 3.03. Realization Upon Defaulted Mortgage Loans.

                  In the event  that any  payment  due  under  any  Conventional
Mortgage Loan is not paid when the same becomes due and payable, or in the event
the  Mortgagor  fails to perform  any other  covenant  or  obligation  under the
Mortgage Loan and such failure continues beyond any applicable grace period, the
Servicer  shall take such action as it shall deem to be in the best  interest of
the  Certificateholders.  In the event that any  payment  due under any FHA Loan
becomes delinquent,  the Servicer shall take all such actions as are in the best
interests of the  Certificateholders and permitted under any applicable FHA loss
mitigation  proceedings,  including,  but not limited to,  requesting the FHA to
accept an assignment of such FHA Loan,  and, upon the  Servicer's  determination
that foreclosure is in the best interest of the  Certificateholders,  commencing
foreclosure  proceedings.  With  respect  to each VA Loan,  the  Servicer  shall
diligently seek to mitigate

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<PAGE>

losses by utilizing all remedies  available in the VA Regulations.  With respect
to any defaulted  Mortgage Loan, the Servicer shall have the right to review the
status of the related  forbearance  plan and, subject to the second paragraph of
Section 3.01, may modify such forbearance plan.

                  In connection  with a  foreclosure  or other  conversion,  the
Servicer  shall  exercise  such rights and powers vested in it hereunder and use
the same degree of care and skill in its exercise as prudent mortgage  servicers
would  exercise  or use  under the  circumstances  in the  conduct  of their own
affairs and consistent with Applicable  Regulations and the servicing  standards
set forth in the FNMA Guide, including, without limitation,  advancing funds for
the payment of taxes and insurance  premiums with respect to first lien Mortgage
Loans.

                  Notwithstanding the foregoing provisions of this Section 3.03,
with respect to any Mortgage  Loan as to which the Servicer has received  actual
notice of, or has actual  knowledge  of, the  presence of any toxic or hazardous
substance on the related Mortgaged  Property,  the Servicer shall not either (i)
obtain title to such Mortgaged Property as a result of or in lieu of foreclosure
or otherwise,  or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property if, as a result of any such action, the
Trust Fund would be considered to hold title to, to be a mortgagee-in-possession
of, or to be an owner or operator of such Mortgaged  Property within the meaning
of the Comprehensive  Environmental Response,  Compensation and Liability Act of
1980, as amended from time to time, or any comparable  law,  unless the Servicer
has also previously  determined,  based on its reasonable judgment and a prudent
report prepared by a Person who regularly  conducts  environmental  audits using
customary industry standards, that:

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

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

                  The cost of the  environmental  audit report  contemplated  by
this Section 3.03 shall be advanced by the Servicer,  subject to the  Servicer's
right to be  reimbursed  therefor  from the  Collection  Account as  provided in
Section 3.05(b).

                  If the Servicer determines,  as described above, that it is in
the best economic interest of the Certificateholders to take such actions as are
necessary to bring any such Mortgaged  Property into  compliance with applicable
environmental laws, or to

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<PAGE>

take such action with respect to the  containment,  clean-up or  remediation  of
hazardous substances,  hazardous materials, hazardous wastes, or petroleum-based
materials  affecting any such Mortgaged  Property,  then the Servicer shall take
such  action  as  it  deems  to  be  in  the  best  economic   interest  of  the
Certificateholders.  The cost of any such  compliance,  containment,  cleanup or
remediation  shall be advanced by the Servicer,  subject to the Servicer's right
to be  reimbursed  therefor from the  Collection  Account as provided in Section
3.05(b).

                  Section 3.04. Collection Account and Distribution Account.

                  (a) The Servicer shall  segregate and hold all funds collected
and received  pursuant to each  Mortgage Loan separate and apart from any of its
own funds and  general  assets  and shall  establish  and  maintain  one or more
Collection Accounts. Each Collection Account shall be an Eligible Account.

                  The  Servicer  shall  deposit in the  Collection  Account on a
daily  basis  within two  Business  Days of  receipt,  and retain  therein,  the
following payments and collections received or made by it after the Cut-Off Date
with respect to the Mortgage Loans:

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

                  (ii) all payments on account of interest on the Mortgage Loans
         adjusted to the Mortgage  Interest Rate less the Servicing Fee Rate and
         the amount required to maintain the Primary Insurance Policy;

                  (iii) all proceeds from a cash liquidation;

                  (iv) all Insurance  Proceeds  including amounts required to be
         deposited  pursuant to Section 3.10,  other than proceeds to be held in
         the Escrow  Account  and  applied to the  restoration  or repair of the
         Mortgaged  Property or released to the Mortgagor in accordance with the
         Servicer's   normal  servicing   procedures,   the  loan  documents  or
         applicable law;

                  (v) all Condemnation Proceeds affecting any Mortgaged Property
         which  are  not  released  to the  Mortgagor  in  accordance  with  the
         Servicer's   normal  servicing   procedures,   the  loan  documents  or
         applicable law; and

                  (vi) any amounts  required to be  deposited by the Servicer in
         connection with any REO Property pursuant to Section 3.13.

                  Any  interest  paid  on  funds  deposited  in  the  Collection
Account,  subject to Section  3.25,  shall accrue to the benefit of the Servicer
and the Servicer shall be entitled to retain and withdraw such interest from the
Collection Account pursuant to Section 3.05(e).  The foregoing  requirements for
deposit from the Collection Account shall be exclusive,  it being understood and
agreed that,  without limiting the generality of the foregoing,  payments in the
nature of late payment charges, prepayment charges that are

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<PAGE>

not  prepayment  penalties,  and  assumption  fees need not be  deposited by the
Servicer in the Collection Account.

                  (b) On behalf of the Trust Fund,  the Trustee shall  establish
and maintain one or more accounts (such account or accounts,  the  "Distribution
Account"), held in trust for the benefit of the Certificateholders. On behalf of
the Trust  Fund,  the  Servicer  shall  deliver to the  Trustee  in  immediately
available funds for deposit in the Distribution Account by the close of business
New York time on the Servicer  Remittance  Date,  that portion of the  Available
Funds (calculated  without regard to the references in the definition thereof to
amounts  that may be  deposited  to the  Distribution  Account  from a different
source as provided herein) then on deposit in the Collection Account. Amounts in
the  Distribution  Account  shall be deemed to be held on behalf of the  related
REMICs and the Grantor  Trust in  accordance  with the REMIC  distributions  set
forth in Section 4.10.

                  (c)  Funds  in the  Collection  Account  and the  Distribution
Account  may be  invested  in  Permitted  Investments  in  accordance  with  the
provisions  set forth in Section  3.25.  The  Servicer  shall give notice to the
Trustee  of the  location  of  the  Collection  Account  maintained  by it  when
established  and prior to any change  thereof.  The Trustee shall give notice to
the Servicer and the Depositor of the location of the Distribution  Account when
established and prior to any change thereof.

                  (d) In the event the Servicer shall deliver to the Trustee for
deposit in the  Distribution  Account any amount not  required  to be  deposited
therein,  it may at any time request that the Trustee  withdraw such amount from
the  Distribution  Account  and  remit  to the  Servicer  any such  amount,  any
provision  herein to the contrary  notwithstanding.  In  addition,  the Servicer
shall  deliver to the  Trustee  from time to time for  deposit,  and the Trustee
shall so deposit, in the Distribution Account in respect of REMIC 1:

                  (i) any Advances, as required pursuant to Section 4.07;

                  (ii) any Stayed  Funds,  as soon as  permitted  by the federal
         bankruptcy court having jurisdiction in such matters;

                  (iii) any  prepayment  penalties  and  premiums  or amounts in
         connection with the waiver of such prepayment penalties or premiums, in
         each case required to be deposited pursuant to Section 3.01;

                  (iv) any amounts  required to be deposited in the Distribution
         Account  pursuant to Sections 2.03,  3.04,  3.15,  3.16,  3.23, 3.28 or
         4.07; and

                  (v) any  amounts  required  to be  deposited  by the  Servicer
         pursuant to Section 3.11 in connection  with the  deductible  clause in
         any blanket hazard insurance  policy,  such deposit being made from the
         Servicer's own funds, without reimbursement therefor.

                  (e) Promptly  upon receipt of any Stayed  Funds,  whether from
the Servicer,  a trustee in  bankruptcy,  or federal  bankruptcy  court or other
source, the Trustee

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<PAGE>

shall  notify  the  Servicer  of such  receipt  and  deposit  such  funds in the
Distribution Account,  subject to withdrawal thereof as permitted hereunder.  In
addition,  the Trustee  shall  deposit in the  Distribution  Account any amounts
required to be  deposited  pursuant to Section  3.25 in  connection  with losses
realized on Permitted Investments with respect to funds held in the Distribution
Account.

                  Section  3.05.  Permitted   Withdrawals  From  the  Collection
Account.

                  The  Servicer  may,  from  time to  time,  withdraw  from  the
Collection Account for the following purposes:

                  (a) to remit to the Trustee  for  deposit in the  Distribution
Account the amounts  required to be so remitted  pursuant to Section  3.04(b) or
permitted to be so remitted pursuant to the first sentence of Section 3.04(d);

                  (b) to reimburse  itself for Advances and Servicing  Advances;
provided  that  the  Servicer's  right  to  reimburse  itself  pursuant  to this
subclause (b) is limited to amounts  received on the related Mortgage Loan which
represent  payments of (i) principal  and/or interest  respecting which any such
Advance  was  made  or  (ii)  Condemnation   Proceeds,   Insurance  Proceeds  or
Liquidation Proceeds respecting which any such Servicing Advance was made;

                  (c) to reimburse itself for unreimbursed  Servicing  Advances,
any unpaid Servicing Fees and for unreimbursed  Advances to the extent that such
amounts are deemed to be  Nonrecoverable  Advances,  and to reimburse itself for
such  amounts  to the  extent  that such  amounts  are  nonrecoverable  from the
disposition of REO Property pursuant to Section 3.03 or Section 3.13 hereof;

                  (d) to  reimburse  itself for any  amounts  paid  pursuant  to
Section 3.03 (and not otherwise previously reimbursed);

                  (e)  to  pay to  itself  as  servicing  compensation  (a)  any
interest  earned on funds in the  Collection  Account  (all such  interest to be
withdrawn  monthly  not later than each  Servicer  Remittance  Date) and (b) the
Servicing  Fee from that  portion of any payment or recovery as to interest to a
particular  Mortgage  Loan  to the  extent  not  retained  pursuant  to  Section
3.04(a)(ii);

                  (f) to  reimburse  itself for any  amounts  paid  pursuant  to
Section 6.03 (and not otherwise previously reimbursed); and

                  (g) to clear and  terminate  the  Collection  Account upon the
termination of this Agreement.

                  The foregoing  requirements for withdrawal from the Collection
Account  shall be  exclusive.  In the event the  Servicer  shall  deposit in the
Collection  Account any amount not required to be deposited  therein,  it may at
any time withdraw such amount from the Collection Account,  any provision herein
to the contrary notwithstanding.

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<PAGE>

                  Section 3.06.  Establishment of Escrow  Accounts;  Deposits in
Escrow Accounts.

                  The Servicer shall  segregate and hold all funds collected and
received  pursuant  to each  Mortgage  Loan  which  constitute  Escrow  Payments
separate  and  apart  from any of its own  funds and  general  assets  and shall
establish and maintain one or more Escrow Accounts,  in the form of time deposit
or demand  accounts.  A copy of any letter  agreement  related to such  accounts
shall be furnished to the Trustee upon request.  The Escrow  Account shall be an
Eligible Account.

                  The Servicer  shall deposit in the Escrow  Account or Accounts
on a daily basis within two Business Days of receipt,  and retain  therein,  (i)
all Escrow Payments  collected on account of the Mortgage Loans, for the purpose
of  effecting  timely  payment of any such items as required  under the terms of
this Agreement,  and (ii) all Insurance  Proceeds which are to be applied to the
restoration  or  repair of any  Mortgaged  Property.  The  Servicer  shall  make
withdrawals  therefrom  only to effect such payments as are required  under this
Agreement,  and for  such  other  purposes  as  shall  be set  forth  in,  or in
accordance  with,  Section  3.07.  The Servicer  shall be entitled to retain any
interest  paid on  funds  deposited  in the  Escrow  Account  by the  depository
institution  other than interest on escrowed funds required by law to be paid to
the  Mortgagor  and,  to the extent  required by the  related  Mortgage  Loan or
Applicable Regulations, the Servicer shall pay interest on escrowed funds to the
Mortgagor  notwithstanding  that the Escrow Account is  non-interest  bearing or
that interest paid thereon is insufficient for such purposes.

                  Section 3.07. Permitted Withdrawals From Escrow Account.

                  Withdrawals  from  the  Escrow  Account  may  be  made  by the
Servicer (i) to effect  timely  payments of ground  rents,  taxes,  assessments,
water rates, fire, flood and hazard insurance premiums, Primary Insurance Policy
premiums,  if applicable,  and comparable  items, (ii) to reimburse the Servicer
for any  Servicing  Advance  made by the  Servicer  with  respect  to a  related
Mortgage Loan but only from amounts  received on the related Mortgage Loan which
represent late payments or Late Collections of Escrow Payments thereunder, (iii)
to refund to the Mortgagor  any funds as may be determined to be overages,  (iv)
for  transfer to the  Collection  Account in  accordance  with the terms of this
Agreement,  (v) for  application  to  restoration  or  repair  of the  Mortgaged
Property,  (vi)  to pay to the  Servicer,  or to  the  Mortgagor  to the  extent
required by the related  Mortgage Loan or Applicable  Regulations,  any interest
paid on the funds deposited in the Escrow Account,  (vii) to clear and terminate
the Escrow Account on the termination of this  Agreement,  (viii) to transfer to
the Collection Account any insurance proceeds,  or (ix) in the case of FHA Loans
and VA Loans, for transfer to the Collection Account,  fire and hazard insurance
proceeds and Escrow  Payments with respect to any Mortgage Loan where the FHA or
VA,  as the case may be,  has  directed  application  of such  funds as a credit
against the proceeds of the FHA Insurance Contract or the VA Guaranty Agreement.
As part  of its  servicing  duties,  the  Servicer  shall  pay to the  Mortgagor
interest on funds in the Escrow  Account,  to the extent required by the related
Mortgage Loan or Applicable Regulations,  and to the extent that interest earned
on funds in the

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<PAGE>

Escrow  Account is  insufficient,  shall pay such  interest  from its own funds,
without any reimbursement therefor.

                  In the event the Servicer  shall deposit in the Escrow Account
any amount not required to be  deposited  therein,  it may at any time  withdraw
such  amount  from the Escrow  Account,  any  provision  herein to the  contrary
notwithstanding.

                  Section 3.08.  Payment of Taxes,  Insurance and Other Charges;
Collections Thereunder.

                  With respect to each first lien  Mortgage  Loan,  the Servicer
shall maintain  accurate records  reflecting the status of ground rents,  taxes,
assessments,  water rates and other  charges which are or may become a lien upon
the Mortgaged  Property and the status of Primary  Insurance Policy premiums and
fire, flood and hazard insurance  coverage and shall obtain,  from time to time,
all bills for the payment of such charges (including renewal premiums) and shall
effect payment thereof prior to the applicable  penalty or termination  date and
at a time appropriate for securing maximum  discounts  allowable,  employing for
such purpose  deposits of the  Mortgagor in the Escrow  Account which shall have
been estimated and  accumulated  by the Servicer in amounts  sufficient for such
purposes, as allowed under the terms of the Mortgage or Applicable  Regulations.
To the extent  that the  Mortgage  does not  provide  for Escrow  Payments,  the
Servicer shall determine that any such payments are made by the Mortgagor at the
time they first  become due. The Servicer  assumes full  responsibility  for the
timely  payment of all such bills and shall effect  timely  payments of all such
bills  irrespective  of the Mortgagor's  faithful  performance in the payment of
same or the making of the Escrow Payments and shall make Servicing Advances from
its own funds to effect such payments.

                  The Servicer,  on behalf of the Trustee,  as  mortgagee,  will
maintain  in full force and effect (to the extent a Mortgage  Loan has a Primary
Insurance  Policy) a Primary Insurance Policy issued by a Qualified Insurer with
respect to each Mortgage Loan for which such coverage is required. Such coverage
will be  maintained  until  the  Combined  Loan-to-Value  Ratio  of the  related
Mortgage Loan is reduced to 80% or less.  The Servicer will not cancel or refuse
to renew any  Primary  Insurance  Policy in effect on the  Closing  Date that is
required to be kept in force under this Agreement  unless a replacement  Primary
Insurance  Policy for such cancelled or non-renewed  policy is obtained from and
maintained  with a Qualified  Insurer.  The  Servicer  shall not take any action
which would result in non-coverage under any applicable Primary Insurance Policy
of any loss which, but for the actions of the Servicer,  would have been covered
thereunder.  In connection with any assumption or substitution agreement entered
into or to be entered into pursuant to Section 3.14, the Servicer shall promptly
notify the insurer under the related Primary  Insurance  Policy, if any, of such
assumption or  substitution  of liability in  accordance  with the terms of such
policy and shall take all actions  which may be  required  by such  insurer as a
condition to the continuation of coverage under the Primary Insurance Policy. If
such Primary  Insurance  Policy is terminated as a result of such  assumption or
substitution  of  liability,  the Servicer  shall obtain a  replacement  Primary
Insurance Policy as provided above.

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<PAGE>

                  In connection  with its  activities as servicer,  the Servicer
agrees to prepare and present,  on behalf of itself and the  Trustee,  claims to
the insurer under any Primary Insurance Policy in a timely fashion in accordance
with the terms of such  policies  and,  in this  regard,  to take such action as
shall be  necessary  to permit  recovery  under  any  Primary  Insurance  Policy
respecting a defaulted  Mortgage  Loan.  Pursuant to Section  3.04,  any amounts
collected by the Servicer under any Primary  Insurance Policy shall be deposited
in the Collection Account, subject to withdrawal pursuant to Section 3.05.

                  Section 3.09. Transfer of Accounts.

                  The Servicer may transfer the Collection Account or the Escrow
Account  to a  different  depository  institution  from time to time.  Upon such
transfer,  the  Servicer  shall  deliver to the  Trustee  and the  Depositor,  a
certification or letter  agreement,  as the case may be, as required pursuant to
Sections 3.04 and 3.06.

                  Section 3.10. Maintenance of Hazard Insurance.

                  The Servicer  shall cause to be  maintained  for each Mortgage
Loan fire and hazard  insurance  with  extended  coverage as is customary in the
area where the  Mortgaged  Property  is  located in an amount  which is at least
equal to the  lesser of (i) the amount  necessary  to fully  compensate  for any
damage  or loss to the  improvements  which  are a part  of such  property  on a
replacement cost basis, (ii) the Principal Balance of the Mortgage Loan, in each
case in an amount  not less than such  amount as is  necessary  to  prevent  the
Mortgagor  and/or the  Mortgagee  from becoming a co-insurer or (iii) the amount
required under applicable HUD/FHA  regulations.  If the Mortgaged Property is in
an area  identified in the Federal  Register by the Flood  Emergency  Management
Agency  as having  special  flood  hazards  and  flood  insurance  has been made
available,  the Servicer  will cause to be maintained a flood  insurance  policy
meeting the  requirements  of the current  guidelines  of the Federal  Insurance
Administration  with a  generally  acceptable  insurance  carrier,  in an amount
representing  coverage not less than the least of (i) the  Principal  Balance of
the Mortgage Loan, (ii) the maximum insurable value of the improvements securing
such Mortgage Loan or (iii) the maximum  amount of insurance  which is available
under the Flood Disaster Protection Act of 1973, as amended.  The Servicer shall
also maintain on the REO Property for the benefit of the Certificateholders, (x)
fire and hazard insurance with extended  coverage in an amount which is at least
equal  to the  replacement  cost of the  improvements  which  are a part of such
property,  (y) public  liability  insurance and, (z) to the extent  required and
available  under the Flood Disaster  Protection  Act of 1973, as amended,  flood
insurance in an amount as provided above. Any amounts  collected by the Servicer
under any such policies other than amounts to be deposited in the Escrow Account
and  applied  to the  restoration  or repair of the  Mortgaged  Property  or REO
Property,  or released to the Mortgagor in accordance with the Servicer's normal
servicing procedures,  shall be deposited in the Collection Account,  subject to
withdrawal  pursuant  to Section  3.05.  It is  understood  and  agreed  that no
earthquake  or other  additional  insurance is required to be  maintained by the
Servicer or the Mortgagor or  maintained on property  acquired in respect of the
Mortgage Loan,  other than pursuant to such  Applicable  Regulations as shall at
any time be in force and as shall require such  additional  insurance.  All such
policies shall be endorsed with standard mortgagee

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<PAGE>

clauses with loss payable to the Servicer and shall  provide for at least thirty
days prior  written  notice of any  cancellation,  reduction in the amount of or
material  change in coverage to the Servicer.  The Servicer  shall not interfere
with the Mortgagor's freedom of choice in selecting either his insurance carrier
or  agent;  provided,  however,  that the  Servicer  shall not  accept  any such
insurance  policies from insurance  companies  unless such  companies  currently
reflect a general policy rating of B:VI or better in Best's Key Rating Guide and
are  licensed to do business in the state  wherein the  property  subject to the
policy is located.

                  Section 3.11.  Maintenance  of Mortgage  Impairment  Insurance
Policy.

                  In the event that the  Servicer  shall  obtain and  maintain a
blanket  policy issued by an insurer that has a general policy rating of B:VI or
better in Best's Key Rating Guide  insuring  against hazard losses on all of the
Mortgage Loans,  then, to the extent such policy provides  coverage in an amount
equal to the amount  required  pursuant to Section 3.10 and  otherwise  complies
with all other  requirements of Section 3.10, it shall conclusively be deemed to
have satisfied its obligations as set forth in Section 3.10, it being understood
and agreed that such policy may contain a deductible  clause,  in which case the
Servicer  shall,  in the event that there shall not have been  maintained on the
related Mortgaged Property or REO Property a policy complying with Section 3.10,
and there shall have been a loss which would have been  covered by such  policy,
deliver to the Trustee for  deposit in the  Distribution  Account the amount not
otherwise  payable under the blanket policy because of such  deductible  clause,
which amount shall not be  reimbursable  to the Servicer from the Trust Fund. In
connection with its activities as servicer of the Mortgage  Loans,  the Servicer
agrees to prepare and present,  on behalf of the Trustee,  claims under any such
blanket policy in a timely fashion in accordance  with the terms of such policy.
Upon  request of the Trustee,  the  Servicer  shall cause to be delivered to the
Trustee a certified  true copy of such  policy and a statement  from the insurer
thereunder  that  such  policy  shall in no event be  terminated  or  materially
modified without thirty days prior written notice to the Trustee.

                  Section 3.12. Fidelity Bond, Errors and Omissions Insurance.

                  The Servicer  shall  maintain,  at its own expense,  a blanket
fidelity  bond (the  "Fidelity  Bond")  and an errors  and  omissions  insurance
policy,  with broad  coverage  with  financially  responsible  companies  on all
officers,  employees or other persons  acting in any capacity with regard to the
Mortgage  Loans to handle funds,  money,  documents  and papers  relating to the
Mortgage Loans. The Fidelity Bond and errors and omissions insurance shall be in
the form of the Mortgage  Banker's Blanket Bond and shall protect and insure the
Servicer against losses, including forgery, theft,  embezzlement,  fraud, errors
and omissions and negligent acts of such persons.  Such Fidelity Bond shall also
protect and insure the Servicer against losses in connection with the failure to
maintain any  insurance  policies  required  pursuant to this  Agreement and the
release or satisfaction  of a Mortgage Loan without having  obtained  payment in
full of the  indebtedness  secured  thereby.  No  provision of this Section 3.12
requiring the Fidelity Bond and errors and omissions insurance shall diminish or
relieve  the  Servicer  from its  duties  and  obligations  as set forth in this
Agreement. The minimum coverage under any such bond and

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<PAGE>

insurance policy shall be at least equal to the  corresponding  amounts required
by FNMA in the FNMA MBS  Selling  and  Servicing  Guide or by FHLMC in the FHLMC
Servicer's  Guide.  Upon request of the Trustee,  the Servicer shall cause to be
delivered to the Trustee a certified  true copy of the Fidelity  Bond and errors
and omissions  insurance  policy and a statement from the surety and the insurer
that such Fidelity Bond and errors and  omissions  insurance  policy shall in no
event be terminated or materially  modified  without  thirty days' prior written
notice to the Trustee.

                  Section  3.13.  Title,   Management  and  Disposition  of  REO
Property.

                  (a) In  the  event  that  title  to a  Mortgaged  Property  is
acquired  in  foreclosure  or by  deed  in  lieu  of  foreclosure,  the  deed or
certificate  of sale shall be taken  (pursuant to a limited power of attorney to
be provided  by the  Trustee to the  Servicer)  in the name of the  Trustee,  on
behalf of the Certificateholders,  or in the event the Trustee is not authorized
or permitted to hold title to real  property in the state where the REO Property
is located,  or would be adversely  affected  under the "doing  business" or tax
laws of such state by so holding title, the deed or certificate of sale shall be
taken in the name of such  Person  or  Persons  as shall be  consistent  with an
Opinion of Counsel  obtained by the Servicer  from an attorney  duly licensed to
practice  law in the state  where the REO  Property  is  located.  Any Person or
Persons  holding such title other than the Trustee shall  acknowledge in writing
that such title is being held as nominee for the benefit of the Trustee.

                  (b) In the event that the Trust Fund acquires any REO Property
as aforesaid or otherwise in connection with a default or imminent  default on a
Mortgage Loan, the Servicer shall dispose of such REO Property before the end of
the third calendar year beginning after the year of its acquisition by the Trust
Fund for  purposes of Section  860G(a)(8)  of the Code or, at the expense of the
Trust Fund, request from the Internal Revenue Service,  more than 60 days before
the day on which the  above-mentioned  grace period would otherwise  expire,  an
extension of the  above-mentioned  grace period,  unless the Servicer obtains an
Opinion of Counsel,  addressed to the  Servicer  and the Trustee,  to the effect
that the  holding  by the Trust  Fund of such REO  Property  subsequent  to such
period  will  not:  (i)  result  in the  imposition  of any  tax on  "prohibited
transactions"  as defined in Section  860F of the Code;  or (ii) cause any REMIC
constituting  any part of the Trust  Fund 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 REO Property (subject to any conditions  contained in such
Opinion of Counsel).  The Servicer  shall be entitled to be reimbursed  from the
Collection  Account for any costs incurred in obtaining such Opinion of Counsel,
as provided in Section 3.05.

                  Subject to compliance  with applicable laws and regulations as
shall at any time be in force, and  notwithstanding any other provisions of this
Agreement,  no REO  Property  acquired  by the Trust  Fund  shall be rented  (or
allowed to continue to be rented) or otherwise used by or on behalf of the Trust
Fund in such a manner or pursuant  to any terms that  would:  (i) cause such REO
Property  to fail to qualify as  "foreclosure  property"  within the  meaning of
Section  860G(a)(8) of the Code; or (ii) subject any REMIC  constituting part of
the Trust Fund to the imposition of any federal income taxes

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<PAGE>

on the income  earned from such REO  Property,  including  any taxes  imposed by
reason of Sections  860F or 860G(c) of the Code,  unless the Servicer has agreed
to indemnify and hold harmless the Trust Fund with respect to the  imposition of
any such taxes.

                  The Servicer shall manage, conserve,  protect and operate each
REO  Property  for the  Certificateholders  and the Trust  Fund  solely  for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure  property" within the meaning of
Section  860G(a)(8) of the Code or result in the receipt by the related REMIC of
any  "income  from   non-permitted   assets"   within  the  meaning  of  Section
860F(a)(2)(B) of the Code, or any "net income from  foreclosure  property" which
is subject to taxation under the REMIC Provisions. The Servicer shall cause each
REO Property to be inspected  promptly upon the acquisition of title thereto and
shall cause each REO Property to be inspected at least annually thereafter.  The
Servicer  shall  make  or  cause  to be  made a  written  report  of  each  such
inspection.  Such reports shall be retained in the Mortgage  Servicing  File and
copies  thereof  shall be forwarded by the Servicer to the Trustee upon request.
The Servicer shall attempt to sell the same (and may temporarily  rent the same)
on such terms and conditions as the Servicer deems to be in the best interest of
the Certificateholders and the Trust Fund.

                  With  respect  to  each  REO  Property,   the  Servicer  shall
segregate  and hold all funds  collected  and  received in  connection  with the
operation of the REO  Property  separate and apart from its own funds or general
assets and shall  establish and maintain with respect to all REO Property an REO
Account or Accounts in the form of a time deposit or demand  account,  unless an
Opinion  of  Counsel  is  obtained  by the  Servicer  to  the  effect  that  the
classification  as a REMIC for federal  income tax  purposes of the  arrangement
under  which  the  Mortgage  Loans  and the REO  Property  is held  will  not be
adversely  affected by holding  such funds in another  manner.  Such REO Account
shall be  established  with the  Servicer or with a  commercial  bank,  a mutual
savings bank or a savings and loan association.  The creation of any REO Account
shall be  evidenced by a letter  agreement,  in the case of an account held by a
depository.  In  either  case,  an  original  of such  certification  or  letter
agreement shall be furnished to the Trustee upon request.

                  The  Servicer  shall  deposit or cause to be  deposited,  on a
daily basis,  within two  Business  Days of receipt,  in each REO  Account,  all
revenues  received  with respect to the related REO Property and shall  withdraw
therefrom funds necessary for the proper  operation,  management and maintenance
of the REO Property,  including  the cost of  maintaining  any hazard  insurance
pursuant to Section  3.10 hereof and the fees of any  managing  agent  acting on
behalf of the Servicer.  The Servicer shall have the right to earn interest,  if
any, on funds  deposited  in such REO Account.  On or before each  Determination
Date,  the Servicer  shall  withdraw  from each REO Account and deposit into the
Collection  Account the net receipts from the REO Property on deposit in the REO
Account and retain any interest.

                  The Servicer  shall  furnish to the Trustee,  on each Servicer
Remittance  Date,  an operating  statement  for each REO  Property  covering the
operation of each REO

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<PAGE>

Property for the previous month.  Such operating  statement shall be accompanied
by such other information as the Trustee shall reasonably request.

                  The Servicer  shall use its best efforts to dispose of the REO
Property  as  promptly  as  is  practically   consistent   with  protecting  the
Certificateholders' interests.

                  Each REO  Disposition  shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer deems to be in the
best  interest  of the  Certificateholders.  If as of the date  title to any REO
Property  was  acquired  by the  Servicer  there were  outstanding  unreimbursed
Servicing Advances with respect to the REO Property,  the Servicer,  upon an REO
Disposition  of such REO Property,  shall be entitled to  reimbursement  for any
related  unreimbursed  Servicing  Advances from proceeds  received in connection
with such REO  Disposition.  The proceeds from the REO  Disposition,  net of any
payment to the Servicer as provided above, shall be deposited in the REO Account
and shall be transferred to the Collection  Account on the Determination Date in
the month following receipt thereof for distribution on the succeeding  Servicer
Remittance Date in accordance with Section 4.01.

                  Any REO Disposition  shall be for cash only (unless changes in
the REMIC  Provisions  made subsequent to the Startup Day allow a sale for other
consideration  and an  Opinion of Counsel is  obtained  by the  Servicer  to the
effect that such sale shall not cause any REMIC  constituting  part of the Trust
Fund to fail to qualify as a REMIC).

                  The Servicer shall not complete,  or allow to be completed,  a
foreclosure  or  accept  a deed in lieu of a  foreclosure  with  respect  to any
Ineligible  Foreclosure  Property Loan if it would cause the Trustee to hold REO
Property from Ineligible  Foreclosure  Property Loans with an aggregate value in
excess of 0.75% of the aggregate  outstanding  Principal Balance of the Mortgage
Loans as of the end of the prior Collection Period. If the Value of REO Property
from  Ineligible  Foreclosure  Property  Loans  equals  or  exceeds  1%  of  the
outstanding  Principal  Balance  of the  Mortgage  Loans  as of  the  end of any
Collection  Period,  the Seller shall purchase at the Purchase Price on or prior
to the  related  Distribution  Date  sufficient  REO  Property  from  Ineligible
Foreclosure  Property  Loans to cause  the  Trustee  to hold REO  Property  from
Ineligible  Foreclosure  Property  Loans  with a Value  of  less  than 1% of the
outstanding  Principal  Balance of the Mortgage Loans and such proceeds shall be
treated as received during the related  Prepayment  Period.  If the Seller shall
fail to purchase any REO Property as described in the preceding  sentences,  the
Servicer shall sell such REO Property as soon as reasonably practicable and in a
commercially  reasonable  manner.  For purposes of this paragraph the "Value" of
REO Property  from a Ineligible  Foreclosure  Property  Loan shall be treated as
equal to the Principal Balance of the related  Ineligible  Foreclosure  Property
Loan plus  interest  that had  accrued on such  Mortgage  Loan as of the date of
acquisition  of the REO Property by the Trustee.  The Trustee  shall  reconvey a
Mortgage  Loan so  purchased  in the same  manner  and under  the same  terms as
specified in Section 2.03.

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<PAGE>

                  Section 3.14. Due-on-Sale Clauses; Assumption and Substitution
Agreements.

                  When a Mortgaged  Property has been or is about to be conveyed
by the  Mortgagor,  the Servicer  shall,  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 the Servicer
shall not exercise any such right if the "due-on-sale" clause, in the reasonable
belief of the Servicer,  is not enforceable  under applicable law. An Opinion of
Counsel  at the  expense of the  Servicer  (which  expense  shall  constitute  a
Servicing  Advance)  delivered to the Trustee and the Depositor to the foregoing
effect shall  conclusively  establish the reasonableness of such belief. In such
event,  the 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 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.  The Mortgage Loan, as assumed,  shall conform in
all  respects  to the  requirements,  representations  and  warranties  of  this
Agreement.  The Servicer  shall notify the Trustee that any such  assumption  or
substitution  agreement has been  completed by forwarding to the Trustee (or the
Custodian,  as the  case  may  be) the  original  copy  of  such  assumption  or
substitution  agreement (indicating the Mortgage File to which it relates) which
copy shall be added by the Trustee (or the Custodian, as the case may be) 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. The 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 the Servicer for consenting to any such  conveyance or entering
into an assumption or substitution agreement shall be retained by or paid to the
Servicer as additional servicing compensation.

                  Notwithstanding the foregoing paragraph or any other provision
of this Agreement,  the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations  hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption  which the Servicer may be
restricted by law from preventing, for any reason whatsoever.

                  Section 3.15. Notification of Adjustments.

                  On each  Adjustment  Date,  the Servicer  shall make  Mortgage
Interest Rate adjustments for each Group 2 Mortgage Rate Loan in compliance with
the requirements

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<PAGE>

of the related  Mortgage  and  Mortgage  Note and  Applicable  Regulations.  The
Servicer  shall  execute and deliver the notices  required by each  Mortgage and
Mortgage  Note and  Applicable  Regulations  regarding  Mortgage  Interest  Rate
adjustments.  The Servicer also shall provide timely notification to the Trustee
of all applicable  data and  information  regarding such Mortgage  Interest Rate
adjustments and the Servicer's  methods of implementing  such Mortgage  Interest
Rate  adjustments.  Upon the  discovery  by the Servicer or the Trustee that the
Servicer has failed to adjust or has  incorrectly  adjusted a Mortgage  Interest
Rate or a Monthly Payment pursuant to the terms of the related Mortgage Note and
Mortgage,  the  Servicer  shall  deliver  to  the  Trustee  for  deposit  in the
Distribution  Account from its own funds the amount of any interest  loss caused
thereby without reimbursement therefor; provided, however, the Servicer shall be
held harmless with respect to any Mortgage Interest Rate adjustments made by any
servicer prior to the Servicer.

                  Section  3.16.  Optional and  Mandatory  Purchases of Mortgage
Loans by Seller.

                  The Seller may, at its option,  repurchase a Mortgage  Loan or
REO Property which becomes 60 or more days  delinquent or for which the Servicer
has accepted a deed in lieu of foreclosure. Prior to repurchase pursuant to this
Section  3.16,  the  Servicer  shall be required  to  continue  to make  monthly
advances  pursuant to Section  4.07.  The Seller shall not use any  procedure in
selecting  Mortgage Loans to be repurchased  which is materially  adverse to the
interests  of  the  Certificateholders.  The  Seller  shall  purchase  such  (i)
delinquent  Mortgage  Loan at a price  equal  to the  Principal  Balance  of the
Mortgage Loan plus accrued interest  thereon at the Mortgage  Interest Rate from
the date to which  interest  has last been paid to the Trust Fund to the date of
purchase  plus any  unreimbursed  Servicing  Advances  and  Advances or (ii) REO
Property at its fair market value as  determined  in good faith by the Servicer.
Any such repurchase of a Mortgage Loan or REO Property  pursuant to this Section
3.16  shall be  accomplished  by  delivery  to the  Trustee  for  deposit in the
Distribution  Account of the amount of the  purchase  price.  The Trustee  shall
immediately  effectuate the conveyance of such  delinquent  Mortgage Loan or REO
Property to the Seller to the extent necessary, including the prompt delivery of
all documentation to the Seller.

                  Section 3.17. Trustee to Cooperate; Release of Files.

                  (a) Upon the payment in full of any Mortgage  Loan  (including
any liquidation of such Mortgage Loan through  foreclosure or otherwise,  or the
receipt by the Servicer of a notification  that payment in full will be escrowed
in a manner  customary  for such  purposes),  the Servicer  shall deliver to the
Trustee (or the Custodian as the case may be) two executed copies of a completed
"Request  for Release"  substantially  in the form of Exhibit E. Upon receipt of
such Request for Release of Documents, the Trustee (or the Custodian as the case
may be) shall  promptly  release the related  Mortgage File, in trust to (i) the
Servicer,  or (ii) such  other  party  identified  in the  related  Request  for
Release. Upon any such payment in full, or the receipt of such notification that
such funds have been placed in escrow,  the Servicer shall direct the Trustee in
writing to execute an  instrument  of  satisfaction  (or  assignment of Mortgage
without recourse) regarding the

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<PAGE>

Mortgaged  Property relating to such Mortgage,  which instrument of satisfaction
or  assignment,  as the case may be, shall be delivered to the Person or Persons
entitled  thereto  against  receipt  therefor  of  payment  in  full,  it  being
understood  and  agreed  that  no  expense  incurred  in  connection  with  such
instrument  of  satisfaction  or  assignment,  as the  case  may  be,  shall  be
chargeable to the Collection Account. In lieu of executing any such satisfaction
or  assignment,  as the case may be, the  Servicer may prepare and submit to the
Trustee a satisfaction  (or  assignment  without  recourse,  if requested by the
Person or Persons  entitled  thereto) in form for  execution by the Trustee with
all requisite  information completed by the Servicer; in such event, the Trustee
shall execute and acknowledge such  satisfaction or assignment,  as the case may
be, and deliver the same with the related Mortgage File, as aforesaid.

                  (b) From time to time and as  appropriate  in the servicing of
any  Mortgage  Loan,  including,   without  limitation,   foreclosure  or  other
comparable  conversion  of a Mortgage  Loan or  collection  under any  insurance
policy relating to a Mortgage Loan, the Trustee shall (except in the case of the
payment or liquidation  pursuant to which the related  Mortgage File is released
to an escrow  agent or an  employee,  agent or  attorney of the  Trustee),  upon
written  request of the Servicer and delivery to the Trustee (or the  Custodian,
as  the  case  may  be)  of two  executed  copies  of a  "Request  for  Release"
substantially  in the form of Exhibit E signed by a Servicing  Officer,  release
the related  Mortgage File to the Servicer and shall  execute such  documents as
shall  be  necessary  to the  prosecution  of any such  proceedings,  including,
without  limitation,  an assignment  without recourse of the related Mortgage to
the Servicer.  Such receipt  shall  obligate the Servicer to return the Mortgage
File to the  Trustee  (or the  Custodian,  as the  case  may be)  when  the need
therefor by the  Servicer no longer  exists  unless the  Mortgage  Loan shall be
liquidated, in which case, upon receipt of a Request for Release evidencing such
liquidation,  the receipt shall be released by the Trustee (or the Custodian, as
the case may be) to the Servicer.

                  (c) Subject to Section 3.01, the Servicer shall have the right
to accept  applications  of  Mortgagors  for consent to (i) partial  releases of
Mortgages, (ii) alterations, (iii) removal, demolition or division of properties
subject to  Mortgages  and (iv) second  mortgage  subordination  agreements.  No
application for approval shall be considered by the Servicer unless:  (w) it has
received an Opinion of Counsel,  addressed to the Trustee  (which  opinion shall
not be an expense of the Trustee or the Trust Fund) that such sale, disposition,
substitution,  acquisition or contribution  will not affect adversely the status
of any REMIC  constituting  part of the Trust Fund as a REMIC or cause any REMIC
constituting  part of the  Trust  Fund  to be  subject  to a tax on  "prohibited
transactions"  or  "contributions"  pursuant  to the REMIC  Provisions;  (x) the
provisions  of the related Note and Mortgage have been  complied  with;  (y) the
Combined Loan-to-Value Ratio and debt-to-income ratio after any release does not
exceed  the  maximum  Combined  Loan-to-Value  Ratio  and  debt-to-income  ratio
established in accordance with the underwriting standards of the Mortgage Loans;
and (z) the lien priority of the related Mortgage is not affected.  Upon receipt
by the Trustee of a Servicing  Officer's  certificate  setting  forth the action
proposed to be taken in respect of a  particular  Mortgage  Loan and  certifying
that the  criteria set forth in the  immediately  preceding  sentence  have been
satisfied,  the Trustee shall execute and deliver to the Servicer the consent or
partial release so requested by the

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<PAGE>

Servicer.  A proposed  form of consent or partial  release,  as the case may be,
shall accompany any Servicing  Officer's  certificate  delivered by the Servicer
pursuant to this paragraph.

                  Section 3.18. Servicing Compensation.

                  As  compensation  for its activities  hereunder,  the Servicer
shall be entitled to retain the amount of the Servicing Fee with respect to each
Mortgage Loan  (including  REO  Properties).  The Servicer  shall be entitled to
retain additional servicing  compensation in the form of release fees, bad check
charges,  assumption fees, modification or extension fees, late payment charges,
or any other  service-related  fees, Insurance Proceeds and Liquidation Proceeds
not required to be deposited in the Collection Account and similar items, to the
extent collected from Mortgagors.  Additionally,  the Servicer shall be entitled
to the Special Servicing Fee, payable in accordance with Section 4.02.

                  Section 3.19. Annual Statement as to Compliance.

                  (a) The  Servicer,  at its own  expense,  will  deliver to the
Trustee  and the  Depositor,  not later  than 90 days  following  the end of the
fiscal year of the Servicer  which as of the Startup Day ends on the last day of
December,  commencing in 2000, a Servicing Officer's  certificate stating, as to
each signer thereof,  that (i) a review of the activities of the Servicer during
such preceding fiscal year (or such shorter period in the case of the first such
report)  and of  performance  under  this  Agreement  has been made  under  such
officers' supervision,  and (ii) to the best of such officers' knowledge,  based
on such review,  the  Servicer  has  fulfilled  all its  obligations  under this
Agreement for such year,  or, if there has been a default in the  fulfillment of
all such  obligations,  specifying  each such default known to such officers and
the nature and status thereof including the steps being taken by the Servicer to
remedy such default.

                  (b) Delivery of such reports, information and documents to the
Trustee is for  informational  purposes only and the  Trustee's  receipt of such
shall not constitute constructive notice of any information contained therein or
determinable,  from  information  contained  therein,  including the  Servicer's
compliance  with any of its  covenants  hereunder  (as to which the  Trustee  is
entitled to rely exclusively on Officers' Certificates).

                  Section 3.20. Annual Independent Certified Public Accountants'
Reports.

                  (a) Not later than 90 days  following  the end of each  fiscal
year of the Servicer  commencing in 2000,  the Servicer,  at its expense,  shall
cause a nationally  recognized firm of independent  certified public accountants
to furnish to the Trustee and the  Depositor  a report  stating  that (i) it has
obtained  a  letter  of  representation   regarding  certain  matters  from  the
management  of the Servicer  which  includes an assertion  that the Servicer has
complied with certain  minimum  residential  mortgage loan servicing  standards,
identified in either the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America or the Audit

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<PAGE>

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

                  (b) Delivery of such reports, information and documents to the
Trustee is for  informational  purposes only and the  Trustee's  receipt of such
shall not constitute constructive notice of any information contained therein or
determinable,  from  information  contained  therein,  including the  Servicer's
compliance  with any of its  covenants  hereunder  (as to which the  Trustee  is
entitled to rely exclusively on Officers' Certificates).

                  (c) The Trustee shall,  on behalf of the Trust Fund,  prepare,
sign and file with the Securities  and Exchange  Commission any and all reports,
statements and information  respecting the Trust which the Depositor  determines
are required to be filed with the Securities and Exchange Commission pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, each
such report,  statement and  information to be filed on or prior to the required
filing date for such report,  statement or information.  Upon the request of the
Trustee, each of the Seller, the Servicer and the Depositor shall cooperate with
the  Trustee in the  preparation  of any such  report  and shall  provide to the
Trustee in a timely manner all such  information or documentation as the Trustee
may  reasonably  request in connection  with the  performance  of its duties and
obligations under this Section.

                  Section 3.21. Access to Certain  Documentation and Information
Regarding the Mortgage Loans.

                  The Servicer shall provide to the Trustee,  Certificateholders
that are federally insured savings and loan  associations,  the Office of Thrift
Supervision,  the FDIC and the  supervisory  agents and examiners of each of the
foregoing  (which,  in the case of  supervisory  agents  and  examiners,  may be
required  by   applicable   state  and  federal   regulations)   access  to  the
documentation  regarding the Mortgage Loans,  such access being afforded without
charge but only upon reasonable  request and during normal business hours at the
offices of the Servicer designated by it.

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<PAGE>

                  Section 3.22. Reserved.

                  Section  3.23.  Obligations  of the  Servicer  in  Respect  of
Compensating Interest.

                  Not  later  than  the  close  of  business  on  each  Servicer
Remittance  Date,  the Servicer  shall deliver to the Trustee for deposit in the
Distribution Account an amount ("Compensating  Interest") equal to the lesser of
(A)  the  aggregate  of the  Prepayment  Interest  Shortfalls  on the  Actuarial
Mortgage  Loans for the  related  Distribution  Date  resulting  from  Principal
Prepayments on the Actuarial Mortgage Loans during the related Prepayment Period
and (B) 50% of its aggregate  Servicing  Fee received in the related  Collection
Period. The Servicer shall apply Compensating  Interest to offset any Prepayment
Interest Shortfalls on the Actuarial Mortgage Loans. The Servicer shall not have
the right to reimbursement for any amounts remitted to the Trustee in respect of
Compensating  Interest.  Such  amounts  so  remitted  shall be  included  in the
Available Funds and  distributed  therewith on the next  Distribution  Date. The
Servicer  shall not be obligated to pay  Compensating  Interest  with respect to
Prepayment  Interest  Shortfalls on Simple Interest Mortgage Loans or Relief Act
Interest Shortfalls.

                  Section  3.24.  Obligations  of the  Servicer  in  Respect  of
Mortgage Interest Rates and Monthly Payments.

                  In  the  event  that  a  shortfall  in  any  collection  on or
liability with respect to any Mortgage Loan results from or is  attributable  to
adjustments to Mortgage Interest Rates,  Monthly Payments or Principal  Balances
that were made by the Servicer in a manner not consistent  with the terms of the
related  Mortgage  Note and this  Agreement,  the  Servicer,  upon  discovery or
receipt of notice thereof,  immediately shall deliver to the Trustee for deposit
in the Distribution  Account from its own funds the amount of any such shortfall
and shall indemnify and hold harmless the Trust Fund, the Trustee, the Depositor
and any successor  servicer in respect of any such liability.  Such  indemnities
shall survive the termination or discharge of this Agreement.

                  Section 3.25.  Investment of Funds in the  Collection  Account
and the Distribution Account.

                  (a)  The  Servicer  may  direct  any  depository   institution
maintaining  the  Collection  Account and the Trustee may direct any  depository
institution  maintaining the Distribution  Account (for purposes of this Section
3.25,  each an  "Investment  Account"),  to invest the funds in such  Investment
Account  in one or more  Permitted  Investments  bearing  interest  or sold at a
discount, and maturing, unless payable on demand, (i) no later than the Business
Day  immediately  preceding  the date on which  such  funds are  required  to be
withdrawn from such account  pursuant to this Agreement,  if a Person other than
the  Trustee is the  obligor  thereon,  and (ii) no later than the date on which
such funds are  required  to be  withdrawn  from such  account  pursuant to this
Agreement, if the Trustee is the obligor thereon. All such Permitted Investments
shall be held to maturity,  unless payable on demand. Any investment of funds in
an Investment  Account shall be made in the name of the Trustee or the Servicer,
as applicable (in its capacity as such) or

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in the name of a nominee of the Trustee.  The Trustee  shall be entitled to sole
possession  (except  with respect to  investment  direction of funds held in the
Collection  Account) over each such investment and the income  thereon,  and any
certificate  or  other  instrument  evidencing  any  such  investment  shall  be
delivered  directly to the Trustee or its agent,  together  with any document of
transfer  necessary to transfer  title to such  investment to the Trustee or its
nominee.  In the event  amounts on deposit in an  Investment  Account are at any
time invested in a Permitted  Investment payable on demand, the Trustee shall at
the direction of the Servicer:

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

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

                  (b) All income and gain realized from the  investment of funds
in the Collection Account shall be for the benefit of the Servicer. The Servicer
shall  deposit in the  Collection  Account  the amount of any loss  incurred  in
respect  of any such  Permitted  Investment  made  with  funds  in such  account
immediately upon realization of such loss. All income and gain realized from the
investment of funds in the Distribution  Account shall be for the benefit of the
Trustee. The Trustee shall deposit in the Distribution Account the amount of any
loss incurred on Permitted Investments in the Distribution Account.

                  (c) Except as otherwise  expressly provided in this Agreement,
if any  default  occurs  in the  making of a  payment  due  under any  Permitted
Investment,  or if a default occurs in any other performance  required under any
Permitted  Investment,  the Trustee may and, subject to Section 8.01 and Section
8.02(a)(v),  upon the request of the Holders of Certificates  representing  more
than 50% of the Voting Rights allocated to any Class of Certificates, shall take
such  action as may be  appropriate  to enforce  such  payment  or  performance,
including the institution and prosecution of appropriate proceedings.

                  The  Trustee  shall not in any way be held liable by reason of
any  insufficiency  in any  Account  held  by the  Trustee  resulting  from  any
investment  loss on any Permitted  Investment  included  therein  (except to the
extent that the Trustee is the obligor and has defaulted thereon).

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                  Section 3.26. Liability of Servicer; Indemnification.

                  (a) Subject to clause (b) below and Section 6.03, the Servicer
(except  the  Trustee if it is  required  to  succeed  the  Servicer  hereunder)
indemnifies  and  holds  the  Trustee,   the  Seller,  the  Depositor  and  each
Certificateholder harmless against any and all claims, losses, penalties, fines,
forfeitures,  reasonable legal fees and related costs, judgments,  and any other
costs,   fees  and  expenses   that  the   Trustee,   the   Depositor   and  any
Certificateholder  may sustain in any way related to the failure of the Servicer
to perform its duties and  service the  Mortgage  Loans in  compliance  with the
Servicing  Standards.  The Servicer shall  immediately  notify the Trustee,  the
Depositor and each  Certificateholder if a claim is made that may result in such
claims,  losses,  penalties,  fines,  forfeitures,  legal fees or related costs,
judgments,  or any other costs, fees and expenses, and the Servicer shall assume
(with the  consent  of the  Trustee)  the  defense of any such claim and pay all
expenses  in  connection  therewith,  including  reasonable  counsel  fees,  and
promptly pay,  discharge and satisfy any judgment or decree which may be entered
against the Servicer,  the Trustee,  the Depositor and/or  Certificateholder  in
respect of such claim.  The  provisions  of this Section 3.26 shall  survive the
termination of this Agreement and the payment of the outstanding Certificates.

                  (b) None of the Depositor, the Seller, the Servicer, or any of
the directors, officers, employees or agents of the Depositor, the Seller or the
Servicer   shall  be   under   any   liability   to  the   Trust   Fund  or  the
Certificateholders  for any action taken,  or for refraining  from the taking of
any action, in good faith pursuant to this Agreement, or for errors in judgment;
provided,  however,  that this provision  shall not protect the  Depositor,  the
Seller or the Servicer or any such Person  against any breach of  warranties  or
representations  made herein,  or against any specific  liability imposed on the
Servicer for a breach of the Servicing Standard,  or against any liability which
would otherwise be imposed by reason of its respective willful misfeasance,  bad
faith,  fraud or  negligence in the  performance  of its duties or by reasons of
negligent disregard of its respective obligations or duties hereunder.

                  The  Depositor,  the  Servicer,  the Seller and any  director,
officer,  employee or agent of the  Depositor,  the Seller or the Servicer,  may
rely in good faith on any document of any kind which,  prima facie,  is properly
executed  and  submitted by any  appropriate  Person with respect to any matters
arising hereunder.  The Depositor,  the Servicer,  the Seller, and any director,
officer, employee or agent of the Depositor, the Seller or the Servicer shall be
indemnified  and held harmless by the Trust Fund against any loss,  liability or
expense  incurred in connection with any legal action relating to this Agreement
or the  Certificates,  other than any loss,  liability  or expense  incurred  in
connection   with  any  legal  action  incurred  by  reason  of  its  respective
misfeasance,  bad faith,  fraud or negligence,  a breach of a representation  or
warranty  hereunder or (in the case of the  Servicer) a breach of the  Servicing
Standard in the  performance of its respective  duties or by reason of negligent
disregard  of its  respective  obligations  or  duties  hereunder.  Neither  the
Depositor,  the Seller nor the Servicer  shall be under any obligation to appear
in,  prosecute or defend any legal  action  unless such action is related to its
respective  duties under this Agreement and in its opinion does not expose it to
any expense or liability;  provided,  however, that the Depositor, the Seller or
the Servicer may

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in its  discretion  undertake any action  related to its  obligations  hereunder
which it may deem  necessary or desirable with respect to this Agreement and the
rights  and  duties  of  the   parties   hereto   and  the   interests   of  the
Certificateholders hereunder.

                  Section  3.27.  Reports  of  Foreclosure  and  Abandonment  of
Mortgaged Properties.

                  On or before the last day of February  of each year  beginning
in 2001, the Servicer shall file the reports of foreclosure  and  abandonment of
any Mortgaged  Property  required by Section 6050J of the Code with the Internal
Revenue Service and provide an Officer's  Certificate  certifying its compliance
with this Section 3.27 to the Trustee. The reports from the Servicer shall be in
form and substance sufficient to meet the reporting requirements imposed by such
Section 6050J.

                  Section  3.28.  Protection  of  Assets(a)  .  (a)  Except  for
transactions and activities  entered into in connection with the  securitization
that is the subject of this  agreement,  the trust created by this  agreement is
not authorized and has no power to:

                  (1)      borrow money or issue debt;

                  (2)      merge with another entity,  reorganize,  liquidate or
sell assets;

                  (3)      engage in any business or activities.

                  (b) Each party to this agreement  agrees that it will not file
an  involuntary  bankruptcy  petition  against  the Trustee or the Trust Fund or
initiate any other form of insolvency  proceeding  until after the  Certificates
have been paid.

                                   ARTICLE IV

                                  FLOW OF FUNDS

                  Section 4.01. Interest Distributions.

                  On each Distribution Date, the Trustee shall withdraw from the
Distribution  Account  the  Interest  Remittance  Amount  and  apply  it in  the
following order of priority (based upon the Mortgage Loan  information  provided
to it in the Remittance Report,  upon which the Trustee may conclusively  rely),
and  the  calculations  required  to be  made  by the  Trustee,  to  the  extent
available:

                  (i) to the  Trustee,  the  Trustee  Fee for such  Distribution
         Date;

                  (ii)  concurrently,  to the Class  A-1F,  Class A-2F and Class
         A-1A  Certificates,   pro  rata,  the  applicable  Accrued  Certificate
         Interest for such Distribution Date;

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<PAGE>

                  (iii)  concurrently,  to the Class A-1F,  Class A-2F and Class
         A-1A  Certificates,  pro rata,  the  applicable  Interest Carry Forward
         Amount for the Class  A-1F,  Class  A-2F and Class  A-1A  Certificates,
         respectively;

                  (iv) to the Class M-1  Certificates,  the Accrued  Certificate
         Interest thereon for such Distribution Date;

                  (v) to the Class M-2  Certificates,  the  Accrued  Certificate
         Interest thereon for such Distribution Date;

                  (vi) to the Class B-1  Certificates,  the Accrued  Certificate
         Interest thereon for such Distribution Date;

                  (vii) to the Class B-2 Certificates,  the Accrued  Certificate
         Interest thereon for such Distribution Date; and

                  (viii) the amount,  if any, of the Interest  Remittance Amount
         remaining  after  application  with respect to the priorities set forth
         above will be applied as described under Section 4.02(b) hereof.

                  Section 4.02.  Distributions  of Principal and Monthly  Excess
Cashflow Amounts.

                  (a) On each  Distribution  Date,  the  Trustee  shall make the
following  distributions  in the  following  order of  priority  (based upon the
Mortgage Loan  information  provided to it in the  Remittance  Report),  and the
calculations  required to be made by the Trustee, to the extent of the Principal
Distribution Amount:

                  (i)  before  the  Stepdown  Date or with  respect  to  which a
         Trigger Event is in effect,

                           (A) concurrently, as follows:

                                    (1) sequentially to the Holders of the Class
                           A-1F and Class A-2F Certificates,  in that order, the
                           Group  1  Principal   Percentage   of  the  Principal
                           Distribution Amount for such Distribution Date, until
                           the Certificate  Principal Balance of each such Class
                           has been  reduced  to zero and then to the Class A-1A
                           Certificates, until the Certificate Principal Balance
                           of such Class has been reduced to zero; and

                                    (2)  to  the   Holders  of  the  Class  A-1A
                           Certificates, the Group 2 Principal Percentage of the
                           Principal  Distribution  Amount for such Distribution
                           Date, until the Certificate Principal Balance of such
                           Class has been reduced to zero and then  sequentially
                           to the Class  A-1F and Class  A-2F  Certificates,  in
                           that order,  until the Certificate  Principal Balance
                           of each such Class has been reduced to zero;

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<PAGE>

                           (B) to the  Holders  of the Class  M-1  Certificates,
                  100% of the remaining  Principal  Distribution Amount for such
                  Distribution Date, until the Certificate  Principal Balance of
                  the Class M-1 Certificates has been reduced to zero;

                           (C) to the  Holders  of the Class  M-2  Certificates,
                  100% of the remaining Principal Distribution Amount, until the
                  Certificate  Principal  Balance of the Class M-2  Certificates
                  has been reduced to zero;

                           (D) to the  Holders  of the Class  B-1  Certificates,
                  100% of the remaining Principal Distribution Amount, until the
                  Certificate  Principal  Balance of the Class B-1  Certificates
                  has been reduced to zero;

                           (E) to the  Holders  of the Class  B-2  Certificates,
                  100% of the remaining Principal Distribution Amount, until the
                  Certificate  Principal  Balance of the Class B-2  Certificates
                  has been reduced to zero; and

                           (F) any amount of the Principal  Distribution  Amount
                  remaining  after  making all of the  distributions  in clauses
                  (A),  (B),  (C),  (D) and (E) shall be applied as set forth in
                  Section 4.02(b).

                  (ii) on or after  the  Stepdown  Date and as long as a Trigger
         Event is not in effect:

                           (A)  the  lesser  of (x) the  Principal  Distribution
                  Amount  and (y) the  Class A  Principal  Distribution  Amount,
                  concurrently as follows:

                                    (1) the Group 1 Principal  Percentage of the
                           lesser of (x) the Principal  Distribution  Amount and
                           (y) Class A  Principal  Distribution  Amount  will be
                           distributed sequentially, to the Class A-1F and Class
                           A-2F   Certificates,   in  that   order,   until  the
                           Certificate  Principal Balance of each such Class has
                           been  reduced  to zero  and  then to the  Class  A-1A
                           Certificates, until the Certificate Principal Balance
                           of such Class has been reduced to zero; and

                                    (2) the Group 2 Principal  Percentage of the
                           lesser of (x) the Principal  Distribution  Amount and
                           (y) Class A  Principal  Distribution  Amount  will be
                           distributed to the Class A-1A Certificates, until the
                           Certificate  Principal Balance of such Class has been
                           reduced  to zero and then  sequentially  to the Class
                           A-1F and  Class  A-2F  Certificates,  in that  order,
                           until the Certificate  Principal Balance of each such
                           Class has been reduced to zero;

                           (B) the lesser of (x) the excess of (i) the Principal
                  Distribution  Amount over (ii) the amount  distributed  to the
                  Class A Certificates in clause (A) above and (y) the Class M-1
                  Principal Distribution Amount will be distributed to the Class
                  M-1  Certificates,  until the  Certificate  Principal  Balance
                  thereof has been reduced to zero;

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<PAGE>

                           (C) the lesser of (x) the excess of (i) the Principal
                  Distribution   Amount   over  (ii)  the  sum  of  the   amount
                  distributed  to the Class A  Certificates  in clause (A) above
                  and the amount  distributed to the Class M-1  Certificates  in
                  clause (B) above and (y) the Class M-2 Principal  Distribution
                  Amount  will be  distributed  to the Class  M-2  Certificates,
                  until  the  Certificate  Principal  Balance  thereof  has been
                  reduced to zero;

                           (D) the lesser of (x) the excess of (i) the Principal
                  Distribution   Amount   over  (ii)  the  sum  of  the   amount
                  distributed to the Class A Certificates pursuant to clause (A)
                  above,  the amount  distributed to the Class M-1  Certificates
                  pursuant to clause (B) above and the amount distributed to the
                  Class M-2  Certificates  pursuant  to clause (C) above and (y)
                  the  Class  B-1   Principal   Distribution   Amount   will  be
                  distributed   to  the  Class  B-1   Certificates,   until  the
                  Certificate  Principal  Balance  thereof  has been  reduced to
                  zero;

                           (E) the lesser of (x) the excess of (i) the Principal
                  Distribution   Amount   over  (ii)  the  sum  of  the   amount
                  distributed to the Class A Certificates pursuant to clause (A)
                  above,  the amount  distributed to the Class M-1  Certificates
                  pursuant to clause (B) above,  the amount  distributed  to the
                  Class M-2  Certificates  pursuant  to clause (C) above and the
                  amount  distributed to the Class B-1 Certificates  pursuant to
                  clause (D) above and (y) the Class B-2 Principal  Distribution
                  Amount  will be  distributed  to the Class  B-2  Certificates,
                  until  the  Certificate  Principal  Balance  thereof  has been
                  reduced to zero; and

                           (F) any amount of the Principal  Distribution  Amount
                  remaining  after  making all of the  distributions  in clauses
                  (A), (B), (C), (D) and (E) above shall be applied as set forth
                  in Section 4.02(b).

                  (b) On each  Distribution  Date, any Monthly  Excess  Cashflow
Amount shall be distributed,  to the extent available, in the following order of
priority on such Distribution Date:

                  (i) to pay any remaining unpaid Accrued  Certificate  Interest
         for such Distribution  Date, pro rata, among the Class A-1F, Class A-2F
         and Class A-1A Certificates;

                  (ii) to pay the remaining  Interest Carry Forward  Amounts for
         the Classes of Class A Certificates,  if any, pro rata, among the Class
         A-1F, Class A-2F and the Class A-1A Certificates;

                  (iii) to pay the Extra Principal  Distribution Amount for such
         Distribution Date in accordance with Section 4.02(a);

                  (iv) to pay any remaining unpaid Accrued Certificate  Interest
         for such Distribution Date for the Class M-1 Certificates;

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<PAGE>

                  (v) to pay the  remaining  Class M-1  Interest  Carry  Forward
         Amount, if any;

                  (vi) to pay the Class M-1 Realized  Loss  Amortization  Amount
         for such Distribution Date;

                  (vii) to pay any remaining unpaid Accrued Certificate Interest
         for such Distribution Date for the Class M-2 Certificates;

                  (viii) to pay the remaining  Class M-2 Interest  Carry Forward
         Amount, if any;

                  (ix) to pay the Class M-2 Realized  Loss  Amortization  Amount
         for such Distribution Date;

                  (x) to pay any remaining unpaid Accrued  Certificate  Interest
         for such Distribution Date for the Class B-1 Certificates;

                  (xi) to pay the  remaining  Class B-1 Interest  Carry  Forward
         Amount, if any;

                  (xii) to pay the Class B-1 Realized Loss  Amortization  Amount
         for such Distribution Date;

                  (xiii)  to  pay  any  remaining  unpaid  Accrued   Certificate
         Interest for such Distribution Date for the Class B-2 Certificates;

                  (xiv) to pay the  remaining  Class B-2 Interest  Carry Forward
         Amount, if any;

                  (xv) to pay the Class B-2 Realized  Loss  Amortization  Amount
         for such Distribution Date;

                  (xvi) to the Excess  Reserve Fund  Account,  and then from the
         Excess Reserve Fund Account to the Class A-1A  Certificates,  an amount
         equal to the Class A-1A LIBOR Carryover Amount;

                  (xvii) to the Excess Reserve Fund Account,  an amount equal to
         the Required Excess Reserve Fund Deposit;

                  (xviii)   to  pay  the   Special   Servicing   Fees  for  such
         Distribution  Date and any accrued and unpaid  Special  Servicing  Fees
         which remain unpaid from any previous Distribution Date;

                  (xix)  together with amounts from the Class N Reserve Fund, if
         necessary,  to pay the Class N  Certificates,  the Accrued  Certificate
         Interest for the Class N  Certificates  and any Interest  Carry Forward
         Amount thereon unpaid on prior Distribution Dates;

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<PAGE>

                  (xx) to the Class N Reserve Fund, the Required Class N Reserve
         Fund Deposit;

                  (xxi) any remaining  Monthly Excess  Cashflow  Amount together
         with the Class N Excess  Release  Amount to reduce the Class N Notional
         Amount, until the Class N Notional Amount has been reduced to zero; and

                  (xxii) to the Class X Certificates,  the Class X Distributable
         Amount for such Distribution Date.

                  On each  Distribution  Date, there shall be distributed to the
Holders of the Class R  Certificates  in respect of the Class R-1 Interest,  any
remaining amount in the Distribution  Account on such date after the application
pursuant to Sections 4.01, 4.02(a), 4.02(b)(i)-(xxii) and 4.02(c).

                  (c) On each  Distribution  Date, all  prepayment  premiums and
penalties (including amounts deposited by the Seller in lieu thereof pursuant to
Section 3.01) shall be allocated to the Class N Certificates  for so long as the
Class N Notional  Amount is greater than zero  pursuant to Section  4.02(b)(xxi)
above),  and to the Class X Certificates  after the Class N Notional  Amount has
been reduced to zero.

                  (d) Any amounts  distributed  to the Offered  Certificates  in
respect of interest  pursuant to Sections  4.01(ii)-(vii)  which constitute Rate
Payments shall first be deemed  distributed by REMIC 2 to the Class X/N Interest
as a distribution in respect of the REMIC 2 Components,  and then distributed to
the  Offered  Certificates  from the  Grantor  Trust  as  payments  on  notional
principal contracts in the nature of cap contracts.

                  (e) Any amounts  distributed to the Class A-1A Certificates in
respect of Class A-1A LIBOR Carryover  Amounts pursuant to Section  4.02(b)(xvi)
shall  first be deemed  distributed  by REMIC 2 to the Class X/N  Interest  as a
distribution  of Monthly Excess  Cashflow  Amount,  and then  distributed to the
Class A-1A Certificates from the Grantor Trust as payments on notional principal
contracts in the nature of cap contracts.

                  (f)  Any  amounts  distributed  to the  Class  N  Certificates
pursuant to Section 4.02(b)(xix) and (xxi), to the Class N Reserve Fund pursuant
to  Section  4.02(b)(xx)  and to the Class X  Certificates  pursuant  to Section
4.02(b)(xxii)  shall be  considered  distributed  to the Class X/N  Interest  in
respect  of the  REMIC  2  Components  and  then  to the  Class  N and  Class  X
Certificates pursuant to Section 9.01(n).

                  Section 4.03. Allocation of Losses.

                  Realized Losses shall be allocated first against the Remaining
Initial    Overcollateralization   Amount   and   second   to   the   Subsequent
Overcollateralization  Amount, until the  Overcollateralization  Amount has been
reduced to zero.  If, after giving effect to the  distribution  of the Principal
Distribution Amount on any Distribution Date the aggregate Certificate Principal
Balance of the Offered  Certificates  exceeds the Pool  Balance as of the end of
the related Collection  Period,  such excess will be allocated against the Class
B-2, Class B-1, Class M-2, Class M-1 and the Senior Certificates, in

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<PAGE>

that order and until the respective  Certificate  Principal Balances thereof are
reduced to zero.  Any  allocation  to the Senior  Certificates  shall be further
allocated  among the Class  A-1A,  Class A-1F and Class A-2F  Certificates,  pro
rata, on the basis of their respective Certificate Principal Balances.

                  Section 4.04. Method of Distribution.

                  The  Trustee  shall  make   distributions   in  respect  of  a
Distribution Date to each Certificateholder of record on the related Record Date
(other than as provided in Section 10.01 respecting the final distribution),  in
the  case  of  Certificateholders  of the  Certificates,  by  wire  transfer  in
immediately  available  funds to the account of the Person  entitled  thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered  owner of such  Certificates  the aggregate  initial  Certificate
Principal  Balance of which is in excess of  $5,000,000,  or by check  mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register,  provided that the Trustee may
deduct a reasonable  wire  transfer fee from any payment made by wire  transfer.
Distributions  among  Certificateholders  shall  be  made in  proportion  to the
Percentage    Interests   evidenced   by   the   Certificates   held   by   such
Certificateholders.

                  Section 4.05. Distributions on Book-Entry Certificates.

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

                  Section 4.06. Statements.

                  (a) On each Distribution  Date,  based, as applicable,  on the
Mortgage Loan information  contained in the Remittance Report, the Trustee shall
prepare and post on its  website at  www.chase.com/sfa,  a  statement  as to the
distributions made on such Distribution Date:

                  (i) the amount of the distribution  made on such  Distribution
         Date  to the  Holders  of  each  Class  of  Certificates  allocable  to
         principal  or  reduction  of the Class N  Notional  Amount,  separately
         identified;

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<PAGE>

                  (ii) the amount of the distribution  made on such Distribution
         Date to the Holders of each Class of Certificates allocable to interest
         or Class X Distributable Amount, separately identified;

                  (iii)     the      Overcollateralization      Amount,      the
         Overcollateralization   Release   Amount,   the   Overcollateralization
         Deficiency  and  the  Overcollateralization  Target  Amount  as of such
         Distribution  Date and the Monthly Excess  Interest  Amount and Monthly
         Excess Cashflow Amount for such Distribution Date;

                  (iv) the aggregate amount of servicing  compensation  received
         by the Servicer  during the related  Collection  Period and accrued and
         unpaid Special Servicing Fees;

                  (v)  the   aggregate   amount  of  Advances  for  the  related
         Collection Period;

                  (vi) the Pool Balance and the Loan Group Balance for each Loan
         Group at the close of  business  at the end of the  related  Collection
         Period;

                  (vii)   separately   stated  for  each  Loan  Group  and  each
         Sub-group,  the number, weighted average remaining term to maturity and
         weighted average Mortgage Interest Rate of the Mortgage Loans as of the
         related Due Date;

                  (viii)   separately  stated  for  each  Loan  Group  and  each
         Sub-group,  the  number  and  aggregate  unpaid  principal  balance  of
         Mortgage Loans (a) 30 to 59 days past due on a contractual  basis,  (b)
         60 to 89 days past due on a contractual basis, (c) 90 or more days past
         due on a contractual  basis,  (d) as to which  foreclosure  proceedings
         have been  commenced  and (e) in bankruptcy as of the close of business
         on the last day of the calendar month preceding such Distribution Date;

                  (ix) separately stated for each Loan Group and each Sub-group,
         with  respect to any Mortgage  Loan that became an REO Property  during
         the preceding  calendar  month,  the loan number of such Mortgage Loan,
         the unpaid principal balance and the Principal Balance of such Mortgage
         Loan as of the date it became an REO Property;

                  (x) separately  stated for each Loan Group and each Sub-group,
         the book value of any REO  Property  as of the close of business on the
         last  Business Day of the calendar  month  preceding  the  Distribution
         Date,  and,  cumulatively,  the total number and  cumulative  principal
         balance of all REO  Properties  as of the close of business of the last
         day of the preceding Collection Period;

                  (xi) separately stated for each Loan Group and each Sub-group,
         the aggregate  amount of Principal  Prepayments made during the related
         Prepayment Period;

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                  (xii) the aggregate amount of prepayment  penalties  collected
         or deposits  by the Seller in lieu  thereof  pursuant  to Section  3.01
         during the related  Collection Period and the amounts thereof allocable
         to the Class N Certificates and the Class X Certificates;

                  (xiii)   separately  stated  for  each  Loan  Group  and  each
         Sub-group,  the aggregate amount of Realized Losses incurred during the
         related Collection Period and the cumulative amount of Realized Losses;

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

                  (xv) the beginning balance of amounts on deposit in the Excess
         Reserve Fund as of the preceding  Distribution  Date,  any  withdrawals
         from and deposits into the Excess  Reserve Fund as of the  Distribution
         Date,  and the  ending  balance  of  amounts  on  deposit in the Excess
         Reserve Fund on such Distribution Date;

                  (xvi) the beginning balance of amounts on deposit in the Class
         N Reserve Fund as of the preceding  Distribution  Date, any withdrawals
         from and deposits into the Class N Reserve Fund as of the  Distribution
         Date,  and the  ending  balance  of  amounts  on deposit in the Class N
         Reserve Fund on such Distribution Date;

                  (xvii) the  Accrued  Certificate  Interest  in respect of each
         Class of Offered  Certificates for such Distribution  Date,  separately
         identifying the portions thereof attributable to Rate Payments, and the
         respective  portions  thereof,  if any,  remaining unpaid following the
         distributions made in respect of such Certificates on such Distribution
         Date;

                  (xviii)  the  aggregate  amount  of  any  Prepayment  Interest
         Shortfalls  for such  Distribution  Date,  to the extent not covered by
         payments by the Servicer pursuant to Section 3.23;

                  (xix) [Reserved];

                  (xx)  the  Principal  Balance  of the  Re-performing  60+  Day
         Delinquent Loans;

                  (xxi) the amount of the Trustee Fee paid;

                  (xxii) Class A-1A LIBOR  Carryover  Amounts for the Class A-1A
         Certificates  distributed  on such  Distribution  Date and the  amounts
         remaining  after  giving  effect  to  distributions   thereof  on  such
         Distribution Date;

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                  (xxiii)  any  Overcollateralization  Deficiency  after  giving
         effect to the distribution of principal on such Distribution Date;

                  (xxiv) whether a Trigger Event has occurred and is continuing,
         and the  cumulative  Realized  Losses,  as a percentage of the original
         Pool Balance;

                  (xxv) the Available Funds;

                  (xxvi) the rate at which  interest  accrues  for each Class of
         Certificates for such Distribution Date;

                  (xxvii) the Liquidation Report for such Distribution Date;

                  (xxviii) [Reserved]

                  (xxix)  the  aggregate  Principal  Balance of  Mortgage  Loans
         purchased  by the  Servicer  or Seller  during the  related  Collection
         Period and  indicating  the  Section  of this  Agreement  requiring  or
         allowing the purchase of each such Mortgage Loan; and

                  (xxx) the aggregate  Principal  Balance of the Mortgage  Loans
         repurchased  by the Seller  during  the  related  Collection  Period in
         connection with Section 3.16.

                  The  Trustee  may fully rely upon and shall have no  liability
with respect to  information  with respect to the Mortgage Loans provided by the
Servicer.

                  In the case of  information  furnished  pursuant to subclauses
(i) through (iii) above, the amounts shall be expressed in a separate Section of
the report as a dollar  amount for each Class for each  $1,000  original  dollar
amount as of the Cut-Off Date.

                  (b) Within a  reasonable  period of time after the end of each
calendar  year,  the Trustee shall furnish to each Person who at any time during
the calendar year was a Certificateholder of a Regular Certificate, if requested
in writing by such  Person,  such  information  as is  reasonably  necessary  to
provide to such  Person a  statement  containing  the  information  set forth in
subclauses (i), (ii), (xv) and (xx) above,  aggregated for such calendar year or
applicable  portion  thereof  during which such Person was a  Certificateholder.
Such  obligation  of the Trustee  shall be deemed to have been  satisfied to the
extent that substantially comparable information shall be prepared and furnished
by the Trustee to Certificateholders pursuant to any requirements of the Code as
are in force from time to time.

                  (c) On each  Distribution  Date,  the Trustee shall provide to
the Class R  Certificateholders  a copy of the  reports  provided to the Regular
Certificateholders  in  respect  of  such  Distribution  Date  with  such  other
information as the Trustee deems  necessary or  appropriate.  Such obligation of
the  Trustee  shall  be  deemed  to  have  been  satisfied  to the  extent  that
substantially comparable information shall be prepared and

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furnished  to  Class  R  Certificateholders  by  the  Trustee  pursuant  to  any
requirements of the Code as from time to time in force.

                  Section 4.07. Remittance Reports; Advances.

                  (a) On the second  Business Day following  each  Determination
Date  but in no  event  less  than  four  Business  Days  prior  to the  related
Distribution  Date, the Servicer shall deliver to the Trustee by telecopy (or by
such other means as the  Servicer and the Trustee may agree from time to time) a
Remittance  Report with respect to the related  Distribution  Date.  On the same
date,  the Servicer  shall  forward to the Trustee by overnight  mail a computer
readable  magnetic  tape or  diskette  or in such other  medium as may be agreed
between the Servicer and the Trustee  containing  the  information  set forth in
such Remittance Report with respect to the related  Distribution Date. Not later
than the close of business New York time on the Servicer  Remittance  Date,  the
Servicer  shall  deliver or cause to be  delivered to the Trustee in addition to
the  information  provided  on the  Remittance  Report,  such other  information
reasonably available to it with respect to the Mortgage Loans as the Trustee may
reasonably request or order in order for the Trustee to perform the calculations
necessary to make the distributions  contemplated by Section 4.01, 4.02 and 4.03
and to prepare the  statements  to  Certificateholders  contemplated  by Section
4.06. The Trustee shall not be  responsible to recompute,  recalculate or verify
any information provided to it by the Servicer.

                  (b) The amount of Advances to be made by the  Servicer for any
Distribution Date shall equal,  subject to Section 4.07(d), the aggregate amount
of Monthly  Payments (net of the related  Servicing Fee), due during the related
Collection  Period in respect of the  Actuarial  Mortgage  Loans,  which Monthly
Payments were  delinquent on a contractual  basis as of the close of business on
the related  Determination  Date.  For purposes of the preceding  sentence,  the
Monthly Payment on each Balloon Mortgage Loan with a delinquent  Balloon Payment
is equal to the assumed  monthly payment that would have been due on the related
Due Date based on the  original  principal  amortization  schedule  for the such
Balloon  Mortgage  Loan. The Servicer shall not be obligated to make any Advance
with respect to Simple Interest Mortgage Loans or REO Properties.

                  On or  before  the  close of  business  New  York  time on the
Servicer  Remittance  Date, the Servicer  shall remit in  immediately  available
funds to the Trustee for deposit in the Distribution  Account an amount equal to
the aggregate amount of Advances,  if any, to be made in respect of the Mortgage
Loans for the  related  Distribution  Date either (i) from its own funds or (ii)
from the  Collection  Account,  to the extent of funds held  therein  for future
distribution (in which case it will cause to be made an appropriate entry in the
records of the Collection Account that amounts held for future distribution have
been,  as permitted by this Section  4.07,  used by the Servicer in discharge of
any  such  Advance)  or (iii)  in the  form of any  combination  of (i) and (ii)
aggregating the total amount of Advances to be made by the Servicer with respect
to the  Mortgage  Loans.  Any amounts held for future  distribution  and so used
shall be appropriately  reflected in the Servicer's  records and replaced by the
Servicer by deposit in the Collection  Account on or before any future  Servicer
Remittance Date to the extent

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that the Available Funds for the related  Distribution Date (determined  without
regard to Advances  to be made on the  Servicer  Remittance  Date) shall be less
than  the  total   amount   that  would  be   distributed   to  the  Classes  of
Certificateholders  pursuant to Section 4.01 and 4.02 on such  Distribution Date
if such  amounts  held  for  future  distributions  had not been so used to make
Advances.  The Trustee  will  provide  notice to the Servicer by telecopy by the
close of business on any Servicer  Remittance  Date in the event that the amount
remitted by the  Servicer to the Trustee on such date is less than the  Advances
required to be made by the Servicer for the related  Distribution  Date,  as set
forth in the related Remittance Report.

                  (c) The  obligation  of the Servicer to make such  Advances is
mandatory,  notwithstanding any other provision of this Agreement but subject to
(d) below,  and, with respect to any Mortgage  Loan,  shall  continue  until the
earlier  of such  time as the  Trust  acquires  title to the  related  Mortgaged
Property or such  Mortgage  Loan is paid in full by the Mortgagor or disposed of
by the Trust, or until the recovery of all Liquidation Proceeds thereon.

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

                  Section 4.08. Class N Reserve Fund.

                  (a) On the Closing  Date,  the  Trustee  shall  establish  and
maintain  in its name,  in trust for the  benefit of the  Holders of the Class N
Certificates,  the Class N Reserve Fund. The Class N Reserve Fund will not be an
asset of the Trust  Fund or any  REMIC.  The Class N  Reserve  Fund  shall be an
Eligible Account,  and funds on deposit therein shall be held separate and apart
from,  and shall not be commingled  with, any other moneys,  including,  without
limitation,  other moneys of the Trustee held pursuant to this Agreement. Except
as provided in Section 4.08(b), the Trustee shall distribute the Class N Reserve
Fund only to the holders of the Class N Certificates  and only on a Distribution
Date to the extent that there is insufficient  cash in the Distribution  Account
to make the distribution  pursuant to Section 4.02(b)(xix) for such Distribution
Date.

                  (b)  Funds in the  Class N  Reserve  Fund may be  invested  in
Permitted Investments by the Trustee at the direction of the Holder of the Class
X  Certificates  with the  greatest  Percentage  Interest.  Any earnings on such
amounts shall be distributed to the Holders of the Class X Certificates  and any
losses shall be chargeable first to amounts held in the Class N Reserve Fund and
second to Holders of the Class X  Certificates.  The Class N Reserve Fund is not
an asset of any of the REMICs,  but rather is an "outside  reserve  fund" within
the meaning of the REMIC Provisions that is beneficially owned by the beneficial
owner of the  Class X and  Class N  Certificates  (when  the Class X and Class N
Certificates  are  beneficially  owned  by one  Person)  or by  the  partnership
comprised of the Class X and Class N Certificates  (when the Class X and Class N
Certificates are

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beneficially owned by two or more Persons).  In the absence of written direction
from the  Holders of the Class X  Certificates,  funds on deposit to the Class N
Reserve Fund shall be invested in the Chase Vista Money  Market  Fund.  Upon the
earlier to occur of (i)  termination  of the Trust Fund or (ii) the reduction of
the  Class N  Notional  Amount to zero,  any  amounts  remaining  in the Class N
Reserve Fund shall be distributed to the Holders of the Class X Certificates.

                  Section 4.09. [Reserved]

                  Section 4.10. Excess Reserve Fund Account.

                  (a) On the Closing  Date,  the  Trustee  shall  establish  and
maintain in its name,  in trust for the benefit of the Holders of the Class A-1A
Certificates,  the Excess Reserve Fund Account.  The Excess Reserve Fund Account
shall be an  Eligible  Account,  and  funds  on  deposit  therein  shall be held
separate and apart from,  and shall not be  commingled  with,  any other moneys,
including, without limitation, other moneys of the Trustee held pursuant to this
Agreement.

                  (b) On the  Closing  Date,  $5,000  will be  deposited  by the
Seller into the Excess  Reserve Fund Account.  Thereafter,  on any  Distribution
Date if the Class A-1A Net Funds Cap does not exceed the Class A-1A Pass-Through
Rate by at least 0.25%, the amount to be held in the Excess Reserve Fund Account
on any  Distribution  Date thereafter will equal the greater of (i) 0.50% of the
outstanding  Certificate  Principal Balance of the Class A-1A Certificates as of
such  Distribution  Date  and  (ii)  $5,000  and  will be  funded  from  amounts
distributed pursuant to Section 4.02(b)(xvii). Thereafter, if the Class A-1A Net
Funds Cap for any Distribution Date exceeds the Class A-1A Pass-Through Rate for
the Class A-1A  Certificates  on such  Distribution  Date by 0.25% or more,  the
Required Excess Reserve Fund Balance for such Distribution Date will be at least
$5,000.  The amount required to be on deposit in the Excess Reserve Fund Account
at any time is referred to herein as the "Required Excess Reserve Fund Balance."

                  (c) On each  Distribution  Date on which there  exists a Class
A-1A LIBOR Carryover  Amount on the Class A-1A  Certificates,  the Trustee shall
withdraw from the Excess Reserve Fund Account amounts necessary to pay the Class
A-1A LIBOR Carryover Amount incurred by the Class A-1A Certificates,  until such
amount is reduced to zero.

                  (d) Funds in the Excess  Reserve  Fund Account may be invested
in  Permitted  Investments  by the  Trustee  at the  direction  of the  Majority
Certificateholders  of the Class X Certificates.  On each Distribution Date, any
earnings  on such  amounts  shall be  distributed  to the Holders of the Class X
Certificates  and any losses shall be  chargeable  to amounts held in the Excess
Reserve  Fund  Account.   The  Majority   Certificateholders   of  the  Class  X
Certificates  shall  evidence  ownership of the Excess  Reserve Fund Account for
federal income tax purposes and shall direct the Trustee,  in writing, as to the
investment  of amounts  on  deposit  therein.  In the  absence  of such  written
direction, all funds in the Excess Reserve Fund Account shall be invested by the
Trustee in The Chase Manhattan Bank Vista Money Market Fund. Upon termination of

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the Trust Fund,  any amounts  remaining in the Excess Reserve Fund Account shall
be  distributed to the Holders of the Class X  Certificates.  The Excess Reserve
Fund  Account is not an asset of any of the  REMICs,  but rather is an  "outside
reserve fund" within the meaning of the REMIC  Provisions  that is  beneficially
owned by the beneficial owner of the Class X Certificates  (when the Class X and
Class N Certificates are beneficially owned by one Person) or by the partnership
comprised of the Class X and Class N Certificates  (when the Class X and Class N
Certificates are beneficially owned by two or more Persons).

                                   ARTICLE V

                                THE CERTIFICATES

                  Section 5.01. The Certificates.

                  Each of the Class  A-1F,  Class A-2F,  Class A-1A,  Class M-1,
Class M-2,  Class B-1,  Class  B-2,  Class N, Class X, and Class R  Certificates
shall be  substantially  in the forms annexed hereto as exhibits,  and shall, on
original  issue, be executed,  authenticated  and delivered by the Trustee to or
upon  the  receipt  of a  Written  Order  to  Authenticate  from  the  Depositor
concurrently with the sale and assignment to the Trustee of the Trust Fund. Each
Class of the  Certificates  (other  than the Class X and  Class R  Certificates)
shall  be  initially  evidenced  by  one or  more  Certificates  representing  a
Percentage  Interest with a minimum dollar  denomination of $25,000 and integral
dollar  multiples  of $1 in excess  thereof.  The  Class N,  Class X and Class R
Certificates are issuable only in minimum Percentage Interests of 10%.

                  The  Certificates  shall be executed on behalf of the Trust by
manual or facsimile signature on behalf of the Trustee by a Responsible 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,  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
Certificate.  No  Certificate  shall  be  entitled  to any  benefit  under  this
Agreement or be valid for any purpose,  unless such Certificate  shall have been
manually  authenticated  by the Trustee  substantially  in the form provided for
herein,  and such  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.  Subject to Section 5.02(c),  the Offered Certificates
shall be Book-Entry Certificates.  The Class N, Class X and Class R Certificates
shall not be  Book-Entry  Certificates  but shall be issued in fully  registered
certificate form.

                  Section  5.02.   Registration  of  Transfer  and  Exchange  of
Certificates.

                  (a) The  Certificate  Registrar  shall cause to be kept at the
Corporate  Trust  Office  a  Certificate  Register  in  which,  subject  to such
reasonable  regulations as it may prescribe,  the  Certificate  Registrar  shall
provide for the registration of Certificates and of

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<PAGE>

transfers and exchanges of  Certificates as herein  provided.  The Trustee shall
initially  serve  as  Certificate  Registrar  for  the  purpose  of  registering
Certificates and transfers and exchanges of Certificates as herein provided.

                  Upon surrender for registration of transfer of any Certificate
at any office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing  paragraph  and, in the case of a Class R Certificate,
upon  satisfaction  of the conditions set forth below,  the Trustee on behalf of
the Trust shall execute, authenticate and deliver, in the name of the designated
transferee or  transferees,  one or more new  Certificates of the same aggregate
Percentage Interest.

                  At the option of the  Certificateholders,  Certificates may be
exchanged  for  other  Certificates  in  authorized  denominations  and the same
aggregate  Percentage  Interests,  upon  surrender  of  the  Certificates  to be
exchanged  at any such  office  or  agency.  Whenever  any  Certificates  are so
surrendered  for exchange,  the Trustee shall execute on behalf of the Trust and
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive.  Every Certificate presented or surrendered for
registration of transfer or exchange shall (if so required by the Trustee or the
Certificate  Registrar)  be duly  endorsed  by, or be  accompanied  by a written
instrument of transfer satisfactory to the Trustee and the Certificate Registrar
duly executed by, the Holder thereof or his attorney duly authorized in writing.

                  (b) Upon original issuance, the Book-Entry  Certificates shall
be issued in the form of one or more typewritten  certificates,  to be delivered
to the Depository,  the initial Depository,  by, or on behalf of, the Depositor;
or  to,  and  deposited  with  the  Certificate  Custodian,  on  behalf  of  the
Depository,  if directed to do so pursuant to instructions  from the Depository.
Except as provided in paragraph (c) below, the Book-Entry  Certificates shall at
all times remain  registered in the name of the Depository or its nominee and at
all times: (i)  registration of such  Certificates may not be transferred by the
Trustee  except  to  another  Depository;  (ii) the  Depository  shall  maintain
book-entry  records with respect to the  Certificate  Owners and with respect to
ownership and transfers of such  Certificates;  (iii) ownership and transfers of
registration  of such  Certificates  on the  books  of the  Depository  shall be
governed by applicable rules established by the Depository;  (iv) the Depository
may  collect  its  usual and  customary  fees,  charges  and  expenses  from its
Depository  Participants;  (v) the Trustee  shall for all purposes deal with the
Depository as representative  of the Certificate  Owners of the Certificates for
purposes of exercising the rights of Holders under this Agreement,  and requests
and  directions for and votes of such  representative  shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; (vi)
the Trustee may rely and shall be fully  protected in relying  upon  information
furnished by the  Depository  with respect to its  Depository  Participants  and
furnished by the Depository  Participants with respect to indirect participating
firms and Persons  shown on the books of such  indirect  participating  firms as
direct or indirect  Certificate Owners; and (vii) the direct participants of the
Depository  shall have no rights under this  Agreement  under or with respect to
any of the  Certificates  held  on  their  behalf  by the  Depository,  and  the
Depository may be treated by the Trustee and its agents, employees, officers and
directors as the absolute owner of the Certificates for all purposes whatsoever.

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<PAGE>

                  All transfers by Certificate Owners of Book-Entry Certificates
shall be made in accordance  with the  procedures  established by the Depository
Participant  or  brokerage  firm  representing  such  Certificate  Owners.  Each
Depository   Participant   shall  only  transfer   Book-Entry   Certificates  of
Certificate Owners that it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.  The parties hereto
are hereby authorized to execute a Letter of Representations with the Depository
or take such  other  action as may be  necessary  or  desirable  to  register  a
Book-Entry  Certificate to the Depository.  In the event of any conflict between
the terms of any such Letter of Representation and this Agreement,  the terms of
this Agreement shall control.

                  (c) If (i)(x) the  Depository  or the  Depositor  advises  the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as Depository and (y) the Trustee or the Depositor
is unable to  locate a  qualified  successor,  (ii) the  Depositor,  at its sole
option,  with the consent of the  Trustee,  elects to terminate  the  book-entry
system  through the Depository or (iii) after the occurrence of a Servicer Event
of Termination,  the Certificate Owners of each Class of Book-Entry Certificates
representing  Percentage Interests of such Classes aggregating not less than 51%
advises the Trustee and Depository through the Financial  Intermediaries and the
Depository  Participants in writing that the continuation of a book-entry system
through  the  Depository  to  the  exclusion  of  definitive,  fully  registered
certificates (the "Definitive  Certificates") to Certificate Owners is no longer
in  the  best  interests  of  the  Certificate  Owners.  Upon  surrender  to the
Certificate  Registrar  of  the  Book-Entry   Certificates  by  the  Depository,
accompanied by registration  instructions  from the Depository for registration,
the Trustee shall, at the Depositor's expense, in the case of (ii) above, or the
Seller's expense,  in the case of (i) and (iii) above,  execute on behalf of the
Trust and  authenticate the Definitive  Certificates.  Neither the Depositor nor
the Trustee shall be liable for any delay in delivery of such  instructions  and
may  conclusively   rely  on,  and  shall  be  protected  in  relying  on,  such
instructions.  Upon the issuance of Definitive  Certificates,  the Trustee,  the
Certificate  Registrar,  the Servicer,  any Paying Agent and the Depositor shall
recognize  the  Holders of the  Definitive  Certificates  as  Certificateholders
hereunder.

                  (d) Except with respect to the initial transfer of the Private
Certificates by the Depositor, no transfer, sale, pledge or other disposition of
any Private Certificate shall be made unless such disposition is exempt from the
registration  requirements  of the Securities Act of 1933, as amended (the "1933
Act"),  and any applicable  state  securities laws or is made in accordance with
the 1933 Act and  laws.  In the  event of any such  transfer,  (i)  unless  such
transfer  is made in reliance  upon Rule 144A (as  evidenced  by the  investment
letter delivered to the Trustee,  in  substantially  the form attached hereto as
Exhibit J) under the 1933 Act,  the Trustee and the  Depositor  shall  require a
written Opinion of Counsel (which may be in-house counsel)  acceptable to and in
form and substance reasonably satisfactory to the Trustee and the Depositor that
such transfer may be made pursuant to an exemption,  describing  the  applicable
exemption and the basis therefor, from the 1933 Act or is being made pursuant to
the 1933 Act, which Opinion of Counsel shall not be an expense of the Trustee or
the  Depositor or (ii) the Trustee  shall  require the  transferor  to execute a
transferor  certificate (in substantially the form attached hereto as Exhibit L)
and the transferee to execute an investment  letter (in  substantially  the form
attached

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<PAGE>

hereto  as  Exhibit  J)  acceptable  to and in  form  and  substance  reasonably
satisfactory  to the Depositor  and the Trustee  certifying to the Depositor and
the Trustee the facts  surrounding such transfer,  which investment letter shall
not be an  expense  of the  Trustee  or the  Depositor.  The Holder of a Private
Certificate that is also a Class N Certificate  desiring to effect a transfer of
a such Class N Certificate  shall not make such  transfer to a Non-U.S.  Person.
The Holder of any Private  Certificate  desiring to effect a transfer shall, and
does  hereby  agree to,  indemnify  the Trustee  and the  Depositor  against any
liability  that may  result if the  transfer  is not so exempt or is not made in
accordance with such federal and state laws.

                  No transfer of an  ERISA-Restricted  Certificate shall be made
unless the Trustee  shall have  received  either (i) a  representation  from the
transferee  of  such  Certificate,  acceptable  to and  in  form  and  substance
satisfactory  to the Trustee and the Depositor,  (such  requirement is satisfied
only by the Trustee's  receipt of a  representation  letter from the  transferee
substantially in the form of Exhibit I hereto,  as  appropriate),  to the effect
that such transferee is not an employee  benefit plan or arrangement  subject to
Section 406 of ERISA or a plan subject to Section 4975 of the Code, nor a person
acting on behalf of any such  plan or  arrangement  nor using the  assets of any
such plan or  arrangement to effect such transfer or (ii) (except in the case of
a Class R, Class X or Class N  Certificate)  if the  purchaser  is an  insurance
company,  a representation  that the purchaser is an insurance  company which is
purchasing  such  Certificates  with funds  contained in an  "insurance  company
general  account"  (as  such  term is  defined  in  Section  V(e) of  Prohibited
Transaction  Class  Exemption  95-60  ("PTCE  95-60") and that the  purchase and
holding of such Certificates are covered under Sections I and III of PTCE 95-60.
For purposes of clause (i) of the preceding sentence,  such representation shall
be deemed to have been made to the Trustee by the  acceptance  by a  Certificate
Owner  of  the  beneficial  interest  in  any  such  Class  of  ERISA-Restricted
Certificates,  unless the Trustee  shall have  received  from the  transferee an
alternative  representation  acceptable in form and substance to the  Depositor.
Notwithstanding  anything else to the contrary herein, any purported transfer of
an  ERISA-Restricted  Certificate  to or on behalf of an employee  benefit  plan
subject to ERISA or to the Code shall be void and of no effect.

                  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 to
have irrevocably appointed the Depositor or its designee as its attorney-in-fact
to  negotiate  the terms of any  mandatory  sale  under  clause (v) below and to
execute all  instruments  of transfer  and to do all other  things  necessary in
connection  with any such sale,  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 Trustee of any change or  impending  change in its
         status as a Permitted Transferee.

                                       97
<PAGE>

                  (ii) No Person shall acquire an Ownership  Interest in a Class
         R Certificate  unless such  Ownership  Interest is a pro rata undivided
         interest.

                  (iii)  In  connection  with  any  proposed   transfer  of  any
         Ownership  Interest in a Class R  Certificate,  the Trustee  shall as a
         condition to registration of the transfer,  require  delivery to it, in
         form and substance satisfactory to it, of each of the following:

                  A. an  affidavit  in the form of  Exhibit  K  hereto  from the
proposed transferee to the effect that, among other things, such transferee is a
Permitted  Transferee and that it is not acquiring its Ownership Interest in the
Class R Certificate  that is the subject of the proposed  transfer as a nominee,
trustee or agent for any Person who is not a Permitted Transferee; and

                  B. a covenant of the  proposed  transferee  to the effect that
the  proposed  transferee  agrees  to be bound  by and to abide by the  transfer
restrictions applicable to the Class R Certificates.

                  (iv) Any  attempted  or  purported  transfer of any  Ownership
         Interest in a Class R  Certificate  in violation of the  provisions  of
         this Section shall be absolutely null and void and shall vest no rights
         in the purported  transferee.  If any purported  transferee  shall,  in
         violation of the provisions of this Section, become a Holder of a Class
         R Certificate,  then the prior Holder of such Class R Certificate  that
         is a Permitted  Transferee  shall, upon discovery that the registration
         of transfer of such Class R  Certificate  was not in fact  permitted by
         this Section,  be restored to all rights as Holder thereof  retroactive
         to the date of  registration  of transfer of such Class R  Certificate.
         The  Trustee  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 this Section or for making any  distributions  due on such
         Class R  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 Trustee  received the documents  specified in clause (iii).
         The Trustee  shall be entitled to recover  from any Holder of a Class R
         Certificate  that was in fact not a  Permitted  Transferee  at the time
         such  distributions  were made all  distributions  made on such Class R
         Certificate.  Any such  distributions so recovered by the Trustee shall
         be distributed and delivered by the Trustee to the prior Holder of such
         Class R Certificate that is a Permitted Transferee.

                  (v) If any Person other than a Permitted  Transferee  acquires
         any  Ownership  Interest in a Class R  Certificate  in violation of the
         restrictions in this Section, then the Trustee shall have the right but
         not the  obligation,  without  notice  to the  Holder  of such  Class R
         Certificate or any other Person having an Ownership  Interest  therein,
         to  notify  the  Depositor  to  arrange  for the  sale of such  Class R
         Certificate.  The proceeds of such sale, net of commissions  (which may
         include  commissions  payable to the  Depositor  or its  affiliates  in
         connection  with such sale),  expenses  and taxes due, if any,  will be
         remitted  by the  Trustee  to the  previous  Holder  of  such  Class  R
         Certificate that is a Permitted Transferee, except

                                       98
<PAGE>

         that in the event that the Trustee  determines  that the Holder of such
         Class R Certificate may be liable for any amount due under this Section
         or any other  provisions of this Agreement,  the Trustee may withhold a
         corresponding  amount from such  remittance as security for such claim.
         The terms and  conditions  of any sale under  this  clause (v) shall be
         determined  in the sole  discretion  of the Trustee and it shall not be
         liable  to any  Person  having  an  Ownership  Interest  in a  Class  R
         Certificate as a result of its exercise of such discretion.

                  (vi) If any Person other than a Permitted  Transferee acquires
         any  Ownership  Interest in a Class R  Certificate  in violation of the
         restrictions  in this  Section,  then the Trustee  will  provide to the
         Internal  Revenue  Service,  and to the persons  specified  in Sections
         860E(e)(3) and (6) of the Code,  information  needed to compute the tax
         imposed under  Section  860E(e)(5) of the Code on transfers of residual
         interests to disqualified organizations.  The Trustee shall be entitled
         to reasonable  compensation  for providing  such  information  from the
         person to whom it is provided.

The  foregoing  provisions  of this  Section  shall cease to apply to  transfers
occurring  on or after the date on which there shall have been  delivered to the
Trustee,  in  form  and  substance  satisfactory  to the  Trustee,  (i)  written
notification  from each Rating  Agency that the removal of the  restrictions  on
Transfer  set  forth in this  Section  will not  cause  such  Rating  Agency  to
downgrade its rating of the  Certificates  and (ii) an Opinion of Counsel to the
effect that such removal  will not cause any REMIC  hereunder to fail to qualify
as a REMIC.

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

                  All  Certificates  surrendered for registration of transfer or
exchange  shall be  cancelled  by the  Certificate  Registrar  and  disposed  of
pursuant to its standard procedures.

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

                  If  (i)  any  mutilated  Certificate  is  surrendered  to  the
Certificate  Registrar or the  Certificate  Registrar  receives  evidence to its
satisfaction of the destruction, loss or theft of any Certificate and (ii) there
is delivered to the Trustee,  the Depositor and the  Certificate  Registrar such
security or indemnity as may be required by them to save each of them  harmless,
then, in the absence of notice to the Trustee or the Certificate  Registrar that
such  Certificate has been acquired by a bona fide purchaser,  the Trustee shall
execute on behalf of the Trust,  authenticate and deliver, in exchange for or in
lieu of any  such  mutilated,  destroyed,  lost  or  stolen  Certificate,  a new
Certificate of like tenor and Percentage Interest.  Upon the issuance of any new
Certificate  under this Section,  the Trustee or the  Certificate  Registrar 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

                                       99
<PAGE>

other  expenses  (including  the  fees  and  expenses  of the  Trustee  and  the
Certificate Registrar) in connection therewith. Any duplicate Certificate issued
pursuant to this Section, shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.

                  Section 5.04. Persons Deemed Owners.

                  The Servicer,  the  Depositor,  the Trustee,  the  Certificate
Registrar,  any Paying Agent and any agent of the Servicer,  the Depositor,  the
Certificate  Registrar,  any Paying  Agent or the  Trustee may treat the Person,
including a Depository, in whose name any Certificate is registered as the owner
of such  Certificate  for the  purpose of  receiving  distributions  pursuant to
Section  4.01 and 4.02 and for all other  purposes  whatsoever,  and none of the
Servicer,  the Trust, the Trustee nor any agent of any of them shall be affected
by notice to the contrary.

                  Section 5.05. Appointment of Paying Agent.

                  (a)   The   Paying   Agent   shall   make   distributions   to
Certificateholders  from the  Distribution  Account pursuant to Section 4.01 and
4.02 and shall  report the amounts of such  distributions  to the  Trustee.  The
duties of the Paying Agent may include the obligation (i) to withdraw funds from
the  Collection  Account  pursuant to Section 3.05 and for the purpose of making
the  distributions  referred  to above  and (ii) to  distribute  statements  and
provide  information to  Certificateholders  as required  hereunder.  The Paying
Agent  hereunder shall at all times be an entity duly  incorporated  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 subject to
supervision  or examination  by federal or state  authorities.  The Paying Agent
shall  initially be the  Trustee.  The Trustee may appoint a successor to act as
Paying  Agent,  which  appointment  shall  be  reasonably  satisfactory  to  the
Depositor and the Rating Agencies.

                  (b) The Trustee  shall  cause the Paying  Agent (if other than
the Trustee) to execute and deliver to the Trustee an  instrument  in which such
Paying  Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the  Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such  Certificateholders  and  shall  agree  that it  shall  comply  with all
requirements  of the Code  regarding the  withholding  of payments in respect of
Federal income taxes due from  Certificate  Owners and otherwise comply with the
provisions of this Agreement applicable to it.

                                      100
<PAGE>

                                   ARTICLE VI

                   THE SELLER, THE SERVICER AND THE DEPOSITOR

                  Section  6.01.  Liability of the Seller,  the Servicer and the
Depositor.

                  The  Seller  and the  Servicer  shall be liable in  accordance
herewith  only to the extent of the  obligations  specifically  imposed upon and
undertaken by the Seller or Servicer,  as the case may be, herein. The Depositor
shall be liable in  accordance  herewith  only to the extent of the  obligations
specifically imposed upon and undertaken by the Depositor.

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

                  Any  entity  into  which  the  Seller,  the  Servicer  or  the
Depositor  may be merged  or  consolidated,  or any  entity  resulting  from any
merger,  conversion or  consolidation  to which the Seller,  the Servicer or the
Depositor shall be a party, or any corporation succeeding to the business of the
Seller, the Servicer or the Depositor, shall be the successor of the Seller, the
Servicer or the Depositor, as the case may be, hereunder,  without the execution
or  filing  of any paper or any  further  act on the part of any of the  parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
the successor  Servicer shall satisfy all the  requirements of Section 7.02 with
respect to the qualifications of a successor Servicer.

                  Section  6.03.  Limitation  on  Liability  of the Servicer and
Others.

                  Neither the Servicer  nor any of the  directors or officers or
employees or agents of the Servicer shall be under any liability to the Trust or
the Certificateholders for any action taken or for refraining from the taking of
any action by the  Servicer  in good faith  pursuant to this  Agreement,  or for
errors in judgment; provided, however, that this provision shall not protect the
Servicer  or any such Person  against any  liability  which would  otherwise  be
imposed by reason of its willful  misfeasance,  bad faith or gross negligence in
the performance of duties of the Servicer or by reason of its reckless disregard
of its obligations and duties of the Servicer hereunder; provided, further, that
this  provision  shall not be  construed to entitle the Servicer to indemnity in
the event that amounts advanced by the Servicer to retire any senior lien exceed
Liquidation  Proceeds (in excess of related liquidation  expenses) realized with
respect to the related  Mortgage  Loan. The Servicer and any director or officer
or employee or agent of the  Servicer  may rely in good faith on any document of
any kind prima facie  properly  executed and submitted by any Person  respecting
any matters  arising  hereunder.  The  Servicer  and any  director or officer or
employee or agent of the  Servicer  shall be  indemnified  by the Trust and held
harmless against any loss,  liability or expense incurred in connection with any
legal  action  relating to this  Agreement or the  Certificates,  other than any
loss,  liability or expense  related to any specific  Mortgage  Loan or Mortgage
Loans  (except  as any such  loss,  liability  or  expense  shall  be  otherwise
reimbursable  pursuant to this  Agreement)  and any loss,  liability  or expense
incurred by reason of its willful misfeasance, bad faith or

                                      101
<PAGE>

negligence in the  performance of duties  hereunder or by reason of its reckless
disregard of obligations  and duties  hereunder.  The Servicer may undertake any
such  action  which  it may deem  necessary  or  desirable  in  respect  of this
Agreement,  and the rights and duties of the parties hereto and the interests of
the Certificateholders  hereunder.  In such event, the reasonable legal expenses
and  costs  of such  action  and any  liability  resulting  therefrom  shall  be
expenses,  costs and liabilities of the Trust and the Servicer shall be entitled
to be reimbursed therefor only pursuant to Section 3.05. The Servicer's right to
indemnity  or   reimbursement   pursuant  to  this  Section  shall  survive  any
resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with
respect to any losses,  expenses,  costs or  liabilities  arising  prior to such
resignation or  termination  (or arising from events that occurred prior to such
resignation or  termination).  This paragraph shall apply to the Servicer solely
in its capacity as Servicer hereunder and in no other capacities.

                  Section 6.04. Servicer Not to Resign.

                  Subject to the  provisions  of Section 7.01 and Section  6.02,
the Servicer shall not resign from the  obligations and duties hereby imposed on
it except (i) upon  determination  that the  performance  of its  obligations or
duties  hereunder  are no  longer  permissible  under  applicable  law or are in
material conflict by reason of applicable law with any other activities  carried
on by it or its subsidiaries or Affiliates, the other activities of the Servicer
so causing such a conflict being of a type and nature carried on by the Servicer
or its  subsidiaries  or Affiliates  at the date of this  Agreement or (ii) upon
satisfaction  of the  following  conditions:  (a) the  Servicer  has  proposed a
successor  servicer  to the  Trustee  in  writing  and such  proposed  successor
servicer is  reasonably  acceptable  to the Trustee;  and (b) each Rating Agency
shall have  delivered a letter to the Trustee  prior to the  appointment  of the
successor  servicer  stating that the  proposed  appointment  of such  successor
servicer as Servicer hereunder will not result in the reduction or withdrawal of
the then current rating of the Regular  Certificates  or the ratings that are in
effect; provided, however, that no such resignation by the Servicer shall become
effective  until  such  successor  servicer  or, in the case of (i)  above,  the
Trustee  shall have  assumed the  Servicer's  responsibilities  and  obligations
hereunder  or  the  Trustee  shall  have  designated  a  successor  servicer  in
accordance  with  Section  7.02.  Any such  resignation  shall not  relieve  the
Servicer of responsibility for any of the obligations specified in Sections 7.01
and 7.02 as  obligations  that survive the  resignation  or  termination  of the
Servicer.  Any such  determination  permitting  the  resignation of the Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect  delivered  to  the  Trustee.  Any  such  determination   permitting  the
resignation  of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee.

                  Section 6.05. Delegation of Duties.

                  In the ordinary  course of business,  the Servicer at any time
may delegate any of its duties  hereunder  to any Person,  including  any of its
Affiliates,  who agrees to conduct  such  duties in  accordance  with  standards
comparable to those set forth in Section 3.01. Such delegation shall not relieve
the Servicer of its liabilities and responsibilities

                                      102
<PAGE>

with respect to such duties and shall not  constitute a  resignation  within the
meaning of Section 6.04.  The Servicer  shall provide the Trustee and the Rating
Agencies with 60 days prior written notice prior to the delegation of any of its
duties  to any  Person  other  than any of the  Servicer's  Affiliates  or their
respective successors and assigns.

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

                                  ARTICLE VII

                                     DEFAULT

                  Section 7.01. Servicer Events of Termination.

                  (a) If any one of the following  events  ("Servicer  Events of
Termination") shall occur and be continuing:

                  (i) (A) The failure by the  Servicer to make any  Advance;  or
         (B) any other  failure by the  Servicer  to  deposit in the  Collection
         Account or Distribution  Account any deposit  required to be made under
         the terms of this Agreement which continues  unremedied for a period of
         one  Business  Day  after the date upon  which  written  notice of such
         failure  shall have been given to the Servicer by the Trustee or by any
         Holder of a Regular  Certificate  evidencing at least 25% of the Voting
         Rights; or

                  (ii)  The  failure  by  the  Servicer  to  make  any  required
         Servicing Advance which failure continues unremedied for a period of 30
         days, or the failure by the Servicer duly to observe or perform, in any
         material respect, any other covenants, obligations or agreements of the
         Servicer  as set  forth  in this  Agreement,  which  failure  continues
         unremedied for a period of 30 days, after the date (A) on which written
         notice of such failure,  requiring the same to be remedied,  shall have
         been given to the Servicer by the Trustee or by any Holder of a Regular
         Certificate  evidencing at least 25% of the Voting Rights or (B) actual
         knowledge of such failure by a Servicing Officer of the Servicer; or

                                      103
<PAGE>

                  (iii) The entry against the Servicer of a decree or order by a
         court or agency or supervisory  authority  having  jurisdiction  in the
         premises for the  appointment  of a trustee,  conservator,  receiver or
         liquidator   in   any   insolvency,   conservatorship,    receivership,
         readjustment of debt,  marshalling of assets and liabilities or similar
         proceedings,  or for the winding up or liquidation of its affairs,  and
         the  continuance of any such decree or order unstayed and in effect for
         a period of 60 days; or

                  (iv)  The  Servicer  shall  voluntarily  go into  liquidation,
         consent to the  appointment  of a conservator or receiver or liquidator
         or similar person in any insolvency,  readjustment of debt, marshalling
         of assets and liabilities or similar  proceedings of or relating to the
         Servicer or of or relating to all or substantially all of its property;
         or a decree  or order of a court or  agency  or  supervisory  authority
         having   jurisdiction   in  the  premises  for  the  appointment  of  a
         conservator,  receiver, liquidator or similar person in any insolvency,
         readjustment of debt,  marshalling of assets and liabilities or similar
         proceedings, or for the winding-up or liquidation of its affairs, shall
         have been  entered  against the Servicer and such decree or order shall
         have remained in force undischarged,  unbonded or unstayed for a period
         of 60 days; or the Servicer shall admit in writing its inability to pay
         its  debts  generally  as they  become  due,  file a  petition  to take
         advantage of any applicable insolvency or reorganization  statute, make
         an assignment for the benefit of its creditors or  voluntarily  suspend
         payment of its obligations; or

                  (v)  The  aggregate  amount  of  cumulative   Realized  Losses
         incurred  since the  Cut-Off  Date  through the last day of the related
         Collection  Period  divided by the  initial  Pool  Balance  exceeds the
         applicable   percentages   set  forth   below  with   respect  to  such
         Distribution Date:

<TABLE>
<CAPTION>
                  Distribution Date Occurring In                            Percentage
                  ---------------------------------------------           --------------
                  <S>                                                         <C>
                  December 2000 through November 2004                          2.75%
                  December 2004 through November 2005                          3.50%
                  December 2005 through November 2006                          4.00%
                  December 2006 and thereafter                                 4.50%
</TABLE>

                  (b)  Then,  and in each  and  every  such  case,  so long as a
Servicer Event of Termination shall not have been remedied within the applicable
grace period, (x) with respect solely to clause (i)(A) above, if such Advance is
not made by 2:00 P.M., New York time, on the Business Day immediately  following
the Servicer  Remittance  Date,  the Trustee may terminate all of the rights and
obligations of the Servicer under this Agreement and the Trustee, or a successor
servicer  appointed in accordance with Section 7.02, shall immediately make such
Advance and assume, pursuant to Section 7.02, the duties of a successor Servicer
and (y) in the case of (i)(B),  (ii),  (iii),  (iv) and (v) above,  the  Trustee
shall,  at the  direction  of the Holders of each Class of Regular  Certificates
evidencing  Percentage  Interests  aggregating not less than 51%, by notice then
given in  writing  to the  Servicer  (and to the  Trustee if given by Holders of
Certificates),  terminate all of the rights and  obligations  of the Servicer as
servicer  under this  Agreement.  Any such notice to the Servicer  shall also be
given to each Rating Agency, the Depositor and

                                      104
<PAGE>

the Seller.  On or after the receipt by the Servicer (and by the Trustee if such
notice is given by the Holders) of such written notice,  all authority and power
of the Servicer under this Agreement,  whether with respect to the  Certificates
or the Mortgage  Loans or otherwise,  shall pass to and be vested in the Trustee
pursuant to and under this  Section;  and,  without  limitation,  the Trustee is
hereby  authorized  and  empowered  to  execute  and  deliver,  on behalf of the
Servicer,  as  attorney-in-fact  or  otherwise,  any and all documents and other
instruments,  and to do or  accomplish  all other  acts or things  necessary  or
appropriate  to effect the  purposes of such notice of  termination,  whether to
complete  the  transfer  and  endorsement  of each  Mortgage  Loan  and  Related
Documents or otherwise.  The Servicer  agrees to cooperate  with the Trustee (or
the  applicable   successor  Servicer)  in  effecting  the  termination  of  the
responsibilities  and  rights  of the  Servicer  hereunder,  including,  without
limitation,  the delivery to the Trustee of all documents and records  requested
by it to enable it to assume  the  Servicer's  functions  under  this  Agreement
within ten Business  Days  subsequent  to such notice,  the transfer  within one
Business  Day  subsequent  to such  notice  to the  Trustee  (or the  applicable
successor  Servicer) for the administration by it of all cash amounts that shall
at the time be held by the Servicer and to be deposited by it in the  Collection
Account,  the  Distribution  Account,  the Excess Reserve Fund Account,  any REO
Account or any Escrow  Account or that have been  deposited  by the  Servicer in
such  accounts  or  thereafter  received  by the  Servicer  with  respect to the
Mortgage  Loans or any REO Property  received by the  Servicer.  All  reasonable
costs and expenses  (including  attorneys'  fees)  incurred in  connection  with
transferring the servicing to the successor Servicer and amending this Agreement
to reflect such succession as Servicer pursuant to this Section shall be paid by
the  predecessor  Servicer (or if the predecessor  Servicer is the Trustee,  the
initial  Servicer) upon  presentation of reasonable  documentation of such costs
and expenses.

                  Section 7.02. Trustee to Act; Appointment of Successor.

                  (a) Within 90 days of the time the Servicer  (and the Trustee,
if notice is sent by the Holders)  receives a notice of termination  pursuant to
Section  7.01 or 6.04,  the  Trustee  (or such other  successor  Servicer  as is
approved  in  accordance  with this  Agreement)  shall be the  successor  in all
respects to the Servicer in its capacity as servicer  under this  Agreement  and
the  transactions  set forth or provided  for herein and shall be subject to all
the  responsibilities,  duties and  liabilities  relating  thereto placed on the
Servicer by the terms and provisions hereof arising on and after its succession.
As compensation  therefor,  the Trustee (or such other successor Servicer) shall
be entitled to such  compensation  as the Servicer  would have been  entitled to
hereunder if no such notice of termination had been given.  Notwithstanding  the
above,  (i) if the Trustee is unwilling to act as successor  Servicer or (ii) if
the Trustee is legally unable so to act, the Trustee shall appoint or petition a
court of competent  jurisdiction to appoint,  any  established  housing and home
finance  institution,  bank or other  mortgage loan or home equity loan servicer
having a net worth of not less than $50,000,000 as the successor to the Servicer
hereunder in the assumption of all or any part of the  responsibilities,  duties
or liabilities of the Servicer hereunder;  provided, that the appointment of any
such  successor  Servicer  will not result in the  qualification,  reduction  or
withdrawal of the ratings  assigned to the  Certificates or the ratings that are
in effect by the Rating  Agencies as  evidenced  by a letter to such effect from
the Rating Agencies. Pending appointment of

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a successor to the Servicer  hereunder,  unless the Trustee is prohibited by law
from so acting, the Trustee shall act in such capacity as hereinabove  provided.
In connection  with such  appointment  and  assumption,  the successor  shall be
entitled to receive  compensation out of payments on Mortgage Loans in an amount
equal to the  compensation  which the Servicer  would  otherwise  have  received
pursuant  to Section  3.18 (or such other  compensation  as the Trustee and such
successor shall agree, not to exceed the Servicing Fee). The successor  servicer
shall be entitled to withdraw from the Collection Account all costs and expenses
associated  with the transfer of the  servicing to the successor  servicer.  The
appointment  of a  successor  servicer  shall not  affect any  liability  of the
predecessor  Servicer  which may have arisen under this  Agreement  prior to its
termination as Servicer to pay any deductible under an insurance policy pursuant
to Section 3.12 or to indemnify the Trustee  pursuant to Section 3.26, nor shall
any  successor  Servicer be liable for any acts or omissions of the  predecessor
Servicer  or for any breach by such  Servicer of any of its  representations  or
warranties contained herein or in any related document or agreement. The Trustee
and such successor shall take such action,  consistent  with this Agreement,  as
shall be necessary to effectuate any such succession.

                  In  the   event   of  a   Servicer   Event   of   Termination,
notwithstanding  anything to the contrary  above,  the Trustee and the Depositor
hereby agree that upon delivery to the Trustee by the Servicing  Rights  Pledgee
of a letter signed by the Servicer within ten Business Days of when notification
of such event shall have been provided to the Trustee,  whereunder  the Servicer
shall resign as Servicer  under this  Agreement,  the Trustee  shall appoint the
Servicing Rights Pledgee or its designee as successor Servicer (provided that at
the time of such appointment the Servicing Rights Pledgee or such designee meets
the  requirements  of a successor  Servicer set forth  above) and the  Servicing
Rights Pledgee agrees to be subject to the terms of this Agreement.

                  (b) Any successor,  including the Trustee,  to the Servicer as
servicer  shall  during the term of its service as servicer  continue to service
and  administer the Mortgage  Loans for the benefit of  Certificateholders,  and
maintain  in force a  policy  or  policies  of  insurance  covering  errors  and
omissions in the  performance  of its  obligations  as Servicer  hereunder and a
Fidelity  Bond in  respect  of its  officers,  employees  and agents to the same
extent as the Servicer is so required pursuant to Section 3.12.

                  Section 7.03. Waiver of Defaults.

                  The  Majority   Certificateholders   may,  on  behalf  of  all
Certificateholders,  waive any  events  permitting  removal of the  Servicer  as
servicer  pursuant to this Article  VII;  provided,  however,  that the Majority
Certificateholders  may not waive a default in making a required distribution on
a Certificate  without the consent of the Holder of such  Certificate.  Upon any
waiver of a past  default,  such  default  shall cease to exist and any Servicer
Event of Termination arising therefrom shall be deemed to have been remedied for
every purpose of this  Agreement.  No such waiver shall extend to any subsequent
or other  default or impair any right  consequent  thereto  except to the extent
expressly so waived.  Notice of any such waiver shall be given by the Trustee to
the Rating Agencies.

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                  Section 7.04. Notification to Certificateholders.

                  (a) Upon any  termination  or  appointment  of a successor the
Servicer  pursuant to this Article VII or Section  6.04,  the Trustee shall give
prompt  written  notice thereof to the  Certificateholders  at their  respective
addresses appearing in the Certificate Register and each Rating Agency.

                  (b) No later  than 60 days after the  occurrence  of any event
which  constitutes  or  which,  with  notice  or a lapse of time or both,  would
constitute  a  Servicer  Event of  Termination  for five  Business  Days after a
Responsible  Officer of the Trustee  becomes aware of the  occurrence of such an
event,  the Trustee shall transmit by mail to all  Certificateholders  notice of
such occurrence  unless such default or Servicer Event of Termination shall have
been waived or cured. Such notice shall be given to the Rating Agencies promptly
after any such occurrence.

                  Section 7.05. Survivability of Servicer Liabilities.

                  Notwithstanding   anything   herein  to  the  contrary,   upon
termination  of the Servicer  hereunder,  any  liabilities of the Servicer which
accrued prior to such termination shall survive such termination.

                                  ARTICLE VIII

                                   THE TRUSTEE

                  Section 8.01. Duties of Trustee.

                  The Trustee,  prior to the  occurrence of a Servicer  Event of
Termination  of which a  Responsible  Officer of the  Trustee  shall have actual
knowledge and after the curing of all Servicer  Events of Termination  which may
have  occurred,  undertakes  to perform  such duties and only such duties as are
specifically set forth in this Agreement. If a Servicer Event of Termination has
occurred  (which has not been cured) of which a  Responsible  Officer has actual
knowledge, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement,  and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.

                  The Trustee,  upon receipt of all  resolutions,  certificates,
statements,  opinions, reports, documents, orders or other instruments furnished
to the Trustee 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 that the
Trustee shall not be responsible  for the accuracy or content of any resolution,
certificate,  statement,  opinion,  report,  document, order or other instrument
furnished by the Servicer,  the Seller or the Depositor  hereunder.  If any such
instrument is found not to conform in any material  respect to the  requirements
of this  Agreement,  the Trustee  shall  notify the  Certificateholders  of such
instrument in

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the  event  that  the  Trustee,   after  so  requesting,   does  not  receive  a
satisfactorily corrected instrument.

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

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

                  (ii) the Trustee shall not be  personally  liable for an error
         of judgment made in good faith by a Responsible Officer 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   direction   of   the   Majority
         Certificateholders relating to the time, method and place of conducting
         any proceeding for any remedy  available to the Trustee,  or exercising
         or omitting to exercise any trust or power  conferred upon the Trustee,
         under this Agreement; and

                  (iv) the Trustee  shall not be charged  with  knowledge of any
         failure by the Servicer to comply with the  obligations of the Servicer
         referred  to in clauses  (i) and (ii) of Section  7.01 or any  Servicer
         Event of Termination unless a Responsible Officer of the Trustee at the
         Corporate Trust Office obtains actual  knowledge of such failure or the
         Trustee  receives  written  notice of such failure from the Servicer or
         the Majority Certificateholders. In the absence of such receipt of such
         notice,  the Trustee may conclusively  assume that there is no Servicer
         Event of Termination.

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

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rights,  duties,  powers and privileges of, the Servicer in accordance  with the
terms of this Agreement.

                  The  Trustee  shall  have  no duty  (A) to see 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  or  filing  or
depositing or to any rerecording,  refiling or redepositing of any 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 Fund
other than from funds available in the Distribution Account.

                  Section 8.02. Certain Matters Affecting the Trustee.

                  (a) Except as otherwise provided in Section 8.01:

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

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

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

                  (v) prior to the occurrence of a Servicer Event of Termination
         and after the curing of all Servicer  Events of  Termination  which may
         have occurred, the Trustee shall not be bound to make any investigation
         into the  facts  or  matters  stated  in any  resolution,  certificate,
         statement,  instrument,  opinion,  report,  notice,  request,  consent,
         order, approval, bond or other paper or documents, unless

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<PAGE>

         requested  in  writing  to  do so by  the  Majority  Certificateholder;
         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 the security afforded
         to it  by  the  terms  of  this  Agreement,  the  Trustee  may  require
         reasonable  indemnity  against  such cost,  expense or  liability  as a
         condition  to such  proceeding.  The  reasonable  expense of every such
         examination  shall be paid by the  Servicer or, if paid by the Trustee,
         shall be reimbursed by the Servicer upon demand. Nothing in this clause
         (v) shall  derogate from the  obligation of the Servicer to observe any
         applicable  law  prohibiting  disclosure of  information  regarding the
         Mortgagors;

                  (vi) the  Trustee  shall  not be  accountable,  shall  have no
         liability  and  makes no  representation  as to any  acts or  omissions
         hereunder  of the  Servicer  until  such  time  as the  Trustee  may be
         required to act as Servicer pursuant to Section 7.02;

                  (vii) the  Trustee  may  execute  any of the  trusts or powers
         hereunder  or perform  any duties  hereunder  either  directly or by or
         through agents or attorneys or a custodian and the Trustee shall not be
         responsible  for any  misconduct  or negligence on the part of any such
         agent,  attorney or  custodian  appointed by the Trustee with due care;
         and

                  (viii) 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.

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

                  The recitals  contained herein and in the Certificates  (other
than the  authentication of the Trustee on the  Certificates)  shall be taken as
the statements of the Seller,  and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or  sufficiency  of  this  Agreement  or of the  Certificates  (other  than  the
signature  and  authentication  of the  Trustee on the  Certificates)  or of any
Mortgage Loan or Related Document.  The Trustee shall not be accountable for the
use or application  by the Servicer,  or for the use or application of any funds
paid to the  Servicer  in  respect  of the  Mortgage  Loans or  deposited  in or
withdrawn from the Collection  Account by the Servicer.  The Trustee shall at no
time have any  responsibility  or liability for or with respect to the legality,
validity  and  enforceability  of any  Mortgage  or any  Mortgage  Loan,  or the
perfection  and  priority  of any  Mortgage  or  the  maintenance  of  any  such
perfection and priority,  or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to  Certificateholders
under this Agreement,  including,  without limitation: the existence,  condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard  insurance  thereon (other than if the Trustee shall assume the duties of
the Servicer  pursuant to Section  7.02);  the validity of the assignment of any
Mortgage Loan

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<PAGE>

to the  Trustee  or of  any  intervening  assignment;  the  completeness  of any
Mortgage Loan;  the  performance or enforcement of any Mortgage Loan (other than
if the  Trustee  shall  assume the duties of the  Servicer  pursuant  to Section
7.02);  the  compliance  by the  Depositor,  the Seller or the Servicer with any
warranty or representation  made under this Agreement or in any related document
or the accuracy of any such  warranty or  representation  prior to the Trustee's
receipt of notice or other  discovery  of any  non-compliance  therewith  or any
breach thereof;  any investment of monies by or at the direction of the Servicer
or any loss  resulting  therefrom,  it being  understood  that the Trustee shall
remain  responsible  for any Trust  property that it may hold in its  individual
capacity;  the  acts or  omissions  of any of the  Servicer  (other  than if the
Trustee shall assume the duties of the Servicer  pursuant to Section  7.02),  or
any  Mortgagor;  any action of the  Servicer  (other than if the  Trustee  shall
assume the duties of the Servicer  pursuant to Section 7.02),  taken in the name
of the  Trustee;  the  failure  of the  Servicer  to act or  perform  any duties
required of it as agent of the Trustee  hereunder;  or any action by the Trustee
taken at the instruction of the Servicer (other than if the Trustee shall assume
the duties of the Servicer pursuant to Section 7.02);  provided,  however,  that
the  foregoing  shall not relieve the Trustee of its  obligation  to perform its
duties under this Agreement. The Trustee shall have no responsibility for filing
any financing or  continuation  statement in any public office at any time or to
otherwise  perfect or maintain the  perfection of any security  interest or lien
granted to it hereunder.

                  Section 8.04. Trustee May Own Certificates.

                  The Trustee in its individual or any other capacity may become
the owner or pledgee of Certificates with the same rights as it would have if it
were not  Trustee and may  transact  any  banking  and trust  business  with the
Seller, the Servicer, the Depositor or their Affiliates.

                  Section 8.05. Seller to Pay Trustee Fees and Expenses.

                  Prior to  disbursing  the Available  Funds,  the Trustee shall
withdraw  from the  Distribution  Account on each  Distribution  Date and pay to
itself  the  Trustee  Fee  and,  to the  extent  funds  therein  are at any time
insufficient  for such  purpose,  the Seller  shall pay such fees as  reasonable
compensation  (which  shall not be limited by any  provision of law in regard to
the compensation of a trustee of an express trust) for all services  rendered by
it in the  execution  of the  trusts  hereby  created  and in the  exercise  and
performance  of any of the powers and duties  hereunder of the Trustee,  and the
Seller will pay or  reimburse  the Trustee  upon its request for all  reasonable
expenses,  disbursements  and  advances  incurred  or  made  by the  Trustee  in
accordance  with  any  of  the  provisions  of  this  Agreement  (including  the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ)  except any such expense,  disbursement
or  advance  as may  arise  from  its  negligence  or bad  faith or which is the
responsibility of Certificateholders  or the Trustee hereunder.  Notwithstanding
any other  provision of this  Agreement,  including  Section 2.03(a) and Section
2.04, to the contrary,  the Seller covenants and agrees to indemnify the Trustee
and its officers,  directors,  employees  and agents from,  and hold it harmless
against, any and all losses,  liabilities,  damages, claims or expenses incurred
in connection with any

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legal  action  relating  to this  Agreement,  the  Certificates  or  incurred in
connection with the administration of the Trust, other than any loss,  liability
or expense incurred by reason of willful misfeasance, bad faith or negligence of
the  Trustee  in the  performance  of its duties  hereunder  or by reason of the
Trustee's  reckless  disregard of obligations and duties hereunder.  Anything in
this Agreement to the contrary notwithstanding, in no event shall the Trustee be
liable  for  special,  indirect  or  consequential  loss or  damage  of any kind
whatsoever (including but not limited to lost profits),  even if the Trustee has
been advised of the likelihood of such loss or damage and regardless of the form
of action.  The  Trustee  and any  director,  officer,  employee or agent of the
Trustee shall be  indemnified,  to the extent not paid by the Seller pursuant to
this Section, by the Trust Fund and held harmless against any loss, liability or
expense (not including expenses,  disbursements and advances incurred or made by
the Trustee,  in the ordinary course of the Trustee's  performance in accordance
with the  provisions  of this  Agreement)  incurred by the Trustee or such party
arising out of or in connection  with the  acceptance or  administration  of its
duties under this Agreement,  other than any loss, liability or expense incurred
by reason of willful misfeasance,  bad faith or negligence in the performance by
the  Trustee of its duties  under this  Agreement  or by reason of the  reckless
disregard of the Trustee's  obligations  and duties under this  Agreement.  This
Section  shall  survive  termination  of this  Agreement or the  resignation  or
removal of any Trustee hereunder.

                  Section 8.06. Eligibility Requirements for Trustee.

                  The Trustee  hereunder  shall at all times be a Department  of
Housing  and Urban  Development  and  Federal  Housing  Administration  approved
mortgagee,  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,  having a combined  capital and surplus of at
least  $50,000,000  and a minimum  long-term debt rating of BBB by Fitch and S&P
and Baa2 by Moody's,  and 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 8.06,  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 8.06,  the Trustee shall resign  immediately in the manner and with
the effect specified in Section 8.07.

                  Section 8.07. Resignation or Removal of Trustee.

                  The Trustee may at any time resign and be discharged  from the
trusts hereby created by giving  written  notice  thereof to the Depositor,  the
Servicer and each Rating Agency. Upon receiving such notice of resignation,  the
Depositor shall promptly appoint a successor Trustee by written  instrument,  in
duplicate,  one copy of which  instrument  shall be delivered  to the  resigning
Trustee and one copy to the successor

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<PAGE>

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 8.06 and shall fail to resign after
written request  therefor by the Depositor,  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 or the Servicer  removes the
Trustee under the authority of the immediately preceding sentence, the Depositor
shall promptly appoint a successor Trustee by written instrument,  in duplicate,
one copy of which  instrument  shall be  delivered to the Trustee so removed and
one copy to the successor Trustee.

                  The  Majority  Certificateholders  may at any time  remove the
Trustee by written  instrument or  instruments  delivered to the  Servicer,  the
Depositor and the Trustee; the Depositor shall thereupon use its best efforts to
appoint a successor Trustee in accordance with this Section.

                  Any resignation or removal of the Trustee and appointment of a
successor  Trustee  pursuant to any of the provisions of this Section 8.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 8.08.

                  Section 8.08. Successor Trustee.

                  Any  successor  Trustee  appointed as provided in Section 8.07
shall execute,  acknowledge and deliver to the Depositor,  the Rating  Agencies,
the  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 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 8.08 unless at the time of such acceptance  such successor  Trustee
shall be eligible  under the  provisions of Section 8.06 and the  appointment of
such  successor  Trustee  shall  not  result  in a  downgrading  of the  Regular
Certificates by either Rating Agency,  as evidenced by a letter from each Rating
Agency.

                  Upon  acceptance  of  appointment  by a  successor  Trustee as
provided in this Section 8.08,  the  successor  Trustee shall mail notice of the
appointment of a

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successor Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency.

                  Section 8.09. Merger or Consolidation of Trustee.

                  Any entity into which the  Trustee may be merged or  converted
or with which it may be  consolidated,  or any entity resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any entity
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder,  provided  such entity  shall be  eligible  under the  provisions  of
Section  8.06 and  8.08,  without  the  execution  or filing of any paper or any
further act on the part of any of the  parties  hereto,  anything  herein to the
contrary notwithstanding.

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

                  Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal  requirements of any  jurisdiction in
which  any  part of the  Trust  or any  Mortgaged  Property  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,  and to vest in such  Person or  Persons,  in such  capacity  and for the
benefit of the Certificateholders, such title to the Trust, or any part thereof,
and, subject to the other provisions of this Section 8.10, such powers,  duties,
obligations,  rights and trusts as the  Servicer  and the Trustee  may  consider
necessary or desirable. Any such co-trustee or separate trustee shall be subject
to the written  approval of the Servicer.  If the Servicer shall not have joined
in such  appointment  within 15 days after the  receipt by it of a request so to
do, or in the case a Servicer  Event of  Termination  shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment.  No
co-trustee or separate trustee  hereunder shall be required to meet the terms of
eligibility  as a  successor  Trustee  under  Section  8.06,  and no  notice  to
Certificateholders  of the  appointment  of any  co-trustee or separate  trustee
shall be required under Section 8.08. The Servicer shall be responsible  for the
fees of any co-trustee or separate trustee appointed hereunder.

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

                  (i) all rights,  powers,  duties and obligations  conferred or
         imposed  upon  the  Trustee  shall be  conferred  or  imposed  upon and
         exercised  or  performed  by the Trustee and such  separate  trustee or
         co-trustee  jointly (it being  understood that such separate trustee or
         co-trustee  is not  authorized  to act  separately  without the Trustee
         joining  in such act),  except to the extent  that under any law of any
         jurisdiction  in which any  particular  act or acts are to be performed
         (whether  as  Trustee   hereunder  or  as  successor  to  the  Servicer
         hereunder),  the Trustee shall be incompetent or unqualified to perform
         such act or acts,  in which  event  such  rights,  powers,  duties  and
         obligations (including the holding of title to the Trust or any

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         portion  thereof  in any  such  jurisdiction)  shall be  exercised  and
         performed singly by such separate trustee or co-trustee,  but solely at
         the direction of the Trustee;

                  (ii) no trustee  hereunder shall be held personally  liable by
         reason of any act or omission of any other trustee hereunder; and

                  (iii) the Servicer and the Trustee,  acting jointly may at any
         time  accept  the  resignation  of or remove  any  separate  trustee or
         co-trustee  except that following the occurrence of a Servicer Event of
         Termination,  the Trustee  acting alone may accept the  resignation  or
         remove any separate trustee or co-trustee.

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

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

                  Section 8.11. Limitation of Liability.

                  The  Certificates  are  executed  by the  Trustee,  not in its
individual  capacity but solely as Trustee of the Trust,  in the exercise of the
powers and authority  conferred and vested in it by this Agreement.  Each of the
undertakings  and agreements made on the part of the Trustee in the Certificates
is made and intended not as a personal  undertaking  or agreement by the Trustee
but is made and intended for the purpose of binding only the Trust.

                  Section 8.12. Trustee May Enforce Claims Without Possession of
Certificates.

                  (a) All rights of action and claims  under this  Agreement  or
the  Certificates  may be  prosecuted  and  enforced by the Trustee  without the
possession  of  any  of  the  Certificates  or  the  production  thereof  in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in its own name or in its  capacity as Trustee for the benefit of all
Holders of such Certificates, subject to the provisions of this

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Agreement.  Any recovery of judgment  shall,  after provision for the payment of
the reasonable compensation, expenses, disbursement and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the  Certificateholders in
respect of which such judgment has been recovered.

                  (b) The Trustee shall afford the Seller,  the  Depositor,  the
Servicer  and  each  Certificateholder  upon  reasonable  notice  during  normal
business  hours,  access to all records  maintained by the Trustee in respect of
its duties  hereunder  and access to  officers of the  Trustee  responsible  for
performing such duties.  The Trustee shall cooperate fully with the Seller,  the
Servicer,  the Depositor and such  Certificateholder and shall make available to
the Seller, the Servicer,  the Depositor and such  Certificateholder  for review
and  copying at the expense of the party  requesting  such  copies,  such books,
documents or records as may be requested  with respect to the  Trustee's  duties
hereunder.  The Seller, the Depositor,  the Servicer and the  Certificateholders
shall not have any  responsibility or liability for any action or failure to act
by the Trustee and are not obligated to supervise the performance of the Trustee
under this Agreement or otherwise.

                  Section 8.13. Suits for Enforcement.

                  In case a Servicer  Event of  Termination  or other default by
the Servicer or the Seller hereunder shall occur and be continuing,  the Trustee
may   proceed  to  protect  and  enforce  its  rights  and  the  rights  of  the
Certificateholders  under this  Agreement  by a suit,  action or  proceeding  in
equity or at law or  otherwise,  whether  for the  specific  performance  of any
covenant or agreement  contained in this Agreement or in aid of the execution of
any power granted in this  Agreement or for the  enforcement of any other legal,
equitable or other remedy, as the Trustee, being advised by counsel, and subject
to the  foregoing,  shall deem most  effectual to protect and enforce any of the
rights of the Trustee and the Certificateholders.

                  Section 8.14. Waiver of Bond Requirement.

                  The Trustee  shall be relieved of, and each  Certificateholder
hereby waives,  any  requirement of any  jurisdiction in which the Trust, or any
part  thereof,  may be located that the Trustee post a bond or other surety with
any court, agency or body whatsoever.

                  Section 8.15.  Waiver of Inventory,  Accounting  and Appraisal
Requirement.

                  The Trustee  shall be relieved of, and each  Certificateholder
hereby waives,  any  requirement of any  jurisdiction in which the Trust, or any
part thereof, may be located that the Trustee file any inventory,  accounting or
appraisal  of the  Trust  with any  court,  agency or body at any time or in any
manner whatsoever.

                  Section 8.16. Compliance with National Housing Act of 1934.

                  In performing its duties  hereunder with respect to FHA Loans,
the Trustee shall comply with all  requirements  of the National  Housing Act of
1934, as amended.

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                                   ARTICLE IX

                     REMIC AND GRANTOR TRUST ADMINISTRATION

                  Section 9.01. REMIC Administration.

                  (a) The Trustee shall make or cause to be made REMIC elections
for each of REMIC 1 and REMIC 2 as set  forth in the  Preliminary  Statement  on
Forms  1066 or other  appropriate  federal  tax or  information  return  for the
taxable  year  ending  on the  last  day of  the  calendar  year  in  which  the
Certificates  are issued.  The regular  interests and residual  interest in each
REMIC shall be as designated in the Preliminary Statement.

                  (b) The Closing Date is hereby designated as the "Startup Day"
of each REMIC within the meaning of Section 860G(a)(9) of the Code.

                  (c) The  Servicer  shall pay any and all tax related  expenses
(not  including  taxes)  of each  REMIC,  including,  but not  limited  to,  any
professional  fees or  expenses  related  to  audits  or any  administrative  or
judicial  proceedings  with  respect  to such REMIC that  involve  the  Internal
Revenue Service or state tax  authorities,  but only to the extent that (i) such
expenses are ordinary or routine expenses, including expenses of a routine audit
but not  expenses of  litigation  (except as  described  in (ii));  or (ii) such
expenses or liabilities  (including taxes and penalties) are attributable to the
negligence  or willful  misconduct  of the  Servicer  in  fulfilling  its duties
hereunder.  The Servicer shall be entitled to  reimbursement  of expenses to the
extent provided in clause (i) above from the Collection Account.

                  (d) The Trustee  shall  prepare or cause to be prepared,  sign
and  file  or  cause  to be  filed,  each  REMIC's  federal  and  state  tax and
information  returns as such  REMIC's  direct  representative.  The  expenses of
preparing and filing such returns shall be borne by the Trustee.

                  (e) The Holder of the Class R Certificates holding the largest
Percentage  Interest  shall be the "tax matters  person" as defined in the REMIC
Provisions  (the "Tax  Matters  Person")  with  respect to each  REMIC,  and the
Trustee is irrevocably designated as and shall act as attorney-in-fact and agent
for such Tax Matters  Person for each REMIC.  The Trustee,  as agent for the Tax
Matters Person,  shall perform, on behalf of each REMIC, all reporting and other
tax compliance duties that are the  responsibility of such REMIC under the Code,
the REMIC  Provisions,  or other  compliance  guidance  issued  by the  Internal
Revenue Service or any state or local taxing authority.  Among its other duties,
if required  by the Code,  the REMIC  Provisions,  or other such  guidance,  the
Trustee, as agent for the Tax Matters Person,  shall provide (i) to the Treasury
or  other  governmental  authority  such  information  as is  necessary  for the
application of any tax relating to the transfer of a Residual Certificate to any
disqualified  person or  organization  and (ii) to the  Certificateholders  such
information or reports as are required by the Code or REMIC Provisions.

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                  (f) The Trustee, the Servicer, and the Holders of Certificates
shall take any action or cause any REMIC to take any action  necessary to create
or maintain the status of such REMIC as a REMIC under the REMIC  Provisions  and
shall assist each other as necessary to create or maintain such status.  Neither
the Trustee, the Servicer, nor the Holder of any Residual Certificate shall take
any  action or cause  any  REMIC to take any  action or fail to take (or fail to
cause to be taken) any action that, under the REMIC Provisions,  if taken or not
taken,  as the case may be,  could (i)  endanger  the  status of such REMIC as a
REMIC or (ii) result in the imposition of a tax upon such 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) (either such event,  an "Adverse  REMIC Event")  unless the Trustee
and the  Servicer  have  received  an Opinion of Counsel  (at the expense of the
party  seeking to take such action) to the effect that the  contemplated  action
will not  endanger  such  status or result in the  imposition  of such a tax. In
addition,  prior to taking  any action  with  respect to any REMIC or the assets
therein,  or  causing  such  REMIC to take any  action,  which is not  expressly
permitted  under  the  terms  of  this  Agreement,  any  Holder  of  a  Residual
Certificate will consult with the Trustee and the Servicer,  or their respective
designees,  in  writing,  with  respect to whether  such  action  could cause an
Adverse  REMIC  Event to occur with  respect to such  REMIC,  and no such Person
shall take any such  action or cause  such  REMIC to take any such  action as to
which the  Trustee or the  Servicer  has  advised it in writing  that an Adverse
REMIC Event could occur.

                  (g) Each Holder of a Residual  Certificate  shall pay when due
its pro rata share of any and all taxes imposed on any REMIC by federal or state
governmental  authorities.  To the extent  that such REMIC taxes are not paid by
Residual Certificateholders, the Trustee shall pay any remaining REMIC taxes out
of  current  or future  amounts  otherwise  distributable  to the  Holder of the
Residual Certificate in each REMIC or, if no such amounts are available,  out of
other amounts held in the Collection Account, and shall reduce amounts otherwise
payable to Holders of the REMIC Regular  Interests or the  Certificates,  as the
case may be.

                  (h) The  Trustee,  shall,  for  federal  income tax  purposes,
maintain or cause to be maintained  books and records with respect to each REMIC
on a calendar year and on an accrual basis.

                  (i) No additional contributions of assets shall be made to any
REMIC,  except as expressly  provided in this Agreement with respect to Eligible
Substitute Mortgage Loans.

                  (j) Neither the Trustee nor the Servicer  shall enter into any
arrangement  by which any REMIC  will  receive a fee or other  compensation  for
services.

                  (k) On or before April 15 of each calendar  year  beginning in
2001,  the  Servicer  shall  deliver to the Trustee  and each  Rating  Agency an
Officer's  Certificate stating the Servicer's  compliance with the provisions of
this Section 9.01.

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                  (l) The  Trustee  shall  account for the rights of the Offered
Certificates  to receive Rate Payments as a right in interest rate cap contracts
written by the Class X and Class N  Certificateholders,  as beneficial owners of
the Class X/N Interest, in favor of the Holders of the Offered Certificates, and
the Trustee  shall account for such as property held separate and apart from the
regular interests it holds in REMIC 1 and REMIC 2. This provision is intended to
satisfy the  requirements of Treasury  Regulations  Section  1.860G-2(i) for the
treatment of property  rights  coupled with regular  interests to be  separately
respected and shall be  interpreted  consistent  with such  regulation.  On each
Distribution  Date,  to the extent the  Offered  Certificates  receive  interest
(excluding Class A-1A LIBOR Carryover Amounts) in excess of the Class A-1A REMIC
Pass-Through  Rate,  Class  A-1F  REMIC  Pass-Through  Rate,  Class  A-2F  REMIC
Pass-Through   Rate,  Class  M-1  REMIC   Pass-Through  Rate,  Class  M-2  REMIC
Pass-Through   Rate,  Class  B-1  REMIC   Pass-Through  Rate,  Class  B-2  REMIC
Pass-Through  Rate, as applicable,  such interest will be treated as distributed
to the Class X/N Interest,  pro rata, and then paid to the  respective  Class of
Offered Certificates pursuant to the related interest rate cap agreement.

                  (m) The Trustee shall treat the Excess Reserve Fund Account as
an outside  reserve  fund  within the  meaning of  Treasury  Regulation  Section
1.860G-2(h) that is owned by the Class X and Class N Certificateholders and that
is not an asset of any REMIC.  The  Trustee  shall treat the rights of the Class
A-1A Certificateholders to receive payments from the Excess Reserve Fund Account
in respect of Class A-1A LIBOR Carryover Amounts as a right in interest rate cap
contracts written by the Class X and Class N  Certificateholders,  as beneficial
owners of the Class X/N Interest, in favor of the Class A-1A Certificateholders,
and the Trustee  shall account for such as property held separate and apart from
the  regular  interests  it holds in REMIC 1 and  REMIC  2.  This  provision  is
intended to satisfy the requirements of Treasury  Regulation Section 1.860G-2(i)
for the  treatment  of property  rights  coupled  with  regular  interests to be
separately  respected and shall be interpreted  consistent with such regulation.
On each  Distribution  Date, to the extent the Class A-1A  Certificates  receive
interest  in excess  of the Class  A-1A Net Funds  Cap,  such  interest  will be
treated as distributed to the Class X/N Interest, pro rata, and then paid to the
Excess  Reserve  Fund  Account  and then  paid to the Class  A-1A  Certificates,
respectively, pursuant to the related interest rate cap agreement.

                  (n) In the event that the beneficial  ownership of the Class N
Certificates and the Class X Certificates is held by a single Person for federal
income tax purposes, such Person shall be treated as the beneficial owner of the
Class X/N  Interest  represented  thereby and the Class N Reserve  Fund.  In the
event that  beneficial  ownership of the Class N and the Class X Certificates is
held by two or more Persons for tax purposes,  the Trustee shall treat the Class
N  Certificateholders  and  the  Class X  Certificateholders  as  partners  in a
partnership  that owns the Class X/N  Interest  and the Class N Reserve Fund for
federal  income  tax  purposes  and  shall  not  treat  the  Class N and Class X
Certificates  as an interest in any REMIC  created  hereunder.  By acquiring the
Class N Certificates and the Class X Certificates,  the respective  Holders will
agree to treat the Class N  Certificates  and the  Class X  Certificates  in the
manner  described in the preceding  sentence 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

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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 or
losses  and  distributions  allocable  to such  Certificates,  (ii) the  Class N
Certificates  shall be  allocated  income in an amount  equal to interest at the
Pass-Through  Rate  thereon  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 its Notional  Amount,  (iii) the Class X and Class N
Certificates  shall be allocated income with respect to all prepayment  premiums
in accordance with the allocation of such amounts  pursuant to Section  4.02(c),
to the extent not allocated  pursuant to Section 9.01(m) 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
Class X/N Interest to pay Rate Payments and Class A-1A LIBOR Carryover  Amounts,
and shall be  allocated  expense in  respect of any actual  payment of such Rate
Payments  or Class  A-1A  LIBOR  Carryover  Amounts  based on which  one of such
Classes  economically bears such expense,  (v) the Class X Certificates shall be
allocated all remaining income and any expenses and Realized Losses with respect
to the Class X/N  Interest  and any  income or loss with  respect to the Class N
Reserve Fund,  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 Certificates 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 the Class N Notional  Amount and any accrued but
unpaid  interest   thereon  is  reduced  to  zero,  and  then  to  the  Class  X
Certificates,  (allocating  any  remaining  Class N Reserve  Fund to the Class X
Certificates)  and (viii) the Trustee  shall  maintain  books and  records  with
respect to the partnership on a calendar year basis (unless a different  taxable
year shall be required by the Code) and shall  prepare or cause to be  prepared,
and  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 X and Class N Certificates,  the Trustee shall
not make an election  under  Section 954 of the Code.  The Holder of the largest
Percentage  Interest of the Class X  Certificates,  by acceptance of its Class X
Certificate,  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 9.01(n).

                  Section 9.02. Prohibited Transactions and Activities.

                  Neither  the  Seller,  the  Depositor,  the  Servicer  nor the
Trustee  shall sell,  dispose of, or substitute  for any of the Mortgage  Loans,
except in a disposition pursuant to (i) the foreclosure of a Mortgage Loan, (ii)
the bankruptcy of the Trust Fund, (iii) the

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termination  of any  REMIC  pursuant  to  Article  X of this  Agreement,  (iv) a
substitution  pursuant to Article II of this  Agreement or (v) a  repurchase  of
Mortgage Loans pursuant to Article II of this Agreement,  nor acquire any assets
for any  REMIC,  nor sell or  dispose  of any  investments  in the  Distribution
Account for gain,  nor accept any  contributions  to any REMIC after the Closing
Date,  unless it has received an Opinion of Counsel (at the expense of the party
causing  such  sale,  disposition,   or  substitution)  that  such  disposition,
acquisition,  substitution,  or  acceptance  will not (a) affect  adversely  the
status  of such  REMIC as a REMIC or of the  interests  therein  other  than the
Residual   Certificates  as  the  regular  interests  therein,  (b)  affect  the
distribution  of interest or  principal on the  Certificates,  (c) result in the
encumbrance  of the assets  transferred  or assigned  to the Trust Fund  (except
pursuant  to the  provisions  of this  Agreement)  or (d) cause such REMIC to be
subject to a tax on prohibited transactions or prohibited contributions pursuant
to the REMIC Provisions.

                  Section  9.03.  Indemnification  with Respect to Certain Taxes
and Loss of REMIC Status.

                  In the event that any REMIC formed  hereunder 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 Servicer of its duties
and obligations set forth herein, the Servicer shall indemnify the Holder of the
related  Residual  Certificate  against  any and all  losses,  claims,  damages,
liabilities or expenses  ("Losses")  resulting from such  negligence;  provided,
however,  that the Servicer shall not be liable for any such Losses attributable
to the action or inaction of the  Trustee,  the  Depositor or the Holder of such
Residual  Certificate,  as  applicable,  nor for any such Losses  resulting from
misinformation  provided by the Holder of such Residual Certificate on which the
Servicer has relied.  The foregoing shall not be deemed to limit or restrict the
rights and remedies of the Holder of such Residual  Certificate now or hereafter
existing at law or in equity.  Notwithstanding  the  foregoing,  however,  in no
event shall the 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 the 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).

                  Section 9.04. REO Property.

                  (a) Subject to compliance with applicable laws and regulations
as shall at any time be in force,  and  notwithstanding  any other  provision of
this Agreement, the Servicer,  acting on behalf of the Trustee hereunder,  shall
not rent, lease, or otherwise earn income on behalf of any REMIC with respect to
any REO  Property  which  might  cause such REO  Property  to fail to qualify as
"foreclosure"  property within the meaning of Section  860G(a)(8) of the Code or
result in the receipt by any REMIC of any  "income  from  non-permitted  assets"
within the  meaning of Section  860F(a)(2)  of the Code or any "net  income from
foreclosure property" which is subject to tax under the REMIC

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Provisions  unless the  Servicer  has  advised,  or has  caused  the  applicable
Servicer to advise,  the Trustee in writing to the effect that,  under the REMIC
Provisions,  such action would not adversely affect the status of any REMIC as a
REMIC and any  income  generated  for such REMIC by the REO  Property  would not
result in the imposition of a tax upon such REMIC.

                  (b) The Servicer shall make reasonable efforts to sell any REO
Property for its fair market value.  In any event,  however,  the Servicer shall
dispose  of any REO  Property  before  the  close  of the  third  calendar  year
beginning  after  the year of its  acquisition  by the  Trust  Fund  unless  the
Servicer has received a grant of extension from the Internal  Revenue Service to
the  effect  that,  under  the  REMIC  Provisions  and  any  relevant   proposed
legislation and under  applicable state law, any REMIC may hold REO Property for
a longer  period  without  adversely  affecting  its REMIC status or causing the
imposition  of a  Federal  or state  tax upon any  REMIC.  If the  Servicer  has
received such an extension,  then the Servicer shall continue to attempt to sell
the REO Property for its fair market  value as  determined  in good faith by the
Servicer  for such  longer  period  as such  extension  permits  (the  "Extended
Period"). If the Servicer has not received such an extension and the Servicer is
unable to sell the REO Property  within 33 months after its  acquisition  by the
Trust Fund or if the Servicer has received such an  extension,  and the Servicer
is unable to sell the REO Property  within the period ending three months before
the close of the  Extended  Period,  the Servicer  shall,  before the end of the
applicable  period,  (i) purchase  such REO Property at a price equal to the REO
Property's fair market value as determined in good faith by the Servicer or (ii)
auction the REO Property to the highest bidder (which may be the Servicer) in an
auction  reasonably  designed to produce a fair price prior to the expiration of
the applicable period.

                  Section 9.05. Grantor Trust Administration.

                  The  parties  intend  that  the  portions  of the  Trust  Fund
consisting  of the Class N Reserve  Fund and the Excess  Reserve Fund Account be
treated as a "grantor trust" under the Code, and the provisions  hereof shall be
interpreted  consistently with this intention. In furtherance of such intention,
the Trustee  shall  furnish or cause to be  furnished  (i) to the Holders of the
Offered  Certificates  and  (ii)  to the  Holder  of the  Class  X and  Class  N
Certificates  (if there is a single  beneficial  owner  thereof) or to itself on
behalf of the  partnership  comprised  of the Holders of the Class X and Class N
Certificates  (if there are two or more beneficial  owners  thereof),  and shall
file or cause to be filed with the Internal  Revenue Service  together with Form
1041 or such other form as may be applicable,  their allocable  shares of income
with respect to the property held by the Grantor Trust, at the time or times and
in the manner required by the Code.

                                      122
<PAGE>

                                   ARTICLE X

                                   TERMINATION

                  Section 10.01. Termination.

                  (a) The respective  obligations  and  responsibilities  of the
Seller,  the Servicer,  the Depositor and the Trustee created hereby (other than
the  obligation  of the Trustee to make certain  payments to  Certificateholders
after the final  Distribution  Date and the  obligation  of the Servicer to send
certain  notices as  hereinafter  set forth) shall  terminate upon notice to the
Trustee upon the earliest of (i) the Distribution  Date on which the Certificate
Principal  Balance of each Class of Certificates  has been reduced to zero, (ii)
the final payment or other  liquidation  of the last Mortgage Loan in the Trust,
and (iii) the optional purchase by the Seller of the Mortgage Loans in both Loan
Groups as described below.  Notwithstanding the foregoing, in no event shall the
trust created hereby  continue  beyond the expiration of 21 years from the death
of the  last  survivor  of the  descendants  of  Joseph  P.  Kennedy,  the  late
ambassador of the United  States to the Court of St.  James,  living on the date
hereof and the Distribution Date in November 2031.

                  The Seller may, at its option, terminate the Mortgage Loans in
the Trust  Fund and  retire  the  Offered  Certificates  on the next  succeeding
Distribution Date upon which the aggregate current Pool Balance is less than 10%
of the  aggregate  Pool Balance of the Mortgage  Loans as of the Cut-Off Date by
purchasing  all of the  outstanding  (i)  Mortgage  Loans in the Trust Fund at a
price  equal to the sum of the  outstanding  Principal  Balance of the  Mortgage
Loans and except to the extent previously advanced by the Servicer,  accrued and
unpaid interest thereon at the weighted  average of the Mortgage  Interest Rates
through the end of the Collection  Period preceding the final  Distribution Date
plus unreimbursed Servicing Advances, Advances and any unpaid Servicing Fees and
Special  Servicing Fees allocable to such Mortgage Loans and (ii) REO Properties
in the Trust Fund at a price equal to their fair market value as  determined  in
good faith by the Servicer (the "Termination Price").

                  In connection with any such purchase pursuant to the preceding
paragraph,  the  Servicer  shall  deliver  to the  Trustee  for  deposit  in the
Distribution Account all amounts then on deposit in the Collection Account (less
amounts  permitted to be withdrawn  by the Servicer  pursuant to Section  3.07),
which  deposit  shall be  deemed to have  occurred  immediately  following  such
purchase.

                  Any such  purchase  shall be  accomplished  by delivery to the
Trustee for deposit into the Distribution  Account as part of Available Funds on
the Determination Date before such Distribution Date of the Termination Price.

                  (b) Notice of any  termination,  specifying  the  Distribution
Date (which shall be a date that would  otherwise be a  Distribution  Date) upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final  distribution and cancellation,  shall be given promptly by
the Trustee upon the Trustee receiving notice of such date from the Servicer, by
letter to the Certificateholders mailed

                                      123
<PAGE>

not  earlier  than the 15th day of the month  preceding  the month of such final
distribution  and not  later  than  the  15th  day of the  month  of such  final
distribution  specifying (1) the Distribution Date upon which final distribution
of the  Certificates  will be  made  upon  presentation  and  surrender  of such
Certificates at the office or agency of the Trustee therein designated,  (2) the
amount of any such final  distribution  and (3) 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 or agency
of the Trustee therein specified.

                  (c) Upon presentation and surrender of the  Certificates,  the
Trustee shall cause to be distributed to the Holders of the  Certificates on the
Distribution Date for such final  distribution,  in proportion to the Percentage
Interests of their  respective  Class and to the extent that funds are available
for such purpose,  an amount equal to the amount  required to be  distributed to
such Holders in  accordance  with the  provisions  of Sections 4.01 and 4.02 for
such Distribution Date.

                  (d)  In  the  event  that  all  Certificateholders  shall  not
surrender  their  Certificates  for final payment and  cancellation on or before
such final  Distribution  Date, the Trustee shall  promptly  following such date
cause  all  funds  in  the   Distribution   Account  not  distributed  in  final
distribution to Certificateholders to be withdrawn therefrom and credited to the
remaining  Certificateholders  by  depositing  such funds in a  separate  escrow
account  for the  benefit  of such  Certificateholders,  and the  Seller (if the
Seller has  exercised  its right to purchase the Mortgage  Loans) or the Trustee
(in any  other  case)  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 nine months after the
second  notice  all  the  Certificates  shall  not  have  been  surrendered  for
cancellation,  the Class R Certificateholders shall be entitled to all unclaimed
funds and other  assets  which  remain  subject  hereto,  and the  Trustee  upon
transfer of such funds shall be discharged of any responsibility for such funds,
and the  Certificateholders  shall  look to the Class R  Certificateholders  for
payment.

                  Section 10.02. Additional Termination Requirements.

                  (a) In the event that the Seller exercises its purchase option
as provided in Section 10.01,  the Trust shall be terminated in accordance  with
the  following  additional  requirements,  unless  the  Trustee  shall have been
furnished with an Opinion of Counsel to the effect that the failure of the Trust
to comply  with the  requirements  of this  Section  will not (i)  result in the
imposition  of taxes on  "prohibited  transactions"  of the Trust as  defined in
Section 860F of the Code or (ii) cause any REMIC  constituting part of the Trust
Fund to fail to  qualify  as a REMIC  at any  time  that  any  Certificates  are
outstanding:

                  (i) The Trustee shall designate a date within 90 days prior to
         the  final  Distribution  Date as the  date of  adoption  of  plans  of
         complete  liquidation  of each of REMIC 1 and REMIC 2 and shall specify
         such date in the final federal income tax return of each REMIC;

                                      124
<PAGE>

                  (ii)  After the date of  adoption  of such  plans of  complete
         liquidation and at or prior to the final Distribution Date, the Trustee
         shall sell all of the assets of the Trust to the Seller for cash; and

                  (iii) At the time of the  making of the final  payment  on the
         Certificates,  the Trustee shall  distribute or credit,  or cause to be
         distributed  or credited in the following  order of priority (A) to the
         Holders of each of the Class A-1F,  Class A-2F,  Class A-1A, Class M-1,
         Class  M-2,  Class  B-1  and  Class  B-2   Certificates,   the  related
         Certificate Principal Balance, as applicable, plus one month's interest
         thereon at the  applicable  Pass-Through  Rate,  (B) to the Class N and
         Class X Certificates  in respect of the Class X/N Interest,  the amount
         of any  remaining  Monthly  Excess  Cash Flow  Amounts  not  previously
         distributed  thereon,  (C) to the remaining REMIC Regular Interests the
         amounts allocable thereto pursuant to Section 4.10 and (D) to the Class
         R  Certificateholders,  all cash on hand after such payment (other than
         cash  retained to meet  claims) and the Trust shall  terminate  at such
         time.

                  (b) By their acceptance of  Certificates,  the Holders thereof
hereby agree to appoint the Trustee as their  attorney in fact to: (i) designate
such date of  adoption of plans of  complete  liquidation  and (ii) to take such
other action in connection  therewith as may be reasonably required to carry out
such plans of complete liquidation all in accordance with the terms hereof.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

                  Section 11.01. Amendment.

                  This Agreement may be amended from time to time by Seller, the
Depositor,  the  Servicer  and the  Trustee;  and  without  the  consent  of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any
provisions  herein  which  may be  defective  or  inconsistent  with  any  other
provisions  herein or (iii) to make any other provisions with respect to matters
or questions arising under this Agreement,  which shall not be inconsistent with
the provisions of this Agreement; provided, however, that any such action listed
in clause (i) through (iii) above shall not adversely  affect in any respect the
interests of any Certificateholder, as evidenced by (i) notice in writing to the
Depositor,  the  Servicer  and the Trustee  from the Rating  Agencies  that such
action  will not  result in the  reduction  or  withdrawal  of the rating of any
outstanding  Class of Certificates  with respect to which it is a Rating Agency,
or (ii) an Opinion of Counsel delivered to the Servicer and the Trustee.

                  In addition,  this  Agreement may be amended from time to time
by Seller, the Depositor,  the Servicer and the Trustee, with the consent of the
Majority  Certificateholders  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 or

                                      125
<PAGE>

waiver  shall (x)  reduce in any  manner  the amount of, or delay the timing of,
payments on the  Certificates  which are required to be made on any  Certificate
without the consent of the Holder of such  Certificate,  (y) adversely affect in
any material  respect the interests of the Holders of any Class of  Certificates
in a manner other than as described in clause (x) above,  without the consent of
the Holders of Certificates  of such Class  evidencing at least a 66% Percentage
Interest in such Class,  or (z) reduce the percentage of Voting Rights  required
by clause (y) above  without the consent of the Holders of all  Certificates  of
such Class then  outstanding.  Upon  approval  of an  amendment,  a copy of such
amendment  shall be sent to the Rating  Agencies.  Prior to the execution of any
amendment to this  Agreement,  the Trustee shall be entitled to receive and rely
upon an Opinion of Counsel (at the expense of the Person seeking such amendment)
stating that the execution of such  amendment is authorized or permitted by this
Agreement.  The Trustee may, but shall not be obligated  to, enter into any such
amendment  which affects the Trustee's  own rights,  duties or immunities  under
this Agreement.

                  Notwithstanding   any  provision  of  this  Agreement  to  the
contrary,  the Trustee  shall not  consent to any  amendment  to this  Agreement
unless it shall have first received an Opinion of Counsel,  delivered by (and at
the  expense  of) the Person  seeking  such  Amendment,  to the effect that such
amendment will not result in the  imposition of a tax on any REMIC  constituting
part of the  Trust  Fund  pursuant  to the REMIC  Provisions  or cause any REMIC
constituting  part of the Trust to fail to  qualify  as a REMIC at any time that
any  Certificates  are  outstanding  and that  the  amendment  is being  made in
accordance with the terms hereof.

                  Promptly after the execution of any such amendment the Trustee
shall furnish, at the expense of the Person that requested the amendment if such
Person is the  Seller or the  Servicer  (but in no event at the  expense  of the
Trustee),  otherwise at the expense of the Trust,  a copy of such  amendment and
the Opinion of Counsel referred to in the immediately preceding paragraph to the
Servicer and each Rating Agency.

                  It   shall   not   be    necessary    for   the   consent   of
Certificateholders  under this Section 11.01 to approve the  particular  form of
any proposed  amendment;  instead it shall be  sufficient  if such consent shall
approve the  substance  thereof.  The manner of obtaining  such  consents and of
evidencing  the  authorization  of the execution  thereof by  Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.

                  The Trustee may, but shall not be obligated to, enter into any
amendment  pursuant to this 11.01  Section that  affects its rights,  duties and
immunities under this Agreement or otherwise.

                  Section 11.02. Recordation of Agreement; Counterparts.

                  To the extent  permitted by applicable  law, this Agreement is
subject to  recordation  in all  appropriate  public  offices for real  property
records in all the counties or other  comparable  jurisdictions  in which any or
all of the  properties  subject to the Mortgages are situated,  and in any other
appropriate public recording office or elsewhere,

                                      126
<PAGE>

such recordation to be effected by the Servicer at the expense of the Trust, but
only upon direction of Certificateholders,  accompanied by an Opinion of Counsel
to the effect that such  recordation  materially  and  beneficially  affects the
interests of the Certificateholders.

                  For  the  purpose  of  facilitating  the  recordation  of this
Agreement  as herein  provided and for other  purposes,  this  Agreement  may be
executed   simultaneously   in  any  number  of  counterparts,   each  of  which
counterparts  shall be deemed to be an  original,  and such  counterparts  shall
together constitute but one and the same instrument.

                  Section 11.03. Limitation on Rights of Certificateholders.

                  The death or incapacity of any Certificateholder shall not (i)
operate  to  terminate   this   Agreement  or  the  Trust,   (ii)  entitle  such
Certificateholder's  legal representatives or heirs to claim an accounting or to
take any action or  proceeding in any court for a partition or winding up of the
Trust, or (iii) otherwise affect the rights,  obligations and liabilities of the
parties hereto or any of them.

                  Except as expressly provided for herein, no  Certificateholder
shall have any right to vote or in any manner  otherwise  control the  operation
and management of the Trust, or the obligations of the parties hereto, nor shall
anything  herein  set forth or  contained  in the terms of the  Certificates  be
construed  so as to  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 person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.

                  No  Certificateholder  shall  have any  right by virtue of any
provision of this  Agreement  to institute  any suit,  action or  proceeding  in
equity or at law upon or under or with  respect to this  Agreement,  unless such
Holder  previously  shall have given to the Trustee a written  notice of default
and of the continuance thereof, as herein provided,  and unless also the Holders
of  Certificates  entitled to at least 25% of the Voting  Rights shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee  hereunder  and shall have  offered to the Trustee  such
reasonable  indemnity  as  it  may  require  against  the  costs,  expenses  and
liabilities to be incurred therein or thereby, and the Trustee for 15 days after
its receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action,  suit or  proceeding.  It is understood
and intended,  and expressly  covenanted  by each  Certificateholder  with every
other  Certificateholder  and  the  Trustee,  that  no one or  more  Holders  of
Certificates  shall  have any  right in any  manner  whatever  by  virtue of any
provision of this  Agreement to affect,  disturb or prejudice  the rights of the
Holders  of any  other of such  Certificates,  or to  obtain  or seek to  obtain
priority  over or  preference  to any  other  such  Holder,  which  priority  or
preference is not otherwise  provided for herein,  or to enforce any right under
this Agreement,  except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 11.03 each and every Certificateholder and the
Trustee  shall be entitled  to such  relief as can be given  either at law or in
equity.

                                      127
<PAGE>

                  Section 11.04. Governing Law; Jurisdiction.

                  This Agreement  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. With respect
to any claim arising out of this Agreement,  each party  irrevocably  submits to
the exclusive jurisdiction of the courts of the State of New York and the United
States  District  Court  located in the Borough of  Manhattan in The City of New
York, and each party  irrevocably  waives any objection which it may have at any
time to the laying of venue of any suit, action or proceeding  arising out of or
relating  hereto brought in any such courts,  irrevocably  waives any claim that
any such suit,  action or proceeding  brought in any such court has been brought
in any inconvenient  forum and further  irrevocably  waives the right to object,
with  respect to such  claim,  suit,  action or  proceeding  brought in any such
court, that such court does not have jurisdiction over such party, provided that
service of process has been made by any lawful means.

                  Section 11.05. Notices.

                  All  directions,  demands  and notices  hereunder  shall be in
writing and shall be deemed to have been duly given if  personally  delivered at
or mailed by first class mail, postage prepaid,  or by express delivery service,
to  (a)  in  the  case  of  the  Seller,   Credit-Based   Asset   Servicing  and
Securitization  LLC,  335  Madison  Avenue,  19th  Floor,  New  York,  New York,
Attention: Director - Mortgage Finance (telecopy number (212) 850-7760), or such
other address or telecopy  number as may hereafter be furnished to the Depositor
and the Trustee in writing by the Seller,  (b) in the case of the  Trustee,  The
Chase  Manhattan  Bank,  450 West 33rd Street,  14th Floor,  New York,  New York
10001,  Attention:  Capital  Markets  Fiduciary  Services,  C-BASS Mortgage Loan
Asset-Backed  Certificates,  Series  2000-CB4,  or  such  other  address  as may
hereafter be furnished to the Depositor,  the Seller and the Servicer in writing
by the Trustee,  (c) in the case of the  Depositor,  Residential  Asset  Funding
Corporation,   301  South  College  Street,  TW-09,  Charlotte,  North  Carolina
28288-0610,  Attention:  C-BASS Mortgage Loan Asset-Backed Certificates,  Series
2000-CB4,  or such other address as may be furnished to the Seller, the Servicer
and  the  Trustee  in  writing  by the  Depositor,  and  (d) in the  case of the
Servicer,  Litton Loan Servicing LP, 5373 W. Alabama,  Suite 600, Houston, Texas
77056,  Attention:  Janice McClure, or such other address as may be furnished to
the Seller, the Depositor and the Trustee in writing by the Servicer. 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 Servicer Event of Termination 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.

                                      128
<PAGE>

                  Section 11.06. Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement  shall for any reason  whatsoever be 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. Article and Section References.

                  All  article and Section  references  used in this  Agreement,
unless otherwise provided, are to articles and Sections in this Agreement.

Section 11.08.    Notice to the Rating Agencies.

                  (a) Each of the Trustee and the Servicer shall be obligated to
use its best  reasonable  efforts  promptly  to  provide  notice  to the  Rating
Agencies with respect to each of the following of which a Responsible Officer of
the Trustee or Servicer, as the case may be, has actual knowledge:

                  (i) any material change or amendment to this Agreement;

                  (ii) the occurrence of any Servicer Event of Termination  that
         has not been cured or waived;

                  (iii) the  resignation  or  termination of the Servicer or the
         Trustee;

                  (iv) the final payment to Holders of the  Certificates  of any
         Class;

                  (v) any change in the location of any Account; and

                  (vi) if the Trustee is acting as successor  Servicer  pursuant
         to Section 7.02 hereof, any event that would result in the inability of
         the Trustee to make Advances.

                  (vii) In addition, the Servicer shall promptly furnish to each
         Rating Agency copies of the following:

                           (A) each annual statement as to compliance  described
                  in Section 3.19 hereof;

                           (B)  each  annual  independent  public   accountants'
                  servicing report described in Section 3.20 hereof; and

                           (C) each notice delivered pursuant to Section 7.01(a)
                  hereof  which  relates to the fact that the  Servicer  has not
                  made an Advance.

                                      129
<PAGE>

                  Any such  notice  pursuant to this  Section  11.08 shall be in
writing and shall be deemed to have been duly given if  personally  delivered or
mailed by first class mail,  postage prepaid,  or by express delivery service to
Fitch, Inc., One State Street Plaza, New York, New York 10004, Attention:  Sonny
Weng;  Standard & Poor's Ratings Services,  55 Water Street,  New York, New York
10041, Attention:  Scott Mason; and Moody's Investors Services,  Inc., 99 Church
Street, New York, New York 10007, Attention: Nehal Farooqui.

                  Section 11.09. Further Assurances.

                  Notwithstanding any other provision of this Agreement, neither
the Regular  Certificateholders  nor the Trustee  shall have any  obligation  to
consent to any amendment or modification of this Agreement unless they have been
provided reasonable  security or indemnity against their out-of-pocket  expenses
(including reasonable attorneys' fees) to be incurred in connection therewith.

                  Section 11.10. Benefits of Agreement.

                  Nothing in this Agreement or in the Certificates, expressed or
implied,  shall give to any Person,  other than the  Certificateholders  and the
parties  hereto  and their  successors  hereunder,  any  benefit or any legal or
equitable right, remedy or claim under this Agreement.

                  Section 11.11. Acts of Certificateholders.

                  (a) Any request,  demand,  authorization,  direction,  notice,
consent,  waiver or other action provided by this Agreement to be given or taken
by the  Certificateholders  may be  embodied  in and  evidenced  by one or  more
instruments of substantially similar tenor signed by such  Certificateholders in
person or by agent duly  appointed  in  writing;  and such action  shall  become
effective  when such  instrument  or  instruments  are delivered to the Trustee,
Seller and the Servicer. Such instrument or instruments (and the action embodied
therein and evidenced  thereby) are herein sometimes referred to as the "act" of
the  Certificateholders  signing  such  instrument  or  instruments.   Proof  of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient  for any purpose of this  Agreement and conclusive in favor of the
Trustee and the Trust, if made in the manner provided in this Section 11.11.

                  (b) The fact and date of the  execution  by any  Person of any
such  instrument  or writing may be proved by the affidavit of a witness of such
execution or by the  certificate of a notary public or other officer  authorized
by law to take acknowledgments of deeds,  certifying that the individual signing
such instrument or writing  acknowledged to him the execution thereof.  Whenever
such  execution  is by a  signer  acting  in a  capacity  other  than his or her
individual  capacity,  such  certificate  or  affidavit  shall  also  constitute
sufficient proof of his authority.

                  (c) Any request,  demand,  authorization,  direction,  notice,
consent, waiver or other action by any Certificateholder shall bind every future
Holder of such Certificate and the Holder of every  Certificate  issued upon the
registration of transfer

                                      130
<PAGE>

thereof or in exchange therefor or in lieu thereof, in respect of anything done,
omitted or suffered to be done by the Trustee or the Trust in reliance  thereon,
whether or not notation of such action is made upon such Certificate.

                                      131
<PAGE>

                  IN WITNESS WHEREOF,  the Seller,  the Depositor,  the Servicer
and the Trustee have caused their names to be signed hereto by their  respective
officers  thereunto  duly  authorized,  all as of the day and year  first  above
written.

                                               RESIDENTIAL ASSET FUNDING
                                               CORPORATION, as Depositor

                                               By: /s/ Eric Kaplan
                                                  ------------------------------
                                                    Name: Eric Kaplan
                                                    Title: Vice President

                                               CREDIT-BASED ASSET SERVICING
                                               AND SECURITIZATION LLC, as Seller

                                               By: /s/ Ivan Halpern
                                                  ------------------------------
                                                    Name: Ivan Halpern
                                                    Title: Vice President

                                               LITTON LOAN SERVICING LP, as
                                               Servicer

                                               By: /s/ Janice McClure
                                                  ------------------------------
                                                    Name: Janice McClure
                                                    Title: Sr. Vice President

                                               THE CHASE MANHATTAN BANK, as
                                               Trustee

                                               By: /s/ Karen Schluter
                                                  ------------------------------
                                                    Name: Karen Schluter
                                                    Title: Trust Officer

               [Signature Page to Pooling and Servicing Agreement]
<PAGE>

STATE OF  NC                   )
                               ) ss.:
COUNTY OF MECKLENBURG          )

                  On the 12th day of December,  2000 before me, a notary  public
in and for said State,  personally appeared Eric Kaplan known to me to be a Vice
President of Residential Asset Funding Corporation, a North Carolina corporation
that executed the within  instrument,  and also known to me to be the person who
executed  it on behalf of said  corporation,  and  acknowledged  to me that such
corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                              Notary Public

                                                              Margaret Gavin
                                                              Expires: 12-5-03
<PAGE>

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

                  On the __ day of December,  2000 before me, a notary public in
and for said State,  personally  appeared  Ivan Halpern known to me to be a Vice
President of  Credit-Based  Asset  Servicing and  Securitization  LLC, a limited
liability company that executed the within  instrument,  and also known to me to
be the person who executed it on behalf of said limited liability  company,  and
acknowledged  to me that such  limited  liability  company  executed  the within
instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                             Notary Public

                                                             Marion D. Rodriguez
                                                             Expires 4-19-01

                                        2
<PAGE>

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

                  On the 11th day of December,  2000 before me, a notary  public
in and for said State,  personally  appeared Karen  Schluter,  known to me to be
Trust Officer of The Chase Manhattan Bank, a New York banking  corporation  that
executed  the  within  instrument,  and also  known to me to be the  person  who
executed  it on behalf of said  association,  and  acknowledged  to me that such
corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                             Notary Public

                                                             Genevieve A. Forbes
                                                             Expires 1-23-01

                                       3
<PAGE>

STATE OF TEXAS                 )
                               ) ss.:
COUNTY OF HARRIS               )

                  On the 8th day of December, 2000 before me, a notary public in
and for said State, personally appeared Janice McClure,  known to me to be a of
Litton Loan  Servicing  LP, a Delaware  limited  partnership,  that executed the
within  instrument,  and also known to me to be the person  who  executed  it on
behalf of said limited  partnership,  and  acknowledged  to me that such limited
partnership executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                              Notary Public

                                                              Laurie Struecker
                                                              Expires 2-4-02

                                       4
<PAGE>

                                   EXHIBIT A-1

                      [FORM OF THE CLASS A-1A CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                           SERIES 2000-CB4, CLASS A-1A

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

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

<TABLE>
<S>                                        <C>
Series 2000-CB4, Class A-1A                 Original Class Certificate Principal Balance
                                            of the Class A-1A  Certificates  as  of  the
Pass-Through Rate:  Variable                Closing Date: $81,771,000

Date of Pooling and Servicing Agreement:    Denomination: $81,771,000
November 1, 2000
Cut-off Date:  November 1, 2000

                                            Servicer: Litton Loan Servicing LP

First Distribution Date: December 26,
2000                                        Trustee: The Chase Manhattan Bank

No.

                                            Closing Date:  December 13, 2000
</TABLE>

CUSIP:  12489WCR3

                                     A-1-1

<PAGE>

DISTRIBUTIONS  IN  REDUCTION  OF  THE  CERTIFICATE  PRINCIPAL  BALANCE  OF  THIS
CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.  ACCORDINGLY,   THE
OUTSTANDING  CERTIFICATE  PRINCIPAL  BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ABOVE.

                                     A-1-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
     RESIDENTIAL  ASSET  FUNDING   CORPORATION,   THE  SERVICER,   THE  TRUSTEE,
     CREDIT-BASED  ASSET  SERVICING  AND  SECURITIZATION  LLC OR  ANY  OF  THEIR
     AFFILIATES.   THIS   CERTIFICATE   IS  NOT  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

     This certifies that _______________ is the registered owner of a Percentage
Interest  (obtained  by dividing the  denomination  of this  Certificate  by the
Original Class Certificate  Principal Balance of the Class A-1A Certificates) in
that  certain  beneficial  ownership  interest  evidenced  by all the Class A-1A
Certificates  in the Trust Fund  created  pursuant  to a Pooling  and  Servicing
Agreement,  dated as specified above (the "Agreement"),  among Residential Asset
Funding Corporation (hereinafter called the "Depositor," which term includes any
successor  entity  under  the  Agreement),   Credit-Based  Asset  Servicing  and
Securitization  LLC, the  Servicer and the Trustee,  a summary of certain of the
pertinent provisions of which is set forth hereafter.  To the extent not defined
herein,  the  capitalized  terms used herein have the  meanings  assigned in the
Agreement.  This  Certificate  is issued  under  and is  subject  to the  terms,
provisions  and conditions of the  Agreement,  to which  Agreement the Holder of
this  Certificate by virtue of the  acceptance  hereof assents and by which such
Holder is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the Business Day immediately  preceding such  Distribution Date
(the "Record Date"),  from funds in the Distribution  Account in an amount equal
to the product of the Percentage  Interest evidenced by this Certificate and the
amount  required to be distributed to the Holders of Class A-1A  Certificates on
such Distribution Date pursuant to the Agreement, provided, however, that if any
Class A-1A Certificate  becomes a Definitive  Certificate:  (as defined herein),
the Record Date for such  Certificate will be the last Business Day of the month
immediately preceding the month in which the related Distribution Date occurs.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution Date and is the registered owner of

                                     A-1-3

<PAGE>

Class A-1A Certificates,  the aggregate initial Certificate Principal Balance of
which is in excess of $5,000,000,  or by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register; provided that the Trustee may deduct a reasonable wire
transfer fee from any payment made by wire transfer.  Notwithstanding the above,
the final  distribution on this Certificate will be made after due notice by the
Trustee of the  pendency of such  distribution  and only upon  presentation  and
surrender of this  Certificate at the office or agency  appointed by the Trustee
for that purpose as provided in the Agreement.

     The Class A-1A  Pass-Through  Rate on each Distribution Date will be a rate
per annum  equal to the sum of one month  LIBOR plus the Class A-1A  Certificate
Margin. Interest will accrue on the Class A-1A Certificates during each Interest
Accrual Period at a rate equal to the lesser of (i) the Class A-1A  Pass-Through
Rate and (ii) the Class A-1A Net Funds Cap for such Distribution Date.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-1A Certificates.

     The Class  A-1A  Certificates  are  limited  in right of payment to certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing,  and thereupon one or more new  Certificates  of the same
Class in authorized denominations evidencing the

                                     A-1-4

<PAGE>

same aggregate  Percentage Interest will be issued to the designated  transferee
or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized  denominations evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all proposes, and none of the Depositor,  the Servicer, the
Trustee,  the  Certificate  Registrar  nor any such agent  shall be  affected by
notice to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-1-5

<PAGE>

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

Dated:  December 13, 2000

                                         THE CHASE MANHATTAN BANK, as
                                            Trustee

                                         By:
                                            ----------------------------------
                                             Authorized Officer

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

     This  is  one  of  the  Class  A-1A   Certificates   referred   to  in  the
within-mentioned Agreement.

                                          THE CHASE MANHATTAN BANK, as
                                             Certificate Registrar

                                          By:
                                             ---------------------------------
                                              Authorized Signatory

Date of authentication:  December 13, 2000

                                     A-1-6

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be  construed  as though they were  written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common               UNIF GIFT MIN ACT - Custodian
                                                                 ---------
TEN ENT - as tenants by the entireties                           (Cust) (Minor)
                                                                 under Uniform
                                                                 Gifts to Minors
                                                                 Act

                                                                  ------------
                                                                     (State)
JT TEN - as joint tenants with right
         of survivorship and not as
         tenants in common

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assigns) and transfers)
unto ___________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
a  Percentage  Interest  equal to _____ % evidenced  by the within  asset-backed
Certificate  and  hereby  authorize(s)  the  registration  of  transfer  of such
interest to assignee on the Certificate Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

--------------------------------------------------------------------------------
Dated:

                                 ------------------------------------------
                                 Signature by or on behalf of assignor

                                 ------------------------------------------
                                 Signature Guaranteed

                                     A-1-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
available funds to  ____________________________________________________________
________________________________________________________________________________
for the account of ____________________________,  account number ______________,
or, if mailed by check,  to  __________________________________________________,
Applicable statements should be mailed to  _____________________________________
This  information is provided by  _____________________________________________,
the assignee named above, or _______________________________, as its agent.

                                     A-1-8

<PAGE>

                                   EXHIBIT A-2

                        [FORM OF CLASS A-1F CERTIFICATE]

              C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES SERIES
                              2000-CB4, CLASS A-1F

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

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

Series 2000-CB4, Class A-1F               Original Class Certificate Principal
                                          Balance of the Class A-1F Certificates
                                          as of the Closing Date: $34,480,000
Pass-Through Rate:  7.055%

Date of Pooling and Servicing Agreement:  Denomination: $34,480,000
November 1, 2000
Cut-off Date: November 1, 2000

                                          Servicer:  Litton Loan Servicing LP

First Distribution Date: December 26,
2000
                                          Trustee:  The Chase Manhattan Bank
No.
                                          Closing Date:  December 13, 2000
CUSIP:  12489WCP7

                                     A-2-1

<PAGE>

DISTRIBUTIONS  IN  REDUCTION  OF  THE  CERTIFICATE  PRINCIPAL  BALANCE  OF  THIS
CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.  ACCORDINGLY,   THE
OUTSTANDING  CERTIFICATE  PRINCIPAL  BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ABOVE.

                                     A-2-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
RESIDENTIAL ASSET FUNDING CORPORATION,  THE SERVICER, THE TRUSTEE,  CREDIT-BASED
ASSET  SERVICING  AND  SECURITIZATION  LLC  OR  ANY OF  THEIR  AFFILIATES.  THIS
CERTIFICATE  IS NOT  GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY  OF THE UNITED
STATES.

     This certifies that _______________ is the registered owner of a Percentage
Interest  (obtained  by dividing the  denomination  of this  Certificate  by the
Original Class Certificate  Principal Balance of the Class A-1F Certificates) in
that  certain  beneficial  ownership  interest  evidenced  by all the Class A-1F
Certificates  in the Trust Fund  created  pursuant  to a Pooling  and  Servicing
Agreement,  dated as specified above (the "Agreement"),  among Residential Asset
Funding Corporation (hereinafter called the "Depositor," which term includes any
successor  entity  under  the  Agreement),  the  Servicer,   Credit-Based  Asset
Servicing and  Securitization  LLC and the Trustee,  a summary of certain of the
pertinent provisions of which is set forth hereafter.  To the extent not defined
herein,  the  capitalized  terms used herein have the  meanings  assigned in the
Agreement.  This  Certificate  is issued  under  and is  subject  to the  terms,
provisions  and conditions of the  Agreement,  to which  Agreement the Holder of
this  Certificate by virtue of the  acceptance  hereof assents and by which such
Holder is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the Business Day immediately  preceding such  Distribution Date
(the "Record Date"),  from funds in the Distribution  Account in an amount equal
to the product of the Percentage  Interest evidenced by this Certificate and the
amount  required to be distributed to the Holders of Class A-1F  Certificates on
such Distribution Date pursuant to the Agreement; provided, however, that if any
Class A-1F Certificate becomes a Definitive Certificate (as defined herein), the
Record  Date for such  Certificate  will be the last  Business  Day of the month
immediately preceding the month in which the related Distribution Date occurs.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date and is the registered owner of Class A-1F  Certificates,  the
aggregate initial Certificate Principal Balance of which is in

                                     A-2-3

<PAGE>

excess of  $5,000,000,  or by check mailed by first class mail to the address of
the  Person  entitled  thereto,  as such name and  address  shall  appear on the
Certificate  Register;  provided  that the Trustee may deduct a reasonable  wire
transfer fee from any payment made by wire transfer.  Notwithstanding the above,
the final  distribution on this Certificate will be made after due notice by the
Trustee of the  pendency of such  distribution  and only upon  presentation  and
surrender of this  Certificate at the office or agency  appointed by the Trustee
for that purpose as provided in the Agreement.

     The Class A-1F  Pass-Through  Rate on each Distribution Date will be a rate
per annum  equal to the sum of one month  LIBOR plus the Class A-1F  Certificate
Margin. Interest will accrue on the Class A-1F Certificates during each Interest
Accrual Period at a rate equal to the lesser of (i) the Class A-1F  Pass-Through
Rate and (ii) the Class A-1F Net Funds Cap for such Distribution Date.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-1F Certificates.

     The Class  A-1F  Certificates  are  limited  in right of payment to certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing,  and thereupon one or more new  Certificates  of the same
Class in authorized denominations evidencing the

                                     A-2-4

<PAGE>

same aggregate  Percentage Interest will be issued to the designated  transferee
or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized  denominations evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all purposes, and none of the Depositor,  the Servicer, the
Trustee,  the  Certificate  Registrar  nor any such agent  shall be  affected by
notice to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-2-5

<PAGE>

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

Dated:  December 13, 2000

                                     THE CHASE MANHATTAN BANK, as
                                        Trustee

                                     By:_______________________________________
                                        Authorized Officer

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

     This  is  one  of  the  Class  A-1F   Certificates   referred   to  in  the
within-mentioned Agreement.

                                         THE CHASE MANHATTAN BANK, as
                                           Certificate Registrar

                                         By:___________________________________
                                            Authorized Signatory

Date of authentication:  December 13, 2000

                                     A-2-6

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be  construed  as though they were  written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------
TEN ENT - as tenants by the entireties                      (Cust)(Minor)
                                                            under Uniform
                                                            Gifts to Minors
                                                            Act

                                                             ---------
                                                              (State)

JT TEN  - as joint tenants with right
          of survivorship and not as
          tenants in common

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR  VALUE  RECEIVED,   the  undersigned  hereby  sell(s),   assign(s)  and
transfers) unto  _______________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification   Number   of   assignee)   _________________________________   a
Percentage  Interest  equal  to _____ %  evidenced  by the  within  asset-backed
Certificate  and  hereby  authorize(s)  the  registration  of  transfer  of such
interest to assignee on the Certificate Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

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

Dated:

                                     ------------------------------------------
                                     Signature by or on behalf of assignor

                                     ------------------------------------------
                                     Signature Guaranteed

                                     A-2-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
available  funds  to  __________________________________________________________
________________________________________________________________________________
for the account of ____________________________,  account number ______________,
or, if mailed by check,  to  __________________________________________________,
Applicable statements should be mailed to  _____________________________________
This  information is provided by  _____________________________________________,
the assignee named above, or _______________________________, as its agent.

                                     A-2-8

<PAGE>

                                   EXHIBIT A-3

                        [FORM OF CLASS A-2F CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                           SERIES 2000-CB4, CLASS A-2F

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

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

<TABLE>
<S>                                             <C>
Series 2000-CB4, Class A-2F                      Original Class Certificate Principal
                                                 Balance   of  the  Class
                                                 A-2F  Certificates as of
                                                 the Closing Date: $18,820,000
Pass-Through Rate:  7.170%

Date of Pooling and Servicing Agreement:         Denomination:  $18,820,000
November 1, 2000
Cut-off Date:  November 1, 2000
                                                 Servicer:  Litton Loan Servicing LP
First Distribution Date:  December 26,
2000
                                                 Trustee:  The Chase Manhattan Bank
No.
                                                 Closing Date:  December 13, 2000
</TABLE>

CUSIP:  12489WCQ5

                                     A-3-1

<PAGE>

DISTRIBUTIONS  IN  REDUCTION  OF  THE  CERTIFICATE  PRINCIPAL  BALANCE  OF  THIS
CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.  ACCORDINGLY,   THE
OUTSTANDING  CERTIFICATE  PRINCIPAL  BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ABOVE.

                                     A-3-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
RESIDENTIAL ASSET FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR
AFFILIATES.  THIS CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY
OF THE UNITED STATES.

     This  certifies  that   ________________  is  the  registered  owner  of  a
Percentage  Interest  (obtained by dividing the denomination of this Certificate
by  the  Original  Class  Certificate   Principal  Balance  of  the  Class  A-2F
Certificates) in that certain beneficial ownership interest evidenced by all the
Class A-2F  Certificates  in the Trust Fund  created  pursuant  to a Pooling and
Servicing  Agreement,   dated  as  specified  above  (the  "Agreement"),   among
Residential Asset Funding Corporation (hereinafter called the "Depositor," which
term includes any successor  entity under the  Agreement),  the Servicer and the
Trustee, a summary of certain of the pertinent  provisions of which is set forth
hereafter.  To the extent not defined herein,  the capitalized teams used herein
have the meanings  assigned in the Agreement.  This  Certificate is issued under
and is subject to the terms,  provisions  and  conditions of the  Agreement,  to
which  Agreement  the  Holder of this  Certificate  by virtue of the  acceptance
hereof assents and by which such Holder is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the last  Business Day of the month  immediately  preceding the
month in which the related  Distribution Date occurs or the Closing Date, in the
case of the first  Distribution  Date (the  "Record  Date"),  from  funds in the
Distribution  Account  in an  amount  equal  to the  product  of the  Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class A-2F  Certificates on such Distribution Date pursuant to
the Agreement.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date and is the registered owner of Class A-2F  Certificates,  the
aggregate  initial  Certificate  Principal  Balance  of  which is in  excess  of
$5,000,000,  or by check mailed by first class mail to the address of the Person
entitled  thereto,  as such name and  address  shall  appear on the  Certificate
Register;

                                     A-3-3

<PAGE>

provided  that the Trustee may deduct a  reasonable  wire  transfer fee from any
payment made by wire transfer. Notwithstanding the above, the final distribution
on this Certificate will be made after due notice by the Trustee of the pendency
of  such   distribution  and  only  upon  presentation  and  surrender  of  this
Certificate at the office or agency appointed by the Trustee for that purpose as
provided in the Agreement.

     The Class A-2F  Pass-Through Rate on each Distribution Date will be the per
annum  rate  specified  above,  plus on each  Distribution  Date  following  the
Optional  Termination  Date, 0.50% per annum.  Interest will accrue on the Class
A-2F  Certificates  during each Interest  Accrual  Period at a rate equal to the
lesser of (i) the Class A-2F  Pass-Through  Rate and (ii) the  applicable  Class
A-2F Net Funds Cap for such Distribution Date.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class A-2F Certificates.

     The Class  A-2F  Certificates  are  limited  in right of payment to certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing,  and thereupon one or more new  Certificates  of the same
Class in  authorized  denominations  evidencing  the same  aggregate  Percentage
Interest will be issued to the designated transferee or transferees.

                                     A-3-4

<PAGE>

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized  denominations evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all purposes, and none of the Depositor,  the Servicer, the
Trustee,  the  Certificate  Registrar  nor any such agent  shall be  affected by
notice to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-3-5

<PAGE>

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

Dated:  December 13, 2000

                                       THE CHASE MANHATTAN BANK, as
                                         Trustee

                                       By:____________________________________
                                          Authorized Officer

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

     This  is  one  of  the  Class  A-2F   Certificates   referred   to  in  the
within-mentioned Agreement.

                                     THE CHASE MANHATTAN BANK, as
                                       Certificate Registrar

                                     By:______________________________________
                                        Authorized Signatory

Date of authentication:  December 13, 2000

                                     A-3-6

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be  construed  as though they were  written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT  - Custodian
                                                              ---------
                                                            (Cust) (Minor)
TEN ENT - as tenants by the entireties                      under Uniform
                                                            Gifts to Minors
                                                            Act
JT TEN  - as joint tenants with right                       ______________
          of survivorship and not as                             (State)
          tenants in common

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR  VALUE  RECEIVED,   the  undersigned  hereby  sell(s),   assign(s)  and
transfers) unto ________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of  assignee)_____________________________________________
a  Percentage  Interest  equal to _____ % evidenced  by the within  asset-backed
Certificate  and  hereby  authorize(s)  the  registration  of  transfer  of such
interest to assignee on the Certificate Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

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

Dated:

                                      ------------------------------------------
                                      Signature by or on behalf of assignor

                                      ------------------------------------------
                                      Signature Guaranteed

                                     A-3-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
________________________________________________________________________________
________________________________________________________________________________
available  funds to for the  account  of  ____________________________,  account
number      ______________,      or,     if     mailed     by     check,      to
__________________________________________________, Applicable statements should
be mailed to _____________________________________  This information is provided
by  _____________________________________________,  the assignee named above, or
_______________________________, as its agent.

                                     A-3-8

<PAGE>

                                    EXHIBIT B

                         [FORM OF CLASS B-1 CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                           SERIES 2000-CB4, CLASS B-1

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS WRONGFUL  INASTMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS  CERTIFICATE IS  SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A, CLASS M-1
AND CLASS M-2  CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING  AGREEMENT
REFERRED TO HEREIN.

THIS  CERTIFICATE  MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT HAS
NOT DELIVERED A REPRESENTATION  LETTER STATING EITHER (A) THAT THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT  ARRANGEMENT SUBJECT TO TITLE I
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 497 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),  OR A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL,
STATE OR LOCAL LAW WHICH IS, TO A  MATERIAL  EXTENT,  SIMILAR  TO THE  FOREGOING
PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,  A "PLAN"),  AND IS NOT ACTING ON
BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS
SET FORTH IN THE POOLING AND SERVICING AGREEMENT,  THAT THE SOURCE OF FUNDS USED
TO PURCHASE THIS  CERTIFICATE IS AN "INSURANCE  COMPANY  GENERAL  ACCOUNT." EACH
PERSON WHO ACQUIRES THIS  CERTIFICATE OR ANY INTEREST THEREIN SHALL BE DEEMED TO
HAVE MADE THE REPRESENTATIONS  REQUIRED BY THE REPRESENTATION LETTER REFERRED TO
IN THE PRECEDING SENTENCE, UNLESS SUCH PERSON SHALL HAVE

                                     B-1-1

<PAGE>

PROVIDED SUCH REPRESENTATION LETTER REFERRED TO IN THE PRECEDING SENTENCE TO THE
TRUSTEE.  THE POOLING AND  SERVICING  AGREEMENT  PROVIDES  THAT ANY ATTEMPTED OR
PURPORTED TRANSFER IN VIOLATION OF THESE TRANSFER  RESTRICTIONS WILL BE NULL AND
VOID AND WILL VEST NO RIGHTS IN ANY PURPORTED TRANSFEREE.

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

<TABLE>
<S>                                      <C>
Series 2000-CB4, Class B-1                Original Class Certificate Principal Balance
                                          of the Class B-1 Certificates  as of  the
                                          Closing Date:  $4,942,000

Pass-Through Rate:  8.705%

Date of Pooling and Servicing Agreement:  Denomination:  $4,942,000
November 1, 2000

Cut-off Date:  November 1, 2000           Servicer:  Litton Loan Servicing LP
First Distribution Date: December 26,
2000                                      Trustee:  The Chase Manhattan Bank

No.
                                          Closing Date:  December 13, 2000
CUSIP:  12489WCU6
</TABLE>

DISTRIBUTIONS  IN  REDUCTION  OF  THE  CERTIFICATE  PRINCIPAL  BALANCE  OF  THIS
CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.  ACCORDINGLY,   THE
OUTSTANDING  CERTIFICATE  PRINCIPAL  BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ABOVE.

                                     B-1-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
RESIDENTIAL ASSET FUNDING CORPORATION,  THE SERVICER, THE TRUSTEE,  CREDIT-BASED
ASSET  SERVICING  AND  SECURITIZATION  LLC  OR  ANY OF  THEIR  AFFILIATES.  THIS
CERTIFICATE  IS NOT  GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY  OF THE UNITED
STATES.

     This certifies that  ______________ is the registered owner of a Percentage
Interest  (obtained  by dividing the  denomination  of this  Certificate  by the
Original Class  Certificate  Principal Balance of the Class B-1 Certificates) in
that  certain  beneficial  ownership  interest  evidenced  by all the  Class B-1
Certificates  in the Trust Fund  created  pursuant  to a Pooling  and  Servicing
Agreement,  dated as specified above (the "Agreement"),  among Residential Asset
Funding Corporation (hereinafter called the "Depositor," which term includes any
successor  entity  under  the  Agreement),  the  Servicer,   Credit-Based  Asset
Servicing and  Securitization  LLC and the Trustee,  a summary of certain of the
pertinent provisions of which is set forth hereafter.  To the extent not defined
herein,  the  capitalized  terms used herein have the  meanings  assigned in the
Agreement.  This  Certificate  is issued  under  and is  subject  to the  terms,
provisions  and conditions of the  Agreement,  to which  Agreement the Holder of
this  Certificate by virtue of the  acceptance  hereof assents and by which such
Holder is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the last  Business Day of the month  immediately  preceding the
month in which the related  Distribution Date occurs or the Closing Date, in the
case of the first  Distribution  Date (the  "Record  Date"),  from  funds in the
Distribution  Account  in an  amount  equal  to the  product  of the  Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class B-1 Certificates on such  Distribution  Date pursuant to
the Agreement.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date and is the registered  owner of Class B-1  Certificates,  the
aggregate  initial  Certificate  Principal  Balance  of  which is in  excess  of
$5,000,000, or by check mailed by first class mail to the address of the Person

                                     B-1-3

<PAGE>

entitled  thereto,  as such name and  address  shall  appear on the  Certificate
Register;  provided  that the Trustee may deduct a reasonable  wire transfer fee
from any payment made by wire  transfer.  Notwithstanding  the above,  the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such  distribution  and only upon  presentation and surrender of
this  Certificate  at the office or agency  appointed  by the  Trustee  for that
purpose as provided in the Agreement.

     The Class B-1  Pass-Through  Rate on the  Class  B-1  Certificates  on each
Distribution  Date will be the per annum rate  specified  above.  Interest  will
accrue on the Class B-1  Certificates  during each Interest  Accrual Period at a
rate  equal to the  lesser of (i) the Class B-1  Pass-Through  Rate and (ii) the
Pool Cap for such Distribution Date.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class B-1 Certificates.

     The Class B-1  Certificates  are  limited  in right of  payment  to certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     This  certificate is subordinated in right of payment to the Class A, Class
M-1 and Class  M-2  Certificates  as  described  in the  Pooling  and  Servicing
Agreement referred to herein.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing, and thereupon one or

                                     B-1-4

<PAGE>

more new Certificates of the same Class in authorized  denominations  evidencing
the  same  aggregate  Percentage  Interest  will  be  issued  to the  designated
transferee or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized  denominations evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all purposes, and none of the Depositor,  the Servicer, the
Trustee,  the  Certificate  Registrar  nor any such agent  shall be  affected by
notice to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     B-1-5

<PAGE>

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

Dated:  December 13, 2000

                                        THE CHASE MANHATTAN BANK, as
                                          Trustee

                                        By:
                                           -----------------------------------
                                           Authorized Officer

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

     This  is  one  of  the  Class   B-1   Certificates   referred   to  in  the
within-mentioned Agreement.

                                         THE CHASE MANHATTAN BANK, as
                                           Certificate Registrar

                                         By:
                                            ----------------------------------
                                            Authorized Signatory

Date of authentication:  December 13, 2000

                                     B-1-6

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be  construed  as though they were  written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common              UNIF GIFT MIN ACT - Custodian
                                                                ---------
                                                               (Cust)(Minor)
TEN ENT - as tenants by the entireties                          under Uniform
                                                                Gifts to Minors
                                                                Act
JT TEN  - as joint tenants with right                           _________
          of survivorship and not as                             (State)
          tenants in common

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR  VALUE  RECEIVED,   the  undersigned  hereby  sell(s),   assign(s)  and
transfers) unto ________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification  Number  of  assignee)  a  Percentage  Interest  equal to _____ %
evidenced by the within  asset-backed  Certificate and hereby  authorize(s)  the
registration  of  transfer  of such  interest  to  assignee  on the  Certificate
Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

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

Dated:

                                     -------------------------------------------
                                     Signature by or on behalf of assignor

                                     -------------------------------------------
                                     Signature Guaranteed

                                     B-1-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
available  funds to for the  account  of  ____________________________,  account
number      ______________,      or,     if     mailed     by     check,      to
__________________________________________________, Applicable statements should
be mailed to _____________________________________  This information is provided
by  _____________________________________________,  the assignee named above, or
_______________________________, as its agent.

                                     B-1-8

<PAGE>

                         [FORM OF CLASS B-2 CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                           SERIES 2000-CB4, CLASS B-2

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS WRONGFUL  INASTMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS  CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A, CLASS M-1,
CLASS M-2 AND CLASS B-1  CERTIFICATES  AS DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.

THIS  CERTIFICATE  MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT HAS
NOT DELIVERED A REPRESENTATION  LETTER STATING EITHER (A) THAT THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT  ARRANGEMENT SUBJECT TO TITLE I
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 497 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),  OR A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL,
STATE OR LOCAL LAW WHICH IS, TO A  MATERIAL  EXTENT,  SIMILAR  TO THE  FOREGOING
PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,  A "PLAN"),  AND IS NOT ACTING ON
BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS
SET FORTH IN THE POOLING AND SERVICING AGREEMENT,  THAT THE SOURCE OF FUNDS USED
TO PURCHASE THIS  CERTIFICATE IS AN "INSURANCE  COMPANY  GENERAL  ACCOUNT." EACH
PERSON WHO ACQUIRES THIS  CERTIFICATE OR ANY INTEREST THEREIN SHALL BE DEEMED TO
HAVE MADE THE REPRESENTATIONS  REQUIRED BY THE REPRESENTATION LETTER REFERRED TO
IN  THE  PRECEDING  SENTENCE,  UNLESS  SUCH  PERSON  SHALL  HAVE  PROVIDED  SUCH
REPRESENTATION  LETTER REFERRED TO IN THE PRECEDING SENTENCE TO THE TRUSTEE. THE
POOLING

                                     B-2-1

<PAGE>

AND SERVICING  AGREEMENT  PROVIDES  THAT ANY ATTEMPTED OR PURPORTED  TRANSFER IN
VIOLATION OF THESE TRANSFER  RESTRICTIONS WILL BE NULL AND VOID AND WILL VEST NO
RIGHTS IN ANY PURPORTED TRANSFEREE.

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

<TABLE>
<S>                                          <C>
Series 2000-CB4, Class B-2                    Original Class Certificate Principal Balance
                                              of the Class B-2 Certificates  as of  the
                                              Closing Date: $2,471,000

Pass-Through Rate:  8.900%

Date of Pooling and Servicing Agreement:      Denomination:  $2,471,000
November 1, 2000

Cut-off Date:  November 1, 2000               Servicer:  Litton Loan Servicing LP

First Distribution Date:  December 26,
2000
                                              Trustee:  The Chase Manhattan Bank
No.
                                              Closing Date:  December 13, 2000
</TABLE>

CUSIP:  12489WCV4

DISTRIBUTIONS  IN  REDUCTION  OF  THE  CERTIFICATE  PRINCIPAL  BALANCE  OF  THIS
CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.  ACCORDINGLY,   THE
OUTSTANDING  CERTIFICATE  PRINCIPAL  BALANCE HEREOF AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ABOVE.

                                     B-2-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
RESIDENTIAL ASSET FUNDING CORPORATION,  THE SERVICER, THE TRUSTEE,  CREDIT-BASED
ASSET  SERVICING  AND  SECURITIZATION  LLC  OR  ANY OF  THEIR  AFFILIATES.  THIS
CERTIFICATE  IS NOT  GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY  OF THE UNITED
STATES.

     This certifies that  ______________ is the registered owner of a Percentage
Interest  (obtained  by dividing the  denomination  of this  Certificate  by the
Original Class  Certificate  Principal Balance of the Class B-2 Certificates) in
that  certain  beneficial  ownership  interest  evidenced  by all the  Class B-2
Certificates  in the Trust Fund  created  pursuant  to a Pooling  and  Servicing
Agreement,  dated as specified above (the "Agreement"),  among Residential Asset
Funding Corporation (hereinafter called the "Depositor," which term includes any
successor  entity  under  the  Agreement),  the  Servicer,   Credit-Based  Asset
Servicing and  Securitization  LLC and the Trustee,  a summary of certain of the
pertinent provisions of which is set forth hereafter.  To the extent not defined
herein,  the  capitalized  terms used herein have the  meanings  assigned in the
Agreement.  This  Certificate  is issued  under  and is  subject  to the  terms,
provisions  and conditions of the  Agreement,  to which  Agreement the Holder of
this  Certificate by virtue of the  acceptance  hereof assents and by which such
Holder is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the last  Business Day of the month  immediately  preceding the
month in which the related  Distribution Date occurs or the Closing Date, in the
case of the first  Distribution  Date (the  "Record  Date"),  from  funds in the
Distribution  Account  in an  amount  equal  to the  product  of the  Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class B-2 Certificates on such  Distribution  Date pursuant to
the Agreement.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date and is the registered  owner of Class B-2  Certificates,  the
aggregate  initial  Certificate  Principal  Balance  of  which is in  excess  of
$5,000,000,  or by check mailed by first class mail to the address of the Person

                                     B-2-3

<PAGE>

entitled  thereto,  as such name and  address  shall  appear on the  Certificate
Register;  provided  that the Trustee may deduct a reasonable  wire transfer fee
from any payment made by wire  transfer.  Notwithstanding  the above,  the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such  distribution  and only upon  presentation and surrender of
this  Certificate  at the office or agency  appointed  by the  Trustee  for that
purpose as provided in the Agreement.

     The Class B-2  Pass-Through  Rate on the  Class  B-2  Certificates  on each
Distribution  Date will be the per annum rate  specified  above.  Interest  will
accrue on the Class B-2  Certificates  during each Interest  Accrual Period at a
rate  equal to the  lesser of (i) the Class B-2  Pass-Through  Rate and (ii) the
Pool Cap for such Distribution Date.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class B-2 Certificates.

     The Class B-2  Certificates  are  limited  in right of  payment  to certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     This  certificate is subordinated in right of payment to the Class A, Class
M-1,  Class M-2 and Class B-1  Certificates  as  described  in the  Pooling  and
Servicing Agreement referred to herein.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing, and thereupon one or

                                     B-2-4

<PAGE>

more new Certificates of the same Class in authorized  denominations  evidencing
the  same  aggregate  Percentage  Interest  will  be  issued  to the  designated
transferee or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized  denominations evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all purposes, and none of the Depositor,  the Servicer, the
Trustee,  the  Certificate  Registrar  nor any such agent  shall be  affected by
notice to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     B-2-5

<PAGE>

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

Dated:  December 13, 2000

                                     THE CHASE MANHATTAN BANK, as
                                        Trustee

                                     By:
                                        ----------------------------------
                                         Authorized Officer

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

     This  is  one  of  the  Class   B-2   Certificates   referred   to  in  the
within-mentioned Agreement.

                                     THE CHASE MANHATTAN BANK, as
                                        Certificate Registrar

                                     By:
                                        ----------------------------------
                                         Authorized Signatory

Date of authentication:  December 13, 2000

                                     B-2-6

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be  construed  as though they were  written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common              UNIF GIFT MIN ACT  - Custodian
                                                                 ---------
                                                                 (Cust)(Minor)
TEN ENT - as tenants by the entireties                           under Uniform
                                                                 Gifts to Minors
                                                                 Act
JT TEN  - as joint tenants with right                            _____________
          of survivorship and not as                               (State)
          tenants in common

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR  VALUE  RECEIVED,   the  undersigned  hereby  sell(s),   assign(s)  and
transfers) unto ________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)______________________________________________
a  Percentage  Interest  equal to _____ % evidenced  by the within  asset-backed
Certificate  and  hereby  authorize(s)  the  registration  of  transfer  of such
interest to assignee on the Certificate Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

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

Dated:

                                  ------------------------------------------
                                  Signature by or on behalf of assignor

                                  ------------------------------------------
                                  Signature Guaranteed

                                     B-2-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
available  funds  to  ___________________________________  for  the  account  of
____________________________,  account number  ______________,  or, if mailed by
check,   to    __________________________________________________,    Applicable
statements  should  be  mailed  to  _____________________________________   This
information  is provided by  _____________________________________________,  the
assignee named above, or _______________________________, as its agent.

                                     B-2-8

<PAGE>

                                   EXHIBIT C-1

                          [FORM OF CLASS R CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                            SERIES 2000-CB4, CLASS R

THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.

FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE REPRESENTS THE "RESIDUAL
INTEREST" IN FOUR SEPARATE "REAL ESTATE MORTGAGE INVESTMENT  CONDUITS," AS THOSE
TERMS ARE  DEFINED,  RESPECTIVELY,  IN  SECTIONS  860G AND 860D OF THE  INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

THIS CLASS R CERTIFICATE  IS  SUBORDINATE  TO THE OFFERED  CERTIFICATES  OF THIS
SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.

THIS CLASS R  CERTIFICATE  WILL NOT BE ENTITLED  TO PAYMENTS  UNTIL SUCH TIME AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

THIS  CLASS R  CERTIFICATE  HAS NOT  BEEN  REGISTERED  OR  QUALIFIED  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),  OR THE SECURITIES  LAWS OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH  REGISTRATION OR QUALIFICATION  MAY BE MADE ONLY IN A TRANSACTION THAT DOES
NOT REQUIRE  SUCH  REGISTRATION  OR  QUALIFICATION  AND IN  ACCORDANCE  WITH THE
PROVISIONS  OF SECTION 5.02 OF THE POOLING AND SERVICING  AGREEMENT  REFERRED TO
HEREIN.

NO TRANSFER OF THIS  CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR THE CODE WILL BE REGISTERED.

ANY RESALE,  TRANSFER OR OTHER  DISPOSITION  OF THIS CLASS R CERTIFICATE  MAY BE
MADE  ONLY  IF  THE  PROPOSED  TRANSFEREE  PROVIDES  (1)  AN  AFFIDAVIT  TO  THE
CERTIFICATE REGISTRAR AND THE TRUSTEE THAT SUCH TRANSFEREE IS NOT (A) THE UNITED
STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT,  ANY
INTERNATIONAL

                                     C-1-1

<PAGE>

ORGANIZATION,  OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY
ORGANIZATION  (OTHER THAN A  COOPERATIVE  DESCRIBED  IN SECTION 521 OF THE CODE)
WHICH IS  EXEMPT  FROM THE TAX  IMPOSED  BY  CHAPTER 1 OF THE CODE  UNLESS  SUCH
ORGANIZATION  IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE,  (C) ANY
ORGANIZATION  DESCRIBED  IN SECTION  1381(A)(2)(C)  OF THE CODE (ANY SUCH PERSON
DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C) BEING HEREINAFTER REFERRED TO
AS  A  "DISQUALIFIED   ORGANIZATION"),   OR  (D)  AN  AGENT  OF  A  DISQUALIFIED
ORGANIZATION  AND (2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR
COLLECTION  OF TAX,  AND  (3)  SUCH  TRANSFEREE  SATISFIES  CERTAIN  ADDI-TIONAL
CONDITIONS  RELATING  TO THE  FINANCIAL  CONDITION  OF THE  PROPOSED  TRANSFEREE
NOTWITHSTANDING  THE  REGISTRATION IN THE CERTIFICATE  REGISTER OR ANY TRANSFER,
SALE  OR  OTHER  DISPOSITION  OF  THIS  CLASS R  CERTIFICATE  TO A  DISQUALIFIED
ORGANIZATION OR AN AGENT OF A DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL
BE DEEMED TO BE OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT
BE DEEMED TO BE A CERTIFICATEHOLDER  FOR ANY PURPOSE HEREUNDER,  INCLUDING,  BUT
NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF
A CLASS R CERTIFICATE BY ACCEPTANCE OF THIS CERTIFICATE  SHALL BE DEEMED TO HAVE
CONSENTED TO THE  PROVISIONS  OF THIS  PARAGRAPH  AND THE  PROVISIONS OF SECTION
5.02(D) OF THE POOLING AND SERVICING  AGREEMENT  REFERRED TO HEREIN.  ANY PERSON
THAT IS A DISQUALIFIED  ORGANIZATION  IS PROHIBITED  FROM  ACQUIRING  BENEFICIAL
OWNERSHIP OF THIS CLASS R CERTIFICATE.

Series 2000-CB4, Class R                   Servicer:  Litton Loan Servicing LP
Date of Pooling and Servicing Agreement:   Trustee:  The Chase Manhattan Bank
November 1, 2000
Cut-off Date:  November 1, 2000

First Distribution Date:  December 26,     Closing Date:  December 13, 2000
2000

No.

Percentage Interest:  100%

                                     C-1-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
     RESIDENTIAL  ASSET  FUNDING   CORPORATION,   THE  SERVICER,   THE  TRUSTEE,
     CREDIT-BASED  ASSET  SERVICING  AND  SECURITIZATION  LLC OR  ANY  OF  THEIR
     AFFILIATES.   THIS   CERTIFICATE   IS  NOT  GUARANTEED  BY  ANY  AGENCY  OR
     INSTRUMENTALITY OF THE UNITED STATES.

     This  certifies  that  __________________  is  the  registered  owner  of a
Percentage  Interest  set  forth  above  in that  certain  beneficial  ownership
interest  evidenced  by all the Class R  Certificates  in the Trust Fund created
pursuant to a Pooling and  Servicing  Agreement,  dated as specified  above (the
"Agreement"),  among Residential Asset Funding  Corporation  (hereinafter called
the "Depositor,"  which term includes any successor entity under the Agreement),
the  Servicer,  Credit-Based  Asset  Servicing  and  Securitization  LLC and the
Trustee, a summary of certain of the pertinent  provisions of which is set forth
hereafter.  To the extent not defined herein,  the capitalized terms used herein
have the meanings  assigned in the Agreement.  This  Certificate is issued under
and is subject to the terms,  provisions  and  conditions of the  Agreement,  to
which  Agreement  the  Holder of this  Certificate  by virtue of the  acceptance
hereof assents and by which such Holder is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the last  Business Day of the month  immediately  preceding the
month in which the related  Distribution Date occurs or the Closing Date, in the
case of the first  Distribution  Date (the  "Record  Date"),  from  funds in the
Distribution  Account  in an  amount  equal  to the  product  of the  Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class R Certificates on such Distribution Date pursuant to the
Agreement.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date  and is the  registered  owner of  Class R  Certificates  the
aggregate Percentage Interest of which is in excess of a 66% Percentage Interest
of the  Class R  Certificates,  or by check  mailed by first  class  mail to the
address of the Person entitled thereto, as such name and address shall appear on
the

                                     C-1-3

<PAGE>

Certificate  Register;  provided  that the Trustee may deduct a reasonable  wire
transfer fee from any payment made by wire transfer.  Notwithstanding the above,
the final  distribution on this Certificate will be made after due notice by the
Trustee of the  pendency of such  distribution  and only upon  presentation  and
surrender of this  Certificate at the office or agency  appointed by the Trustee
for that purpose as provided in the Agreement.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest specified on the face hereof.

     The  Class R  Certificates  are  limited  in right of  payment  to  certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing,  and thereupon one or more new  Certificates  of the same
Class in  authorized  denominations  evidencing  the same  aggregate  Percentage
Interest will be issued to the designated transferee or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized

                                     C-1-4

<PAGE>

denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same.

     No transfer of this Certificate  shall be made unless that transfer is made
pursuant to an effective registration statement under the 1933 Act and effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such  registration or  qualification.  In
the event that a transfer is to be made without  registration or  qualification,
the Trustee and the  Certificate  Registrar  shall  require,  in order to assure
compliance  with such laws,  either (i) that the  Certificateholder  desiring to
effect the transfer and such  Certificateholder's  prospective  transferee  each
execute  a  representation  letter  in  the  form  described  by  the  Agreement
certifying to the Trustee and the  Certificate  Registrar the facts  surrounding
the  transfer,  or (ii) that the Trustee  and the  Certificate  Registrar  shall
require an Opinion of Counsel  satisfactory  to them that such  transfer  may be
made without such registration or qualification,  which Opinion of Counsel shall
not be an expense of the Depositor, the Trustee or the Certificate Registrar, in
their  respective  capacities as such.  None of the Depositor,  the  Certificate
Registrar  nor the  Trustee is  obligated  to  register  or qualify the Class of
Certificates  specified  on the face  hereof  under  the  1933 Act or any  other
securities law or to take any action not otherwise  required under the Agreement
to  permit  the  transfer  of  such   Certificates   without   registration   or
qualification.  Any such  Certificateholder  desiring  to effect  such  transfer
shall,  and does hereby agree to,  indemnify  the Trustee,  the  Depositor,  the
Certificate  Registrar and any Servicer against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.

     No  transfer  of a  Certificate  or any  interest  therein  may be  made to
employee  benefit plans and certain  other  retirement  plans and  arrangements,
including  individual  retirement  accounts  and  annuities,   Keogh  plans  and
collective  investment funds and separate accounts in which such plans, accounts
or  arrangements  are invested that are subject to the fiduciary  responsibility
provisions of ERISA and Section 4975 of the Code  ("Plans") or any person who is
directly or indirectly  purchasing the Certificate or interest therein on behalf
of, as named  fiduciary of, as trustee of, or with assets of a Plan. The Trustee
shall require the  prospective  transferee of any Certificate to certify that it
is neither (i) a Plan nor (ii) a Person who is directly or indirectly purchasing
such  Certificate  on behalf of, as named  fiduciary  of, as trustee of, or with
assets of a Plan (including any insurance  company using funds in its general or
separate accounts that may constitute "plan assets").

     The Holder of this Certificate,  by its acceptance hereof,  shall be deemed
for all  purposes to have  consented  to the  provisions  of Section 5.02 of the
Agreement and to any amendment of the Agreement  deemed  necessary by counsel of
the  Depositor  to ensure that the  transfer of this  Certificate  to any Person
other than a Permitted  Transferee  or any other Person will not cause the Trust
to cease to qualify as two separate REMICs or cause the imposition of a tax upon
the Trust.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient

                                     C-1-5

<PAGE>

to cover any tax or other governmental  charge that may be imposed in connection
with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all purposes, and none of the Depositor,  the Servicer, the
Trustee,  the  Certificate  Registrar  nor any such agent  shall be  affected by
notice to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     C-1-6

<PAGE>

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

Dated:  December 13, 2000

                                        THE CHASE MANHATTAN BANK, as
                                          Trustee

                                        By:
                                           ------------------------------------
                                            Authorized Officer

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

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

                                         THE CHASE MANHATTAN BANK, as
                                           Certificate Registrar

                                         By:
                                            -----------------------------------
                                             Authorized Signatory

Date of authentication:  December 13, 2000

                                     C-1-7

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be  construed  as though they were  written out in full
according to applicable laws or regulations:

TEN COM  - as tenants in common             UNIF GIFT MIN ACT  - Custodian
                                                                 ---------
                                                                 (Cust)(Minor)
TEN ENT  - as tenants by the entireties                          under Uniform
                                                                 Gifts to Minors
                                                                 Act
JT TEN   - as joint tenants with right                           _____________
           of survivorship and not as                               (State)
           tenants in common

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR  VALUE  RECEIVED,   the  undersigned  hereby  sell(s),   assign(s)  and
transfers)  unto _______________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)  ______________________________  a Percentage
Interest equal to _____ % evidenced by the within  asset-backed  Certificate and
hereby authorize(s) the registration of transfer of such interest to assignee on
the Certificate Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

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

Dated:

                                    ------------------------------------------
                                    Signature by or on behalf of assignor

                                    ------------------------------------------
                                    Signature Guaranteed

                                     C-1-8

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
available funds to _____________________________________________________________
________________________________________________________________________________
for the account of ____________________________,  account number ______________,
or, if mailed by check,  to  __________________________________________________,
Applicable statements should be mailed to  _____________________________________
This  information is provided by  _____________________________________________,
the assignee named above, or _______________________________, as its agent.

                                     C-1-9

<PAGE>

                                   EXHIBIT C-2

                         [FORM OF CLASS M-1 CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                           SERIES 2000-CB4, CLASS M-1

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

THIS  CERTIFICATE  MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT HAS
NOT DELIVERED A REPRESENTATION  LETTER STATING EITHER (A) THAT THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT  ARRANGEMENT SUBJECT TO TITLE I
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 497 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),  OR A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL,
STATE OR LOCAL LAW WHICH IS, TO A  MATERIAL  EXTENT,  SIMILAR  TO THE  FOREGOING
PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,  A "PLAN"),  AND IS NOT ACTING ON
BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS
SET FORTH IN THE POOLING AND SERVICING AGREEMENT,  THAT THE SOURCE OF FUNDS USED
TO PURCHASE THIS  CERTIFICATE IS AN "INSURANCE  COMPANY  GENERAL  ACCOUNT." EACH
PERSON WHO ACQUIRES THIS  CERTIFICATE OR ANY INTEREST THEREIN SHALL BE DEEMED TO
HAVE MADE THE REPRESENTATIONS  REQUIRED BY THE REPRESENTATION LETTER REFERRED TO
IN

                                     C-2-1

<PAGE>

THE   PRECEDING   SENTENCE,   UNLESS  SUCH  PERSON  SHALL  HAVE   PROVIDED  SUCH
REPRESENTATION  LETTER REFERRED TO IN THE PRECEDING SENTENCE TO THE TRUSTEE. THE
POOLING  AND  SERVICING  AGREEMENT  PROVIDES  THAT ANY  ATTEMPTED  OR  PURPORTED
TRANSFER IN VIOLATION OF THESE TRANSFER  RESTRICTIONS  WILL BE NULL AND VOID AND
WILL VEST NO RIGHTS IN ANY PURPORTED TRANSFEREE.

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

<TABLE>
<S>                                        <C>
Series 2000-CB4, Class  M-1                   Original Class Certificate Principal Balance
                                              of the Class M-1 Certificates as of the
                                              Closing Date: $11,531,000

Pass-Through Rate:  7.565%

Date of Pooling and Servicing Agreement:      Denomination:  $11,531,000
November 1, 2000

                                              Servicer:  Litton Loan Servicing LP

First Distribution Date:  December 26,
2000

Cut-off Date:  November 1, 2000               Trustee: The Chase Manhattan Bank

No.
                                              Closing Date:  December 13, 2000
CUSIP:  12489WCS1

</TABLE>

         DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.  ACCORDINGLY,  THE
         OUTSTANDING  CERTIFICATE  PRINCIPAL  BALANCE  HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE.

                                     C-2-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
RESIDENTIAL ASSET FUNDING CORPORATION,  THE SERVICER, THE TRUSTEE,  CREDIT-BASED
ASSET  SERVICING  AND  SECURITIZATION  LLC  OR  ANY OF  THEIR  AFFILIATES.  THIS
CERTIFICATE  IS NOT  GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY  OF THE UNITED
STATES.

     This certifies that  _____________  is the registered owner of a Percentage
Interest  (obtained  by dividing the  denomination  of this  Certificate  by the
Original Class  Certificate  Principal Balance of the Class M-1 Certificates) in
that  certain  beneficial  ownership  interest  evidenced  by all the  Class M-1
Certificates  in the Trust Fund  created  pursuant  to a Pooling  and  Servicing
Agreement,  dated as specified above (the "Agreement"),  among Residential Asset
Funding Corporation (hereinafter called the "Depositor," which term includes any
successor  entity  under  the  Agreement),  the  Servicer,   Credit-Based  Asset
Servicing and  Securitization  LLC and the Trustee,  a summary of certain of the
pertinent provisions of which is set forth hereafter.  To the extent not defined
herein,  the  capitalized  terms used herein have the  meanings  assigned in the
Agreement.  This  Certificate  is issued  under  and is  subject  to the  terms,
provisions  and conditions of the  Agreement,  to which  Agreement the Holder of
this  Certificate by virtue of the  acceptance  hereof assents and by which such
Holder is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the last  Business Day of the month  immediately  preceding the
month in which the related  Distribution Date occurs or the Closing Date, in the
case of the first  Distribution  Date (the  "Record  Date"),  from  funds in the
Distribution  Account  in an  amount  equal  to the  product  of the  Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class M-1 Certificates on such  Distribution  Date pursuant to
the Agreement.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date and is the registered  owner of Class M-1  Certificates,  the
aggregate  initial  Certificate  Principal  Balance  of  which is in  excess  of
$5,000,000,  or by check mailed by first class mail to the address of the Person

                                     C-2-3

<PAGE>

entitled  thereto,  as such name and  address  shall  appear on the  Certificate
Register;  provided  that the Trustee may deduct a reasonable  wire transfer fee
from any payment made by wire  transfer.  Notwithstanding  the above,  the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such  distribution  and only upon  presentation and surrender of
this  Certificate  at the office or agency  appointed  by the  Trustee  for that
purpose as provided in the Agreement.

     The Class M-1  Pass-Through  Rate on the  Class  M-1  Certificates  on each
Distribution  Date will be the per annum rate  specified  above.  Interest  will
accrue on the Class M-1  Certificates  during each Interest  Accrual Period at a
rate  equal to the lesser of (i) the Class M- 1  Pass-Through  Rate and (ii) the
Pool Cap for such Distribution Date.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class M-1 Certificates.

     The Class M-1  Certificates  are  limited  in right of  payment  to certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     This  certificate  is  subordinated  in right  of  payment  to the  Class A
Certificates  as described in the Pooling and  Servicing  Agreement  referred to
herein.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing,  and thereupon one or more new  Certificates  of the same
Class in authorized denominations evidencing the

                                     C-2-4

<PAGE>

same aggregate  Percentage Interest will be issued to the designated  transferee
or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized  denominations evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all proposes, and none of the Depositor,  the Servicer, the
Trustee, the Certificate Registrar nor any such went shall be affected by notice
to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such fight will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     C-2-5

<PAGE>

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

Dated:  December 13, 2000

                                      THE CHASE MANHATTAN BANK, as
                                        Trustee

                                      By:
                                         --------------------------------------
                                          Authorized Officer

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

     This  is  one  of  the  Class   M-1   Certificates   referred   to  in  the
within-mentioned Agreement.

                                      THE CHASE MANHATTAN BANK, as
                                        Certificate Registrar

                                      By:
                                         --------------------------------------
                                          Authorized Signatory

Date of authentication:  December 13, 2000

                                     C-2-6

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be:  construed  as though they were written out in full
according to applicable laws or regulations:

TEN COM  - as tenants in common              UNIF GIFT MIN ACT - Custodian
                                                                 ---------
                                                                (Cust)(Minor)
TEN ENT  - as tenants by the entireties                         under Uniform
                                                                Gifts to Minors
                                                                Act
JT TEN   - as joint tenants with right                          _____________
           of survivorship and not as                              (State)
           tenants in common

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assigns) and transfers)
unto ___________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite  name,  address   including   postal  zip  code,  and
Taxpayer Identification Number of assignee) a Percentage Interest equal to _____
% evidenced by the within  asset-backed  Certificate and hereby  authorizes) the
registration  of  transfer  of such  interest  to  assignee  on the  Certificate
Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

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

Dated:

                                    ------------------------------------------
                                    Signature by or on behalf of assignor

                                    ------------------------------------------
                                    Signature Guaranteed

                                     C-2-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
available  funds to ____________________________________________________________
________________________________________________________________________________
for the account of ____________________________,  account number ______________,
or, if mailed by check,  to  __________________________________________________,
Applicable statements should be mailed to  _____________________________________
This  information is provided by  _____________________________________________,
the assignee named above, or _______________________________, as its agent.

                                     C-2-8

<PAGE>

                                   EXHIBIT C-3

                         [FORM OF CLASS M-2 CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                           SERIES 2000-CB4, CLASS M-2

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"), TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THIS  CERTIFICATE IS  SUBORDINATED  IN RIGHT OF PAYMENT TO THE CLASS A AND CLASS
M-1 CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.

THIS  CERTIFICATE  MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON THAT HAS
NOT DELIVERED A REPRESENTATION  LETTER STATING EITHER (A) THAT THE TRANSFEREE IS
NOT AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT  ARRANGEMENT SUBJECT TO TITLE I
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 497 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),  OR A
GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL,
STATE OR LOCAL LAW WHICH IS, TO A  MATERIAL  EXTENT,  SIMILAR  TO THE  FOREGOING
PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,  A "PLAN"),  AND IS NOT ACTING ON
BEHALF OF OR INVESTING THE ASSETS OF A PLAN OR (B) SUBJECT TO CERTAIN CONDITIONS
SET FORTH IN THE POOLING AND SERVICING AGREEMENT,  THAT THE SOURCE OF FUNDS USED
TO PURCHASE THIS  CERTIFICATE IS AN "INSURANCE  COMPANY  GENERAL  ACCOUNT." EACH
PERSON WHO ACQUIRES THIS  CERTIFICATE OR ANY INTEREST THEREIN SHALL BE DEEMED TO
HAVE MADE THE REPRESENTATIONS  REQUIRED BY THE REPRESENTATION LETTER REFERRED TO
IN THE PRECEDING SENTENCE, UNLESS SUCH PERSON SHALL HAVE

                                     C-3-1

<PAGE>

PROVIDED SUCH REPRESENTATION LETTER REFERRED TO IN THE PRECEDING SENTENCE TO THE
TRUSTEE.  THE POOLING AND  SERVICING  AGREEMENT  PROVIDES  THAT ANY ATTEMPTED OR
PURPORTED TRANSFER IN VIOLATION OF THESE TRANSFER  RESTRICTIONS WILL BE NULL AND
VOID AND WILL VEST NO RIGHTS IN ANY PURPORTED TRANSFEREE.

FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE  REPRESENTS  BENEFICIAL
OWNERSHIP  OF  A  "REGULAR  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 8606 AND 860D OF
THE  INTERNAL  REVENUE CODE OF 1986,  AS AMENDED (THE "CODE") AND CERTAIN  OTHER
PROPERTY.

<TABLE>
<S>                                          <C>
Series 2000-CB4, Class M-2                    Original Class Certificate Principal Balance
                                              of the Class M-2  Certificates  as of  the
                                              Closing Date: $7,825,000

Pass-Through Rate:  7.915%

Date of Pooling and Servicing Agreement:      Denomination:  $7,825,000
November 1, 2000

Cut-off Date:  November 1, 2000               Servicer:  Litton Loan Servicing LP
First Distribution Date:  December 26,
2000
                                              Trustee:  The Chase Manhattan Bank
No.
                                              Closing Date:  December 13, 2000

CUSIP:  12489WCT9

         DISTRIBUTIONS 1N REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.  ACCORDINGLY,  THE
         OUTSTANDING  CERTIFICATE  PRINCIPAL  BALANCE  HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE.

</TABLE>

                                     C-3-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
RESIDENTIAL ASSET FUNDING CORPORATION,  THE SERVICER, THE TRUSTEE,  CREDIT-BASED
ASSET  SERVICING  AND  SECURITIZATION  LLC  OR  ANY OF  THEIR  AFFILIATES.  THIS
CERTIFICATE  IS NOT  GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY  OF THE UNITED
STATES.

     This  certifies that  ___________  is the registered  owner of a Percentage
Interest  (obtained  by dividing the  denomination  of this  Certificate  by the
Original Class  Certificate  Principal Balance of the Class M-2 Certificates) in
that  certain  beneficial  ownership  interest  evidenced  by all the  Class M-2
Certificates  in the Trust Fund  created  pursuant  to a Pooling  and  Servicing
Agreement,  dated as specified above (the "Agreement"),  among Residential Asset
Funding Corporation (hereinafter called the "Depositor," which term includes any
successor  entity  under  the  Agreement),  the  Servicer,   Credit-Based  Asset
Servicing and  Securitization  LLC and the Trustee,  a summary of certain of the
pertinent provisions or' which is set forth hereafter. To the extent not defined
herein,  the  capitalized  terms used herein have the  meanings  assigned in the
Agreement.  This  Certificate  is issued  under  and is  subject  to the  terms,
provisions and conditions of the Agreement to which Agreement the Holder of this
Certificate by virtue of the acceptance  hereof assents and by which such Holder
is bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
2ith day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the last  Business Day of the month  immediately  preceding the
month in which the related  Distribution Date occurs or the Closing Date, in the
case of the first  Distribution  Date (the  "Record  Date"),  from  funds in the
Distribution  Account  in an  amount  equal  to the  product  of the  Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class M-2 Certificates on such  Distribution  Date pursuant to
the Agreement.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date and is the registered  owner of Class M-2  Certificates,  the
aggregate  initial  Certificate  Principal  Balance  of  which is in  excess  of
$5,000,000,  or by check mailed by first class mail to the address of the Person

                                     C-3-3

<PAGE>

entitled  thereto,  as such name and  address  shall  appear on the  Certificate
Register,  provided  that the Trustee may deduct a reasonable  wire transfer fee
from any payment made by wire  transfer.  Notwithstanding  the above,  the final
distribution on this Certificate will be made after due notice by the Trustee of
the pendency of such  distribution  and only upon  presentation and surrender of
this  Certificate  at the office or agency  appointed  by the  Trustee  for that
purpose as provided in the Agreement.

     The Class M-2  Pass-Through  Rate on the  Class  M-2  Certificates  on each
Distribution  Date will be the per annum rate  specified  above.  Interest  will
accrue on the Class M-2  Certificates  during each Interest  Accrual Period at a
rate  equal to the  lesser of (i) the Class M-2  Pass-Through  Rate and (ii) the
Pool Cap for such Distribution Date.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class M-2 Certificates.

     The Class M-2  Certificates  are  limited  in right of  payment  to certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     This  certificate  is  subordinated  in right of payment to the Class A and
Class M-1  Certificates  as  described  in the Pooling and  Servicing  Agreement
referred to herein.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing,  and thereupon one or

                                     C-3-4

<PAGE>

more new Certificates of the same Class in authorized  denominations  evidencing
the  same  aggregate  Percentage  Interest  will  be  issued  to the  designated
transferee or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized  denominations evidencing the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all purposes, and none of the Depositor,  the Servicer, the
Trustee,  the  Certificate  Registrar  nor any such anent  shall be  affected by
notice to the contrary.

     The  obligations  created  by the  Agreement  and the `trust  Fund  created
thereby shall  terminate upon payment to the  Certificateholders  of all amounts
held by or on behalf of the Trustee and required to be paid to them  pursuant to
the  Agreement  following  the  earlier  of  (i)  the  final  payment  or  other
liquidation  (or any advance with  respect  thereto) of the last  Mortgage  Loan
remaining in the Trust Fund,  and (ii) the purchase by the party  designated  in
the Agreement at a price  determined as provided in the Agreement from the Trust
Fund of all Mortgage Loans and all property acquired in respect of such Mortgage
Loans. The Agreement permits,  but does not require, the party designated in the
Agreement to purchase  from the Trust Fund all  Mortgage  Loans and all property
acquired in respect of any Mortgage  Loan at a price  determined  as provided in
the .Agreement.  The exercise of such right will effect early  retirement of the
Certificates;  however,  such right to  purchase  is  subject  to the  aggregate
Principal  Balance of the  Mortgage  Loans at the time of purchase  being 10% or
less of the Cut-off Date Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     C-3-5

<PAGE>

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

Dated:  December 13, 2000

                                    THE CHASE MANHATTAN BANK, as
                                        Trustee

                                    By:
                                       -------------------------------------
                                        Authorized Officer

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

     This  is  one  of  the  Class   M-2   Certificates   referred   to  in  the
within-mentioned Agreement.

                                    THE CHASE MANHATTAN BANK, as
                                        Certificate Registrar

                                    By:
                                       ------------------------------------
                                        Authorized Signatory

Date of authentication:  December 13, 2000

                                     C-3-6

<PAGE>

                                  ABBREVIATIONS

     The following  abbreviations,  when used in the  inscription on the face of
this  instrument,  shall be:  construed  as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common              UNIF GIFT MIN ACT  - Custodian
                                                                 ---------
                                                                 (Cust)(Minor)
TEN ENT - as tenants by the entireties                           under Uniform
                                                                 Gifts to Minors
                                                                 Act
JT TEN  - as joint tenants with right                            _________
          of survivorship and not as                              (State)
          tenants in common

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

     FOR VALUE RECEIVED, the undersigned hereby sell(s), assigns) and transfers)
unto ___________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification  Number  of  assignee)   ____________________________________   a
Percentage  Interest  equal  to _____ %  evidenced  by the  within  asset-backed
Certificate and hereby authorizes) the registration of transfer of such interest
to assignee on the Certificate Register of the Trust Fund.

     I (we) further direct the Certificate  Registrar to issue a new Certificate
of a like Percentage  Interest and Class to the above named assignee and deliver
such Certificate to the following address:

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

Dated:

                              ------------------------------------------
                              Signature by or on behalf of assignor

                              ------------------------------------------
                              Signature Guaranteed

                                     C-3-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise,  in immediately
available funds to  ____________________________________________________________
________________________________________________________________________________
for the account of ____________________________,  account number ______________,
or, if mailed by check,  to  __________________________________________________,
Applicable statements should be mailed to  _____________________________________
This  information is provided by  _____________________________________________,
the assignee named above, or _______________________________, as its agent.

                                     C-3-8

<PAGE>

                                   EXHIBIT C-4

                         [FORM OF CLASS X CERTIFICATES]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES
                            SERIES 2000-CB4, CLASS X

FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS  CERTIFICATE  REPRESENTS A DIRECT OR
INDIRECT  BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED,  RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL  REVENUE  CODE OF 1986,  AS AMENDED (THE "CODE") AND IN
CERTAIN OTHER PROPERTY.

THIS CLASS X CERTIFICATE  IS  SUBORDINATE  TO THE OFFERED  CERTIFICATES  OF THIS
SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.

THIS CLASS X  CERTIFICATE  WILL NOT BE ENTITLED  TO PAYMENTS  UNTIL SUCH TIME AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

THIS  CLASS X  CERTIFICATE  HAS NOT  BEEN  REGISTERED  OR  QUALIFIED  UNDER  THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),  OR THE SECURITIES  LAWS OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH  REGISTRATION OR QUALIFICATION  MAY BE MADE ONLY IN A TRANSACTION THAT DOES
NOT REQUIRE  SUCH  REGISTRATION  OR  QUALIFICATION  AND IN  ACCORDANCE  WITH THE
PROVISIONS  OF SECTION 5.02 OF THE POOLING AND SERVICING  AGREEMENT  REFERRED TO
HEREIN.

NO TRANSFER OF THIS  CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR THE CODE WILL BE REGISTERED.

                                     C-4-1

<PAGE>

<TABLE>
<S>                                               <C>
Series 2000-CB4, Class X                            Servicer:  Litton Loan Servicing LP

Date of Pooling and Servicing Agreement:            Trustee:  The Chase Manhattan Bank
November 1, 2000

Cut-off Date:  November 1, 2000                     Closing Date:  December 13, 2000

First Distribution Date:  December 26,
2000

No.

Percentage Interest:  ___%
</TABLE>

                                     C-4-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

     THIS  CERTIFICATE  DOES NOT  REPRESENT  AN  OBLIGATION  OF OR  INTEREST  IN
RESIDENTIAL ASSET FUNDING CORPORATION,  THE SERVICER, THE TRUSTEE,  CREDIT-BASED
ASSET  SERVICING  AND  SECURITIZATION  LLC  OR  ANY OF  THEIR  AFFILIATES.  THIS
CERTIFICATE  IS NOT  GUARANTEED BY ANY AGENCY OR  INSTRUMENTALITY  OF THE UNITED
STATES.

     This  certifies  that  ________________________________  is the  registered
owner of a  Percentage  Interest  set  forth  above in that  certain  beneficial
ownership  interest  evidenced by all the Class X Certificates in the Trust Fund
created pursuant to a Pooling and Servicing Agreement,  dated as specified above
(the  "Agreement"),  among  Residential Asset Funding  Corporation  (hereinafter
called the  "Depositor,"  which term  includes  any  successor  entity under the
Agreement), the Servicer, Credit-Based Asset Sericing and Securitization LLC and
the Trustee,  a summary of certain of the  pertinent  provisions of which is set
forth hereafter.  To the extent not defined herein,  the capitalized  terms used
herein have the meanings  assigned in the Agreement.  This Certificate is issued
under and is subject to the terms,  provisions  and conditions of the Agreement,
to which  Agreement the Holder of this  Certificate  by virtue of the acceptance
hereof assents and by which such Holder a bound.

     Pursuant to the terms of the Agreement,  distributions  will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day  immediately  following (a  "Distribution  Date"),  commencing  on the first
Distribution  Date specified above, to the Person in whose name this Certificate
is registered on the last  Business Day of the month  immediately  preceding the
month in which the related  Distribution  Date occurs or the Closing Date in the
case of the first  Distribution  Date (the  "Record  Date"),  from  funds in the
Distribution  Account  in an  amount  equal  to the  product  of the  Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class X Certificates on such Distribution Date pursuant to the
Agreement.

     All  distributions  to the Holder of this  Certificate  under the Agreement
will be made  or  caused  to be made  by or on  behalf  of the  Trustee  by wire
transfer in immediately  available  funds to the account of the Person  entitled
thereto if such Person  shall have so  notified  the Trustee in writing at least
five  Business  Days  prior  to  the  Record  Date  immediately  prior  to  such
Distribution  Date and is the  registered  owner of  Class X  Certificates,  the
aggregate initial  Certificate  Principal Balance of which is in excess of a 66%
Percentage  Interest of the Class X  Certificates,  or by check  mailed by first
class  mail to the  address  of the Person  entitled  thereto,  as such name and
address

                                     C-4-3

<PAGE>

shall appear on the Certificate Register, provided that the Trustee may deduct a
reasonable   wire  transfer  fee  from  any  payment  made  by  wire   transfer.
Notwithstanding  the above,  the final  distribution on this Certificate will be
made after due notice by the Trustee of the  pendency of such  distribution  and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose as provided in the Agreement.

     This  Certificate  is  one  of a  duly  authorized  issue  of  Certificates
designated  as C-BASS  Mortgage  Loan  Asset-Backed  Certificates  of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest specified on the face hereof.

     The  Class X  Certificates  are  limited  in right of  payment  to  certain
collections  and  recoveries   respecting  the  Mortgage  Loans,   all  as  more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

     The  Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,  the Servicer,  the Trustee and the rights of the  Certificateholders
under the Agreement at any time by the  Depositor,  the Servicer and the Trustee
with the consent of the Holders of  Certificates  entitled to the Voting  Rights
identified in the agreement.  Any such consent by the Holder of this Certificate
shall be  conclusive  and binding on such Holder and upon all future  Holders of
this  Certificate and of any  Certificate  issued upon the transfer hereof or in
exchange  herefor or in lieu hereof  whether or not  notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances,  without the consent of the Holders of any of the
Certificates.

     As provided in the Agreement and subject to certain limitations therein set
forth,  the  transfer of this  Certificate  is  registrable  in the  Certificate
Register upon surrender of this  Certificate for registration of transfer at the
offices or agencies appointed by the Trustee as provided in the Agreement,  duly
endorsed by, or  accompanied by an assignment in the form below or other written
instrument of transfer in form  satisfactory  to the Trustee and the Certificate
Registrar  duly executed by, the Holder  hereof or such  Holder's  attorney duly
authorized in writing,  and thereupon one or more new  Certificates  of the same
Class in  authorized  denominations  evidencing  the same  aggregate  Percentage
Interest will he issued to the designated transferee or transferees.

     The Certificates are issuable in fully registered form only without coupons
in Classes and denominations  representing Percentage Interests specified in the
Agreement.  As provided  in the  Agreement  and  subject to certain  limitations
therein set forth,  Certificates  are  exchangeable  for new Certificates of the
same Class in authorized

                                     C-4-4

<PAGE>

denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same.

     No transfer of this Certificate  shall be made unless that transfer is made
pursuant to an effective registration statement under the 1933 Act and effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such  registration or  qualification.  In
the event that a transfer is to be made without  registration or  qualification,
the Trustee and the  Certificate  Registrar  shall  require,  in order to assure
compliance  with such laws,  either (i) that the  Certificateholder  desiring to
effect the transfer and such  Certificateholder's  prospective  transferee  each
execute  a  representation  letter  in  the  form  described  by  the  Agreement
certifying to the Trustee and the  Certificate  Registrar the facts  surrounding
the  transfer,  or (ii) that the Trustee  and the  Certificate  Registrar  shall
require an Opinion of Counsel  satisfactory  to them that such  transfer  may be
made without such registration or qualification,  which Opinion of Counsel shall
not be an expense of the Depositor, the Trustee or the Certificate Registrar, in
their  respective  capacities as such.  None of the Depositor,  the  Certificate
Registrar  nor the  Trustee is  obligated  to  register  or qualify the Class of
Certificates  specified  on the face  hereof  under  the  1933 Act or any  other
securities law or to take any action not otherwise  required under the Agreement
to  permit  the  transfer  of  such   Certificates   without   registration   or
qualification.  Any such  Certificateholder  desiring  to effect  such  transfer
shall,  and does hereby agree to,  indemnify  the Trustee,  the  Depositor,  the
Certificate  Registrar and the Servicer against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.

     Except as otherwise set forth in the next succeeding paragraph, no transfer
of a Certificate or any interest  therein may be made to employee  benefit plans
and  certain  other  retirement  plans and  arrangements,  including  individual
retirement accounts and annuities,  Keogh plans and collective  investment funds
and separate accounts in which such plans, accounts or arrangements are invested
that are subject to the fiduciary responsibility provisions of ERISA and Section
4975  of  the  Code  ("Plans")  or any  person  who is  directly  or  indirectly
purchasing the Certificate or interest  therein on behalf of, as named fiduciary
of, as trustee  of, or with  assets of a Plan.  The  Trustee  shall  require the
prospective  transferee of any  Certificate  to certify that it is neither (i) a
Plan nor (ii) a Person who is directly or indirectly purchasing such Certificate
on behalf of, as named  fiduciary  of, as trustee  of, or with  assets of a Plan
(including any insurance company using funds in its general or separate accounts
that may constitute "plan assets").

     No service  charge  will be made for any such  registration  of transfer or
exchange  of  Certificates,  but  the  Trustee  may  require  payment  of a  sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection with any transfer or exchange of Certificates.

     The Depositor,  the Servicer, the Trustee and the Certificate Registrar and
any  agent of the  Depositor,  the  Servicer,  the  Trustee  or the  Certificate
Registrar may treat the Person in whose name this  Certificate  is registered as
the owner hereof for all

                                     C-4-5

<PAGE>

purposes, and none of the Depositor,  the Servicer, the Trustee, the Certificate
Registrar nor any such agent shall be affected by notice to the contrary.

     The obligations created by the Agreement and the Trust Fund created thereby
shall terminate upon payment to the Certificateholders of all amounts held by or
on  behalf  of the  Trustee  and  required  to be paid to them  pursuant  to the
Agreement  following the earlier of (i) the final  payment or other  liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund, and (ii) the purchase by the party  designated in the Agreement at a
price  determined  as  provided  in the  Agreement  from the  Trust  Fund of all
Mortgage Loans and all property  acquired in respect of such Mortgage Loans. The
Agreement permits,  but does not require,  the party designated in the Agreement
to purchase from the Trust Fund all Mortgage Loans and all property  acquired in
respect of any Mortgage Loan at a price determined as provided in the Agreement.
The exercise of such right will effect  early  retirement  of the  Certificates;
however, such right to purchase is subject to the aggregate Principal Balance of
the Mortgage Loans at the time of purchase being 10% or less of the Cut-off Date
Aggregate Principal Balance.

     The recitals contained herein shall be taken as statements of the Depositor
and the Trustee assumes no responsibility for their correctness.

     Unless the  certificate of  authentication  hereon has been executed by the
Certificate  Registrar,  by  manual  signature,  this  Certificate  shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     C-4-6

<PAGE>

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

Dated:  December 13, 2000

                                 THE CHASE MANHATTAN BANK, as
                                    Trustee

                                 By:
                                    ---------------------------------------
                                     Authorized Officer

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

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

                                 THE CHASE MANHATTAN BANK, as
                                   Certificate Registrar

                                 By:
                                    ---------------------------------------
                                     Authorized Signatory

Date of authentication:  December 13, 2000

                                     C-4-7

<PAGE>

                                  ABBREVIATIONS

          The following abbreviations,  when used in the inscription on the face
of this instrument,  shall be: construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common           UNIF GIFT MIN ACT - Custodian
                                                             ---------
                                                           (Cust) (Minor)
TEN ENT - as tenants by the entireties                     under Uniform
                                                           Gifts to Minors
                                                           Act
JT TEN  - as joint tenants with right                      ______________
          of survivorship and not as                          (State)
          tenants in common

          Additional  abbreviations  may also be used  though not in the
          above list.

                                   ASSIGNMENT

          FOR VALUE  RECEIVED,  the  undersigned  hereby  sell(s),  assigns) and
transfers)   unto    -----------------------------------------------------------
-----------------------------------------------------------------------  (Please
print or  typewrite  name,  address  including  postal  zip code,  and  Taxpayer
Identification Number of  assignee)------------------------------------------- a
Percentage  Interest  equal  to _____ %  evidenced  by the  within  asset-backed
Certificate and hereby authorizes) the registration of transfer of such interest
to assignee on the Certificate Register of the Trust Fund.

          I (we)  further  direct  the  Certificate  Registrar  to  issue  a new
Certificate of alike  Percentage  Interest and Class to the above named assignee
and deliver such Certificate to the following address:

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

Dated:

                                  ----------------------------------------------
                                  Signature by or on behalf of assignor

                                  ----------------------------------------------
                                  Signature Guaranteed

                                     C-4-8
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The   assignee   should   include  the   following   for  purposes  of
distribution:

          Distributions  shall  be  made,  by wire  transfer  or  otherwise,  in
immediately                  available                  funds                 to
--------------------------------------------------------------------------------
-------------------------------------------------    for    the    account    of
____________________________,  account number  ______________,  or, if mailed by
check,   to    __________________________________________________,    Applicable
statements  should  be  mailed  to  _____________________________________   This
information  is provided by  _____________________________________________,  the
assignee named above, or _______________________________, as its agent.

                                      C-4-9

<PAGE>

                                   EXHIBIT C-5

                          [FORM OF CLASS N CERTIFICATE]

                 C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES

                            SERIES 2000-CB4, CLASS N

         FOR U.S.  FEDERAL INCOME TAX PURPOSES,  THIS  CERTIFICATE  REPRESENTS A
         DIRECT OR INDIRECT  BENEFICIAL  INTEREST IN A "REGULAR  INTEREST"  IN A
         "REAL ESTATE MORTGAGE INVESTMENT  CONDUIT," AS THOSE TERMS ARE DEFINED,
         RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
         1986, AS AMENDED (THE "CODE") AND IN CERTAIN OTHER PROPERTY.

         THIS CLASS N CERTIFICATE IS SUBORDINATE TO THE OFFERED  CERTIFICATES OF
         THIS  SERIES TO THE  EXTENT  DESCRIBED  HEREIN AND IN THE  POOLING  AND
         SERVICING AGREEMENT REFERRED TO HEREIN.

         THIS CLASS N  CERTIFICATE  WILL NOT BE ENTITLED TO PAYMENTS  UNTIL SUCH
         TIME AS DESCRIBED IN THE POOLING AND  SERVICING  AGREEMENT  REFERRED TO
         HEREIN.

         THIS CLASS N CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),  OR THE SECURITIES
         LAWS OF ANY STATE.  ANY RESALE,  TRANSFER OR OTHER  DISPOSITION OF THIS
         CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY
         IN  A  TRANSACTION   THAT  DOES  NOT  REQUIRE  SUCH   REGISTRATION   OR
         QUALIFICATION  AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
         THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

         NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN OR OTHER
         RETIREMENT  ARRANGEMENT  SUBJECT  TO  THE  EMPLOYEE  RETIREMENT  INCOME
         SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED.

Series 2000-CB4, Class N                  Original Class N Notional Amount as of
                                           the Closing Date:

Date of Pooling and Servicing  Agreement: Denomination: $_____________ (Notional
November 1, 2000                          Amount)

Cut-off Date:  November 1, 2000           Servicer:  Litton Loan Servicing LP

First Distribution Date:  December 26,

                                     C-5-1

<PAGE>

2000                                      Trustee:  The Chase Manhattan Bank

No.
                                          Closing Date:  December 13, 2000

                                     C-5-2

<PAGE>

                            ASSET- BACKED CERTIFICATE

evidencing  a  beneficial  ownership  interest  in a  portion  of a  Trust  Fund
consisting  primarily of a pool of conventional  fixed-rate and  adjustable-rate
one- to four-family first and second lien mortgage loans formed and sold by

                      RESIDENTIAL ASSET FUNDING CORPORATION

         THIS  CERTIFICATE  DOES NOT  REPRESENT AN  OBLIGATION OF OR INTEREST IN
         RESIDENTIAL  ASSET  FUNDING  CORPORATION,  THE  SERVICER,  THE TRUSTEE,
         CREDIT-BASED  ASSET  SERVICING AND  SECURITIZATION  LLC OR ANY OF THEIR
         AFFILIATES.  THIS  CERTIFICATE  IS  NOT  GUARANTEED  BY ANY  AGENCY  OR
         INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that  _________________________________  is the
registered owner of a Percentage Interest (obtained by dividing the denomination
of this  Certificate  by the Original  Class N Notional  Amount) in that certain
beneficial  ownership  interest evidenced by all the Class N Certificates in the
Trust Fund  created  pursuant to a Pooling  and  Servicing  Agreement,  dated as
specified above (the "Agreement"),  among Residential Asset Funding  Corporation
(hereinafter  called the  "Depositor,"  which term includes any successor entity
under  the   Agreement),   the  Servicer,   Credit-Based   Asset  Servicing  and
Securitization  LLC and the  Trustee,  a summary  of  certain  of the  pertinent
provisions of which is set forth  hereafter.  To the extent not defined  herein,
the capitalized  terms used herein have the meanings  assigned in the Agreement.
This  Certificate  is issued under and is subject to the terms,  provisions  and
conditions of the Agreement,  to which Agreement the Holder of this  Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement,  distributions will be
made on the 25th day of each month or, if such 25th day is not a  Business  Day,
the Business Day immediately  following (a "Distribution  Date"),  commencing on
the first  Distribution  Date specified  above, to the Person in whose name this
Certificate  is  registered  on the last  Business Day of the month  immediately
preceding the month in which the related Distribution Date occurs or the Closing
Date in the case of the first Distribution Date (the "Record Date"),  from funds
in the Distribution  Account in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to the Holders of Class N Certificates on such Distribution Date pursuant to the
Agreement.

                  All  distributions to the Holder of this Certificate under the
Agreement  will be made or caused to be made by or on behalf of the  Trustee  by
wire  transfer  in  immediately  available  funds to the  account  of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five  Business  Days prior to the Record  Date  immediately  prior to such
Distribution  Date and is the  registered  owner of  Class N  Certificates,  the
aggregate initial  Certificate  Principal Balance of which is in excess of a 66%
Percentage  Interest of the Class N  Certificates,  or by check  mailed by

                                     C-5-3

<PAGE>

first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register,  provided that the Trustee may
deduct a reasonable  wire  transfer fee from any payment made by wire  transfer.
Notwithstanding  the above,  the final  distribution on this Certificate will be
made after due notice by the Trustee of the  pendency of such  distribution  and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose as provided in the Agreement.

                  This  Certificate  is  one  of  a  duly  authorized  issue  of
Certificates designated as C-BASS Mortgage Loan Asset-Backed Certificates of the
Series  specified  on the face hereof  (herein  called the  "Certificates")  and
representing the Percentage Interest specified on the face hereof.

                  The Class N  Certificates  are  limited in right of payment to
certain  collections and recoveries  respecting the Mortgage Loans,  all as more
specifically  set  forth  herein  and  in  the  Agreement.  As  provided  in the
Agreement,  withdrawals from the Collection Account and the Distribution Account
may be  made  from  time  to time  for  purposes  other  than  distributions  to
Certificateholders,  such purposes including  reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The  Agreement   permits,   with  certain  exceptions  therein
provided,  the  amendment  thereof  and  the  modification  of  the  rights  and
obligations  of the Depositor,  the Servicer,  the Trustee and the rights of the
Certificateholders  under  the  Agreement  at any  time  by the  Depositor,  the
Servicer  and the  Trustee  with the  consent  of the  Holders  of  Certificates
entitled to the Voting Rights  identified in the agreement.  Any such consent by
the Holder of this  Certificate  shall be conclusive  and binding on such Holder
and upon all future Holders of this Certificate and of an),  Certificate  issued
upon the transfer hereof or in exchange herefor or in lieu hereof whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain  limited  circumstances  without the
consent of the Holders of any of the Certificates.

                  As   provided  in  the   Agreement   and  subject  to  certain
limitations  therein set forth,  the transfer of this Certificate is registrable
in the Certificate  Register upon surrender of this Certificate for registration
of transfer at the offices or agencies  appointed  by the Trustee as provided in
the  Agreement,  duly endorsed by, or  accompanied  by an assignment in the form
below or other  written  instrument  of  transfer  in form  satisfactory  to the
Trustee and the  Certificate  Registrar  duly  executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized  denominations  evidencing the same
aggregate  Percentage  Interest will be issued to the  designated  transferee or
transferees.

                  The  Certificates  are issuable in fully  registered form only
without coupons in Classes and denominations  representing  Percentage Interests
specified in the Agreement.  As provided in the Agreement and subject to certain
limitations   therein  set  forth,   Certificates   are   exchangeable  for  new
Certificates of the same Class in authorized

                                     C-5-4
<PAGE>

denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same.

                  No  transfer  of this  Certificate  shall be made  unless that
transfer is made pursuant to an effective  registration statement under the 1933
Act  and  effective   registration  or  qualification   under  applicable  state
securities  laws,  or is  made in a  transaction  that  does  not  require  such
registration  or  qualification.  In the  event  that a  transfer  is to be made
without registration or qualification, the Trustee and the Certificate Registrar
shall require, in order to assure compliance with such laws, either (i) that the
Certificateholder  desiring to effect the transfer and such  Certificateholder's
prospective  transferee  each  execute  a  representation  letter  in  the  form
described  by the  Agreement  certifying  to the  Trustee  and  the  Certificate
Registrar the facts  surrounding the transfer,  or (ii) that the Trustee and the
Certificate  Registrar shall require an Opinion of Counsel  satisfactory to them
that such transfer may be made without such registration or qualification, which
Opinion of Counsel shall not be an expense of the Depositor,  the Trustee or the
Certificate  Registrar,  in their  respective  capacities  as such.  None of the
Depositor, the Certificate Registrar nor the Trustee is obligated to register or
qualify the Class of  Certificates  specified  on the face hereof under the 1933
Act or any other  securities  law or to take any action not  otherwise  required
under  the  Agreement  to  permit  the  transfer  of such  Certificates  without
registration or  qualification.  Any such  Certificateholder  desiring to effect
such  transfer  shall,  and does hereby agree to,  indemnify  the  Trustee,  the
Depositor, the Certificate Registrar and the Servicer against any liability that
may result if the  transfer is not so exempt or is not made in  accordance  with
such federal and state laws.

                  Except  as  otherwise   set  forth  in  the  next   succeeding
paragraph,  no transfer of a Certificate or any interest  therein may be made to
employee  benefit plans and certain  other  retirement  plans and  arrangements,
including  individual  retirement  accounts  and  annuities,   Keogh  plans  and
collective  investment funds and separate accounts in which such plans, accounts
or  arrangements  are invested that are subject to the fiduciary  responsibility
provisions  of ERISA and Section 497 of the Code  ("Plans") or any person who is
directly or indirectly  purchasing the Certificate or interest therein on behalf
of, as named  fiduciary of, as trustee of, or with assets of a Plan. The Trustee
shall require the  prospective  transferee of any Certificate to certify that it
is neither (i) a Plan nor (ii) a Person who is directly or indirectly purchasing
such  Certificate  on behalf of, as named  fiduciary  of, as trustee of, or with
assets of a Plan (including any insurance  company using funds in its general or
separate accounts that may constitute "plan assets").

                  No service  charge will be made for any such  registration  of
transfer or exchange of  Certificates,  but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates.

                  The Depositor,  the Servicer,  the Trustee and the Certificate
Registrar  and any agent of the  Depositor,  the  Servicer,  the  Trustee or the
Certificate  Registrar  may treat the Person in whose name this  Certificate  is
registered as the owner hereof for all

                                     C-5-5
<PAGE>

purposes, and none of the Depositor,  the Servicer, the Trustee, the Certificate
Registrar nor any such agent shall be affected by notice to the contrary.

                  The  obligations  created by the  Agreement and the Trust Fund
created  thereby shall terminate upon payment to the  Certificateholders  of all
amounts  held by or on behalf of the  Trustee  and  required  to be paid to them
pursuant to the  Agreement  following  the  earlier of (i) the final  payment or
other  liquidation  (or any advance with respect  thereto) of the last  Mortgage
Loan remaining in the Trust Fund, and (ii) the purchase by the party  designated
in the Agreement at a price  determined  as provided in the  Agreement  from the
Trust Fund of all Mortgage  Loans and all  property  acquired in respect of such
Mortgage  Loans.  The  Agreement  permits,  but  does  not  require,  the  party
designated in the  Agreement to purchase from the Trust Fund all Mortgage  Loans
and all property  acquired in respect of any Mortgage Loan at a price determined
as  provided in the  Agreement.  The  exercise  of such right will effect  early
retirement of the  Certificates:  however,  such right to purchase is subject to
the aggregate  Principal  Balance of the Mortgage  Loans at the time of purchase
being 10% or less of the Cut-off Date Aggregate Principal Balance.

                  The recitals  contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless  the  certificate  of  authentication  hereon  has been
executed by the Certificate  Registrar,  by manual  signature,  this Certificate
shall not be  entitled to any benefit  under the  Agreement  or be valid for any
purpose.

                                     C-5-6
<PAGE>

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

Dated:  December 13, 2000

                                            THE CHASE MANHATTAN BANK, as
                                                 Trustee

                                            By:_________________________________
                                                 Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

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

                                            THE CHASE MANHATTAN BANK, as
                                               Certificate Registrar

                                            By:_________________________________
                                                 Authorized Signatory

Date of authentication:  December 13, 2000

                                     C-5-7

<PAGE>

                                  ABBREVIATIONS

                  The following  abbreviations,  when used in the inscription on
the face of this instrument, shall be: construed as though they were written out
in full according to applicable laws or regulations:

TEN COM  - as tenants in common          UNIF GIFT MIN ACT - Custodian
                                                             ---------
                                                            (Cust) (Minor)
TEN ENT  - as tenants by the entireties                     under Uniform
                                                            Gifts to Minors
                                                            Act
JT TEN   - as joint tenants with right                      ______________
           of survivorship and not as                       (State)
           tenants in common

           Additional  abbreviations  may also be used  though not in the
above list.

                                   ASSIGNMENT

                  FOR VALUE RECEIVED,  the undersigned hereby sell(s),  assigns)
and      transfers)      unto --------------------------------------------------
--------------------------------------------------------------------------------
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)  ------------------------------------------ a
Percentage  Interest  equal  to _____ %  evidenced  by the  within  asset-backed
Certificate and hereby authorizes) the registration of transfer of such interest
to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage  Interest and Class to the above named assignee
and deliver such Certificate to the following address:

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

Dated:

                                     ------------------------------------------
                                     Signature by or on behalf of assignor

                                     ------------------------------------------
                                     Signature Guaranteed

                                     C-5-8
<PAGE>
                            DISTRIBUTION INSTRUCTIONS

          The   assignee   should   include  the   following   for  purposes  of
distribution:

          Distributions  shall  be  made,  by wire  transfer  or  otherwise,  in
immediately available funds to  ------------------------------------------------
--------------------------------------------------------------------------------
for the account of ____________________________,  account number ______________,
or, if mailed by check,  to  __________________________________________________,
Applicable statements should be mailed to  _____________________________________
This  information is provided by  _____________________________________________,
the assignee named above, or _______________________________, as its agent.

                                     C-5-9

<PAGE>

                                    EXHIBIT D

                             MORTGAGE LOAN SCHEDULE

                      [On File with Dewey Ballantine LLP]

                                     D-1-1
<PAGE>

                                    EXHIBIT E

                    FORM OF REQUEST FOR RELEASE OF DOCUMENTS

To:      The Chase Manhattan Bank
         450 West 33rd Street
         14th Floor
         New York, New York 10001
         Attn: Capital Markets Fiduciary Services,
         C-BASS Mortgage Loan Asset-Backed Funding Certificates, Series 2000-CB4

         Re:      Pooling and Servicing  Agreement  dated as of November 1, 2000
                  among  Residential  Asset Funding  Corporation,  as depositor,
                  Credit-Based  Asset  Servicing  and  Securitization   LLC,  as
                  seller,  Litton Loan Servicing LP, as servicer,  and The Chase
                  Manhattan Bank, as trustee.

All  capitalized  terms used herein shall have the means ascribed to them in the
Pooling and Servicing Agreement (the "Agreement") referenced above.

In  connection  with the  administration  of the  Mortgage  Loans held by you as
Trustee  pursuant  to  the  Agreement,   we  request  the  release,  and  hereby
acknowledge  receipt,  of the  Trustee's  Mortgage  File for the  Mortgage  Loan
described below, for the reason indicated.

Mortgage Loan Number:
--------------------

Mortgagor Name, Address & Zip Code:
----------------------------------

Reason for Requesting Documents (check one):
------------------------------------------

----------  1.  Mortgage Paid in Full

----------  2.  Foreclosure

----------  3.  Substitution

----------  4.  Other Liquidation (Repurchase, etc.)

                                       E-2
<PAGE>

---------- 5.   Nonliquidation              Reason:
                                                   -----------------------------

                                            By:
                                                   -----------------------------
                                                     (authorized signer)

                                            Issuer:
                                                   -----------------------------

                                            Address:
                                                   -----------------------------

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

                                            Date:
                                                   -----------------------------

Custodian

Bank One Trust Company, NA

Please acknowledge the execution of the above request by your signature and date
below:

-----------------------------                      -----------------------------
         Signature                                 Date

Documents returned to Custodian:

-----------------------------                      -----------------------------
Custodian                                          Date

                                      E-3

<PAGE>

                                                   F-1-1
                                   EXHIBIT F-I

                     FORM OF TRUSTEE'S INITIAL CERTIFICATION

                                                                            Date

Residential Asset Funding Corporation
One First Union Center, TW9
Charlotte, NC 28288-0610

         Re:      Pooling and  Servicing  Agreement  (the "Pooling and Servicing
                  Agreement"),  dated as of November  1, 2000 among  Residential
                  Asset Funding  Corporation,  as depositor,  Credit-Based Asset
                  Servicing  and  Securitization  LLC,  as seller,  Litton  Loan
                  Servicing  LP, as  servicer,  The  Chase  Manhattan  Bank,  as
                  trustee  with  respect to C-BASS  Mortgage  Loan  Asset-Backed
                  Certificates, Series 2000-CB4.
                  --------------------------------------------------------------

Ladies and Gentlemen:

In  accordance  with Section 2.02 of the Pooling and  Servicing  Agreement,  the
undersigned, as Trustee, hereby certifies that it received confirmation from the
Custodian  that the Custodian has received the documents  listed in Section 2.01
of the Pooling and Servicing Agreement for each Mortgage File pertaining to each
Mortgage  Loan  listed on Schedule A to the  Pooling  and  Servicing  Agreement,
subject to any exceptions noted on Schedule I hereto.

Capitalized words and phrases used herein and not otherwise defined herein shall
have the  respective  meanings  assigned to them in the  Pooling  and  Servicing
Agreement.  This  Certificate is subject in all respects to the terms of Section
2.02 of the  Pooling and  Servicing  Agreement  and the  Pooling  and  Servicing
Agreement sections cross-referenced therein.

                                        THE CHASE MANHATTAN BANK
                                                 as Trustee

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

                                     F-1-1
<PAGE>

                                   EXHIBIT F-2

                      FORM OF TRUSTEE'S FINAL CERTIFICATION

                                                                         [Date]

Residential Asset Funding Corporation
One First Union Center, TW9
Charlotte, NC 28288-0610

         Re:      Pooling and  Servicing  Agreement  (the "Pooling and Servicing
                  Agreement"),  dated as of November  1, 2000 among  Residential
                  Asset Funding  Corporation,  as depositor,  Credit-Based Asset
                  Servicing  and  Securitization  LLC,  as seller,  Litton  Loan
                  Servicing  LP, as  servicer,  The  Chase  Manhattan  Bank,  as
                  trustee  with  respect to C-BASS  Mortgage  Loan  Asset-Backed
                  Certificates, Series 2000-CB4.

Ladies and Gentlemen:

In  accordance  with Section 2.02 of the Pooling and  Servicing  Agreement,  the
undersigned,  as Trustee,  hereby certifies that as to each Mortgage Loan listed
in the Mortgage  Loan  Schedule  (other than any  Mortgage  Loan paid in full or
listed on Schedule I hereto) it received  confirmation  from the Custodian  that
the Custodian has received the  applicable  documents  listed in Section 2.01 of
the Pooling and Servicing Agreement.

The undersigned hereby certifies that as to each Mortgage Loan identified on the
Mortgage  Loan  Schedule,  other than any  Mortgage  Loan  listed on  Schedule I
hereto,  it has reviewed the documents listed above and has determined that each
such  document  appears to be  complete  and,  based on an  examination  of such
documents, the information set forth in the Mortgage Loan Schedule is correct.

Capitalized  words and phrases  used herein shall have the  respective  meanings
assigned to them in the Pooling and Servicing  Agreement.  This  Certificate  is
qualified in all respects by the terms of said Pooling and Servicing Agreement.

                                        THE CHASE MANHATTAN BANK,
                                           as Trustee

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

                                     F-2-1

<PAGE>

                                   EXHIBIT F-3

                        FORM OF RECEIPT OF MORTGAGE NOTE

Residential Asset Funding Corporation
One First Union Center, TW9
Charlotte, NC 28288-0610

                  Re:    C-BASS Mortgage Loan Asset-Backed Funding Certificates,
                         Series 2000-CB4
                         -----------------------------------------------------

Ladies and Gentlemen:

Pursuant to Section  2.01 of the Pooling and  Servicing  Agreement,  dated as of
November 1, 2000, among  Residential  Asset Funding  Corporation,  as depositor,
Credit-Based  Asset  Servicing and  Securitization  LLC, as seller,  Litton Loan
Servicing  LP, as  servicer,  and The Chase  Manhattan  Bank,  as  trustee  (the
"Trustee"),  we hereby  acknowledge the receipt of the original Mortgage Note (a
copy of which is  attached  hereto as  Exhibit  1) with any  exceptions  thereto
listed on Exhibit 2.

                                        THE CHASE MANHATTAN BANK,
                                          as Trustee

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

                                     F-3-1
<PAGE>

                                    EXHIBIT G

                        MORTGAGE LOAN PURCHASE AGREEMENT

                      [On File with Dewey Ballantine LLP]

                                      G-1

<PAGE>
                                    EXHIBIT H

                           FORM OF LOST NOTE AFFIDAVIT

Personally  appeared  before me the undersigned  authority to administer  oaths,
________________  who first  being  duly sworn  deposes  and says:  Deponent  is
___________________  of  _____________________________,  successor  by merger to
___________________________________ ("Seller") and who has personal knowledge of
the facts set out in this affidavit.

On   ________________________,   ________________  did  execute  and  deliver  a
promissory note in the principal amount of $____________.

That  said  note  has been  misplaced  or lost  through  causes  unknown  and is
presently lost and  unavailable  after diligent  search has been made.  Seller's
records  show that an amount of  principal  and  interest  on said note is still
presently outstanding,  due, and unpaid, and Seller is still owner and holder in
due course of said lost note.

Seller  executes this Affidavit for the purpose of inducing The Chase  Manhattan
Bank, as trustee on behalf of C-BASS  Mortgage Loan  Asset-Backed  Certificates,
Series 2000-CB4, to accept the transfer of the above described loan from Seller.

Seller  agrees  to  indemnify  and  hold  harmless  The  Chase  Manhattan  Bank,
Residential  Asset Funding  Corporation  for any losses incurred by such parties
resulting from the above described promissory note has been lost or misplaced.

                                                 By:
                                                    ----------------------------
                                                  ------------------------------

STATE OF                            )
                                    )  SS:
COUNTY OF                           )

On this ______ day of 20____, before me, a Notary Public, in and for said County
and State, appeared ____________________,  who acknowledged the extension of the
foregoing  and who,  having  been duly sworn,  states  that any  representations
therein contained are true.

Witness my hand and Notarial Seal this ___ day of _______ 20 __.

----------------------------------
----------------------------------
My commission expires ___________.

                                      H-1
<PAGE>

                                    EXHIBIT I

                          FORM OF ERISA REPRESENTATION

Residential Asset Funding Corporation
One First Union Center, TW9
Charlotte, NC 28288-0610

         Re:      C-BASS Mortgage Loan Asset-Backed Funding Certificates,
                  Series 2000-CB4
                  -------------------------------------------------------
Ladies and Gentlemen:

1.      The undersigned is the  __________  of (the "Transferee") a [corporation
duly  organized]  and existing under the laws of __________ , on behalf of which
he makes this affidavit.

2.      The  Transferee  hereby acknowledges that under the terms of the Pooling
and  Servicing  Agreement  (the  "Agreement")  among  Residential  Asset Funding
Corporation,  as depositor (the  "Depositor"),  Credit-Based Asset Servicing and
Securitization  LLC, as seller,  Litton Loan  Servicing  LP, as servicer and The
Chase  Manhattan  Bank,  as  trustee  (the   "Trustee"),   no  transfer  of  the
ERISA-Restricted Certificates shall be permitted to be made to any person unless
the Depositor and Trustee have  received a certificate  from such  transferee in
the form hereof.

3.      [With respect to the Class M-1, Class M-2 and Class B Certificates only]
The Transferee either (x) (1) is not an employee benefit plan subject to Section
406 or Section 407 of the Employee  Retirement  Income  Security Act of 1974, as
amended  ("ERISA"),  or Section  4975 of the Internal  Revenue Code of 1986,  as
amended (the "Code"),  the Trustee of any such plan or a person acting on behalf
of any such plan nor a person  using  the  assets of any such plan or (2) if the
Transferee  is  an  insurance  company,   such  Transferee  is  purchasing  such
Certificates with funds contained in an "Insurance  Company General Account" (as
such  term is  defined  in  Section  v(e) of the  Prohibited  Transaction  Class
Exemption  95-60  ("PTCE  95-60"))  and that the  purchase  and  holding of such
Certificates  are covered under PTCE 95-60;  or (y) shall deliver to the Trustee
and the Depositor an opinion of counsel (a "Benefit Plan Opinion")  satisfactory
to the Trustee and the  Depositor,  and upon which the Trustee and the Depositor
shall be  entitled to rely,  to the effect that the  purchase or holding of such
Certificate  by the  Transferee  will not result in the assets of the Trust Fund
being  deemed  to be plan  assets  and  subject  to the  prohibited  transaction
provisions  of  ERISA  or the Code and  will  not  subject  the  Trustee  or the
Depositor to any obligation in addition to those  undertaken by such entities in
the Pooling and  Servicing  Agreement,  which opinion of counsel shall not be an
expense of the Trustee or the Depositor.

3. [With respect to the Class X and Class N  Certificates  only] The  Transferee
either (x) is not an employee benefit plan subject to Section 406 or Section 407
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the

                                      I-1
<PAGE>

Internal Revenue Code of 1986, as amended (the "Code"),  the Trustee of any such
plan or a person acting on behalf of any such plan nor a person using the assets
of any such  plan or (y) shall  deliver  to the  Trustee  and the  Depositor  an
opinion of counsel (a "Benefit Plan  Opinion")  satisfactory  to the Trustee and
the Depositor, and upon which the Trustee and the Depositor shall be entitled to
rely,  to the effect  that the  purchase or holding of such  Certificate  by the
Transferee  will not result in the  assets of the Trust Fund being  deemed to be
plan assets and subject to the prohibited transaction provisions of ERISA or the
Code and will not subject  the Trustee or the  Depositor  to any  obligation  in
addition to those  undertaken  by such  entities  in the  Pooling and  Servicing
Agreement,  which  opinion of counsel  shall not be an expense of the Trustee or
the Depositor.

Capitalized  terms used but not defined herein shall have the meanings  ascribed
to such terms in the Agreement.

IN WITNESS WHEREOF, the Transferee has executed this certificate.

                                                  ------------------------------
                                                  [Transferee]

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

                                      I-2
<PAGE>

                                    EXHIBIT J

                    FORM OF INVESTMENT LETTER [NON-RULE 144A]

                                                                         [DATE]

Residential Asset Funding Corporation
One First Union Center, TW9
Charlotte, NC 28288-0610

The Chase Manhattan Bank
450 West 33rd Street
14th Floor
New York, NY 10001

         Re:  C-BASS Mortgage Loan Asset-Backed Certificates, Series 2000-CB4
              ---------------------------------------------------------------

Ladies and Gentlemen:

In connection  with our  acquisition  of the C-BASS  Mortgage Loan  Asset-Backed
Certificates,  Series  2000-CB4  (the  "Certificates"),  we certify  that (a) we
understand that the  Certificates  are not being registered under the Securities
Act of 1933, as amended (the "Act"),  or any state securities laws and are being
transferred  to us  in a  transaction  that  is  exempt  from  the  registration
requirements of the Act and any such laws, (b) we are an "accredited  investor,"
as defined in Regulation D under the Act, and have such knowledge and experience
in financial and business  matters that we are capable of evaluating  the merits
and risks of investments in the Certificates, (c) we have had the opportunity to
ask questions of and receive answers from the Depositor  concerning the purchase
of  the  Certificates  and  all  matters  relating  thereto  or  any  additional
information  deemed necessary to our decision to purchase the Certificates,  (d)
we are not an employee  benefit plan that is subject to the Employee  Retirement
Income  Security Act of 1974,  as amended,  or a plan that is subject to Section
4975 of the  Internal  Revenue  Code of 1986,  as amended,  nor are we acting on
behalf of any such plan,  (e) we are acquiring the  Certificates  for investment
for our own account and not with a view to any distribution of such Certificates
(but without prejudice to our right at all times to sell or otherwise dispose of
the  Certificates in accordance with clause (g) below),  (f) we have not offered
or sold any Certificates  to, or solicited offers to buy any Certificates  from,
any person,  or otherwise  approached or negotiated with any person with respect
thereto,  or taken any other action which would result in a violation of Section
5 of the Act,  and (g) we will not sell,  transfer or  otherwise  dispose of any
Certificates  unless  (1)  such  sale,  transfer  or other  disposition  is made
pursuant to an effective  registration statement under the Act or is exempt from
such registration requirements, and if requested, we will at our expense provide
an opinion of counsel  satisfactory to the addressees of this  Certificate  that
such sale,  transfer or other  disposition  may be made pursuant to an exemption
from the Act, (2) the purchaser or transferee of such  Certificate  has executed
and  delivered to you a  certificate  to  substantially  the same effect as this
certificate, and (3) the purchaser

                                      J-1

<PAGE>

or transferee has otherwise  complied with any conditions for transfer set forth
in the Pooling and Servicing Agreement.

                                                Very truly yours,

                                                [NAME OF TRANSFEREE]

                                                By:
                                                   -----------------------------
                                                     Authorized Officer

                                      J-2
<PAGE>

                       FORM OF RULE 144A INVESTMENT LETTER

                                     [DATE]

Residential Asset Funding Corporation
One First Union Center, TW9
Charlotte, NC 28288-0610

The Chase Manhattan Bank
450 West 33rd Street
14th Floor
New York, NY 10001

         Re:   C-BASS Mortgage Loan Asset-Backed Certificates, Series 2000-CB4
               ---------------------------------------------------------------

Ladies and Gentlemen:

In connection  with our  acquisition  of the C-BASS  Mortgage Loan  Asset-Backed
Certificates,  Series  2000-CB4  (the  "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 had the  opportunity to
ask questions of and receive answers from the Depositor  concerning the purchase
of  the  Certificates  and  all  matters  relating  thereto  or  any  additional
information  deemed necessary to our decision to purchase the Certificates,  (c)
we are not an employee  benefit plan that is subject to the Employee  Retirement
Income  Security Act of 1974,  as amended,  or a plan that is subject to Section
4975 of the  Internal  Revenue  Code of 1986,  as amended,  nor are we acting on
behalf of any such plan,  (d) 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,  (e) we are a  "qualified  institutional  buyer"  as that  term is
defined in Rule 144A under the Securities  Act and have completed  either of the
forms of  certification to that effect attached hereto as Annex 1 or Annex 2. We
are aware that the sale to us is being  made in  reliance  on Rule 144A.  We are
acquiring the  Certificates  for our own account or for resale  pursuant to Rule
144A and further,  understand that such  Certificates may be resold,  pledged or
transferred  only  (i)  to a  person  reasonably  believed  to  be  a  qualified
institutional  buyer that  purchases for its own account or for the account of a
qualified

                                      J-3

<PAGE>

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.

                                               Very truly yours,

                                               [NAME OF TRANSFEREE]

                                               By:
                                                  ------------------------------
                                                    Authorized Officer

                                      J-4

<PAGE>
                                                            ANNEX 1 TO EXHIBIT J

            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:

i.      As indicated  below,  the undersigned is the President,  Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.

ii.     In  connection  with  purchases by the Buyer,  the Buyer is a "qualified
institutional  buyer" as that term is defined in Rule 144A under the  Securities
Act of 1933,  as  amended  ("Rule  144A")  because  (i) the Buyer  owned  and/or
invested on a  discretionary  basis  $_______(1) in  securities  (except for the
excluded  securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being  calculated in accordance with Rule 144A and (ii)
the Buyer satisfies the criteria in the category marked below.

                  ____ Corporation,  etc. The Buyer is a corporation (other than
                  a bank, savings and loan association or similar  institution),
                  Massachusetts  or  similar  business  trust,   partnership  or
                  charitable  organization described in Section 501(c)(3) of the
                  Internal Revenue Code of 1986, as amended.

                  ____  Bank.  The  Buyer  (a) is a  national  bank  or  banking
                  institution  organized under the laws of any State,  territory
                  or  the  District  of  Columbia,  the  business  of  which  is
                  substantially  confined  to banking and is  supervised  by the
                  State or territorial banking commission or similar official or
                  is a foreign bank or  equivalent  institution,  and (b) has an
                  audited net worth of at least  $25,000,000 as  demonstrated in
                  its latest  annual  financial  statements,  a copy of which is
                  attached hereto.

                  ____  Savings  and Loan.  The Buyer (a) is a savings  and loan
                  association, building and loan association,  cooperative bank,
                  homestead   association  or  similar  institution,   which  is
                  supervised and examined by a State or Federal authority having
                  supervision over any such institutions or is a foreign savings
                  and loan association or equivalent  institution and (b) has an
                  audited net worth of at least  $25,000,000 as  demonstrated in
                  its latest  annual  financial  statements,  a copy of which is
                  attached hereto.

                  _____ Broker-dealer. The Buyer is a dealer registered pursuant
                  to Section 15 of the Securities Exchange Act of 1934.

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

(1)   Buyer  must own and/or invest on a  discretionary  basis at least $____ in
securities  unless Buyer is a dealer,  and, in that case,  Buyer must own and/or
invest on a discretionary basis at least $_____ in securities.

                                      J-5
<PAGE>

                  ____  Insurance  Company.  The Buyer is an  insurance  company
                  whose primary and predominant business activity is the writing
                  of  insurance  or the  reinsuring  of  risks  underwritten  by
                  insurance companies and which is subject to supervision by the
                  insurance  commissioner  or a similar  official or agency of a
                  State, territory or the District of Columbia.

                  ____ State or Local Plan. The Buyer is a plan  established and
                  maintained  by a State,  its  political  subdivisions,  or any
                  agency  or  instrumentality  of the  State  or  its  political
                  subdivisions, for the benefit of its employees.

                  ____ ERISA Plan. The Buyer is an employee  benefit plan within
                  the  meaning  of  Title I of the  Employee  Retirement  Income
                  Security Act of 1974.

                  ____ Investment  Advisor.  The Buyer is an investment  advisor
                  registered under the Investment Advisors Act of 1940.

                  ____  Small  Business  Investment  Company.  Buyer  is a small
                  business   investment  company  licensed  by  the  U.S.  Small
                  Business  Administration  under  Section  301(c) or (d) of the
                  Small Business Investment Act of 1958.

                  ____  Business  Development  Company.   Buyer  is  a  business
                  development  company as defined in Section  202(a)(22)  of the
                  Investment Advisors Act of 1940.

iii. The term  "securities"  as used herein does not include (i)  securities  of
issuers that are affiliated with the Buyer,  (ii) securities that are part of an
unsold  allotment  to or  subscription  by the Buyer,  if the Buyer is a dealer,
(iii)  securities  issued  or  guaranteed  by the  U.S.  or any  instrumentality
thereof,  (iv)  bank  deposit  notes  and  certificates  of  deposit,  (v)  loan
participations,  (vi) repurchase agreements,  (vii) securities owned but subject
to a repurchase  agreement  and (viii)  currency,  interest  rate and  commodity
swaps.

iv. 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.

                                      J-6
<PAGE>

v. 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.

vi.  Until the date of  purchase  of the Rule 144A  Securities,  the Buyer  will
notify each of the patties to which this certification is made of any changes in
the information and conclusions herein.  Until such notice is given, the Buyer's
purchase  of  the   Certificates   will  constitute  a  reaffirmation   of  this
certification  as of the date of such purchase.  In addition,  if the Buyer is a
bank or  savings  and loan is  provided  above,  the Buyer  agrees  that it will
furnish to such parties updated annual financial  statements promptly after they
become available.

                                                 -------------------------------
                                                 Print Name of Buyer

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

                                                 Date:
                                                      --------------------------

                                   J-7

<PAGE>

                                                            ANNEX 2 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [For Transferees That are Registered Investment Companies]

The undersigned  (the "Buyer") hereby certifies as follows to the parties listed
in the Rule 144A Transferee Certificate to which this certification relates with
respect to the Certificates described therein:

1. As indicated below, the undersigned is the President, Chief Financial Officer
or  Senior  Vice  President  of the  Buyer  or,  if the  Buyer  is a  "qualified
institutional  buyer" as that term is defined in Rule 144A under the  Securities
Act of 1933,  as  amended  ("Rule  144A")  because  Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.

2.  In  connection   with  purchases  by  Buyer,   the  Buyer  is  a  "qualified
institutional  buyer" as  defined in SEC Rule 144A  because  (i) the Buyer is an
investment  company  registered  under the  Investment  Company Act of 1940,  as
amended and (ii) as marked  below,  the Buyer  alone,  or the Buyer's  Family of
Investment Companies,  owned at least $100,000,000 in securities (other than the
excluded  securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining  the amount of securities  owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was  used,  except  (i)  where the  Buyer or the  Buyer's  Family of  Investment
Companies  reports its  securities  holdings in its financial  statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those  securities  has been  published.  If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

                  ____  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,

                                      J-8
<PAGE>

(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.

6. Until the date of purchase of the  Certificates,  the undersigned will notify
the  parties  listed  in the Rule  144A  Transferee  Certificate  to which  this
certification  relates of any changes in the information and conclusions herein.
Until such  notice is given,  the  Buyer's  purchase  of the  Certificates  will
constitute a reaffirmation  of this  certification  by the undersigned as of the
date of such purchase.

                                               ---------------------------------
                                               Print Name of Buyer or Adviser

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

                                               IF AN ADVISER:

                                               ---------------------------------
                                               Print Name of Buyer

                                               Date:
                                                    ----------------------------

                                      J-9

<PAGE>

                                    EXHIBIT K

                 FORM OF CLASS R CERTIFICATE TRANSFER AFFIDAVIT

         C-BASS MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2000-CB4

STATE OF               )
                       ) ss.:
COUNTY OF              )

The undersigned, being first duly sworn, deposes and says as follows:

1. The undersigned is an officer of ____________,  the proposed Transferee of an
Ownership Interest in a Class R Certificate (the "Certificate")  issued pursuant
to the Pooling  and  Servicing  Agreement,  (the  "Agreement"),  relating to the
above-referenced  Certificates,  among Residential Asset Funding Corporation, as
depositor,  Credit-Based  Asset  Servicing  and  Securitization  LLC, as seller,
Litton Loan Servicing LP, as servicer,  and The Chase Manhattan Bank, as trustee
(the "Trustee").  Capitalized  terms used, but not defined herein shall have the
meanings ascribed to such terms in the Agreement.  The Transferee has authorized
the undersigned to make this affidavit on behalf of the Transferee.

2. The Transferee is, as of the date hereof,  and will be, as of the date of the
Transfer,  a Permitted  Transferee.  The  Transferee  is acquiring its Ownership
Interest in the  Certificate  either (i) for its own account or (ii) as nominee,
trustee or agent for another  Person and has attached  hereto an affidavit  from
such Person in substantially the same form as this affidavit. The Transferee has
no knowledge that any such affidavit is false.

3. The  Transferee has been advised of, and  understands  that (i) a tax will be
imposed  on  Transfers  of the  Certificate  to Persons  that are not  Permitted
Transferees;  (ii)  such tax will be  imposed  on the  transferor,  or,  if such
Transfer is through an agent (which includes a broker, nominee or middleman) for
a Person that is not a Permitted Transferee,  on the agent; and (iii) the Person
otherwise  liable for the tax shall be relieved of liability  for the tax if the
subsequent Transferee furnished to such Person an affidavit that such subsequent
Transferee is a Permitted  Transferee and, at the time of Transfer,  such Person
does not have actual knowledge that the affidavit is false.

4. The  Transferee  has been  advised  of,  and  understands  that a tax will be
imposed on a "pass-through entity" holding the Certificate if at any time during
the  taxable  year of the  pass-through  entity a Person that is not a Permitted
Transferee  is the record holder of an interest in such entity.  The  Transferee
understands  that such tax will not be imposed  for any period  with  respect to
which the record holder furnishes to the  pass-through  entity an affidavit that
such record holder is a Permitted  Transferee and the  pass-through  entity does
not have actual  knowledge  that such affidavit is false.  (For this purpose,  a
"pass-through  entity" includes a regulated  investment  company,  a real estate
investment  trust or common  trust fund,  a  partnership,  trust or estate,  and
certain  cooperatives  and,  except as

                                   K-1

<PAGE>

may  be  provided  in  Treasury   Regulations,   persons  holding  interests  in
pass-through entities as a nominee for another Person.)

5. The  Transferee  has  reviewed  the  provisions  of  Section  5.02(d)  of the
Agreement  and  understands  the legal  consequences  of the  acquisition  of an
Ownership  Interest  in  the  Certificate  including,  without  limitation,  the
restrictions on subsequent  Transfers and the provisions  regarding  voiding the
Transfer and mandatory sales. The Transferee expressly agrees to be bound by and
to  abide  by the  provisions  of  Section  5.02(d)  of the  Agreement  and  the
restrictions  noted on the face of the Certificate.  The Transferee  understands
and agrees that any breach of any of the  representations  included herein shall
render the Transfer to the Transferee contemplated hereby null and void.

6. The Transferee agrees to require a Transfer Affidavit from any Person to whom
the Transferee  attempts to Transfer its Ownership  Interest in the Certificate,
and in  connection  with any  Transfer  by a Person for whom the  Transferee  is
acting as nominee,  trustee or agent,  and the Transferee  will not Transfer its
Ownership  Interest or cause any  Ownership  Interest to be  Transferred  to any
Person that the Transferee  knows is not a Permitted  Transferee.  In connection
with any such Transfer by the  Transferee,  the Transferee  agrees to deliver to
the Trustee a certificate  substantially in the form set forth in this Exhibit K
to the Agreement (a "Transferor Certificate") to the effect that such Transferee
has no actual  knowledge  that the Person to which the Transfer is to be made is
not a Permitted Transferee.

7. The  Transferee  does not have the  intention  to impede  the  assessment  or
collection  of  any  tax  legally  required  to be  paid  with  respect  to  the
Certificate.

8. The Transferee's taxpayer identification number is ________.

9. The Transferee is a U.S. Person as defined in Code Section 7701(a)(30).

10. The Transferee is aware that the Certificate may be a "noneconomic  residual
interest"  within  the  meaning of  proposed  Treasury  regulations  promulgated
pursuant to the Code and that the transferor of a noneconomic  residual interest
will remain liable for any taxes due with respect to the income on such residual
interest,  unless no  significant  purpose  of the  transfer  was to impede  the
assessment or collection of tax.

11. The Transferee is not an employee benefit plan that is subject to ERISA or a
plan that is subject to Section 4975 of the Code, nor are we acting on behalf of
such a plan.

                                      K-2
<PAGE>

IN WITNESS WHEREOF,  the Transferee has caused this instrument to be executed on
its  behalf,  pursuant  to  authority  of its  Board of  Directors,  by its duly
authorized officer and its corporate seal to be hereunto affixed, duly attested,
this ___ day of _____________, 20__.

                                                  [NAME OF TRANSFEREE]

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

[Corporate Seal]

ATTEST:

[Assistant] Secretary

Personally appeared before me the above-named ________, known or proved to me to
be  the  same  person  who  executed  the  foregoing  instrument  and  to be the
_____________ of the Transferee,  and acknowledged  that he executed the same as
his free act and deed and the free act and deed of the Transferee.

Subscribed and sworn before me this ___ day of , 20_____.

                                                  ------------------------------
                                                  NOTARY PUBLIC

                                                  My Commission expires the ____
                                                  day of ____________, 20__.

                                   K-3
<PAGE>

                                    EXHIBIT L

                         FORM OF TRANSFEROR CERTIFICATE

                                                                          [DATE]

Residential Asset Funding Corporation
One First Union Center, TW9
Charlotte, NC 28288-0610

         Re:    C-BASS Mortgage Loan Asset-Backed Certificates, Series 2000-CB4
                ---------------------------------------------------------------

Ladies and Gentlemen:

In connection  with our  disposition  of the C-BASS  Mortgage Loan  Asset-Backed
Certificates,  Series  2000-CB4  (the  "Certificates"),  we certify  that (a) we
understand that the  Certificates  have not been registered under the Securities
Act of  1933,  as  amended  (the  "Act"),  and  are  being  disposed  by us in a
transaction that is exempt from the registration requirements of the Act, (b) we
have not offered or sold any  Certificates  to, or  solicited  offers to buy any
Certificates  from, any person,  or otherwise  approached or negotiated with any
person with  respect  thereto,  in a manner  that would be deemed,  or taken any
other  action which would result in, a violation of Section 5 of the Act, (c) to
the extent we are disposing of a Class [ ] Certificate, we have no knowledge the
Transferee  is not a  Permitted  Transferee  and (d) no purpose of the  proposed
disposition of a Class [ ] Certificate is to impede the assessment or collection
of tax.

                                                Very truly yours,

                                                [                              ]
                                                  ----------------------------

                                                By:
                                                   -----------------------------

                                      L-1
<PAGE>

                                    EXHIBIT M

                                   [RESERVED]

                                      M-1

<PAGE>

                                    EXHIBIT N

                              DEPOSITORY AGREEMENT

                      [On File With Dewey Ballantine LLP]

                                      N-1
<PAGE>

                                    EXHIBIT O

                   FORM OF SERVICER REQUEST FOR REIMBURSEMENT

                                   O-1

<PAGE>

                                    EXHIBIT P

                    MONTHLY INFORMATION DELIVERED BY SERVICER

                  1. With respect to the Mortgage Pool and each Loan Group,  the
number and  Principal  Balances of all Mortgage  Loans which were the subject of
Principal Prepayments during the related Due Period.

                  2. With respect to the Mortgage Pool and each Loan Group,  the
amount of all curtailments which were received during the related Due Period.

                  3. With respect to the Mortgage Pool and each Loan Group,  the
aggregate amount of principal  portion of all Monthly  Payments  received during
the related Due Period.

                  4. With respect to the Mortgage Pool and each Loan Group,  the
amount of interest received on the Mortgage Loans during the related Due Period.

                  5. With respect to the Mortgage Pool and each Loan Group,  the
aggregate  amount  of the  Advances  made and  recovered  with  respect  to such
Distribution Date.

                  6. With respect to the Mortgage Pool and each Loan Group,  the
delinquency and  foreclosure  information and the amount of Mortgage Loan Losses
during the related Due Period.

                  7. With respect to the Mortgage Pool and each Loan Group,  the
weighted average  maturity,  the weighted average Mortgage Interest Rate and the
weighted average Net Mortgage Interest Rate as of the last day of the Due Period
preceding of the related Accrual Period.

                  8. The Servicing  Fees paid and Servicing  Fees accrued during
the related Due Period.

                  9.  The  amount  of  all  payments  or  reimbursements  to the
Servicer paid or to be paid since the prior Distribution Date (or in the case of
the first Distribution Date, since the Closing Date).

                  10. The Pool Balance and aggregate  Principal Balance for each
Loan Group.

                  11. The PMI Fees paid and PMI Fees accrued  during the related
Due Period.

                  12. With respect to the Mortgage Pool and each Loan Group, the
number of Mortgage  Loans  outstanding  at the  beginning  and at the end of the
related Due Period.

                                      P-1

<PAGE>

                  13. The aggregate interest accrued on the Mortgage Loans at
their respective Mortgage Interest Rates for the
related Due Period.

                  14. The amount  deposited in the Collection  Account which may
not be withdrawn  therefrom  pursuant to an Order of a United States  Bankruptcy
Court of competent  jurisdiction imposing a stay pursuant to Section 362 of U.S.
Bankruptcy Code.

                  15. The aggregate Realized Losses since the Cut-off Date as of
the end of the related Due Period.

                  16.  The LIBOR  Carryover  Amount for the Class A-IA and Class
A-1F Certificates, if any, with respect to such Distribution Date.

                  17.    The    Overcollateralized    Amount,    the    Targeted
Overcollateralization  Amount and any Overcollateralization  Deficiency, in each
case after giving effect to distributions on such Distribution Date.

                                      P-2
<PAGE>

                                    EXHIBIT Q

                                   [RESERVED]

                                      Q-1
<PAGE>

                                    EXHIBIT R

               FORM OF NOTICE OF PREPAYMENT PREMIUM INCONSISTENCY

                                                          ________________, 20__

Credit-Based Asset Servicing and Securitization LLC
335 Madison Avenue, 19th Floor
New York, New York 10017

     Re:  Pooling   and  Servicing  Agreement  (the  "Agreement")  dated  as  of
          November  1,  2000,  among  Residential  Asset  Funding   Corporation,
          Credit-Based  Asset  Servicing  and  Securitization  LLC,  Litton Loan
          Servicing LP and The Chase Manhattan Bank-- C-BASS Mortgage Loan Asset
          Backed Certificates, Series 2000-CB4

Ladies and Gentlemen:

Pursuant to Section 3.01 of the  Agreement,  we have  determined  the  following
inconsistency  between  the amount of the  Prepayment  Premium  remitted  by the
Servicer and the amount of the Prepayment Premium set forth in the Mortgage Loan
Schedule with respect to Mortgage Loan No. _____________:

                                                    THE CHASE MANHATTAN BANK
                                                    as Trustee

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

                                      R-1
<PAGE>

                                    EXHIBIT S

                OFFICER'S CERTIFICATE WITH RESPECT TO PREPAYMENTS

                              Officer's Certificate

         C-BASS Mortgage Loan Asset-Backed Certificates, Series 2000-CB4

Date

Via Facsimile

The Chase Manhattan Bank, Trustee
450 West 33rd Street
14th Floor
New York, NY 10001

         Re:      Pre-Payments

Dear Sir or Madam:

________________hereby  certifies  that  he/she is an officer  of the  Servicer,
holding the office set forth beneath  his/her name and hereby further  certifies
as follows:

With respect to the Mortgage Loans set forth in the attached schedule:

1.   A Principal  Prepayment in full was received during the related  Collection
     Period;

2.   Any  prepayment  penalty  due  under the  terms of the  Mortgage  Note with
     respect  to  such  Principal  Prepayment  in full  was  received  from  the
     mortgagor and deposited in the Collection Account;  __________Yes  ________
     No

3.   As to each Mortgage Loan so noted on the attached schedule,  all or part of
     the prepayment penalty required in connection with the Principal Prepayment
     in  full  was  waived  based  upon  (Circle   one):   (i)  the   Servicer's
     determination  that such waiver  would  maximize  recovery  of  Liquidation
     Proceeds  for such  Mortgage  Loan,  taking into  account the value of such
     prepayment penalty,  or (ii) (A) the enforceability  thereof be limited (1)
     by bankruptcy insolvency,  moratorium,  receivership,  or other similar law
     relating to  creditors'  rights  generally  or (2) due to  acceleration  in
     connection  with a foreclosure  or other  involuntary  payment,  or (B) the
     enforceability is otherwise limited or prohibited by applicable law;

4.   We  certify  that  all  amounts  due in  connection  with the  waiver  of a
     prepayment  penalty  inconsistent with number 3 above which are required to
     be deposited  by the  Servicer  pursuant to Section 3.01 of the Pooling and
     Servicing Agreement, have been or will be so deposited.

Capitalized  terms used herein shall have the meanings ascribed to such terms in
the Pooling and Servicing  Agreement,  dated November 1, 2000, among Residential
Asset

                                      S-1

<PAGE>

Funding   Corporation,   as  depositor,   Credit-Based   Asset  Servicing,   and
Securitization  LLC, as seller,  Litton Loan Servicing LP, as servicer,  and The
Chase Manhattan Bank, as trustee.

                                                 By: LITTON LOAN SERVICING LP

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

                                      S-2EXECUTION COPY

================================================================================

                      RESIDENTIAL ASSET FUNDING CORPORATION

                                  as Purchaser

                                       and

               CREDIT-BASED ASSET SERVICING AND SECURITIZATION LLC

                                    as Seller

                        MORTGAGE LOAN PURCHASE AGREEMENT

                  Fixed Rate and Adjustable Rate Mortgage Loans

                                 2000-CB4 Trust,
         C-BASS Mortgage Loan Asset-Backed Certificates, Series 2000-CB4

                          Dated as of November 1, 2000

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
Article I         DEFINITIONS..................................................1

   Section 1.01   Definitions..................................................1

Article II        SALE OF MORTGAGE LOANS; PAYMENT Of
                  PURCHASE PRICE...............................................2

   Section 2.01   Sale of Mortgage Loans.......................................2
   Section 2.02   Obligations of Seller Upon Sale..............................2
   Section 2.03   Payment of Purchase Price for the Mortgage Loans.............5

Article III       REPRESENTATIONS AND WARRANTIES; REMEDIES
                  FOR BREACH...................................................5

   Section 3.01   Seller Representations and Warranties Relating to the
                  Mortgage Loans...............................................5
   Section 3.02   Seller Representations and Warranties.......................13

Article IV        SELLER'S COVENANTS..........................................17

   Section 4.01   Covenants of the Seller.....................................17

Article V         [RESERVED]..................................................17

Article VI        TERMINATION.................................................17

   Section 6.01   Termination.................................................17

Article VII       MISCELLANEOUS PROVISIONS....................................18

   Section 7.01   Amendment...................................................18
   Section 7.02   Governing Law...............................................18
   Section 7.03   Notices.....................................................18
   Section 7.04   Severability of Provisions..................................18
   Section 7.05   Counterparts................................................18
   Section 7.06   Further Agreements..........................................19
   Section 7.07   Intention of the Parties....................................19
   Section 7.08   Successors and Assigns; Assignment of this Agreement........19
   Section 7.09   Survival....................................................20

Schedule I      - Mortgage Loan Schedule

<PAGE>

          MORTGAGE  LOAN PURCHASE  AGREEMENT,  dated as of November 1, 2000 (the
"Agreement"),  between  CREDIT-BASED  ASSET  SERVICING  AND  SECURITIZATION  LLC
("C-BASS" or the  "Seller")  and  RESIDENTIAL  ASSET  FUNDING  CORPORATION  (the
"Purchaser").

                              W I T N E S S E T H:
                              - - - - - - - - - -

          WHEREAS, the Seller is the owner of either the notes or other evidence
of  indebtedness  (the  "Mortgage  Notes") or other  evidence  of  ownership  so
indicated  on  Schedule  I  hereto,  and  the  other  documents  or  instruments
constituting the Mortgage File (collectively, the "Mortgage Loans"); and

          WHEREAS,  the Seller,  as of the date hereof,  owns the mortgages (the
"Mortgages")  on the  properties  (the  "Mortgaged  Properties")  securing  such
Mortgage Loans,  including rights (a) to any property acquired by foreclosure or
deed  in lieu of  foreclosure  or  otherwise,  and  (b) to the  proceeds  of any
insurance  policies  covering the Mortgage Loans or the Mortgaged  Properties or
the obligors on the Mortgage Loans; and

          WHEREAS,  the parties  hereto desire that the Seller sell the Mortgage
Loans to the Purchaser and the  Purchaser  purchase the Mortgage  Loans from the
Seller pursuant to the terms of this Agreement; and

          WHEREAS,  pursuant to the terms of a Pooling and Servicing  Agreement,
dated as of November 1, 2000 (the "Pooling and Servicing Agreement"),  among the
Purchaser,  as depositor,  the Seller,  Litton Loan Servicing LP ("Litton"),  as
servicer,  and The  Chase  Manhattan  Bank,  as  trustee  (the  "Trustee"),  the
Purchaser will convey the Mortgage Loans to 2000-CB4 Trust.

          NOW,  THEREFORE,  in  consideration  of the  mutual  covenants  herein
contained, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

          Section 1.01  Definitions.  All capitalized terms used but not defined
herein and below  shall have the  meanings  assigned  thereto in the Pooling and
Servicing Agreement.

          "Custodian":  A custodian acceptable to the Trustee,  which may be the
Trustee and which shall not be the Seller or any  affiliate  of the Seller.  The
initial Custodian shall be Bank One Trust Company, N.A.

          "Insurance  Agreement":  With  respect to any FHA Mortgage  Loan,  the
insurance  contract issued by the FHA and, with respect to any VA Mortgage Loan,
the guarantee issued by the Department of Veteran's Affairs.

<PAGE>

                                   ARTICLE II

                SALE OF MORTGAGE LOANS; PAYMENT OF PURCHASE PRICE

          Section 2.01 Sale of Mortgage  Loans.  The Seller does hereby agree to
and does hereby sell,  assign,  set over, and otherwise convey to the Purchaser,
without recourse,  on the Closing Date (i) all of its right,  title and interest
in and to each  Mortgage  Loan and the related  Cut-off Date  Principal  Balance
thereof, including any Related Documents, (ii) all payments on or collections in
respect of the  Mortgage  Loans  received  after the Cut-off  Date  (except with
respect to any Arrearages);  (iii) property which secured such Mortgage Loan and
which has been acquired by foreclosure or deed in lieu of foreclosure;  (iv) its
interest in any insurance policies in respect of the Mortgage Loans; and (v) all
proceeds of any of the foregoing.

          Section 2.02 Obligations of Seller Upon Sale.

          (a) In connection  with any transfer  pursuant to Section 2.01 hereof,
the Seller further agrees, at its own expense,  on or prior to the Closing Date,
(x) to indicate in its books and records that the Mortgage  Loans have been sold
to the Purchaser  pursuant to this Agreement and (y) to deliver to the Purchaser
and the Trustee a computer  file  containing a true and complete list of all the
Mortgage Loans specifying, among other things, for each Mortgage Loan, as of the
Cut-off Date, its account number and Cut-off Date Principal  Balance.  Such file
(the "Mortgage Loan Schedule") which is included as Exhibit D to the Pooling and
Servicing Agreement, shall also be marked as Schedule I to this Agreement and is
hereby incorporated into and made a part of this Agreement.

          In connection with such transfer and assignment of the Mortgage Loans,
the Seller shall,  on behalf of the Purchaser,  deliver to and deposit with, the
Custodian,  as the agent of the Trustee,  the following documents or instruments
(with  respect to each  Mortgage  Loan, a "Mortgage  File") with respect to each
Mortgage Loan so transferred and assigned:

              (i) the original  Mortgage Note,  endorsed  either (A) in blank or
     (B) in the following  form:  "Pay to the order of The Chase Manhattan Bank,
     as Trustee under the Pooling and Servicing Agreement,  dated as of November
     1,  2000,  among  Credit-Based  Asset  Servicing  and  Securitization  LLC,
     Residential  Asset Funding  Corporation,  Litton Loan  Servicing LP and The
     Chase  Manhattan  Bank,  C-BASS  Mortgage Loan  Asset-Backed  Certificates,
     Series 2000-CB4,  without  recourse",  or with respect to any lost Mortgage
     Note, an original lost note  affidavit  stating that the original  mortgage
     note was lost, misplaced or destroyed,  together with a copy of the related
     mortgage note;

          (ii) the original Mortgage with evidence of recording thereon, and the
     original recorded power of attorney,  if the Mortgage was executed pursuant
     to a power of  attorney,  with  evidence of  recording  thereon or, if such
     Mortgage or power of attorney has been  submitted for recording but has not
     been returned from the applicable public recording office, has been lost or
     is not otherwise

                                       2

<PAGE>

     available,  a copy of such  Mortgage or power of attorney,  as the case may
     be, certified to be a true and complete copy of the original  submitted for
     recording;

              (iii) an original  Assignment  of Mortgage,  in form and substance
     acceptable  for  recording.  The Mortgage  shall be assigned  either (A) in
     blank or (B) to "The Chase Manhattan Bank, as Trustee under the Pooling and
     Servicing Agreement, dated as of November 1, 2000, among Credit-Based Asset
     Servicing and Securitization  LLC,  Residential Asset Funding  Corporation,
     Litton Loan Servicing LP and The Chase Manhattan Bank, C-BASS Mortgage Loan
     Asset-Backed Certificates, Series 2000-CB4, without recourse";

              (iv)   an original copy of any intervening  assignment of Mortgage
     showing a complete chain of assignments;

              (v)    the original  or a  certified  copy  of the lender's  title
     insurance policy;

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

              (vii)  for  each  FHA   Loan,  the  original   mortgage  insurance
     certificate;

              (viii) for each VA Loan,  the original loan guaranty  certificate;
     and

              (ix)   with respect to each  Mortgage  Loan that is subject to the
     provisions of the  Homeownership  and Equity  Protection Act of 1994 or any
     comparable  state  law,  a copy of a  notice  to  each  entity  that  was a
     purchaser or assignee of such Mortgage  Loan,  satisfying the provisions of
     such Act or law and the regulations issued  thereunder,  to the effect that
     the Mortgage Loan is subject to special truth in lending rules.

         If any of the documents referred to in Section 2.02(ii),  (iii) or (iv)
above has as of the Closing Date been submitted for recording but either (x) has
not been returned from the applicable  public  recording  office or (y) has been
lost or such public recording office has retained the original of such document,
the  obligations of the Seller to deliver such  documents  shall be deemed to be
satisfied  upon (1) delivery to the Custodian no later than the Closing Date, of
a copy of each such document certified by the Seller in the case of (x) above or
the applicable public recording office in the case of (y) above to be a true and
complete  copy of the original  that was submitted for recording and (2) if such
copy is  certified  by the Seller,  delivery  to the  Custodian,  promptly  upon
receipt  thereof of either the original or a copy of such document  certified by
the  applicable  public  recording  office to be a true and complete copy of the
original.  If the original  lender's  title  insurance  policy was not delivered
pursuant  to Section  2.02(v)  above,  the Seller  shall  deliver or cause to be
delivered  to  the  Custodian,   a  written  commitment  or  interim  binder  or
preliminary  report of title issued by the title  insurance  or escrow  company,
with the  original to be  delivered  to the  Custodian,  promptly  upon  receipt
thereof.  The Seller shall  deliver or cause to be  delivered  to the  Custodian

                                       3

<PAGE>

promptly upon receipt thereof any other original  documents  constituting a part
of a Mortgage File received with respect to any Mortgage  Loan,  including,  but
not limited to, any original documents  evidencing an assumption or modification
of any Mortgage Loan.

         Upon  discovery  or  receipt  of  notice  of any  materially  defective
document  in, or that a document is missing  from, a Mortgage  File,  the Seller
shall have 120 days to cure such defect or 150 days  following the Closing Date,
in the case of  missing  Mortgages  or  Assignments,  or  deliver  such  missing
document to the Trustee (or within 90 days of the earlier of Seller's  discovery
or receipt of  notification  if such defect would cause the Mortgage Loan not to
be a "qualified mortgage" for REMIC purposes).  If the Seller does not cure such
defect or deliver such  missing  document  within such time  period,  the Seller
shall either  repurchase or substitute for such Mortgage Loan in accordance with
Section 2.03 of the Pooling and Servicing Agreement.

         The Purchaser hereby  acknowledges  its acceptance of all right,  title
and  interest  to the  Mortgage  Loans  and other  property,  now  existing  and
hereafter created, conveyed to it pursuant to Section 2.01.

         The parties  hereto intend that the  transaction  set forth herein be a
sale by the  Seller  to the  Purchaser  of all the  Seller's  right,  title  and
interest in and to the Mortgage Loans and other property described above. In the
event the  transaction  set forth herein is deemed not to be a sale,  the Seller
hereby grants to the Purchaser a security interest in all of the Seller's right,
title  and  interest  in, to and under  the  Mortgage  Loans and other  property
described above, whether now existing or hereafter created, to secure all of the
Seller's obligations  hereunder;  and this Agreement shall constitute a security
agreement  under  applicable  law. The Seller and the  Purchaser  shall,  to the
extent consistent with this Agreement,  take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security  interest in the
Mortgage  Loans,  such  security  interest  would be  deemed  to be a  perfected
security  interest of first priority under applicable law and will be maintained
as such throughout the term of the Pooling and Servicing Agreement.

         (b) The Seller  shall  cause the  Assignments  of  Mortgage  which were
delivered in blank to be completed and shall cause all  Assignments  referred to
in 2.02(iii) hereof and, to the extent necessary,  in Section 2.02(iv) hereof to
be  recorded;  provided,  however,  the Seller need not cause to be recorded any
Assignment which relates to a Mortgage Loan in any  jurisdiction  under the laws
of which,  as evidenced by an Opinion of Counsel  delivered by the Seller to the
Trustee and the Rating  Agencies,  the  recordation  of such  Assignment  is not
necessary to protect the Trustee's  interest in the related Mortgage Loan. Under
the terms of the Pooling and Servicing  Agreement,  the Seller shall be required
to deliver such  assignments  for recording  within 30 days of the Closing Date.
The  Seller  shall  furnish  the  Custodian  with a copy of each  Assignment  of
Mortgage submitted for recording.  In the event that any such Assignment is lost
or returned  unrecorded  because of a defect therein,  the Seller shall promptly
have a substitute Assignment prepared or have such defect cured, as the case may
be, and thereafter cause each such Assignment to be duly recorded.  In the event
that any  Mortgage  Note is endorsed in blank as of the Closing  Date,  promptly
following  the

                                       4

<PAGE>

Closing Date the Seller shall cause to be completed  such  endorsements  "Pay to
the order of The  Chase  Manhattan  Bank,  as  Trustee  under  the  Pooling  and
Servicing  Agreement,  dated as of November 1, 2000,  among  Credit-Based  Asset
Servicing and Securitization LLC, Residential Asset Funding Corporation,  Litton
Loan  Servicing  LP  and  The  Chase  Manhattan   Bank,   C-BASS  Mortgage  Loan
Asset-Backed Certificates, Series 2000-CB4, without recourse."

         Section  2.03  Payment of Purchase  Price for the  Mortgage  Loans.  In
consideration of the sale of the Mortgage Loans from the Seller to the Purchaser
on the Closing Date,  the  Purchaser  agrees to pay to the Seller on the Closing
Date by transfer of immediately  available funds, as directed by the Seller,  an
amount equal to  $159,520,326.62 in respect of the Mortgage Loans (the "Purchase
Price"),  net of an expense  reimbursement  amount of  $56,644.00  (the "Expense
Reimbursement  Amount"),  and to transfer  to the Seller or its  designee on the
Closing  Date  the  Class  B-2,  Class  N,  Class  X and  Class  R  Certificates
(collectively,  the "Private  Certificates").  The Expense  Reimbursement Amount
shall  reimburse  the  Purchaser  for the  Purchaser's  Securities  and Exchange
Commission   registration  statement  fees  and  the  Purchaser's   registration
statement  administration fees allocable to the Trust. The Seller shall pay, and
be billed  directly  for, all expenses  incurred by the  Purchaser in connection
with the issuance of the Certificates,  including, without limitation,  printing
fees incurred in connection  with the prospectus  relating to the  Certificates,
blue  sky  registration  fees and  expenses,  fees and  reasonable  expenses  of
Purchaser's  counsel,  fees  of  the  rating  agencies  requested  to  rate  the
Certificates,  accountant's  fees and  expenses and the fees and expenses of the
Trustee and other out-of-pocket  costs, if any. If the Purchaser shall determine
that the  Expense  Reimbursement  Amount  is not  sufficient  to  reimburse  the
Purchaser for all expenses  incurred by it that are subject to  reimbursement by
the Seller hereunder as described above, the Seller shall promptly reimburse the
Purchaser for such  additional  amounts upon written  notice by the Purchaser to
the Seller.

                                  ARTICLE III

               REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH

         Section  3.01 Seller  Representations  and  Warranties  Relating to the
Mortgage Loans. The Seller hereby represents and warrants to the Purchaser, with
respect to the  Mortgage  Loans,  that as of the Closing Date or as of such date
specifically provided herein:

         (a)  The  information  set  forth  in the  Mortgage  Loan  Schedule  is
complete, true and correct as of the Cut-off Date.

         (b) There are no delinquent taxes,  ground rents, water charges,  sewer
rents,  assessments,  including  assessments payable in future installments,  or
other outstanding charges affecting the related Mortgaged Property.

         (c) The  terms  of the  Mortgage  Note and the  Mortgage  have not been
impaired,  waived,  altered  or  modified  in any  respect,  except  by  written
instruments,

                                       5

<PAGE>

recorded in the applicable  public recording office if necessary to maintain the
lien priority of the Mortgage and the interests of the  Certificateholders,  and
which have been  delivered  to the  Trustee;  the  substance of any such waiver,
alteration or modification has been approved by the title insurer, to the extent
required by the related policy,  and is reflected on the Mortgage Loan Schedule.
No instrument of waiver,  alteration or modification  has been executed,  and no
Mortgagor has been released,  in whole or in part, except, in connection with an
assumption  agreement  approved by the title insurer,  to the extent required by
the policy and, in the case of an FHA Loan or VA Loan, to the extent required by
the related Insurance Agreement,  as applicable,  and which assumption agreement
has been  delivered  to the Trustee and the terms of which are  reflected in the
Mortgage Loan Schedule.

         (d) The Mortgage  Note and the Mortgage are not subject to any right of
rescission,  set-off,  counterclaim or defense,  including the defense of usury,
nor  will  the  operation  of any of the  terms  of the  Mortgage  Note  and the
Mortgage,  or  the  exercise  of  any  right  thereunder,  render  the  Mortgage
unenforceable,  in whole or in part,  or  subject  to any  right of  rescission,
set-off,  counterclaim  or defense,  including  the defense of usury and no such
right of  rescission,  set-off,  counterclaim  or defense has been asserted with
respect thereto.

         (e)  All  buildings  upon  the  Mortgaged  Property  are  insured  by a
generally  acceptable insurer against loss by fire, hazards of extended coverage
and such other hazards as are customary in the area where the Mortgaged Property
is located, pursuant to insurance policies conforming to the requirements of the
Pooling and Servicing Agreement.  All such insurance policies contain a standard
mortgagee clause naming the Seller,  its successors and assigns as mortgagee and
all premiums  thereon have been paid. If upon  origination of the Mortgage Loan,
the Mortgaged  Property was in an area identified on a Flood Hazard Map or Flood
Insurance Rate Map issued by the Federal  Emergency  Management Agency as having
special flood hazards (and such flood insurance has been made available) a flood
insurance  policy  meeting the  requirements  of the current  guidelines  of the
Federal  Insurance  Administration  is in effect  which  policy  conforms to the
requirements  of the Federal  National  Mortgage  Association  ("FNMA")  and the
Federal Home Loan Mortgage  Corporation  ("FHLMC").  The Mortgage  obligates the
Mortgagor  thereunder to maintain all such insurance at the Mortgagor's cost and
expense,  and on the Mortgagor's  failure to do so, authorizes the holder of the
Mortgage to maintain such insurance at the  Mortgagor's  cost and expense and to
seek  reimbursement  therefor  from  the  Mortgagor.  All  acts  required  to be
performed  to  preserve  the  rights  and  remedies  of the  Trustee in any such
insurance  policies have been  performed,  including,  without  limitation,  any
necessary  notifications  of insurers and  assignments  of policies or interests
therein.

         (f) Any and all  requirements  of any  federal,  state  or  local  law,
including,  without limitation,  usury, truth in lending, real estate settlement
procedures,  consumer credit protection,  equal credit opportunity or disclosure
laws applicable to the origination and servicing of the Mortgage Loans have been
complied with.

                                       6

<PAGE>

         (g) The Mortgage has not been satisfied, canceled,  subordinated (other
than with  respect to second lien  loans,  the  subordination  to the first lien
loan)  rescinded,  in whole or in part, and the Mortgaged  Property has not been
released  from the  lien of the  Mortgage,  in  whole  or in  part,  nor has any
instrument been executed that would effect any such satisfaction,  cancellation,
subordination, rescission or release.

         (h) The Mortgage is a valid,  existing and enforceable  first or second
lien on the  Mortgaged  Property,  including all  improvements  on the Mortgaged
Property  subject  only to (1) the  lien of  current  real  property  taxes  and
assessments not yet due and payable, (2) covenants, conditions and restrictions,
rights of way,  easements  and other matters of the public record as of the date
of recording being acceptable to mortgage lending institutions generally and, in
the  case of FHA  Loans  and VA  Loans,  to the FHA  and VA,  respectively,  and
specifically referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan, (3) other matters to which like  properties are
commonly  subject  which do not  materially  interfere  with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability  of the related  Mortgaged  Property  and which may not in any way
prevent  realization  of the  benefits of the related  Insurance  Agreement,  if
applicable  and (4) with respect to any second lien mortgage  loan,  the lien of
the related first  mortgage loan. Any security  agreement,  chattel  mortgage or
equivalent  document  related to and delivered in  connection  with the Mortgage
Loan establishes and creates a valid,  existing and enforceable  first or second
lien and first or second priority  security  interest on the property  described
therein  and the  Seller  has  full  right to sell  and  assign  the same to the
Purchaser.

         (i) The Mortgage Note and the related  Mortgage are genuine and each is
the legal,  valid and binding  obligation of the maker  thereof,  enforceable in
accordance with its terms.

         (j) The proceeds of the Mortgage  Loan have been fully  disbursed to or
for the account of the Mortgagor and there is no obligation for the mortgagee to
advance  additional  funds  thereunder  and  any  and  all  requirements  as  to
completion of any on-site or off-site improvement and as to disbursements of any
escrow funds  therefor have been  complied  with.  All costs,  fees and expenses
incurred  in  making or  closing  the  Mortgage  Loan and the  recording  of the
Mortgage have been paid,  and the Mortgagor is not entitled to any refund of any
amounts paid or due to the mortgagee pursuant to the Mortgage Note or Mortgage.

         (k)  Immediately  prior to the  transfer  and  assignment  contemplated
herein,  the Seller was the sole owner and holder of the Mortgage  Loans and has
good and marketable  title to each Mortgage Loan,  free and clear of any and all
liens, pledges, charges, claims,  participation interests,  mortgages,  security
interests or  encumbrances  or other  interests of any nature and has full right
and authority to sell and assign the same.

         (l) Each Mortgage Loan is covered by an ALTA mortgagee  title insurance
policy acceptable to FNMA or FHLMC,  issued by a title insurer acceptable to (1)
FNMA and FHLMC,  in the case of a conventional  Mortgage Loan and (2) the FHA or

                                       7

<PAGE>

VA, as the case may be, in the case of an FHA Loan or a VA Loan,  and  qualified
to do  business in the  jurisdiction  where the  Mortgaged  Property is located,
insuring  (subject  to the  exceptions  contained  in (h)(1)  and (2) above) the
Seller,  its successors  and assigns as to the first or second  priority lien of
the Mortgage in the original  principal  amount of the Mortgage Loan and against
any loss by reason of the invalidity or  unenforceability  of the lien resulting
from the  provisions of the Mortgage  providing  for  adjustment in the mortgage
interest  rate  and/or  monthly  payment  including  any  negative  amortization
thereunder.  Additionally,  such mortgagee title insurance policy  affirmatively
insures  ingress  and egress to and from the  Mortgaged  Property,  and  against
encroachments  by or upon the Mortgaged  Property or any interest  therein.  The
Seller is the sole insured of such mortgagee  title insurance  policy,  and such
lender's title insurance  policy is in full force and effect and will be in full
force and effect upon the consummation of the transactions  contemplated by this
Agreement. No claims have been made under such mortgagee title insurance policy,
and no prior holder of the related Mortgage,  including the Seller, has done, by
act or omission,  anything  which would  impair the  coverage of such  mortgagee
title insurance policy.

         (m) There are no  mechanics' or similar liens or claims which have been
filed for work,  labor or material (and no rights are outstanding that under law
could give rise to such lien) affecting the related Mortgaged Property which are
or may be liens prior to, or equal or coordinate  with,  the lien of the related
Mortgage.

         (n) The collection  practices used by the Servicer with respect to each
Mortgage Note and Mortgage have been in all respects legal, proper,  prudent and
customary in the mortgage servicing industry.

         (o) The  Mortgage  and related  Mortgage  Note  contain  customary  and
enforceable  provisions  such as to render the rights and remedies of the holder
thereof  adequate  for the  realization  against the  Mortgaged  Property of the
benefits  of the  security  provided  thereby,  including,  (1) in the case of a
Mortgage  designated as a deed of trust, by trustee's sale, and (2) otherwise by
judicial foreclosure.  There is no homestead or other exemption available to the
Mortgagor which would interfere with the right to sell the Mortgaged Property at
a trustee's  sale or the right to foreclose the Mortgage.  The Mortgagor has not
notified the Seller and the Seller has no  knowledge of any relief  requested or
allowed to the  Mortgagor  under the  Soldiers  and Sailors  Civil Relief Act of
1940, as amended.

         (p) The Mortgage Note is not and has not been secured by any collateral
except the lien of the corresponding  Mortgage on the Mortgaged Property and the
security interest of any applicable security agreement or chattel mortgage.

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

                                       8

<PAGE>

         (r) No Mortgage  Loan  contains  provisions  pursuant to which  monthly
payments  are (1) paid or  partially  paid with funds  deposited in any separate
account  established by the Seller,  the  Mortgagor,  or anyone on behalf of the
Mortgagor,  (2) paid by any source other than the  Mortgagor or (3) contains any
other  similar  provisions  which may  constitute  a  "buydown"  provision.  The
Mortgage  Loan is not a graduated  payment  mortgage  loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature.

         (s) The Mortgage  Note,  the  Mortgage,  the  Assignment  and any other
documents  required to be delivered  with respect to each Mortgage Loan pursuant
to the Pooling and Servicing Agreement have been delivered to the Trustee or its
designee,  all in compliance  with the specific  requirements of the Pooling and
Servicing Agreement.

         (t)  If  the  residential  dwelling  on  the  Mortgaged  Property  is a
condominium  unit or a unit  in a  planned  unit  development  (other  than a de
minimis planned unit  development)  such condominium or planned unit development
project meets FNMA's eligibility requirements.

         (u) None of the  Mortgage  Loans are secured by a  leasehold  estate or
constitute other than real property under applicable state law.

         (v) The rights with respect to each Mortgage Loan are assignable by the
Seller  without the consent of any Person  other than  consents  which will have
been obtained on or before the Closing Date.

         (w) The Mortgage Loans are not being transferred by the Seller with any
intent to hinder, delay or defraud any creditors of the Seller.

         (x) All  parties  which have had any  interest in each  Mortgage  Loan,
whether as mortgagee,  assignee,  pledgee or otherwise,  and including,  without
limitation,  the  Seller,  are (or  during  the  period  in which  they held and
disposed  such  interest,  were)  in  compliance  with  any and  all  applicable
licensing  requirements  of the laws of the state wherein the property  securing
the Mortgage is located to the extent that any  noncompliance  thereunder  would
affect the value or marketability of the Mortgage Loans.

         (y) To the best of Seller's  knowledge,  the Mortgaged Property is free
from any and all toxic or hazardous  substances and there exists no violation of
any local, state or federal environmental law, rule or regulation.

         (z)  The Mortgaged Property is free from material damage.

         (aa) Each Mortgage Loan has been serviced by the Servicer in accordance
with the terms thereof and Applicable Regulations.

         (bb) [Reserved]

         (cc) [Reserved]

                                       9

<PAGE>

         (dd)  There  is  no  proceeding   pending  for  the  total  or  partial
condemnation and no eminent domain  proceedings  pending affecting any Mortgaged
Property.

         (ee) There was no fraud  involved in the  origination  of any  Mortgage
Loan by the applicable  mortgagee or Mortgagor,  and to the best of the Seller's
knowledge,  there was no fraud by the  appraiser or any other party  involved in
the origination of any such Mortgage Loan.

         (ff) Each mortgage  file  contains an appraisal of or a broker's  price
opinion regarding the related Mortgaged  Property  indicating an appraised value
equal to the  appraised  value  identified  for such  Mortgaged  Property on the
Mortgage Loan Schedule. Each appraisal has been prepared on FNMA or FHLMC forms.

         (gg) No  improvements on any Mortgaged  Property  encroach on adjoining
properties (and in the case of a condominium  unit, such improvements are within
the  project  with  respect to that  unit),  and no  improvements  on  adjoining
properties  encroach  upon such  Mortgaged  Property  unless there exists in the
applicable  Mortgage File a title policy with endorsements  which insure against
losses sustained by the insured as a result of such encroachments.

         (hh) Each  Insurance  Agreement is in full force and effect and will be
in full force and effect upon the consummation of the transactions  contemplated
by this Agreement.

         (ii) With respect to escrow deposits,  if any, all such payments are in
the  possession  of, or under the control of, the  Servicer  and there exists no
deficiencies  in  connection  therewith  for which  customary  arrangements  for
repayment  thereof have not been made. No escrow  deposits or escrow advances or
other  charges or payments  due the  Servicer  have been  capitalized  under any
Mortgage or the related Note.

         (jj) Each Mortgaged Property consists of detached or semi-detached one-
to  four-family  dwelling  units,  townhouses,  mobile  or  manufactured  homes,
individual condominium units and individual units in planned unit developments.

         (kk) No Mortgage Loan,  other than a Bankruptcy  Plan Mortgage Loan, is
subject to any pending bankruptcy or insolvency proceeding. To the Seller's best
knowledge,  no material  litigation or lawsuit  relating to any Mortgage Loan is
pending.

         (ll) The  Seller  used no  selection  procedures  that  identified  the
Mortgage  Loans as being  less  desirable  or  valuable  than  other  comparable
mortgage loans originated or acquired by the Seller.

         (mm) The sale, transfer, assignment and conveyance of Mortgage Loans by
the  Seller  pursuant  to this  Agreement  will not  result  in any tax,  fee or
governmental  charge (other than income taxes and related  taxes) payable by the
Seller,  the Depositor or the Trustee to any federal,  state or local government
other  than taxes  which  have or will be paid by the  Seller as due  ("Transfer
Taxes").  In the event that the Depositor or the

                                       10

<PAGE>

Trustee  receives  actual  notice  of  any  Transfer  Taxes  arising  out of the
transfer,  assignment and conveyance of the Mortgage Loans, other than any taxes
to be paid by the creditor, on written demand by the Depositor,  or the Trustee,
or upon the Seller's  otherwise  being given notice  thereof by the Depositor or
the  Trustee,  the  Seller  shall  pay,  and  otherwise  indemnify  and hold the
Depositor and the Trustee harmless,  on an after-tax basis, from and against any
and all such Transfer Taxes (it being  understood  that the  Certificateholders,
the Trustee and the  Depositor  shall have no  obligation  to pay such  Transfer
Taxes).

         (nn) With respect to each  Mortgage  Loan that is a "mortgage"  as such
term is defined in 15 U.S.C.  1602(aa),  no obligor  has or will have a claim or
defense  under  such  Mortgage  Loan as a  result  of a  violation  of the  Home
Ownership and Equity Protection Act of 1994.

         (oo) With  respect to the  Mortgage  Loans,  the  Mortgaged  Properties
securing  repayment  of the  related  Mortgage  Note,  consists  of a fee simple
interest in a single parcel or two contiguous  parcels of real property improved
by a (A) detached one-family dwelling, (B) detached two-to four family dwelling,
(C)  one-family  unit  in a FNMA  eligible  condominium  project,  (D)  detached
one-family  dwelling in a planned unit development  which is not a co-operative,
(E)  multi-family  dwelling or (F) mobile home or  manufactured  dwelling  which
constitutes real property.

         (pp) Except for the Mortgage  Loans  identified  on the  Mortgage  Loan
Schedule as  delinquent,  there is no  default,  breach,  violation  or event of
acceleration  existing  under the  Mortgage  or the  Mortgage  Note and no event
which,  with the passage of time or with notice and the  expiration of any grace
or cure  period,  would  constitute  a default,  breach,  violation  or event of
acceleration,  and the Seller has not waived any default,  breach,  violation or
event of  acceleration  except,  in the  case of an FHA  Loan or a VA  Loan,  by
written instruments,  and the substance of which waiver has been approved by the
FHA or VA,  as the  case  may  be,  to the  extent  required  by the  applicable
Insurance Agreement.

         (qq) The  Seller  has no  actual  knowledge  that with  respect  to any
Mortgage  Loan (1) the  Servicer  has sent a notice of  default  to the  related
Mortgagor  which the  Servicer  is  currently  seeking  to  enforce,  or (2) any
foreclosure  proceedings have been commenced or acceleration been declared which
is currently  pending The Seller is not  transferring  any Mortgage  Loan to the
Purchaser  with the intention or knowledge  that the Purchaser or the Trust will
acquire the related Mortgaged Property.

         (rr) Except with respect to 3.60% and 0.48% of the Mortgage  Loans that
are 30-59 days and 60-89  days,  respectively,  contractually  delinquent  as of
November  1, 2000 no  Mortgage  Loan is  delinquent  (other  than  Re-performing
Mortgage Loans and Bankruptcy Plan Mortgage Loans. The Seller has not waived any
default,  breach,  violation  or event of  acceleration,  and the Seller has not
taken  any  action  to  waive  any  default,   breach,  violation  or  event  of
acceleration, with respect to any Mortgage Loan.

                                       11

<PAGE>

         (ss) Each Mortgage Loan is a "qualified Mortgage" within the meaning of
Section 860 G(a)(3) of the Code.

         (tt) With respect to any Mortgage Loan which provides for an adjustable
interest rate, all rate  adjustments  have been performed in accordance with the
terms of the related Mortgage Note or subsequent modifications, if any.

         (uu) At the  time of  their  origination,  all FHA  Loans  and VA Loans
conformed to HUD  origination  guidelines or VA origination  guidelines,  as the
case may be.

         (vv)  Each  Mortgage  Loan  is  directly  secured  by a  Mortgage  on a
residential  property,  and either (1)  substantially all of the proceeds of the
Mortgage  Loan were used to  acquire,  improve  or  protect  the  portion of the
residential  property that consists of an interest in real property  (within the
meaning of Treasury  Regulations  Sections  1.856-3(c) and  1.856-3(d))  and the
interest in real  property was the only security for the Mortgage Loan as of the
Testing Date (as defined below), or (2) the fair market value of the interest in
real  property  which secures the Mortgage Loan was at least equal to 80% of the
principal  amount of the Mortgage  Loan (a) as of the Testing Date, or (b) as of
the Closing  Date.  For purposes of the previous  sentence,  (1) the fair market
value of the referenced  interest in real property shall first be reduced by (a)
the amount of any lien on the  interest in real  property  that is senior to the
Mortgage  Loan,  unless the Mortgage  Loans include both a first lien loan and a
second  lien loan on the same  Mortgaged  Property,  in which  case the 80% test
shall be applied in the aggregate, and (b) a proportionate amount of any lien on
the interest in real  property that is on a parity with the Mortgage  Loan,  and
(2) the "Testing Date" shall be the date on which the  referenced  Mortgage Loan
was  originated  unless (a) the Mortgage Loan was modified after the date of its
origination  in a manner  that would  cause  "significant  modification"  of the
Mortgage Loan within the meaning of Treasury  Regulations Section 1.1001-3,  and
(b) the  "significant  modification"  did not occur at a time when the  Mortgage
Loan was in default  or when  default  with  respect  to the  Mortgage  Loan was
reasonably foreseeable.

         (ww)  With  respect  to  each   Mortgage  Loan  that  is  a  mobile  or
manufactured  housing unit, such unit is a "single family  residence" within the
meaning of Section 25(e)(1) of the Code, and has a minimum of 400 square feet of
living space, a minimum width of 102 inches and is of a kind customarily used at
a fixed location.

         With respect to the  representations  and  warranties set forth in this
Section 3.01 that are made to the best of the Seller's  knowledge or as to which
the Seller has no knowledge,  if it is discovered by the Depositor,  the Seller,
the  Servicer  or the  Trustee as set forth in Section  2.04 of the  Pooling and
Servicing  Agreement that the substance of such  representation  and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related  Mortgage  Loan  or  the  interest  therein  of  the  Purchaser  or  the
Purchaser's assignee,  transferee or designee then, notwithstanding the Seller's
lack of knowledge  with  respect to the  substance  of such  representation  and
warranty being inaccurate at the time the  representation  or warranty was made,
such  inaccuracy  shall be deemed a breach of the applicable  representation  or
warranty.

                                       12

<PAGE>

         Upon  discovery  by  the  Depositor,  the  Seller,  the  Servicer,  the
Purchaser or any  assignee,  transferee or designee of the Purchaser of a breach
of any of the  representations  and warranties  contained in this Article III or
Section  2.04  of the  Pooling  and  Servicing  Agreement  that  materially  and
adversely  affects the value of any Mortgage Loan or the interest therein of the
Purchaser  or the  Purchaser's  assignee,  transferee  or  designee,  the  party
discovering the breach shall give prompt written notice to the others. Within 90
days of the earlier of its discovery or its receipt of notice of any such breach
of a representation  or warranty,  the Seller shall promptly cure such breach in
all material  respects,  or in the event such breach cannot be cured, the Seller
shall  repurchase  the  affected  Mortgage  Loan or cause  the  removal  of such
Mortgage  Loan from the Trust Fund and  substitute  for it one or more  Eligible
Substitute  Mortgage  Loans,  in either case, in accordance with Section 2.03 of
the Pooling and Servicing Agreement.

         Upon  discovery  or  receipt  of  notice  of any  materially  defective
document  in, or that a document is missing  from, a Mortgage  File,  the Seller
shall have 120 days to cure such defect or 150 days  following the Closing Date,
in the case of  missing  Mortgages  or  Assignments  (or  within  90 days of the
earlier of the  Seller's  discovery  or receipt of  notification  if such defect
would  cause  the  Mortgage  Loan not to be a  "qualified  mortgage"  for  REMIC
purposes),  or in the  event  such  defect  cannot be cured,  the  Seller  shall
repurchase the affected Mortgage Loan or cause the removal of such Mortgage Loan
from  the  Trust  Fund and  substitute  for it one or more  Eligible  Substitute
Mortgage Loans, in either case,  within such time periods and in accordance with
Section 2.03 of the Pooling and Servicing Agreement.

         It is understood and agreed that the representations and warranties set
forth in this Section 3.01 shall  survive  delivery of the  respective  Mortgage
Files to the Trustee on behalf of the Purchaser.

         It is  understood  and agreed  that the  obligations  of the Seller set
forth in this Section 3.01 to cure,  repurchase  or  substitute  for a defective
Mortgage Loan constitute the sole remedies of the Purchaser respecting a missing
or defective document or a breach of the representations or warranties contained
in this Section 3.01.

         Section 3.02 Seller  Representations and Warranties.  The Seller hereby
represents  and warrants to the  Purchaser  that as of the Closing Date or as of
such date specifically provided herein:

              (i) The Seller is duly  organized,  validly  existing  and in good
     standing  as a  limited  liability  company  under the laws of the State of
     Delaware and has the power and  authority to own its assets and to transact
     the business in which it is currently engaged. The Seller is duly qualified
     to do business and is in good  standing in each  jurisdiction  in which the
     character of the business transacted by it or properties owned or leased by
     it requires such qualification and in which the failure to so qualify would
     have a material adverse effect on (a) its business,  properties,  assets or
     condition  (financial or other),  (b) the  performance  of its  obligations
     under this Agreement, (c) the value or marketability of the

                                       13

<PAGE>

     Mortgage  Loans,  or  (d)  its  ability  to   foreclose   on  the   related
     Mortgaged Properties.

              (ii) The  Seller  has the power and  authority  to make,  execute,
     deliver  and  perform  this   Agreement  and  to  consummate   all  of  the
     transactions  contemplated  hereunder and has taken all necessary action to
     authorize the execution,  delivery and performance of this Agreement.  When
     executed and delivered,  this Agreement will constitute the Seller's legal,
     valid and binding  obligations  enforceable  in accordance  with its terms,
     except as  enforcement  of such  terms may be  limited  by (1)  bankruptcy,
     insolvency,  reorganization,   receivership,  moratorium  or  similar  laws
     affecting  the  enforcement  of  creditors'  rights  generally  and  by the
     availability  of  equitable   remedies,   (2)  general  equity   principals
     (regardless  of whether such  enforcement  is considered in a proceeding in
     equity  or at law)  or (3)  public  policy  considerations  underlying  the
     securities  laws, to the extent that such policy  considerations  limit the
     enforceability of the provisions of this Agreement which purport to provide
     indemnification from securities laws liabilities.

              (iii) The Seller holds all necessary  licenses,  certificates  and
     permits from all  governmental  authorities  necessary for  conducting  its
     business  as  it  is  presently   conducted,   except  for  such  licenses,
     certificates  and  permits  the  absence of which,  individually  or in the
     aggregate,  would not have a material  adverse effect on the ability of the
     Seller to conduct its  business  as it is  presently  conducted.  It is not
     required to obtain the consent of any other party or any consent,  license,
     approval or  authorization  from, or registration or declaration  with, any
     governmental authority,  bureau or agency in connection with the execution,
     delivery, performance, validity or enforceability of this Agreement, except
     for such consents, licenses, approvals or authorizations,  or registrations
     or  declarations  as shall have been obtained or filed, as the case may be,
     prior to the Closing Date.

              (iv) The execution,  delivery and performance of this Agreement by
     the Seller will not conflict with or result in a breach of, or constitute a
     default under, any provision of any existing law or regulation or any order
     or decree of any court applicable to the Seller or any of its properties or
     any provision of its Limited Liability Company  Agreement,  or constitute a
     material  breach of, or result in the creation or  imposition  of any lien,
     charge or encumbrance upon any of its properties  pursuant to any mortgage,
     indenture,  contract or other  agreement to which it is a party or by which
     it may be bound.

              (v) No  certificate  of an officer,  written  statement  or report
     delivered  pursuant to the terms  hereof by the Seller  contains any untrue
     statement of a material fact or omits to state any material fact  necessary
     to make the certificate, statement or report not misleading.

              (vi) The  transactions  contemplated  by this Agreement are in the
     ordinary course of the Seller's business.

                                       14

<PAGE>

              (vii) The  Seller is not  insolvent,  nor will the  Seller be made
     insolvent by the transfer of the Mortgage Loans, nor is the Seller aware of
     any pending insolvency.

              (viii) The Seller is not in violation  of, and the  execution  and
     delivery of this Agreement by it and its  performance  and compliance  with
     the terms of this Agreement will not constitute a violation with respect to
     any  order or  decree  of any  court,  or any  order or  regulation  of any
     federal, state, municipal or governmental agency having jurisdiction, which
     violation  would  materially  and adversely  affect the Seller's  condition
     (financial or  otherwise) or operations or any of the Seller's  properties,
     or materially  and adversely  affect the  performance  of any of its duties
     hereunder.

              (ix)   There  are  no   actions   or   proceedings   against,   or
     investigations  of, the Seller  pending or, to its  knowledge,  threatened,
     before any court,  administrative  agency or other  tribunal  (i) that,  if
     determined  adversely,  would  prohibit the Seller from  entering into this
     Agreement and the Pooling and Servicing Agreement,  (ii) seeking to prevent
     the consummation of any of the transactions  contemplated by this Agreement
     or (iii) that, if determined  adversely,  would  prohibit or materially and
     adversely  affect  the  Seller's  performance  of  any  of  its  respective
     obligations under, or the validity or enforceability of, this Agreement and
     the Pooling and Servicing Agreement.

              (x) The  Seller  is not  transferring  the  Mortgage  Loans to the
     Purchaser hereunder with any intent to hinder,  delay or defraud any of its
     creditors.

              (xi)  The  Seller  acquired  title to the  Mortgage  Loans in good
     faith, without notice of any adverse claims.

              (xii) The  transfer,  assignment  and  conveyance  of the Mortgage
     Notes and the  Mortgages by the Seller  pursuant to this  Agreement are not
     subject to the bulk  transfer laws or any similar  statutory  provisions in
     effect in any applicable jurisdiction.

              (xiii) The Seller  understands  that (a) the Private  Certificates
     have not been and will not be registered or qualified  under the Securities
     Act of 1933, as amended (the "Securities Act") or any state securities law,
     (b) the  Purchaser  is not  required  to so register or qualify the Private
     Certificates, (c) the Private Certificates may be resold only if registered
     and qualified pursuant to the provisions of the Act or any state securities
     law,  or if an  exemption  from  such  registration  and  qualification  is
     available,  (d) the Pooling and Servicing  Agreement contains  restrictions
     regarding  the  transfer  of the Private  Certificates  and (e) the Private
     Certificates will bear a legend to the foregoing effect.

              (xiv) The Seller is acquiring the Private Certificates for its own
     account  for  investment  only  and  not  with a view  to or  for  sale  in
     connection with

                                       15

<PAGE>

     any  distribution  thereof in any manner that would violate the  Securities
     Act or any applicable state securities laws.

              (xv) The Seller is (a) a substantial,  sophisticated institutional
     investor  having such  knowledge  and  experience in financial and business
     matters, and, in particular,  in such matters related to securities similar
     to the  Private  Certificates,  such that it is capable of  evaluating  the
     merits and risks of  investment  in the Private  Certificates,  (b) able to
     bear  the  economic  risks  of such an  investment  and (c) an  "accredited
     investor"  within the meaning of Rule 501 (a)  promulgated  pursuant to the
     Securities Act.

              (xvi)  The  Seller  has  been  furnished  with  such   information
     concerning the Private Certificates and the Purchaser as has been requested
     by the Seller from the Purchaser  and is relevant to the Seller's  decision
     to purchase  the  Private  Certificates.  The Seller has had any  questions
     arising  from such review  answered by the  Purchaser  or the Seller to the
     satisfaction of the Seller.

              (xvii) The Seller  has not and will not nor has it  authorized  or
     will it  authorize  any person to (a) offer,  pledge,  sell,  dispose of or
     otherwise  transfer  any Private  Certificate,  any interest in any Private
     Certificate or any other similar security to any person in any manner,  (b)
     solicit  any  offer to buy or to  accept  a  pledge,  disposition  of other
     transfer  of  any  Private   Certificate,   any  interest  in  any  Private
     Certificate  or any other  similar  security from any person in any manner,
     (c)   otherwise   approach  or  negotiate   with  respect  to  any  Private
     Certificate,  any interest in any Private  Certificate or any other similar
     security with any person in any manner,  (d) make any general  solicitation
     by means of  general  advertising  or in any  other  manner or (e) take any
     other action,  that (as to any of (a) through (e) above) would constitute a
     distribution  of any Private  Certificate  under the  Securities  Act, that
     would  render the  disposition  of any Private  Certificate  a violation of
     Section 5 of the Securities Act or any state  securities law, or that would
     require registration or qualification pursuant thereto. The Seller will not
     sell or  otherwise  transfer  any of the  Private  Certificates,  except in
     compliance with the provisions of the Pooling and Servicing Agreement.

              (xviii)  The  Seller  is not an  employee  benefit  plan or  other
     retirement  arrangement  subject to the Employee Retirement Income Security
     Act of 1974, as amended ("ERISA"),  or Section 4975 of the Internal Revenue
     Code of 1986, as amended (the "Code"), (collectively, an "ERISA Plan"), and
     is not  acting  on behalf  of, as named  fiduciary  of, as  trustee  of, or
     investing the assets of an ERISA Plan.

                                       16

<PAGE>

                                   ARTICLE IV

                               SELLER'S COVENANTS

         Section 4.01 Covenants of the Seller.

         (a) The Seller hereby covenants that except for the transfer hereunder,
the Seller will not sell,  pledge,  assign or transfer to any other  Person,  or
grant,  create,  incur, assume or suffer to exist any lien on any Mortgage Loan,
or any interest therein;  the Seller will notify the Trustee, as assignee of the
Purchaser,  of the existence of any lien on any Mortgage Loan  immediately  upon
discovery  thereof,  and the Seller will defend the right, title and interest of
the Trust,  as assignee of the Purchaser,  in, to and under the Mortgage  Loans,
against  all  claims of third  parties  claiming  through  or under the  Seller;
provided,  however, that nothing in this Section 4.01 shall prevent or be deemed
to prohibit the Seller from  suffering  to exist upon any of the Mortgage  Loans
any liens for municipal or other local taxes and other  governmental  charges if
such taxes or  governmental  charges shall not at the time be due and payable or
if the Seller shall  currently be contesting the validity  thereof in good faith
by  appropriate  proceedings  and shall  have set  aside on its  books  adequate
reserves with respect thereto.

         (b) The Seller  hereby  covenants  that neither it nor any affiliate of
the Seller will  directly  solicit any  Mortgagor  hereunder  to  refinance  the
related Mortgage Loan. For the purposes of the foregoing, neither the Seller nor
any affiliate of the Seller shall be deemed to directly solicit any Mortgagor if
the Seller responds to a request from a Mortgagor  regarding a refinancing or if
the Mortgagor receives marketing materials which are generally disseminated.

                                   ARTICLE V

                                   [RESERVED]

                                   ARTICLE VI

                                   TERMINATION

         Section   6.01    Termination.    The   respective    obligations   and
responsibilities  of the Seller and the Purchaser created hereby shall terminate
upon the  termination  of the Trust as  provided in Article X of the Pooling and
Servicing Agreement.

                                       17

<PAGE>

                                  ARTICLE VII

                            MISCELLANEOUS PROVISIONS

         Section 7.01 Amendment. This Agreement may be amended from time to time
by the Seller and the Purchaser,  by written  agreement signed by the Seller and
the Purchaser.

         Section 7.02  Governing  Law. This  Agreement  shall be governed by and
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.

         Section 7.03 Notices. All demands, notices and communications hereunder
shall be in writing  and shall be deemed to have been duly  given if  personally
delivered  at or  mailed by  registered  mail,  postage  prepaid,  addressed  as
follows:

                  if to the Seller:

                  Credit-Based Asset Servicing and Securitization LLC
                  335 Madison Avenue
                  19th Floor
                  New York, New York  10017
                  Attention:  General Counsel

or such other  address as may hereafter be furnished to the Purchaser in writing
by the Seller.

                  if to the Purchaser:

                  Residential Asset Funding Corporation
                  301 South College Street, TW-09
                  Charlotte, North Carolina  28288-0610
                  Attention:  General Counsel

or such other  address as may hereafter be furnished to the Seller in writing by
the Purchaser.

         Section  7.04  Severability  of  Provisions.  If any one or more of the
covenants,  agreements,  provisions  or  terms of this  Agreement  shall be held
invalid for any reason whatsoever, 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.

         Section 7.05  Counterparts.  This  Agreement  may be executed in one or
more counterparts by the different parties hereto on separate counterparts, each
of which,

                                       18

<PAGE>

when so  executed,  shall be deemed  to be an  original  and such  counterparts,
together, shall constitute one and the same agreement.

         Section  7.06 Further  Agreements.  The  Purchaser  and the Seller each
agree to execute and deliver to the other such additional documents, instruments
or agreements as may be necessary or reasonable  and  appropriate  to effectuate
the purposes of this Agreement or in connection  with the issuance of any Series
of Certificates representing interests in the Mortgage Loans.

         Without  limiting  the  generality  of  the  foregoing,  as  a  further
inducement for the Purchaser to purchase the Mortgage Loans from the Seller, the
Seller will cooperate  with the Purchaser in connection  with the sale of any of
the securities representing interests in the Mortgage Loans. In that connection,
the Seller will provide to the Purchaser any and all information and appropriate
verification of information, whether through letters of its auditors and counsel
or otherwise,  as the Purchaser shall reasonably request and will provide to the
Purchaser such additional representations and warranties, covenants, opinions of
counsel, letters from auditors, and certificates of public officials or officers
of the Seller as are reasonably  required in connection  with such  transactions
and the offering of investment grade securities rated by the Rating Agencies.

         Section  7.07  Intention  of the  Parties.  It is the  intention of the
parties  that the  Purchaser  is  purchasing,  and the  Seller is  selling,  the
Mortgage  Loans rather than the pledging of the Mortgage  Loans by the Seller to
secure a loan by the Purchaser to the Seller.  Accordingly,  the parties  hereto
each intend to treat the  transaction  for Federal  income tax  purposes and all
other  purposes as a sale by the Seller and a purchase by the  Purchaser  of the
Mortgage  Loans.  The Purchaser will have the right to review the Mortgage Loans
and the related Mortgage Files to determine the  characteristics of the Mortgage
Loans  which will  affect the  Federal  income  tax  consequences  of owning the
Mortgage Loans and the Seller will  cooperate with all reasonable  requests made
by the Purchaser in the course of such review.

         Section 7.08 Successors and Assigns; Assignment of this Agreement. This
Agreement  shall  bind and inure to the  benefit  of and be  enforceable  by the
Seller, the Purchaser and the Trustee.  The obligations of the Seller under this
Agreement  cannot be assigned or delegated to a third party  without the consent
of the Purchaser and which consent shall be at the Purchaser's  sole discretion,
except that the Purchaser acknowledges and agrees that the Seller may assign its
obligations  hereunder  to any  Person  into  which the  Seller is merged or any
corporation resulting from any merger,  conversion or consolidation to which the
Seller is a party or any Person  succeeding  to the business of the Seller.  The
parties  hereto  acknowledge  that the Purchaser is acquiring the Mortgage Loans
for the  purpose  of  contributing  them to a trust  that will issue a series of
certificates  representing  undivided  interests in such Mortgage  Loans.  As an
inducement  to  the  Purchaser  to  purchase  the  Mortgage  Loans,  the  Seller
acknowledges  and consents to the  assignment by the Purchaser to the Trustee of
all of the  Purchaser's  rights  against the Seller  pursuant to this  Agreement
insofar as such rights relate to Mortgage  Loans  transferred to the Trustee and
to the enforcement or exercise of any right or remedy

                                       19

<PAGE>

against the Seller pursuant to this Agreement by the Trustee.  Such  enforcement
of a right or remedy by the  Trustee  shall have the same force and effect as if
the right or remedy had been enforced or exercised by the Purchaser directly.

         Section 7.09 Survival.  The representations and warranties set forth in
Sections 3.01 and 3.02 hereof shall  survive the purchase of the Mortgage  Loans
hereunder.

                                       20
<PAGE>

     IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to
be signed to this Mortgage Loan Purchase Agreement by their respective  officers
thereunto duly authorized as of the day and year first above written.

                                            RESIDENTIAL ASSET FUNDING
                                             CORPORATION,
                                             as Purchaser

                                            By: /s/  Eric Kaplan
                                               --------------------------------
                                                Name:  Eric Kaplan
                                                Title: Vice President

                                            CREDIT-BASED ASSET SERVICING
                                             AND SECURITIZATION LLC,
                                             as Seller

                                            By: /s/  Ivan Halpern
                                               --------------------------------
                                               Name:  Ivan Halpern
                                               Title: Vice President

<PAGE>

STATE OF       NC       )
          -------------
                        )  ss.:
COUNTY OF   Mecklenburg )
          -------------

     On the 12th day of December 2000 before me, a Notary Public in and for said
State,  personally  appeared Eric Kaplan,  known to me to be a Vice President of
Residential Asset Funding Corporation,  the corporation that executed the within
instrument,  and also known to me to be the person who  executed it on behalf of
said  corporation,  and  acknowledged to me that such  corporation  executed the
within instrument.

     IN WITNESS  WHEREOF,  I have  hereunto  set my hand and affixed my official
seal the day and year in this certificate first above written.

                                                     /s/  Margaret Gavin
                                                    ----------------------
                                                         Notary Public

<PAGE>

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

     On the 11th day of December 2000 before me, a Notary Public in and for said
State,  personally appeared Ivan Halpern,  known to me to be a Vice President of
Credit-Based Asset Servicing and  Securitization  LLC, the company that executed
the within instrument,  and also known to me to be the person who executed it on
behalf of said  limited  liability  company,  and  acknowledged  to me that such
limited liability company executed the within instrument.

     IN WITNESS  WHEREOF,  I have  hereunto  set my hand and affixed my official
seal the day and year in this certificate first above written.

                                                     /s/  Maria D. Rodriguez
                                                    --------------------------
                                                          Notary Public

<PAGE>

                                   SCHEDULE I

                             MORTGAGE LOAN SCHEDULE

                       [On File with Dewey Ballantine LLP]

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