Document:

MORTGAGE AND CO-OP LOAN WAREHOUSE AND SECURITY AGREEMENT

         MORTGAGE AND CO-OP LOAN WAREHOUSE AND SECURITY AGREEMENT (this
"Agreement"), dated as of January 18, 2000 between Chinatrust Bank (U.S.A.) a
California banking corporation with offices at 366 Madison Avenue, New York,
N.Y. 10017 (the "Lender"), and Community Home Mortgage Corp., a New York
corporation having its principal place of business at 510 Broad Hollow Road,
Melville, NY 11747 (the "Borrower").

                                    RECITALS

         WHEREAS, the Borrower desires to enter into this Agreement to obtain
funds from the Bank under a discretionary, revocable line of credit to be made
available to the Borrower by the Bank during the term hereof to finance one-four
family unit residential mortgage or Co-Op loans originated from time to time by
the Borrower prior to the sale of such mortgage or Co-Op loan by the Borrower to
permanent lenders or investors in the secondary market; and

         WHEREAS, the Lender, subject to the terms and conditions set forth
herein, is willing to grant such a line of credit to the Borrower from time to
time during the term of this Agreement for such purpose provided that the sum of
the aggregate outstanding principal amount of all advances at anyone time shall
not exceed Ten Million Dollars ($10,000,000.00):

         NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lender and the Borrower hereby agree as follows:

         ARTICLE I - DEFINITIONS.

         1.1      Certain Defined Terms.

         Unless the context otherwise requires, as used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

         "Advance" has the meaning set forth in Section 2.1 hereof.

         "Affiliate" with respect to any Person, means any other Person directly
or indirectly Controlling, Controlled by or under common Control with such
Person.

         "Applicable Law" means all applicable laws, statutes, treaties, rules,
codes, ordinances, regulations, certificates, orders, interpretations, licenses,
and permits of any governmental authority or regulatory body (including without
limitation any such items concerning consumer protection, truth-in-lending or
other similar matters) and judgments, decrees, injunctions, writs, orders, or
like action of any court, arbitrator or other judicial or quasi-judicial
tribunal of competent jurisdiction with respect thereto.

         "Borrowing Date" has the meaning set forth in Section 2.3(a) hereof.

<PAGE>

         "Business Day" means any day excluding Saturday, Sunday and any day on
which banking institutions located in the State of New York are authorized by
Applicable Law or the action of any governmental authority or regulatory body to
close.

         "Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which would,
in conformity with generally accepted accounting principles, be required to be
accounted for as a capital lease on the balance sheet of that Person.

         "Co-Op Loan" means a first priority loan in a principal amount not to
exceed $300,000 evidenced by a Co-Op Note and Co-Op Security Agreement with
related UCC-l financing statements, in each case originated by the Borrower and
with respect to which each of the following is accurate and complete:

         (a) Said Co-Op Loan is an Eligible Co-Op Loan;
         (b) The  Obligor  on the said  Co-Op  Loan has the  exclusive  right to
occupy a single-family dwelling in the applicable co-operative housing project;
         (c)  The   co-operative   housing   project  in  which  the   Obligor's
single-family   dwelling  is  located  qualifies  as  a  "co-operative   housing
corporation"  under section 216 of the Internal  Revenue  Service  Code,  and is
located within the States of New York, New Jersey, and Connecticut;
         (d) Said co-operative housing project is designed principally for
residential use, consists of five or more single-family dwelling units, and is
located in an area that has a demonstrated market acceptance for the
co-operative form of ownership;
         (e) Said Co-Op Loan is secured by a first priority Lien which covers
the related co-operative unit that is represented by shares of stock in the
applicable co-operative housing corporation (or by a membership certificate of
other contractual agreement evidencing ownership) and the proprietary lease
appurtenant to such co-operative unit, all pursuant to a valid and binding
Security Agreement;
         (f) The Obligor on said Co-Op Loan has the right to occupy the related
co-operative unit for a period of time that extends at least to the maturity
date of such Co-Op Loan;
         (g) The Co-Operative housing project related to said Co-Op Loan is not:
(1) a Co-Operative hotel or timeshare project, (2)! subject to a leasehold
estate, (3) a limited equity Co- Operative, or (4) subject to any resale
restrictions that could have an adverse affect on the security of such Co-Op
Loan;
         (h) The developer or sponsor of the applicable Co-Operative housing
project does not have any ownership interest or other rights in the related real
estate or facilities, other than the interest or rights it has in relation to
any unsold units, and the unsold units owned by such developer or sponsor do not
constitute more than fifty percent (50% ) by number or value of the units in
such Co-Operative housing project;

         "Co-Op Note" means a promissory note or other evidence of indebtedness
secured by Shares of Stock in a Co-Operative housing project in which the
Obligor's single-family dwelling is located and qualifies as a "Co-Operative
Housing Corporation" under section 216 of the Internal Revenue Code.

                                      -2-
<PAGE>

         "Collateral" means and includes all of the Borrower's right, title and
interest in, to and under the following, whether now owned or existing or
hereafter acquired or arising:

         (A) All Mortgage and Co-Op Loans, Mortgages, Mortgage and Co-Op Notes,
Co-Op Security Agreements, and other documents and other property as shall be
deposited with, or held by or for, the Lender (or an Escrow Agent on behalf of
the Lender pursuant to an Escrow Agreement);

         (B) All documents or instruments executed and delivered in connection
with the documents referred to in paragraph (A) above, including, without
limitation, all guaranties of or other collateral or security for the payment or
performance of any obligation under any Mortgage or Co-Op Loan, Mortgage,
Mortgage Note, Co-Op Security Agreement, or Co-Op Note together with all rights,
powers, privileges, options and other benefits of the Borrower thereunder;

         (C) All payments and prepayments of principal, interest, penalties and
other income due or to become due (other than amounts received by Borrower or
any party retained by the Borrower to act as a mortgage or Co-Op servicer for
the Mortgage or Co-Op Loans for the purpose of payment of real property taxes,
assessments and insurance premiums pursuant to the terms of Mortgages and
Mortgage Notes or Co-Op Security Agreements and Notes) on all Mortgage or Co-Op
Loans, Mortgages and Mortgage Notes, Co-Op Security Agreements and Notes and all
proceeds thereof, all the right, title and interest of every nature whatsoever
of the Borrower in and to the same and all property used in connection therewith
(subject to the Borrower's right under this Agreement to collect certain
payments so long as no Default or Event of Default shall have occurred and be
continuing) including, without limitation, the following:

                  (i) All rights, mortgages, Co-Op loans, pledges, liens and
security interests existing with respect to, or as security for, each Mortgage
or Co-Op Loan, Mortgage and Mortgage Note or Co-Op Security Agreement and Note
and all agreements, documents and instruments relating thereto;

                  (ii) All rights in and to real and personal property (tangible
and intangible) and fixtures securing payments of principal, interest or any
other amounts due and payable or to become due and payable under each Mortgage
or Co-Op Loan, Mortgage and Mortgage Note or Co-Op Security Agreement and Note;

                  (iii) All insurance policies relating to any of the
Co-Operative Unit or Mortgaged Premises, together with the proceeds therefrom
and any premium refunds thereunder, including, without limitation, all insurance
policies providing for title, liability, extended coverage, fire, flood,
casualty and hazard insurance coverage for such premises;

                  (iv) All condemnation proceeds with respect to any of the
Co-Operative Units or Mortgaged Premises;

                  (v) All insurance and guaranties provided by the FHA, VA, HUD,
GNMA, FHLMC, FNMA, FDIC, or any other governmental authority or regulatory body,
as the case may

                                      -3-
<PAGE>

be, with respect to each Mortgage or Co-Op Loan, Mortgage and Mortgage Note,
Co-Op Security Agreement and Note; and

                  (vi) All private mortgage or Co-Op insurance policies with
respect to each Mortgage or Co-Op Loan, Mortgage and Mortgage Note, Co-Op
Security Agreement and Note.

         (D) All Investor Take-Out Commitments and the proceeds resulting from
the sale or other disposition of Mortgage or Co-Op Loans, Mortgages or Mortgage
Notes, Co-Op Security Agreement or Note by the Borrower to Investors pursuant to
such Investor Take-Out Commitments;

         (E) All files, agreements, documents, instruments, surveys,
certificates, correspondence, appraisals, computer programs, tapes, discs,
cards, accounting books and records and other books, records, information and
data of the Borrower related to the sale and/or servicing by the Borrower of
Mortgage or Co-9p Loans, Mortgages or Mortgage Notes, Co-Op Security Agreements
or Notes;

         (F) All cash or other property of the Borrower of any nature whatsoever
now or at any time hereafter in the possession of the Lender (or any agent,
bailee or custodian thereof) in any capacity whatsoever, including, without
limitation, (i) any amounts on deposit in any account of the Borrower maintained
at any office of the Lender and (ii) any negotiable instrument, certificate of
deposit, time deposit or other instrument;

         (G) All property designated on the books and records of the Borrower as
assigned or pledged to the Lender;

         (H) All causes of action, claims, demands and similar rights which the
Borrower may now have or hereafter have in, to and under any of the documents
relating to any of the Collateral referred to in paragraphs (A) through (G)
above, including without limitation any claims for negligence or fraud; and

         (I) All products and proceeds of any of the property described in the
foregoing paragraphs (A) through (H) above (regardless of whether such proceeds
are the result of any voluntary or involuntary sale, collection, exchange,
disposition or conversion of any such property) and any other property or
documents relating to any of the foregoing that may, from time to time
hereafter, be delivered by Borrower to the Lender or an Escrow Agent or held by
or for the Lender or an Escrow Agent (or any other agent, bailee or custodian of
the Borrower or an Escrow Agent) pursuant to the provisions of an Escrow
Agreement, this Agreement or any other agreement, document or instrument.

         "Consolidated Tangible Net Worth" means at any date the consolidated
stockholders' equity of the Borrower and its Subsidiaries, if any, minus the
Intangible Assets of Borrower and such Subsidiaries, all determined as of such
date on a consolidated basis in conformity with generally accepted accounting
principles consistently applied. For purposes of this definition "Intangible
Assets" means the amount (to the extent reflected in determining such
consolidated stockholders' equity) of

                                      -4-
<PAGE>

                  (i) all write-ups [(other than write-ups of assets of a going
         concern business made within twelve months after the acquisition of
         such business)] in the book value of any asset owned by the Borrower or
         a Subsidiary of the Borrower,

                  (ii) all investments of the Borrower and its Affiliates which
         do not constitute Subsidiaries and the financial results of which are
         not otherwise consolidated with those of the Borrower under generally
         accepted accounting principles consistently applied, and

                  (iii) all goodwill, patents, trademarks, service marks, trade
         names, copyrights, organization or developmental expenses and other
         intangible assets.

         "Contractual Obligation" means any obligation or duty required to be
performed by any Person pursuant to the terms of (i) any contract, agreement,
lease, indenture, deed of trust, mortgage (including without limitation any
Mortgage, Mortgage Loan or Mortgage Note), Co-Op Security Agreement or Note,
license, note, instrument, guaranty, obligation or commitment, whether oral or
written, to which such Person is a party or by which such Person or its property
is bound or affected, and (ii) all amendments to any of the foregoing.

         "Control" whether used as a noun or verb, means the possession,
directly or indirectly, of the power to direct, or cause the direction of, the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

         "CTB Prime Rate" means the rate per annum announced by the Lender from
time to time as its prime lending rate, which rate is not tied to any index and
is not intended to be and may not necessarily be the most favorable or lowest
rate of interest charged by the Lender to any borrower or category of borrowers.

         "Default" means an occurrence or act which, with the giving of notice
or the lapse of time, or both, would constitute an Event of Default.

         "Default Rate" means the WSJ Prime Rate plus 6.25%.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any rules or regulations promulgated thereunder.

         "Escrow Agent" means an attorney at law or title insurance company duly
authorized by applicable state law to insure title to real property or a
financial institution (in each case pre-approved in writing by the Lender) who
has agreed in writing to act as escrow agent for the Lender in accordance with
an Escrow Agreement.

         "Escrow Agreement" means an Escrow Agreement by and among an Escrow
Agent, the Lender and the Borrower, substantially in the form annexed hereto as
Exhibit A.

         "Event of Default" has the meaning set forth in Section 10.1 hereof.

                                      -5-
<PAGE>

         "Expiration Date" has the meaning set forth in Section 2.5(a) hereof.

         "Facility A" means that portion of a revocable line of credit in an
amount set forth in Article II Section 2.1, the proceeds of which shall be used
for the short term funding of one-four family residential first lien mortgage
and Co-Op loans originated from time to time by the Borrower prior to the
closing of a sale of such loan by the Borrower to a permanent Take-Out Investor
approved by the Bank pursuant to a previously arranged Take-Out commitment
satisfactory to the Bank and which requires the Investor to purchase the loan
within sixty (60) days.

         "FDIC" means the Federal Deposit Insurance Corporation, or any
successor agency.

         "FHA" means the Federal Housing Administration, or any successor
agency.

         "FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor agency.

         "Final Advance Amount" has the meaning set forth in Section 2.3(b)
hereof.

         "FNMA" means the Federal National Mortgage Association, or any
successor agency.

         "GNMA" means the Government National Mortgage Association, or any
successor agency.

         "governmental authority or regulatory body" means any government or
political subdivision, whether federal, state, local or foreign, or any agency,
authority or instrumentality of or chartered by any such government or political
subdivision, including, without limitation, the FDIC, FHA, FHLMC, FNMA, GNMA,
HUD and VA.

         "Guarantor(s)" mean Ira Silverman.

         "Guaranty" means the Guaranty, dated the date hereof, from the
Guarantor(s) in favor of the Lender, and any amendments or modifications
thereto.

         "Indebtedness" means, as applied to any Person, (i) all indebtedness
for borrowed money of such Person and its consolidated Subsidiaries, (ii) any
Capital Leases or that portion of obligations with respect to any leases which
are properly capitalized as a liability on a consolidated balance sheet of such
Person and its consolidated Subsidiaries, in conformity with generally accepted
accounting principles, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money
by such Person and its consolidated Subsidiaries, (iv) any obligation owed by
such Person and its consolidated Subsidiaries for all or any part of the
deferred purchase price of property or services which purchase price is (a) due
more than six (6) months from the date of incurrence of the obligation in
respect thereof or (b) evidenced by a note or similar written instrument, (v)
all indebtedness of such Person or its consolidated Subsidiaries evidenced by a
note bond, debenture, security or similar written instrument or which is secured
by any mortgage or Co-Op Agreement, pledge,

                                      -6-
<PAGE>

lien, security interest, charge, encumbrance or vendor's interest under any
conditional sale or other title retention agreement existing on any property or
asset owned or held by that Person or any such Subsidiary regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or
Subsidiary or is non-recourse to the credit of that Person or Subsidiary, (vi)
indebtedness relating to reimbursement obligations with respect to any
commercial or standby letter of credit and (vii) indebtedness evidenced by
agreements to repurchase Mortgage or Co-Op Loans.

         "Interest Coverage Ratio" means, with respect to the Borrower and its
Subsidiaries, for any period, the ratio of

                  (x) the sum of (i) consolidated operating income before
         interest expense and taxes, (ii) noncash charges and expenses such as
         depreciation, amortization and similar charges and (iii) dividends
         actually received by Borrower from its Subsidiaries, if any,

to

                  (y) the aggregate sum of all consolidated interest and Capital
         Lease expenses with respect to Indebtedness of the Borrower and its
         Subsidiaries and (ii) consolidated operating lease expenses.

         "Interest Rate" means for Facility A: the thirty (30) day London Inter
Bank Offering Rate ("LIBOR") published Prime Rate plus 2.75%; for Sub-limit B:
the thirty (30) day London Inter Bank Offering Rate ("LIBOR") plus 2.75% and;
for Facility C: the thirty (30) day London Inter Bank Offering Rate ("LIBOR")
plus 3.25%.

         "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and any rules or regulations promulgated thereunder.

         "Investor" means the FDIC, FHA, FNMA, FHLMC, GNMA, HUD, VA or any state
housing governmental authority or regulatory body, or a bank, trust company,
savings and loan association, pension fund, insurance company or other
responsible and substantial financial institution or securities broker in each
case pre-approved by the Lender, and as set forth on the Investor Commitment
Reports delivered by the Borrower pursuant to Section 7.17 hereof.

         "Investor  Commitment  Report"  means a report  in form  and  substance
satisfactory  to the Lender  delivered by the Borrower  pursuant to Section 7.17
hereof.

         "Investor Take-Out Commitment" means a written commitment, in form and
substance satisfactory to the Lender, issued in favor of the Borrower by an
Investor pursuant to which that Investor commits to purchase one or more
Mortgages or Co-Op Loans, Mortgage Notes and Mortgage Loans, or Co-Op Security
Agreements or Notes within sixty (60) days after the Mortgage or Co-Op Loan is
first made.

         "Lender's Renewal Notice" has the meaning set forth in Section 2.5(b)
hereof.

                                      -7-
<PAGE>

         "Leverage Ratio" means the ratio of (i)(A) all Indebtedness plus (B)
the aggregate amount of all funds not yet drawn on but available under any lines
of credit, credit facilities or other instruments of indebtedness of any type
whatsoever with respect to which the Borrower or any of its Subsidiaries is a
party, account party or guarantor to (ii) Consolidated Tangible Net Worth.

         "Line of Credit" has the meaning set forth in Section 2.1 hereof.

         "Margin Stock" has the meaning assigned to such term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.

         "Maximum Line of Credit" has the meaning set forth in Section 2.1
hereof.

         "Mortgage" means a first priority mortgage, deed of trust or similar
security agreement on real property located in the States of New York, New
Jersey, Connecticut, Massachusetts New Ham shire Florida additional States upon
receipt of licensing which is improved by a completed one-four family unit
dwelling.

         "Mortgage Loan" means any loan in a principal amount not to exceed
$300,000.00 evidenced by a Mortgage Note and secured by a Mortgage, in each case
originated by the Borrower.

         "Mortgage Note" means a promissory note, bond or other evidence of
indebtedness secured by a Mortgage.

         "Mortgaged Premises" means a one-four family unit residence subject to
a Mortgage.

         "Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of Borrower or any
Affiliate of Borrower.

         "Note" means the Note issued by the Borrower to the Lender pursuant to
Section 3.1 hereof, substantially in the form of Exhibit B hereto, to evidence
the Advances, and any Note which has been issued in substitution, exchange or
replacement thereof.

         "Obligations" means all obligations of any nature whatsoever of the
Borrower or the Guarantors from time to time owed to the Lender under this
Agreement, the Note, the Guaranty, the Escrow Agreement, and any other
agreements, documents or instruments delivered in connection herewith or
therewith.

         "Officer's Certificate" means a certificate executed on behalf of a
Person by an executive officer of such Person.

         "Pension Plan" means any employee plan which is subject to the
provisions of Title IV of ERISA and which is maintained for employees of the
Borrower or any Affiliate of the Borrower, other than a Multiemployer Plan. Any
employee plan which has been terminated but whose

                                      -8-
<PAGE>

assets have not yet been finally distributed shall be considered a Pension Plan
for purposes of this definition.

         "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and all
governmental authorities and regulatory bodies.

         "Preclosing Documents" has the meaning set forth in Section 5.3(a)
hereof.

         "Pre-Closing Limit" has the meaning set forth in Section 2.2(c) hereof.

         "Renewal Request Notice" has the meaning set forth in Section 2.5(b)
hereof.

         "Request for Advance" means a written request substantially in the form
of Exhibit C hereto, executed by an authorized signatory of the Borrower and
delivered to the Lender in accordance with the terms and conditions of Section
2.3 hereof.

         "Requested Advance Amount" has the meaning set forth in Section 2.3(a)
hereof.

         "Scheduled Expiration Date" has the meaning set forth in Section 2.5(a)
hereof.

         "Subsidiary" means any Person (other than a natural person) in which
twenty-five percent (25%) or more of the total voting power or shares of stock
or other equity interest entitled to vote in the election of directors,
managers, or trustees thereof is at the time owned or Controlled, directly or
indirectly, by Borrower, or which is otherwise directly or indirectly Controlled
by Borrower.

         "Sub-limit B" means that portion of a revocable line of credit in an
amount set forth in Article II Section 2.1, the proceeds of which shall be used
for the short term funding of one-four family residential committed or pooled
second lien mortgage loans and HIL's (Home Improvement Loans) originated from
time to time by the Borrower for sale by the Borrower to permanent Take-Out
Investors approved by the Bank. Each Advance will be for a maximum of ninety
(90) days at a maximum of one hundred percent (100%) of the mortgage amount.

         "Facility C" means that portion of a revocable line of credit in an
amount set forth in Article II Section 2.1, the proceeds of which shall be used
for the short term funding of one-four family committed residential first and/or
second lien HIL's (Home Improvement Loans) secured by UCC-1 statement with a cap
of $25,000.00 per transaction. Each Advance will be for a maximum of ninety (90
days) at one hundred percent (100%) of the purchase price not to exceed the loan
amount.

         "Termination Event" means (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a "Reportable
Event" not subject to the provision for thirty (30)-day notice to the Pension
Benefit Guaranty Corporation under such regulations), or (ii) the withdrawal of
Borrower or any of its Affiliates from a Pension Plan

                                      -9-
<PAGE>

during a plan year in which it was a "substantial employer" as defined in
Section 4001 (a)(2) of ERISA, or (iii) the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Pension Plan by the Pension Benefit Guaranty Corporation (or any
successor thereto), or (v) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan.

         "UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.

         "VA" means the Veterans Administration, or any successor agency.

         ARTICLE II - LINE OF CREDIT; ADVANCES

         2.1      Line of Credit; Advance

Subject to the terms and conditions of this Agreement and in reliance upon the
representations and warranties of the Borrower set forth in Article VI hereof
and of the Guarantors as set forth in the Guaranty, the Lender hereby agrees to
establish a discretionary, revocable line of credit (the "Line of Credit") in
favor of the Borrower under which the Borrower may request, and the Lender in
its sole option and discretion may make advances to the Borrower ("Advances")
from time to time during the period commencing on the date hereof and ending on
the Expiration Date in an aggregate principal amount not to exceed at anyone
time outstanding for Facility A: the sum of Nine Million Five Hundred Thousand
Dollars ($9,500,000.00); for Sub-limit B: the sum of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) and; for Facility C the sum of Five Hundred
Thousand Dollars ($500,000.00). In no event, however, shall the aggregate
outstanding principal amount of all Advances made to finance Mortgage or Co-Op
Loans under Facility A and Sub-limit B and Facility C exceed the sum of Ten
Million Dollars ($10,000,000.00 - the "Maximum Line of Credit"). Subject to the
terms and conditions set forth herein, amounts advanced to the Borrower
hereunder may be repaid, prepaid and, prior to the Expiration Date, readvanced,
so long as the aggregate principal amount of all Advances outstanding at anyone
time does not and will not as a result of the making of any Advance hereunder
exceed the Maximum Line of Credit. Each Advance shall be payable and shall bear
interest in accordance with Article III hereof.

         2.2      Refusal to Provide Advances;
                  Limitations on Individual Advances

         (a) The Lender reserves the right in its sole option and discretion to
deny in whole or in part any request for an Advance. The Lender shall notify the
Borrower of its decision not to make any Advance on a case-by-case basis in
accordance with Section 2.3 hereof.

         (b) In furtherance and not in limitation of the provisions set forth in
Section 2.2(a) hereof, the amount of any Advance made by the Bank to the
Borrower shall be based upon a percentage for Facility A: not to exceed one
hundred percent (100%) of the purchase price set forth in the Investor Take-Out
Commitment covering the purchase by such Investor of the

                                      -10-
<PAGE>

Mortgage or Co-Op Loan for which such Advance was requested by the Borrower, up
to a maximum of one hundred percent (100%) of the individual note amount; for
Sub-limit B: not to exceed one hundred percent (100%) of the individual note
amount; for Facility C: not to exceed one hundred percent (100)% of the
individual loan amount. Such percentage shall be determined by the Lender on a
case-by-case basis in its sole discretion.

         (c) Notwithstanding anything in this Agreement to the contrary, in no
event shall the aggregate outstanding principal amount of all Advances made to
finance Mortgage or Co-Op Loans, the original Mortgages and Mortgage Notes, or
Co-Op Security Agreements and Notes with respect to which are not in the actual
possession of the Lender exceed $10,000,000.00 (the "Pre-Closing Limit").

         2.3 Procedures for Making Advances. Subject to satisfaction of all the
terms and conditions set forth in this Agreement, Advances shall be made as
follows:

         (a) The Borrower shall deliver a Request for Advance with respect to
any Advance requested hereunder preferably two (2) Business Days prior to the
date on which the proposed Advance is to be made (the "Borrowing Date"). The
Request for Advance shall be irrevocable and shall specify (i) the date on which
the proposed Advance is to be made (which shall be a Business Day), and (ii) the
amount of the Advance requested to be made (the "Requested Advance Amount"), and
state that all conditions to the making of Advances set forth in Article IV
hereof have been satisfied. Such Request for Advance also shall be 5 accompanied
by all documents required to be delivered pursuant to Section 4.2 hereof. The
Borrower may deliver more than one Request for Advance on the same Business Day
and may request that multiple Advances be made on the same Business Day.

         (b) Within one (1) Business Day of receipt of a Request for Advance,
the Lender shall notify the Borrower whether the Lender agrees to make the
Advance requested and, if so, whether such Advance shall be for the Requested
Advance Amount or for a lesser amount as determined in the sole option and
discretion of the Lender pursuant to Section 2.2 hereof (the "Final Advance
Amount"). In the event that the Lender decides in its sole option and discretion
to honor any Request for Advance, on the Borrowing Date it will, at the
Borrower's option, deliver to the Borrower or an Escrow Agent a certified check
payable to the Borrower or its designee in the amount of the Final Advance
Amount, deposit proceeds in an amount equal to the Final Advance Amount to one
of the accounts of the Borrower maintained at the Lender pursuant to Section
7.14 hereof, or make available by wire transfer immediately available funds in
an amount equal to the Final Advance Amount to the Borrower at an account
designated in the Request for Advance. The proceeds of each Advance made by the
Lender hereunder shall be deemed to be trust funds and shall be disbursed by the
Borrower or such Escrow Agent directly to or for the account of the mortgagor or
Co-Op Loan borrower of the applicable Mortgage or Co-Op Loan and the maker of
the applicable Mortgage or Co-Op Note.

         2.4 Use of Proceeds. The proceeds of each Advance made hereunder shall
be applied solely to the financing by the Borrower of one Mortgage or Co-Op Loan
prior to the consummation of sale of such Mortgage or Co-Op Loan by the Borrower
to one or more Investors in the secondary market pursuant to Investor Take-Out
Commitments.

                                      -11-
<PAGE>

         2.5 Expiration of Line of Credit; Renewal.

         (a) Subject to Sections 2.5(b) and 10.2 hereof, the Line of Credit will
expire on December 31, 2000 (the "Scheduled Expiration Date"); provided,
however, that it may be terminated at any earlier time at the Lender's sole
option and discretion upon notice to the Borrower. (The Scheduled Expiration
Date or any earlier date on which the Line of Credit so expires or is otherwise
terminated is hereafter referred to as the "Expiration Date".) Notwithstanding
anything in this Agreement or the Note to the contrary, upon expiration or
termination of the Line of Credit, all outstanding principal of and all accrued
and unpaid interest on any Advances made hereunder shall become immediately due
and payable, and this Agreement and the Note shall remain in full force and
effect for all other purposes until all of the Obligations have been fully paid
and performed,

         (b) At least sixty (60) days prior to the Scheduled Expiration Date,
absent the prior termination of the Line of Credit pursuant to Sections 2.5(a)
or 10.2(a) hereof, the Borrower may, by written notice (a "Renewal Request
Notice") to the Lender, request the Lender to renew and/or extend the Line of
Credit beyond the Scheduled Expiration Date. Such notice shall be accompanied by
true, correct and complete copies of (i) the Borrower's most recently available
fiscal year end consolidated balance sheet and consolidated statements of income
and cash flow and of stockholder's equity and changes in financial position as
audited by an independent certified public accountant acceptable to the Lender
and (ii) the Borrower's most recently available fiscal quarter unaudited
consolidated balance sheet and consolidated statements of income and cash flow
and of stockholder's equity and changes in financial position as certified by
the Borrower's chief financial officer. In the event that the Borrower so
requests a renewal and/or extension of the Line of Credit, it agrees to provide
to the Lender all such other documents and information as the Lender may
reasonably request from time to time after the Lender's receipt of the Renewal
Request Notice. Any extension or renewal of the Line of Credit will be at the
sole option and discretion of the Lender and for such periods and upon such
terms as the Lender may in its sole option and discretion determine. If the
Lender, in its sole option and discretion, determines to extend or renew the
Line of Credit, it will so notify the Borrower (the "Lender's Renewal Notice")
on or prior to the Scheduled Expiration Date, with such Notice setting forth the
terms upon which the Lender is willing to i extend or renew the Line of Credit.
If the Borrower agrees to such terms, the term "Scheduled Expiration Date" shall
for all purposes be deemed to mean such date as specified in the Lender's
Renewal Notice.

         ARTICLE III - NOTE; INTEREST RATE AND PAYMENTS; FEES

         3.1 Note; Maturity

         (a) The Advances made hereunder shall be evidenced by the Note, dated
on or before the initial Borrowing Date, payable to the order of the Lender.

         (b) Each Advance shall be payable on demand; provided, however, that if
no demand is made, then such Advance shall automatically be payable without
notice, presentment, demand, dishonor or protest by the Borrower upon the
earliest of (i) the date funds are paid or to be paid

                                      -12-
<PAGE>

by Investor(s) to the Borrower to purchase the Mortgage or Co-Op Loan under the
applicable Investor Take-Out Commitment relating to such Advance, (ii) the
effective date of the termination, expiration, lapse, rescission or cancellation
of such Investor Take-Out Commitment, (iii) the date such Advance becomes due
and payable under Section 10.2(a) hereof, (iv) for Facility A the date which is
sixty (60) days after the date such Advance is made; for Sub-Limit B the date
which is ninety (90) days after the date such Advance is made; for Facility C
the date which is ninety (90) days after the date such Advance is made, or (v)
the Expiration Date.

         3.2 Interest: Prepayments.

         (a) Each Advance shall bear interest on the outstanding principal
amount thereof until paid in full at a rate per annum (based on a year of 360
days and actual days elapsed) equal to the Interest Rate; provided, however,
that upon the occurrence of an Event of Default, the outstanding principal
amount of each Advance and, to the extent permitted by Applicable Law, all
accrued and unpaid interest thereon to the date of such Event of Default shall
bear interest (whether before or after a judgment and before or after
commencement of proceedings under any bankruptcy, reorganization or similar
federal or state law) at a rate per annum (based on a year of 360 days and
actual days elapsed) equal to the Default Rate until such Event of Default is
cured.

         (b) Interest on the unpaid principal amount of each Advance shall
accrue from the date thereof and shall be payable (i) monthly in arrears on the
first Business Day of each month, commencing with the first Business Day of the
month immediately succeeding the month in which the initial Advance is made, or
(ii) on the Expiration Date.

         (c) All agreements between or among the Borrower, the Lender and the
Guarantors, whether now existing or hereafter arising, are hereby limited so
that in no event, whether by reason of demand for payment of, or acceleration of
the maturity of, the Note or any amounts due and payable hereunder, under the
Note or otherwise, shall the interest or other amount contracted for, charged or
received by the Lender exceed the maximum amount permissible under Applicable
Law. If, from any circumstance whatsoever, interest would otherwise be payable
to the Lender in excess of the maximum lawful amount, the interest payable to
the Lender shall be reduced to the maximum amount permitted to the Lender under
Applicable Law; and if from any circumstance the Lender shall ever receive
anything of value deemed interest by Applicable Law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal balance of the t Advances made hereunder and under
the Note and not to the payment of interest or, if such excessive interest
exceeds the unpaid balance of principal of the Advances, such excess shall be
refunded to the Borrower. All interest paid or agreed to be paid to the Lender
shall, to the extent permitted by Applicable Law, be amortized, prorated,
allocated, and spread through the full period until payment in full of the
principal of the Advances (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by Applicable Law. This paragraph shall control all
agreements between or among the Borrower, the Lender and the Guarantors.

                                      -13-
<PAGE>

         (d) All payments of principal, interest and all other amounts hereunder
and under the Note shall be made in immediately available funds, free and clear
of and without any withholding, deduction, set-off or counterclaim, and
delivered to the Lender at its office set forth in Section 11.5 hereof not later
than 3:00 P.M. (Eastern Standard time) on a Business Day. Funds received by the
Lender after that time shall be deemed to have been paid by Borrower on the next
succeeding Business Day. Borrower hereby authorizes the Lender to charge its
accounts with Lender established pursuant to Section 7.14 hereof in order to
cause timely payment of all principal, interest, and other amounts hereunder or
under the Note (subject to sufficient funds being available in its accounts for
that purpose).

         (e) Subject to Section 3.2(b) hereof, all payments received by the
Lender from the Borrower hereunder and under the Note shall be applied first to
the repayment of fees, expenses and other amounts due and payable hereunder or
under the Note, then to the payment of all accrued and unpaid interest, then to
the payment of all outstanding principal.

         3.3 Handling Fee.

         A handling fee of Fifteen Dollars ($15.00) will be charged by the
Lender for each Advance and shall, simultaneously with the making of such
Advance, be paid by the Borrower or debited against the accounts of the Borrower
maintained at the office of the Lender pursuant to Section 7.14 hereof.

         ARTICLE IV - CONDITIONS PRECEDENT

         4.1 Initial Conditions Precedent.

         The Borrower acknowledges that the Lender shall not make any Advances
unless each of the following conditions are satisfied, all in form and substance
satisfactory to the Lender:

         (a) The Borrower shall have delivered to the Lender:

                  (i) Resolutions of the Board of Directors of the Borrower
         approving and authorizing (i) the execution, delivery and performance
         of this Agreement, the Note, the Escrow Agreements and each of the
         other documents required to be delivered hereunder, and (ii) the
         consummation of the transactions contemplated herein, certified by the
         Secretary or an Assistant Secretary of the Borrower;

                  (ii) Signature and incumbency certificates of the officer or
         officers of the Borrower authorized to execute this Agreement, the Note
         and the Escrow Agreements, and to deal with the Lender in connection
         therewith;

                  (iii) A duly executed and delivered counterpart of this
         Agreement;

                  (iv) A duly executed and delivered Note;

                  (v) Copies of (A) the certificate of incorporation of the
         Borrower, certified by the Secretary of State or similar public
         official of the Borrower's jurisdiction of

                                      -14-
<PAGE>

         incorporation as of a recent date, and (B) the bylaws of the Borrower,
         certified by the Secretary or an Assistant Secretary of the Borrower;

                  (vi) A certificate of good standing from the Secretary of
         State or similar public official, dated as of a recent date, of each
         jurisdiction in which the Borrower is incorporated or qualified or
         licensed to transact business; and

                  (vii) A favorable opinion of counsel to the Borrower and the
         Guarantor (who shall be satisfactory to the Lender) covering such
         matters as the Lender may reasonably request.

         (b) The Borrower shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides shall be
performed on or before the initial Advance.

         (c) All actions required to create, perfect and preserve the security
interest and lien of the Lender in all Collateral then in existence or otherwise
reasonably requested by, the Lender shall have been duly authorized and taken
and all filings and recordings (including, without limitation, the execution and
filing of such UCC financing statements as the Lender shall reasonably request)
with governmental authorities or regulatory bodies and all actions with respect
to such governmental authorities or regulatory bodies and all other Persons
shall have been made or taken and completed, and the Lender shall have received
satisfactory evidence thereof.

         (d) The Borrower, the Lender and each Person who will act as an Escrow
Agent shall have executed and delivered an Escrow Agreement.

         (e) The Guarantors shall have executed and delivered the Guaranty to
the Lender.

         4.2      Conditions Precedent to Each Advance.

         Subject to Sections 2.2 hereof and to satisfaction of the conditions
set forth in Section 4.1 hereof, the Borrower acknowledges that the Lender shall
not make the initial or any other Advance unless each of the following
conditions are also satisfied, all in form and substance satisfactory to the
Lender:

         (a) The Borrower shall have timely delivered to the Lender a Request
for Advance as provided in Section 2.3(a) hereof and the documents required
under Section 5.3(a) thereof,

         (b) As of the date of the proposed Advance:

                  (i) The representations and warranties of the Borrower made in
         or in connection with this Agreement, the Escrow Agreement, the Note
         and the Guaranty shall be true, correct and complete in all material
         respects on and as of that date to the same extent as though made on
         and as of that date, and the Lender shall have received an Officer's
         Certificate of the Borrower, dated such date, certifying to such
         matters;

                                      -15-
<PAGE>

                  (ii) No event, condition or act shall have occurred and be
         continuing or would result from or occur after the making of the
         proposed Advance which would constitute a Default or an Event of
         Default, and the Lender shall have received an Officer's Certificate of
         the Borrower, dated such date, certifying to such matters;

                  (iii) The Borrower shall have performed in all material
         respects all agreements and satisfied all conditions which this
         Agreement provides shall be performed by it on or before such date;

                  (iv) No order, judgment or decree of any court, arbitrator or
         governmental authority or regulatory body shall purport to enjoin or
         restrain the Lender from making the applicable Advance; and

                  (v) There shall not be pending or, to the knowledge of the
         Borrower threatened, any action, suit, proceeding, or investigation of
         any governmental authority or regulatory body or any arbitration
         against or affecting the Borrower the Guarantors or any of their
         respective properties which, in the opinion of the Lender, could
         reasonably be expected (a) to affect materially and adversely the
         business, operations, properties, assets or condition (financial or
         otherwise) of either the Borrower or the Guarantors or (b) to impair
         the ability of the Borrower or the Guarantors to perform or of the
         Lender to enforce any of the Obligations.

         (c) With respect to Facility A, Sub-limit B and Facility C the Lender
shall have received a copy of an Investor Take-Out Commitment, if applicable,
relating to the Mortgage or Co-Op Loan to be financed by the Advances providing
for the purchase in full of such Mortgage or Co-Op Loan.

         (d) The Lender shall have approved the Collateral relating to such
Advance and the related Mortgage or Co-Op Loan in the manner provided in Section
5.3 hereof and all actions, if any, required to create, perfect, preserve and
continue the security interest and lien of the Lender in all Collateral then in
existence or coming into existence with the making of such Advance shall have
been duly authorized and taken and all recordings and filings (including,
without limitation, the execution and filing of such UCC financing statements as
the Lender may reasonably request) with governmental authorities or regulatory
bodies and all actions with respect to such governmental authorities or
regulatory bodies and all other Persons shall have been made or taken and
completed, and the Lender shall have received satisfactory evidence thereof.

         (e) If the Advance is to be used to finance a Mortgage or Co-Op Loan
with respect to which the loan-to-value ratio (as determined by the Lender)
exceeds eighty percent (80%), the Lender shall have received evidence
satisfactory to it that the payment of all amounts due and payable with respect
to such Mortgage or Co-Op Loan are insured to Lender's satisfaction pursuant to
a private mortgage insurance policy issued by a reputable insurance company
acceptable to the Lender, the proceeds of which shall have been assigned to the
Lender as Collateral.

                                      -16-
<PAGE>

         (f) The handling fee referred to in Section 3.3 hereof shall have been
paid.

         (g) The Borrower shall have delivered to the Lender such other
documents as the Lender may reasonably request.

         (h) All legal matters shall be satisfactory to the Lender.

         ARTICLE V - SECURITY

         5.1 Grant of Security Interest.

         To secure the payment of the principal of, premium, if any, and
interest on the Advances hereunder and under the Note and the payment and
performance of all other Obligations, the Borrower hereby grants, conveys, sets
over, transfers, pledges and assigns to the Lender a first priority general lien
upon and security interest in all of the Borrower's right, title and interest in
and to the Collateral. Without limiting any other provision of this Agreement,
and notwithstanding anything herein to the contrary, all the Collateral in
existence at any time shall secure each and every Obligation, regardless of
whether or not such Obligation relates to the Mortgage or Co-Op Loan which was
financed by the proceeds of the Advance with respect to which such Collateral
was granted or created.

         5.2 Authority to Collect.

         So long as no Default or Event of Default shall have occurred and be
continuing, subject to Article IX hereof, the Borrower shall have the right to
collect and retain for its own account all payments of principal, interest,
penalties and other amounts due or to become due with respect to the Collateral.

         5.3 Delivery of Collateral.

         (a) Preferably two (2) Business Days prior to the applicable Borrowing
Date for each proposed Advance, the Borrower shall deliver for approval to the
Lender or an Escrow Agent on behalf of the Lender copies of (i) all executed
documents or forms of documents to be executed on or prior to the making of the
Mortgage or Co-Op Loan which evidence, secure or otherwise relate to such
Mortgage or Co-Op Loan (including, without limitation, the Mortgage, the
Mortgage Note, the Co-Op Security Agreement, Co-Op Note, all insurance policies
and all closing documents) or otherwise evidencing or relating to the creation
or perfection of Lender's lien and security interest in the Collateral relating
to such Advance and (ii) all other documents referred to on Exhibit C hereto
(the "Preclosing Documents"). No Advance will be made without the Lender's prior
approval of such Collateral and Preclosing Documents. In the event that such
Collateral and the Preclosing Documents are so approved and an Advance is made,
as soon as possible on or after the Borrowing Date the Borrower shall deliver
executed copies of all the documents referred to in this Section 5.3 to the
Lender (or the Escrow Agent on behalf of the Lender) and shall record or cause
to be recorded the Mortgage securing the Mortgage Loan or the UCC-1 financing
statements securing the Co-Op loan being financed by the Advance and record or
file any other documents relating thereto required to be recorded or filed to
protect,

                                      -17-
<PAGE>

perfect and preserve the validity and priority of the Borrower's lien and
security interest thereunder.

         (b) In furtherance and not in limitation of the provisions set forth in
Section 5.3(a) hereof, the Borrower agrees to deliver or cause to be delivered
to the Lender, immediately after any Advance is made hereunder, all executed
documents pursuant to section 5.3(a) which have not been previously delivered to
the Lender and are referred to in Exhibit D hereto (the "Post Closing
Documents").

         5.4 Representations, Covenants and Warranties Relating to Collateral.
The Borrower represents, covenants and warrants as follows:

         (a) Mortgage and Co-Op Loans. (i) Each Mortgage or Co-Op Note and
Mortgage or Security Agreement, and all agreements, documents and instruments
executed and delivered in connection therewith, will be the legal, valid,
binding and enforceable obligations of all parties thereto; (ii) each Mortgage
or Co-Op Loan comprising part of the Collateral at i the time of the Advance
relating to such Mortgage or Co-Op Loan will not be past due or otherwise in
default; (iii) the Mortgage or Security Agreement securing each such Mortgage or
Co-Op Loan will create a valid first priority lien on and security interest in
the relevant Mortgaged Premises or Co-Operative Unit; (iv) each such Mortgage or
Co-Op Loan will fully comply in all respects with the terms of the applicable
Investor Take-Out Commitment as required under Facility A and the Borrower will
fully comply therewith prior to the expiration of the applicable Investor
Take-Out Commitment; (v) each such Mortgage or Co-Op Loan will comply with all
applicable underwriting standards contained in FDIC, FNMA, HUD, FHA, VA, GNMA,
FHLMC or other approved Investor policy requirements, standards, guidelines,
memoranda or revisions to guides and procedures; (vi) if the loan-to-value ratio
of any such Mortgage or Co-Op Loan exceeds eighty percent (80%), the Mortgage or
Security Agreement securing such Mortgage or Co-Op Loan will be covered by
mortgage or co-op insurance issued by a private, non-governmental insurer
acceptable to the Lender or by the housing insurance fund of a governmental
authority or regulatory body in an amount equal to the amount by which the
loan-to-value ratio exceeds eighty percent (80%); and (vii) no such Mortgage or
Co-Op Loan will have been procured by the mortgagee or Obligor thereunder
through fraud or misrepresentation.

         (b) On or prior to each Borrowing Date the Borrower will have good
title to the Collateral to be granted to the Lender on such Borrowing Date, free
and clear of all liens, mortgages, pledges, security interests, charges and
encumbrances, and full power, authority and legal right to grant, convey, set
over, transfer, pledge and assign the lien and security interest in such
Collateral to the Lender in the manner and form herein done. The Borrower will
forever warrant and defend title to the Collateral against the claims and
demands of all Persons.

         (c) This Agreement is and will remain a valid and enforceable first
priority lien on and security interest in the Collateral securing the payment
and performance of all Obligations. The Borrower will not create or permit to be
created or to exist or to remain, and will promptly discharge or cause to be
discharged without cost to the Lender, any other lien, mortgage, pledge,
security interest, charge or encumbrance of any kind whatsoever upon the
Collateral. If the validity, enforceability or priority of the lien and security
interest of this Agreement in the

                                      -18-
<PAGE>

Collateral, or any portion thereof, shall be endangered, challenged or attacked,
directly or indirectly, the Lender, in its sole option and discretion, shall be
authorized to take, at the expense of the Borrower, all necessary or proper
action in defense thereof, including the retention of legal counsel, the
prosecution or defense of litigation and the compromise or discharge of claims.

         (d) The Borrower shall, at its expense and from time to time, execute,
acknowledge, deliver, file, register and record any and all agreements,
documents and instruments, and do any and all other acts, or cause the same to
be executed, acknowledged, delivered, filed, registered, recorded or done, (and,
when and if necessary to be continued, re-filed, re-registered or re-recorded)
in such manner and in such places as may be required by any present or future
Applicable Law in order to, or as Lender may otherwise deem necessary or
advisable to, create, perfect, preserve, continue or enforce the Lender's lien
on and security interest in the Collateral, or to carry out more effectually the
purposes of this Agreement. Without limiting the foregoing, at Lender's request
Borrower shall forthwith, at its own cost and expense, cause to be recorded any
documents necessary to perfect the Lender's lien and security interest in the
Collateral in any real estate recording office where any Mortgage or UCC 1
financing statement is recorded.

         (e) The grant, conveyance, setting over, transfer, pledge and
assignment of the Collateral under this Agreement is intended as security, and
the execution and delivery of this Agreement shall not in any way impair or
diminish any obligations of the Borrower under any agreement, document or
instrument included in the Collateral, nor shall any of such obligations be
imposed upon the Lender.

         5.5 Lender Appointed Attorney-in-Fact.

         The Borrower hereby appoints the Lender as the Borrower's
attorney-in-fact, with full power of substitution, for the purpose of taking
such action and executing such documents, in the name of the Borrower or
otherwise, as the Lender may deem necessary or advisable to protect the
Collateral and to accomplish the purposes of this Agreement, which appointment
is coupled with an interest and is irrevocable. Without limiting the foregoing,
the Lender is authorized to execute and to file with or without the Borrower's
signature any UCC financing statements, amendments thereto or continuations
thereof.

         ARTICLE VI - GENERAL REPRESENTATIONS, COVENANTS
                      AND WARRANTIES OF BORROWER.

         Borrower represents, covenants and warrants to the Lender as follows,
acknowledging that the Lender is relying upon such representations, covenants
and warranties in connection with its execution and delivery of this Agreement
and the making of any Advances:

         6.1 Corporate Existence and Powers;
             Authorization to Conduct Business.

         Borrower is and will continue to be a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has and will continue to have all requisite corporate power
and authority to own, lease, use, maintain and operate its

                                      -19-
<PAGE>

properties and to carryon its business as now or hereafter conducted and
proposed to be conducted. The Borrower is and will continue to be in all
respects duly licensed, authorized, qualified, and registered (and has duly
filed all notifications required) to conduct its business as it is currently
being conducted or will be conducted and is in and will continue to be in good
standing wherever necessary to carry on its respective business and operations.
The Borrower's chief executive office, principal place of business and office at
which all books and records relating to the Collateral are and will be kept is
and will continue to be located at 510 Broad Hollow Road, Melville, NY 11747.

         Except as disclosed on Schedule 6.2 hereto, the Borrower has no
Subsidiaries or Affiliates.

         6.3 Due Authorization of Agreement and Borrowing.

         The Borrower has all requisite power and authority to enter into and
perform this Agreement and the Escrow Agreements, to issue the Note, to borrow
funds hereunder and grant the lien and security interest in the Collateral
hereunder and to carry out the transactions contemplated herein. The execution,
delivery and performance of this Agreement and the Escrow Agreements and the
issuance, delivery and payment of the Note have been duly authorized by all
necessary corporate action by the Borrower.

         6.4 No Conflict.

         The execution, delivery and performance by the Borrower of this
Agreement and the Escrow Agreements and the issuance, delivery and payment by it
of the Note, and the execution, delivery and performance by the Guarantors of
the Guaranty, do not and will not (a) violate any Applicable Law, the
Certificate of Incorporation or Bylaws of the Borrower [or the Guarantors] or
any order, judgment or decree of any court or other agency of any governmental
authority or regulatory body binding on the Borrower or a Guarantor; (b)
conflict with, result in a breach of or constitute (with any notice or lapse of
time or both) a default under any Contractual Obligation of the Borrower or a
Guarantor, (c) result in or require the creation or imposition of any mortgage,
pledge, security interest, lien, charge or encumbrance of any nature whatsoever
upon any of the properties or assets of the Borrower or a Guarantor, except
liens and security interests in favor of the Lender, or (d) require any approval
or consent of any Person under any Contractual Obligation of the Borrower or the
Guarantors other than authorization to request Advances, approvals or consents
to request Advances which have been obtained and previously disclosed in writing
to Lender.

         6.5 Governmental Consents.

         The execution, delivery and performance by the Borrower of this
Agreement and the Escrow Agreements and the issuance, delivery and performance
of the Note, and the execution, delivery and performance by the Guarantors of
the Guaranty, do not and will not require any registration with, consent or
approval of, or notice to, or other action, with or by, any governmental
authority or regulatory body or other Person except those that have been
obtained,

                                      -20-
<PAGE>

are and will remain in full force and effect and have been previously disclosed
in writing to Lender.

         This Agreement has been duly executed and delivered by the Borrower and
constitutes, and the Escrow Agreements, the Note and the Guaranty, when executed
and delivered in accordance herewith, will be duly executed and delivered and
will constitute, the legally valid and binding obligation of the Borrower or
each Guarantor, as the case may be, enforceable against them in accordance with
their respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditor's rights generally.

         6.7 Financial Condition.

         The Borrower has heretofore delivered to the Lender balance sheets of
the Borrower [and Guarantor] as at 6/30/99, 9/12/99 and the related statements
of income, cash flow and changes in financial position for the twelve (12)-month
fiscal period then ended. All such statements were prepared in accordance with
generally accepted accounting principles consistently applied and fairly present
the financial position of the Borrower [and Guarantor], respectively, as at the
respective dates thereof and the results of operations and changes in financial
position of the Borrower [and Guarantor], respectively, for each of the periods
then ended. As of the date hereof, the Borrower [and the Guarantor] have no
material contingent obligations, contingent liabilities or liabilities for
taxes, long-term leases or unusual forward or long-term commitments, which are
not reflected in the foregoing financial statements, or in the notes thereto.

         6.8 Changes, etc.

         Since the date of the financial statements referred to in Section 6.7
hereof, there has been no change in the business, operations, properties, assets
or condition (financial or otherwise) of the Borrower or Guarantors which has
been, either in any case or in the aggregate, materially adverse to the Borrower
or any Guarantor, respectively.

         6.9 Title to Properties; Liens.

         The Borrower has and as of each Borrowing Date will have, good,
sufficient and legal title to all the properties and assets reflected in the
balance sheets of the Borrower referred to in Section 6.7 hereof (including all
Collateral) and all assets held by the Borrower on the date hereof but acquired
subsequent to the date of such balance sheet, except for assets disposed of in
the ordinary course of business and consistent with past practices. All such
properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges or encumbrances except as expressly permitted
hereunder.

         6.10     Litigation; Adverse Facts.

         There is no action, suit, proceeding or arbitration (whether or not
purportedly on behalf of the Borrower or a Guarantor) at law or in equity or
before or by any governmental authority or regulatory body or arbitral panel
pending or, to the knowledge of the Borrower, threatened

                                      -21-
<PAGE>

against or affecting the Borrower or Guarantors or any of their respective
properties. None of the Borrower or the Guarantors is (i) in violation of any
Applicable Law which materially adversely affects or may materially adversely
affect the business, operations, properties, assets or condition (financial or
otherwise) of the Borrower or the Guarantors or (ii) subject to or in default
with respect to any final judgment, writ, injunction, decree, rule or regulation
of any governmental authority or regulatory body or arbitral panel which would
have a materially adverse effect on the business, operations, properties, assets
or condition (financial or otherwise) of any of the Borrower or the Guarantors.
There is no action, suit, proceeding or investigation pending or, to the
knowledge of the Borrower, threatened against or affecting any of the Borrower
or the Guarantors which questions the validity or the enforceability of this
Agreement, the Escrow Agreements, the Note or the Guaranty.

         6.11 Payment of Taxes.

         All tax returns and reports of the Borrower and the Guarantors required
to be filed by them have been timely filed, and all taxes, assessments, fees and
other governmental charges upon the Borrower and the Guarantors and upon their
respective assets, income and franchises which are due and payable have been
paid when due and payable. The Borrower knows of no proposed tax assessment
against it or the Guarantors which would be material to the business,
operations, properties, assets or condition (financial or otherwise) of the
Borrower or the Guarantors.

         6.12 Materially Adverse Agreements.

         (a) Neither the Borrower nor any Guarantor is a party to or subject to
any Contractual Obligation or any restriction in any charter documents or any
other internal restriction materially adversely affecting its respective
business, operations, properties, assets, or condition (financial or otherwise).

         (b) Neither the Borrower nor any Guarantor is, nor at any Borrowing
Date will be, in default in the performance, observance or fulfillment of any of
its Contractual Obligations, and no condition exists, nor at any Borrowing Date
will exist, which, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a material adverse effect on
the business, properties, assets, operations or condition (financial or
otherwise) of the Borrower or the Guarantors.

         6.13 Absence of Governmental Regulations
              Limiting Right to Borrow Money.

         Borrower is not, and at each Borrowing Date will not be, subject to (i)
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or the Investment Company Act of 1940, or
any amendments thereto or any rules or regulations promulgated with respect to
any of the foregoing Acts, or (ii) any other Applicable Law limiting the
Borrower's ability to incur indebtedness for money borrowed.

                                      -22-
<PAGE>

         6.14     Borrower's Securities Activities.

         Borrower is not, and at each Borrowing Date will not be, engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of any Advance will be used to purchase or carry any Margin Stock.

         6.15     Employee Benefit Plans.

         (a) The Borrower, [the Guarantors] and each of [its] [their] Affiliates
is in compliance in all material respects with any applicable provisions of
ERISA with respect to all Pension Plans and Multiemployer Plans.

         (b) No Termination Event has occurred or is reasonably expected to
occur with respect to any Pension Plan.

         (c) Vested liabilities under all Pension Plans (with assets less than
vested liabilities) do not exceed the assets thereunder.

         (d) Neither the Borrower nor any of its Affiliates has incurred or
reasonably expects to incur any withdrawal liability under ERISA to any
Multiemployer Plan.

         6.16 Disclosure.

         No representation or warranty of the Borrower or of a Guarantor made in
or in connection with this Agreement, the Note, the Guaranty or any other
agreement, document, instrument, certificate or written statement furnished to
Lender by or on behalf of the Borrower or Guarantors for use in connection with
the transactions contemplated by this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact (known to the Borrower or Guarantors in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Borrower or Guarantors
(other than matters of a general economic nature) which materially adversely
affects the business, operations, properties, assets or condition (financial or
otherwise) of the Borrower or the Guarantors, which has not been disclosed
herein or in such other agreements, documents, instruments, certificates, and
statements furnished to the Lender for use in connection with the transactions
contemplated hereby.

         6.17 GNMA, FHA, VA, FNMA and FHLMC
              FDIC Eligibility of Borrower.

         In the event the Borrower is approved, the Borrower will continue to
maintain approval for participation in the HUD-FHA home mortgage insurance
programs as a non-supervised mortgagee, and will continue to meet the
requirements of 24 CFR ss.ss. 203.1(b), 203.2 and 203.4 and any successor
regulation thereof and is a mortgagee in good standing and is and will continue
to be an eligible lender under the VA loan guaranty program and meets and as of
each Borrowing Date will meet all requirements of Applicable Law so as to be
eligible to originate,

                                      -23-
<PAGE>

purchase, hold and service FHA-insured Mortgage Loans, VA-guaranteed Mortgage
Loans and conventional Mortgage Loans, including without limitation all policy
requirements, standards, guidelines, memoranda of revisions to guides and
procedures governing it promulgated by HUD, FHA and VA. In the event the
Borrower is approved, the Borrower will continue to maintain approval as
seller/servicer of Mortgage Loans to FNMA and to FHLMC in the FHLMC regions in
which it operates and meets and will continue to meet all the requirements of
Chapter 3 of the FNMA Securities Guide, the FHLMC Sellers' & Servicers Guides
and all other Applicable Laws, policy requirements, standards, guidelines,
memoranda of revisions to guides and procedures governing its operations as a
seller/servicer of Mortgage Loans for FNMA and FHLMC, respectively, necessary
for Borrower to originate, purchase and service Mortgage Loans to be sold to
FNMA and FHLMC. The Borrower is and will continue to be an approved
issuer/servicer of GNMA Mortgage-Backed Securities and meets and will continue
to meet all applicable GNMA regulations (including, without limitation, the
requirements set forth in the "Government National Mortgage Association
Mortgage-Backed Securities Guide" and all other policy requirements, standards,
guidelines, memoranda of revisions to guides and procedures governing the
Borrower's operations promulgated by GNMA.

         6.18 Grant of Collateral Complies with Applicable Laws.

         In making, purchasing or closing each Mortgage or Co-Op Loan comprising
part of the Collateral, the Borrower will fully comply with, and all loan
documentation relating thereto shall fully comply with, all Applicable Laws,
including, without limitation, the Equal Credit Opportunity Act, usury laws,
Truth-In-Lending Act and the Real Estate Settlement Procedures Act.

         6.19 Flood Hazard Area. The Borrower has not made and will not make any
Mortgage or Co-Op Loan secured by Mortgaged Premises located or to be located in
a Special Flood Hazard Area so designated by the Secretary of Housing and Urban
Development unless the community in which such area is situated is then
participating in the National Flood Insurance Program (and, if the related
Mortgage or co-op Loan is to be part of the Collateral, Special Flood Hazard
Insurance under such program shall be in effect and maintained so long as such
Mortgage or Co-Op Loan is part of the Collateral).

         6.20 Absence of Defaults.

         No Default or Event of Default exists or will as of any Borrowing Date
exist.

         6.21 Absence of Notice Canceling Eligibility.

         Neither the Borrower nor either Guarantor has received any notice or
information from HUD, FHA, GNMA, VA, FHLMC or FNMA that any of the foregoing
intends or is contemplating terminating or restricting Borrower's status as an
approved participant in its programs for which Borrower is, as of the date of
this Agreement, currently registered, approved or authorized.

                                      -24-
<PAGE>

         6.22 FDIC.

         To the Borrower's knowledge, the FDIC is a conservator or receiver of
any bank, trust company, savings and loan, thrift or other financial institution
which is or as of any Borrowing Date will be a counterparty to any Investment
Take-Out Commitment. Neither the Borrower nor either Guarantor has received any
notice from the FDIC disaffirming or repudiating any Investor Take-Out
Commitment and to the Borrower's knowledge, no such disaffirmance or repudiation
has been threatened or is contemplated by the FDIC.

         ARTICLE VII - COVENANTS OF BORROWER

         From and after the date hereof, so long as this Agreement shall be in
effect and until payment and performance in full of all Advances and all other
Obligations, the Borrower covenants as follows:

         7.1 Mortgage or Co-Op Loan Coverage and
             Assignment of Take-Out Commitments.

         Each Advance will be in a principal amount for Facility A: not greater
than 100% of the amount of the related Investor Take-Out Commitment up to 100%
of the note amount; for Sub-limit B: not greater than 100% of the note amount,
and; for Facility C: not greater than 100% of the loan amount. No interest in
any Investor Take-Out Commitment shall be granted, conveyed, set over, pledged,
transferred assigned, or hypothecated to any Person other than to the Lender, as
provided in Article V hereof, and any such grant, conveyance, setting over,
pledge, transfer, assignment or hypothecation to any Person other than the
Lender shall be null and void. Notwithstanding the foregoing, if the grant,
conveyance, setting over, pledge, transfer and assignment to the Lender of any
Investor Take-Out Commitment requires the consent of any Investor or other third
party, and such Investor or other third party objects to such grant, conveyance,
setting over, pledge, transfer and assignment to the Lender of any such Investor
Take-Out Commitment, such grant, conveyance, setting over, pledge, transfer and
assignment hereunder shall be deemed voided and the Borrower will thereafter
cooperate with the Lender in any reasonable arrangement requested by the Lender
to provide the Lender the benefits under such Investor Take-Out Commitment,
substantially equivalent to those which the Lender would have enjoyed if such
consent were granted, including without limitation enforcement at the cost of
the Borrower and for the benefit of the Lender of any and all rights of the
Borrower against such Investor or third party arising out of any breach of such
Investor Take-Out Commitment or any termination or cancellation thereof.

         7.2 Performance of Obligations Under
             Investor Take-Out Commitments.

         The Borrower will perform all obligations required by it under the
Investor Take-Out Commitments, without liability or charge of any kind to the
Lender.

                                      -25-
<PAGE>

         7.3 Preservation of FHA, VA, FNMA,
             GNMA, and FHLMC Eligibility

         When applicable, the Borrower will (i) preserve and maintain its status
as an FHA-approved mortgagee in good standing, (ii) preserve and maintain its
status as an eligible lender under the VA loan guaranty program and will
continue to meet all requirements of Applicable Law to be eligible to originate,
purchase, hold and service FHA-insured Mortgages, VA-guaranteed Mortgage Notes
and conventional Mortgage Notes, including without limitation all policy
requirements, standards, guidelines, memoranda of revisions to guides and
procedures governing it promulgated by HUD, FHA, VA, FNMA, FHLMC and GNMA (iii)
preserve and maintain its status as an approved seller/servicer of Mortgage
Notes to FNMA and to FHLMC and will continue to meet all applicable policy
requirements, standards, guidelines, memoranda of revisions to guides and
procedures governing it promulgated by FNMA and FHLMC to be able to originate,
purchase and service Mortgages to be sold to FNMA and FHLMC, and (iv) preserve
and maintain its status as an approved issuer/servicer of GNMA Mortgage-Backed
Securities and will continue to meet all applicable GNMA regulations (including,
without limitation, the requirements set forth in the "Government National
Mortgage Association Mortgage-Backed Securities Guide" and all other policy
requirements, standards, guidelines, memoranda of revisions to guides and
procedures governing it promulgated by GNMA).

         7.4 Further Filings to Protect Borrower's Security Interest in
Collateral

         The Borrower shall, at its expense and from time to time, execute,
acknowledge, deliver, file, register and record any and all agreements,
documents and instruments, and do any and all other acts, or cause the same to
be executed, acknowledged, delivered, filed, registered, recorded or done, (and,
when and if necessary to be continued, re-filed, re-registered or re-recorded)
in such manner and in such places as may be required by any present or future
Applicable Law in order to, or as the Lender may otherwise deem necessary or
advisable to, create, perfect, preserve, continue or enforce the Borrower's lien
on and security interest in any Mortgaged Premises or Co-operative Units and any
other property in which the Borrower has a lien and security interest to secure
obligations owing to the mortgagee under any Mortgage, Mortgage Loan or Mortgage
Note or holder of the Co-Op Security Agreement and Note which has been financed
by an Advance.

         7.5 Performance of Obligations in Agreement.

         The Borrower will observe and perform all provisions to be observed or
performed by it, and will cause to be observed and performed by the Guarantors
and each other Person all provisions to be observed or performed by it,
contained in this Agreement, the Note, an Escrow Agreement, the Guaranty, and
each agreement, document or instrument included in the Collateral, in accordance
with the terms hereof and thereof and within the time permitted thereby, and
will maintain, or cause to be maintained, the validity and effectiveness of each
such agreement, document or instrument and the assignment thereof or of rights
in respect thereto to Lender.

                                      -26-
<PAGE>

         7.6 No Release of Collateral.

         The Borrower will not take any action or permit any action to be taken
by others, which would release any Person from any of its covenants or
obligations under any instrument agreement or document included in the
Collateral, or which would result in the amendment, hypothecation,
subordination, waiver, modification, termination or discharge or impair the
legality, validity, effectiveness or enforceability, of any such agreement,
document or instrument, or release any security comprising the Collateral,
except as expressly provided herein.

         7.7 Notice of Defaults.

         The Borrower will give notice to the Lender of any Default, Event of
Default or default by any Person under any agreement, document or instrument
included in the Collateral promptly after Borrower obtains knowledge of the
same.

         7.8 Preservation of Corporate Existence;
             Performance of Contractual Obligations

         The Borrower will do or cause to be done all things necessary to
preserve and keep in full effect its existence, rights (charter and statutory)
and franchise as a corporation under the Applicable Laws of the jurisdiction of
its incorporation, and its license, authorization, qualification or registration
as a foreign corporation to transact business in any jurisdiction in which such
licensing, authorization, qualification or registration is necessary. The
Borrower will duly perform, or cause to be performed all Contractual Obligations
of Borrower or the Guarantors.

         7.9 Retention of Collateral.

         The Borrower will not, and will not permit the Guarantors or any other
Person to, sell, lease, transfer or otherwise dispose of the Collateral or any
portion thereof or interest therein, except that the Borrower may sell, transfer
or otherwise dispose of any of the foregoing to the extent expressly permitted
or required by an Investor Take-Out Commitment, subject nevertheless, to the
rights of the Lender in and to the Collateral.

         7.10 Insurance to be Maintained on Mortgaged Premises or Co-Operative
Unit.

         (a) The Borrower will maintain, or will cause to be maintained, upon
all Mortgaged Premises or Co-Operative Units, with an insurer authorized to do
business in the jurisdiction in which such property is located and which is well
rated by a recognized national rating organization and satisfactory to the
Lender, (i) fire insurance and insurance with respect to risks included under
the standard extended coverage endorsement and (ii) flood insurance, if such
insurance is required by Applicable Law. All policies required to be maintained
hereunder shall include a standard mortgagee or Co-Op endorsement in favor of
the Borrower and its assigns, be in an amount not less than the original
principal amount of the Mortgage or Co-Op loan and not permit reduction of the
amount of coverage on account of any co-insurance, reduced rate contribution or
similar clause.

                                      -27-
<PAGE>

         (b) Each Mortgage or Co-Op loan will be insured prior to the applicable
Borrowing Date as a first lien under [an American Land Title Association Loan
Policy -1970 (revised 10/17/70)] Form, or equivalent, issued by a reputable
title insurance company authorized to transact business in the state in which
the Mortgaged Premises or Co-Operative Unit is situated, subject only to the
lien of current taxes not yet due and to such other exceptions which, in the
judgment of Lender, do not materially affect the value of the Mortgaged Premises
or Co-Operative Unit as security. The premium for such policy will have been
paid in full prior to such Borrowing Date.

         7.11 Conformance of Mortgage and Mortgage Loans or Co-Op Loans;
              Compliance with Investor Take-Out Commitment.

         Each Mortgage and Mortgage Loan or Co-Op Loan will conform as of the
applicable Borrowing Date in all respects with all requirements of the Investor
Take-Out Commitment relating to the same and the Borrower will comply with all
other terms and conditions set forth in such Investor Take-Out Commitment.

         7.12 No Defaults.

         No default shall have occurred under any Mortgage or Co-Op Note or the
underlying Mortgage or Co-Op Security Agreement therefor at the time of its
assignment to Lender and as of the date of such assignment no Mortgage or Co-Op
Note, or Mortgage or Co- Op Security Agreement shall have been dated more than
five days prior thereto.

         7.13 Bona Fide Nature of Mortgages and Co-On Loans.

         (a) Each Mortgage Loan and related Mortgage Note and Mortgage or Co-Op
Loan and related Co-Op Note and Security Agreement shall have arisen from a bona
fide, arm's length loan complying with all Applicable Laws and shall have been
made to a Person having legal capacity to contract, and will not be subject to
any defense, dispute, set-off or counterclaim. (This representation and warranty
shall be deemed breached upon the assertion by any Person liable on the Mortgage
or Co-Op Loan, the Mortgage or Co-Op Note or the Mortgage or Security Agreement
or who executed any of the foregoing documents of such a defense, dispute,
set-off or counterclaim including without limitation a claim that the
transaction which gave rise to the Mortgage or Co-Op Loan, the Mortgage or Co-Op
Note or the Mortgage or Security Agreement or any other Collateral did not
comply with any Applicable Law).

         (b) All disclosures required by Applicable Law in connection with each
Mortgage or Co-Op Loan, Mortgage or Co-Op Note and Mortgage or Security
Agreement will have been duly and properly made and given.

         7.14 Compensating Balances

         The Borrower shall at all times prior to the Expiration Date and
thereafter until the Note and all Obligations have been fully paid and
performed, maintain with the Lender (a) a non-

                                      -28-
<PAGE>

interest bearing demand deposit account with an average daily collected balance
of not less than $ ,000.00 and (b) an interest bearing account with a minimum
average daily collected balance of at least $0,000.00 (or an equivalent yield).
The average daily balances for such account[s] shall be analyzed by the Lender
on a quarterly basis. Should any such analysis reflect that the average daily
collected balance during any quarter in [either of] the foregoing account(s) was
less than the minimum average daily balances required to be maintained therein,
the Borrower will pay to Lender on demand an "analysis fee" at a rate per annum
(based on a year of 360 days and actual days elapsed) equal to the WSJ Prime
Rate plus 2% for each day during such quarter on an amount equal to the
difference between the minimum average daily collected balances required to be
maintained and the amount of the actual average daily collected balances so
maintained during such quarter.

         7.15 Servicing of Mortgages and Co-Op Loans and Collection of Payments.

         The Borrower agrees that, during all times that any Mortgage or Co-op
Loan, Mortgage or Co-Op Note, Mortgage or Security Agreement or related property
or rights constitute Collateral under this Agreement, the Borrower shall,
without compensation, as trustee for Lender, service (or cause to be serviced by
a reputable mortgage or Co-Op Loan servicer acting as trustee for the Lender)
such Mortgage or Co-Op Loan, including, without limitation, the following:

         (a) endeavor diligently to collect all payments due under each Mortgage
or Co-Op Loan, Mortgage or Co-Op Note and Mortgage or Security Agreement as and
when the same became due and payable; provided however, that the Borrower shall
not collect or accept any prepayment unless the Lender is given not less than
three (3) days advance notice thereof.

         (b) (i) hold in trust in a separate, segregated, escrow account
earmarked for the Lender all payments received from any maker, mortgagor or
Co-Op Loan borrower or other Person liable for payment of any Mortgage or Co-Op
Loan, Mortgage or Co-Op Note or Mortgage or Security Agreement (including,
without limitation, payments of principal, interest, late charges and penalties,
mortgage or Co-Op insurance premiums, prepayments, insurance proceeds and
condemnation awards or other tenders or payments) unless each such Person agrees
to make all payments to the Lender directly, and (ii) promptly apply and pay to
the appropriate governmental authorities and regulatory bodies all funds
received from any maker, mortgagor or Co-Op Loan borrower or other Person liable
under any Mortgage or Co-Op Loan, Mortgage or Co-Op Note or Mortgage or Security
Agreement for payment of real property or similar taxes and insurance premiums
with respect to the Mortgaged Premises or Co-Operative Units covered by such
Mortgage or Co-Op Loan, Mortgage or Co-Op Note or Mortgage or Security
Agreement.

         (c) furnish to the Lender upon request an Officer's Certificate of the
Borrower as to the gross payments received by the Borrower (or the
mortgage/Co-Op Loan servicer, as the case may be) under each Mortgage or Co-Op
Loan, Mortgage or Co-Op Note and Mortgage or Security Agreement, including a
detailed statement in form and substance satisfactory to the Lender as to the
application of all monies collected.

                                      -29-
<PAGE>

         (d) promptly discharge, to the extent funds paid to the Borrower for
such purpose are adequate, all obligations of each mortgagee or holder of each
Co-Op Loan required by each Mortgage or Co-Op Loan, Mortgage or Co-Op Note and
Mortgage or Security Agreement or under any Applicable Law.

         (e) make available or cause to be made available to the Lender or its
representative, at all reasonable times and from time to time, all books and
records of the Borrower and such mortgage/Co-Op Loan servicer, if any,
applicable to any Mortgage or Co-Op Loan, Mortgage or Co-Op Note and Mortgage or
Security Agreement or any other agreement, document or instrument relating
thereto.

         (f) keep and maintain or cause to be kept and maintained by such
mortgage/Co-Op Loan servicer such books and records and render or cause such
Mortgage/Co-Op Loan servicer to render reports to the Lender in such a manner as
may, from time to time, be requested by the Lender and in such manner as will
fully comply with all Applicable Laws, including without limitation all policy
requirements, standards, guidelines, memoranda or revisions to guides and
procedures promulgated by the FDIC, FHA, FHLMC, FNMA, GNMA, HUD, VA or any other
approved Investor.

         (g) advise the Lender upon request as to the status of any Mortgage or
Co-Op Loan, Mortgage or Co-Op Note or Mortgage or Security Agreement, including
without limitation the status of all payments due thereunder.

         (h) promptly notify the Lender if any payment required under any
Mortgage or Co-Op Loan, Mortgage or Co-Op Note or Mortgage or Security Agreement
was not made when due, and upon knowledge thereof of any loss or damage by fire
or other hazard to the Mortgaged Premises or Co-Operative Unit, or of any sale
or transfer of the legal or equitable title thereto, or of any default by any
maker, mortgagor or Co-Op Loan borrower or other Person under any Mortgage or
Co-Op Loan, Mortgage or Co-Op Note or Mortgage or Security Agreement.

         (i) maintain fidelity insurance or fidelity bonds in form, with limits
and with companies, satisfactory to Lender with respect to the chief financial
officer of the Borrower and any other employee or employees of the Borrower
designated from time to time by the Lender, such insurance or bonds to be
expressly endorsed to recognize that the Lender has an interest therein and that
same will not be canceled, terminated or permitted to lapse unless not less than
thirty (30) days prior notice is given to the Lender.

         (j) if there shall occur a default under any Mortgage or Co-Op Loan,
Mortgage or Co-Op Note or Mortgage or Security Agreement, pay to the Lender the
outstanding balance of principal and interest under the Note secured thereby.

                                      -30-
<PAGE>

         7.16 Financial Statements and Information;
              Compliance Certificates.

         (a) The Borrower will keep adequate books and records and maintain a
system of accounting established and administered in accordance with generally
accepted accounting principles consistently applied.

         (b) As soon as practicable, and in any event within 120 days after the
end of each of the Borrower's fiscal years, Borrower shall furnish to Lender a
copy of:

                  (i) a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such year, and a consolidated statement of income
and cash flow and of stockholders' equity and changes in financial position of
the Borrower and its Subsidiaries for such year, in each case audited by an
independent certified public accountant acceptable to Lender; and

                  (ii) if requested, a fully completed Mortgage Banking Company
Questionnaire on Robert Morris Associates Form No. C.128.

         (c) As soon as practicable and in any event within the time periods set
forth in items (i) and (ii) below, Borrower shall furnish to the Lender:

                  (i) within 60 days after the end of each quarterly interim
         period of each fiscal year of the Borrower, each unaudited financial
         statement of the Borrower covering such period solely to the extent
         that the Borrower has caused such financial statements to be prepared
         in the ordinary course of its business or for any other purpose, all of
         which shall be prepared in accordance with generally accepted
         accounting principles consistently applied and shall be certified by
         the chief financial officer of the Borrower; and

                  (ii) within 90 days after receipt of a written request from
         the Bank, an unaudited consolidated balance sheet of the Borrower and
         its Subsidiaries as of the end of, and an unaudited consolidated
         statement of income and cash flow and of stockholders' equity and
         changes in financial position of the Borrower and its Subsidiaries for,
         such interim period of Borrower's fiscal year as the Bank may request,
         prepared in accordance with generally accepted accounting principles
         consistently applied and certified by the chief financial officer of
         the Borrower.

         (d) (i) Each of the audited financial statements of the Borrower
delivered pursuant to Section 7.16(b)(i) hereof shall be accompanied by a
certificate from the independent public accountant who audited such financial
statements stating that such accountant has reviewed the terms of this Agreement
and the Note and has made, or caused to be made under his or her supervision, a
review in reasonable detail of the transactions and condition of the Borrower
during the accounting period covered by such financial statements, and that such
accountant does not have knowledge of the existence as at the date of the
certificate of any condition or event which constitutes a Default or an Event of
Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof.

                                      -31-
<PAGE>

                  (ii) Each of the financial statements of Borrower delivered
pursuant to Section 7.16(b)(i) or Section 7.16(c) hereof shall be accompanied by
an Officer's Certificate from the Borrower stating that the signer thereof has
reviewed the terms of this Agreement and the Note and has made, or caused to be
made under his or her supervision, a review in reasonable detail of the
transactions and condition of the Borrower during the period covered by such
financial statements, and that the signer does not have knowledge of the
existence as at the date of the Officer's Certificate of any condition or event
which constitutes a Default or an Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period .of existence thereof
and what action the Borrower has taken, is taking and proposes to take with
respect thereto.

         (e) Promptly upon receipt thereof, the Borrower will deliver to the
Lender copies of all reports submitted to the Borrower or by independent public
accountants in connection with each annual, interim or special audit of the
financial statements of the Borrower made by such accountants, including,
without limitation, the comment letter submitted by such accountants to
management in connection with their annual audit.

         7.17 Investor Commitment Report.

         Within two (2) Business Days after a request by the Bank, the Borrower
shall deliver to the Lender an investor commitment report ("Investor Commitment
Report") listing each Investor Take-Out Commitment held by the Borrower as of
the date specified, and setting forth the date of issuance, the original amount,
the unutilized amount and the expiration date of each such Investor Take-Out
Commitment.

         7.18 Notification of ERISA Matters.

         (a) Promptly upon becoming aware of the occurrence of (i) any
Termination Event or (ii) any "prohibited transaction, " as such term is defined
in Section 4975 of the Internal Revenue Code, in connection with any Pension
Plan or any trust created thereunder, the Borrower shall deliver a written
notice to Lender specifying the nature thereof, what action Borrower has taken,
is taking or proposes to take with respect thereto, and, when known, any action
taken or threatened by the Internal Revenue Service or the Pension Benefit
Guaranty Corporation (or any successor) with respect thereto.

         (b) Promptly upon receipt thereof, the Borrower will forward to Lender
copies of (i) any notice received by the Borrower or any of its Affiliates of
the Pension Benefit Guaranty Corporation's (or any successor's) intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan; (ii) each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by Borrower or any of its ERISA Affiliates with the
Internal Revenue Service with respect to each Pension Plan; and (iii) any notice
received by Borrower or any of its ERISA Affiliates from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA.

                                      -32-
<PAGE>

         7.19 Information Regarding Mortgage and Co-Op Loans.

         (a) Within thirty (30) days of the end of each calendar month, Borrower
shall, if requested, deliver to Lender a report for such month and for the
calendar year to date identifying the Mortgage or Co-Op Loans which have been
financed by Advances and which have been sold on a servicing released basis; the
principal amount of such Mortgage or Co-Op Loans sold, and the amount of
proceeds received from each such sale.

         (b) Within thirty (30) days after the end of each calendar month.
Borrower shall deliver to Lender a report identifying Mortgage or Co-Op Loans
which have been financed by Advances held by Borrower in the process of
foreclosure and real estate owned by Borrower as a result of foreclosure as of
the end of such month, and amounts advanced by Borrower during such month with
respect to such Mortgage or Co-Op Loans in foreclosure and such real estate or
stock owned.

         7.20 Financial Covenant.

         The Borrower agrees that, so long as the Line of Credit is in effect or
any Obligation remains outstanding:

         (a) It will not, and will not permit any of its Subsidiaries to create
assume or suffer to exist any Indebtedness in the aggregate at any time
outstanding in excess of $10,000,000.00.

         (b) It will not permit the Leverage Ratio to exceed 15.00 to 1.00.

         (c) It will maintain an Interest Coverage Ratio of not less than 1.10
to 1.00.

         (d) Consolidated Tangible Net Worth will not at any time be less than
$2,300,000.00.

         7.21 Conduct of Business.

         Except for the residential mortgage or Co-Op loan origination and
servicing business, Borrower will not (a) engage in any business, or change in
any substantial respect its methods of operating its existing mortgage or Co-Op
loan origination and servicing business, (b) change in any material respect its
present management or (c) engage in or provide any guarantees with respect to
any lines of business.

         7.22 Additional Documents.

         The Borrower shall, with reasonable promptness, furnish or cause to be
furnished to Lender such other documents and information with respect to the
business, affairs and condition of Borrower or the Guarantors as Lender from
time to time may reasonably request.

                                      -33-
<PAGE>

         7.23 Inspection.

         The Borrower shall, on reasonable prior notice, permit any
representative of Lender to visit Borrower's place of business to examine all
the books of account of Borrower and the records, reports and other papers of
Borrower, to make copies and extracts therefrom, and to discuss Borrower's
affairs, finances and accounts with Borrower's officers, employees, attorneys
and independent public accountants (and by this provision Borrower authorizes
said i attorneys and accountants to discuss with such representatives its
finances and affairs), all at such reasonable times and as often as may be
reasonably requested.

         7.24 No Merger or Consolidation.

         The Borrower shall not merge or consolidate with or into any Person or
materially alter, amend or change its corporate business or sell, lease, assign
or otherwise dispose of all or any substantial part of its assets outside of the
ordinary course of business. The Borrower will not change the location of its
chief executive office, principal place of business or office where all books
and records relating to the Collateral are and will be kept without the Lender's
prior written consent. The Borrower will not conduct business from or maintain
any office at any location not set forth in Schedule 7.25 without the Lender's,
prior written consent.

         7.26 Independence of Covenants.

         All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be r permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a Default or
an Event of Default if such action is taken or condition exists.

         ARTICLE VIII - INDEMNIFICATION.

         8.1 Indemnification.

         The Borrower shall indemnify,  protect and hold Lender harmless, from
and against all liabilities, losses, claims, demands, costs, expenses (including
attorneys' fees and expenses), settlements and judgments of any nature arising,
or alleged to arise, from or in connection with (a) any breach of any
representation, warranty or covenant made by the Borrower or a Guarantor herein,
or in the Note, any Escrow Agreement or the Guaranty or in any agreement,
document or instrument delivered in connection herewith or therewith, or any
other violation, or alleged violation of this Agreement, the Note, any Escrow
Agreement or the Guaranty or any agreement, document or instrument included in
the Collateral, and (b) any damage or loss sustained by Lender in connection
with this Agreement, the Note, the Escrow Agreements or the Guaranty unless such
damage or loss is caused by the gross negligence or willful misconduct of the
Lender. The borrower, at its own expense, will resist and defend any action,
suit or proceeding brought against the Lender by reason of such occurrence by
counsel designated by the Lender. The obligations of this Section 8.1 shall
survive any termination of this Agreement.

                                      -34-
<PAGE>

         ARTICLE IX - TAKE-OUT PROCEDURE

         9.1 Note Due and Payable Upon Date of Mortgage or Co-Op
             Loan Payment Under Investor Take-Out Commitment.

         Notwithstanding any provision herein or in the Note to the contrary,
each Mortgage or Co-Op Loan financed by any Advance which has not yet become due
and payable shall become due and payable, without notice or demand, upon the
date that such Mortgage or Co-Op Loan and underlying Mortgage or Security
Agreement is required to be sold or transferred to a third party pursuant to an
Investor Take-Out Commitment, regardless of whether such sale or transfer
actually occurs.

         9.2 Loan Delivery Authorization.

         Not later than three (3) days prior to the date provided for any sale
or transfer of a Mortgage or Co-Op Loan and underlying Mortgage or Co-Op Note
and Mortgage or Security Agreement to a Person or Investor or their designee
pursuant to an Investor Take-Out Commitment, the Borrower shall execute and
deliver to the Lender a "Loan Delivery Authorization" substantially in the form
annexed hereto as Exhibit E, together with such documents, if any, required to
be delivered to the Investor or its designee pursuant to the provisions of such
Investor Take-Out Commitment which have not been previously delivered i to
Lender, and such other documents, including without limitation, transmittal
envelopes and transmittal packages, as Lender may require instructing the Lender
to deliver the said documents to the Take-Out Investor. The Lender shall
thereafter forward a bailee letter to the Person or Investor acquiring the
Mortgage or Co-Op Loan and Mortgage or Security Agreement, accompanied by such
documents within the possession of Lender as are required to be delivered to
such party pursuant to the Investor Take-Out Commitment. Upon the receipt by the
Lender of immediately available federal funds free and clear of any set-off,
deduction, withholding or counterclaim (and, if approved by Lender, promissory
notes) in an aggregate principal amount equal to the outstanding principal
amount of the Advance to which such Mortgage or Co-Op Loan and Investor Take-Out
Commitment relates, all said amounts received by the Lender shall be applied in
payment of the Obligations as same are due and payable. The Borrower shall
reimburse the Lender for all out-of-pocket expenses incurred by Lender in
transmitting the bailee letter and other required documents to such Investor or
designee thereof pursuant to this Section 9.2.

         ARTICLE X - Events of Default and Remedies

         10.1 Events of Default

         Any of the following occurrences or acts (whether the same shall occur
voluntarily, involuntarily, by operation of law or otherwise) shall constitute
an event of default ("Event of Default") under this Agreement:

         (a) a default shall be made in the payment of any principal, interest,
or premium, if any, on any Advance or the Note, when and as the same shall
become due and payable; or

                                      -35-
<PAGE>

         (b) a default shall be made in the payment of any Obligation other than
the Obligations referred to in Section 10.1(a) hereof and such default shall not
be cured to the satisfaction of the Lender within five days;

         (c) any representation, warranty or other statement of the Borrower or
the Guarantors made in or in connection with this Agreement, the Note, any
Escrow Agreement or the Guaranty or any representation or warranty of any Person
set forth in any certificate or other agreement, document or instrument
delivered pursuant to this Agreement, or any agreement, document or instrument
included in the Collateral, shall prove to be incorrect in any material respect
as of the time when made; or

         (d) any default shall be made in the due observance or performance of
any other provision of this Agreement, the Note, any Escrow Agreement or the
Guaranty or any other agreement, document or instrument delivered hereunder or
thereunder to be observed or performed by the Borrower or a Guarantor; or

         (e) a default by the Borrower under the provisions of any Investor
Take-Out Commitment; or

         (f) the cancellation, termination, discharge, amendment, or
modification of any agreement, document or instrument included in the Collateral
or the release of any property comprising the Collateral, except as expressly
provided for herein; or

         (g) a receiver, trustee, custodian or liquidator (or other similar
official) of Borrower or of the Collateral or any portion thereof, or of any
Guarantor shall be appointed in any proceeding by order of a court or agency of
competent jurisdiction, or by any federal or state officer or other governmental
authority or regulatory body, and such order shall not be vacated or set aside
or stayed within thirty (30) days after the entry thereof, or if Borrower or any
Guarantor shall consent to or acquiesce in such appointment; or

         (h) the filing by Borrower or any Guarantor of a petition in bankruptcy
or for reorganization or for an arrangement pursuant to the Bankruptcy Code or
any similar federal or state law, now or hereafter in effect, or any
adjudication resulting in a judgment that Borrower or either of the Guarantors
is bankrupt or has become insolvent, or if Borrower or either Guarantor shall
make an assignment for the benefit of creditors or shall be unable or admit its
inability to pay debts generally as they become due or shall be dissolved or
shall suspend payment of its obligations or shall take any corporate action in
furtherance of any of the foregoing; or if a petition or an answer shall be
filed proposing the adjudication of Borrower or any Guarantor as a bankrupt or
its reorganization under the Bankruptcy Code or any similar federal or state
law, now or hereafter in effect, and (i) Borrower or any Guarantor, as the case
may be, shall consent to the filing thereof, or (ii) such petition or answer
shall be approved by a court of competent jurisdiction and the order approving
the same shall not be vacated or set aside or stayed within thirty (30) days
after the entry thereof; or

                                      -36-
<PAGE>

         (i) a final judgment for the payment of money shall be rendered against
Borrower or any Guarantor, and Borrower or such Guarantor, as the case may be,
shall not discharge the same or provide for its discharge in accordance with its
terms or procure a stay of execution thereon within thirty (30) days from the
entry thereof, and shall not within said period, or such longer period during
which execution on such Judgment shall have been stayed, appeal therefrom or
from the order, decree or process upon or pursuant to which said judgment shall
have been granted, passed or entered and cause the execution thereof to be
stayed during,  such appeal, and if on appeal such order, decree or process
shall be affirmed and Borrower or any Guarantor, as the case may be, shall not
discharge such judgment or provide for its discharge in accordance with its
terms within 30 days after the entry of the order or decree of affirmance; or

         (j) Borrower or any Guarantor fails to make any payment due on any
Indebtedness or any event shall occur or any condition shall exist in respect of
any Indebtedness of Borrower or any Guarantor, or under any agreement securing
or relating to such Indebtedness, the effect of which is to cause or permit such
Indebtedness, or a portion thereof, to be declared to become due prior to its
stated maturity or prior to its regularly scheduled dates of payment; or

         (k) The Guaranty shall be canceled or terminated or cease to be in full
force and effect for any reason whatsoever; or

         (l) In the sole judgment of Lender, a material adverse change shall
occur in the financial condition or business of the Borrower or a Guarantor.

         10.2 Remedies.

         (a) If an Event of Default described in Section 10.1(g) or (h) shall
occur, the Line of Credit shall automatically terminate, and all outstanding
principal of and accrued and unpaid interest on the Note and all other
Obligations shall automatically become forthwith due and payable. If any other
Event of Default shall occur, then Lender may, by notice to Borrower terminate
the Line of Credit and declare all outstanding principal of and accrued and
unpaid interest on the Note and all other Obligations to be forthwith due and
payable, and upon any such declaration all of the foregoing shall become
forthwith due and payable.

         (b) If an Event of Default hereunder shall have occurred, Borrower will
also reimburse Lender for all the costs and expenses of collection, including
reasonable compensation to Lender, its agents, and counsel, and any expenses and
liabilities incurred. In case Borrower shall fail forthwith to pay such amounts
upon demand, Lender shall be entitled and empowered to institute such
proceedings as may be advised by counsel for the collection of the sums so due
and unpaid, to prosecute such proceedings to judgment or final decree, and to
enforce any such judgment or final decree against Borrower and collect moneys
adjudged or decreed to be payable out of the property of Borrower wherever
situated, as well as out of the Collateral, in any manner not prohibited by
Applicable Law.

         (c) In addition to the foregoing rights, upon the occurrence of an
Event of Default, Lender personally or by its agents or attorneys, may do one or
more of the following:

                                      -37-
<PAGE>

                  (i) sell, to the extent not prohibited by Applicable Law, all
or any part of the Collateral and all estate, right, title, interest, claim and
demand therein, and right of redemption thereof, at one or more public or
private sales, as an entirety or otherwise, and at such time and place and upon
such terms as Lender may fix and specify in the notice of sale to be given to
Borrower, or as may be required by Applicable Law; or

                  (ii) take any action which is appropriate to enforce the
rights and remedies of Lender under any agreement, document or instrument
included in the Collateral, to the extent not prohibited thereby or by law; or

                  (iii) take all other steps to protect and enforce the rights
and remedies of Lender whether by proceedings or otherwise for the specific
performance of any provision of the Note, the Guaranty or this Agreement, or in
aid of the exercise of any right or remedy herein granted, or for any
foreclosure hereunder, or for the enforcement of any other appropriate legal or
equitable remedy) or otherwise as Lender shall deem most effectual to protect
and enforce the same; or

                  (iv) exercise all of the rights of a secured party under the
applicable UCC in effect in each appropriate jurisdiction; or

                  (v) collect and retain all proceeds of any sale made under or
by virtue of this Article X, together with any other sums which then may be held
by Lender under this Agreement as part of the Collateral or the proceeds
thereof. All such sums, whether held by Lender pursuant to the provisions of
this Article X or otherwise, shall be applied as follows:

         First: To the payment of the costs and expenses of any such sale, and
of any proceeding wherein the same may be made, and of all expenses, liabilities
and costs incurred by the Lender under this Agreement, the Note, any Escrow
Agreement and the Guaranty (including, without limitation, the reasonable
compensation and expenses and disbursements of its counsel and of such agents,
representatives and experts not regularly in the employ of Lender as it shall
employ in connection with the exercise and performance of its powers and duties
hereunder), together with, unless prohibited by Applicable Law, interest at the
Default Rate on all Advances made by the Lender to protect the Collateral or
enforce its rights hereunder or under the Note, the Guaranty or any Escrow
Agreement;

         Second: To the payment of any other Obligations (other than any
outstanding principal of, premium, if any, or accrued and unpaid interest on,
the Note) required to be paid r by the Borrower pursuant to any provision of
this Agreement, the Note, the Guaranty or any Escrow Agreement;

         Third: To the payment of all accrued and unpaid interest under the
Note;

         Fourth: To the payment of the whole amount then due and unpaid upon the
Note for principal and premium, if any, and in case such proceeds shall be
insufficient to pay in full the whole amount so due and unpaid upon the Note,
then ratably (after giving effect to any concurrent payment or distribution on
account of any thereof) according to the aggregate of such

                                      -38-
<PAGE>

unpaid principal and premium, if any, without preference, priority or
distinction as, between principal and premium, if any, on the Note;

         Fifth: To the payment of the surplus, if any, to the Borrower or such
other Person or Persons entitled thereto.

         (d) Upon any sale made under or by virtue of this Article X, to the
extent permitted by Applicable Law, the Lender or an independent agent, on its
behalf, may bid for and acquire the Collateral or any part thereof and in lieu
of paying cash therefor may make settlement for the purchase price by crediting
upon the indebtedness of the Borrower secured by this Agreement the net proceeds
of sale, after deducting therefrom the expenses of the sale and the costs of the
proceedings and any other sums which Lender is authorized to deduct under this
Agreement. The Person making such sale shall accept such settlement without
requiring the production of the Note and without such production there shall be
deemed credited thereon the pro rata share of the net proceeds of sale
ascertained and established as aforesaid. The Lender or such independent agent,
upon so acquiring the Collateral or any portion thereof, shall be entitled to
hold, manage, sell or otherwise deal in and with the same in any manner not
prohibited by Applicable Law.

         10.3 Recovery by Judgment Not
              Affected by Sale of Collateral.

         (a) The Lender shall be entitled to recover judgment as noted in
Section 10.2(b) hereof, either before or after or during the pendency of any
other proceedings for the enforcement of this Agreement, the Note, any Escrow
Agreement or the Guaranty; and the right of the Lender to recover such judgment
shall not be affected by any entry or sale hereunder, or by the exercise of any
other right or remedy for the enforcement of the provisions of this Agreement,
the Note, any Escrow Agreement or the Guaranty, or by the foreclosure of the
lien and security interest hereof; and in case of any sale of the Collateral or
any portion thereof, and of the application of the proceeds of sale, as in this
Agreement provided, to the payment of the Obligations, the Lender shall be
entitled to enforce payment of, and to receive all amounts then remaining due
and unpaid upon, any and all of, and to receive all amounts then remaining due
and unpaid upon, any and all of the Note then outstanding, and upon all other
payments, charges and costs due under this Agreement, any Escrow Agreement or
the Guaranty, and shall be entitled to recover judgment for any portion of the
Obligations, remaining unpaid, with interest. In case of proceedings against
Borrower in insolvency or bankruptcy or any proceedings for its reorganization
or involving the liquidation of its assets, then and in such case Lender shall
be entitled to prove the whole amount of principal, premium and interest due
upon the Note to the full amount thereof, and all other Obligations, without
deducting therefrom any proceeds obtained from the sale of the Collateral or any
portions thereof; provided, however, that in no case shall Lender receive from
the aggregate amount of the proceeds of the sale of the Collateral or any
portions thereof and the distribution from the estate of Borrower a greater
amount than such principal, premium and interest and such other Obligations.

         (b) No recovery of any judgment by Lender, and no levy of an execution
under any judgment upon the Collateral or any portion thereof or upon any other
property of Borrower shall affect, in any manner or to any extent, the lien and
security interest of this Agreement upon the

                                      -39-
<PAGE>

Collateral or any portion thereof, or any rights or remedies of Lender
hereunder, but such lien and security interest and such rights and remedies
shall continue unimpaired as before.

         (c) Any monies thus collected by Lender under this Section 10.3 shall
be applied by Lender in accordance with the provisions of Section 10.2(c).

         10.4 Lender to Retain Possession of
              Collateral Upon Event of Default.

         Notwithstanding the appointment of a receiver, trustee, custodian or
liquidator (or other similar official) of Borrower, or of any of the property of
Borrower, or of the Collateral or any portion thereof, Lender shall be entitled
to retain possession and control of all Collateral or other property now or
hereafter held by Lender under or pursuant to the provisions of this Agreement.

         10.5 Remedies Not Exclusive.

         No right or remedy herein conferred upon or reserved to Lender is
intended to be exclusive of any other right or remedy, and each and every right
and remedy shall be cumulative and in addition to any other right or remedy
given hereunder, or now or hereafter. The failure of Lender to insist at any
time upon the strict observance or performance of any of the provisions of this
Agreement, or to exercise any right or remedy provided for in this Agreement,
shall not impair any such right or remedy nor be construed as a waiver or
relinquishment thereof. Every right or remedy of Lender may exercised from time
to time and as often as may be deemed expedient by Lender.

         10.6 Waiver of Moratorium Laws.

         To the extent that it lawfully may, should an Event of Default occur,
Borrower agrees that it will not at any time insist upon, or plead, or in any
manner whatever claim or take any benefit or advantage of any applicable present
or future stay, extension or moratorium law which may affect the payment or
performance of any Obligations; nor claim, take or insist upon any benefit or
advantage of any present or future law providing for the valuation or appraisal
of the Collateral, any other assets or any portion of any thereof prior to any
sale or sales thereof which may be made under or by virtue of this Article X;
nor after any such sale or sales, claim or exercise any right, under any
applicable present or future law or otherwise, to redeem the Collateral or any
portion thereof so sold. Borrower, to the extent that it lawfully may, expressly
waives all benefit or advantage of any such laws, and covenants not to hinder
delay or impede the exercise of any right or remedy herein permitted to be
exercised by Lender, but to suffer and permit the exercise of every such right
or remedy as though no such law or laws were in effect. Borrower for itself and
all who may claim under it, waives, to the extent that it lawfully may, all
right to have the Collateral or any other assets marshalled upon any sale.

                                      -40-
<PAGE>

         ARTICLE XI - Miscellaneous

         11.1 Expenses.

         The Borrower will pay all reasonable out-of-pocket fees and expenses
incurred by the Lender (including, without limitation, fees and disbursements of
the counsel for the Lender) in connection with (i) the preparation, execution,
delivery and performance of this Agreement, the Escrow Agreements, the Note and
the Guaranty and any other agreement, document or instrument entered into in
connection therewith (whether or not the transactions hereby contemplated shall
be consummated or any Advances made), (ii) enforcement, protection, perfection
and continuation of the Lender's lien and security interest in the t Collateral
and (iii) the enforcement and protection of all other rights of the Lender in
connection with this Agreement, the Escrow Agreements, the Note and the Guaranty
and any other agreement, document or instrument entered into in connection
therewith. Borrower agrees that Lender shall not be liable for taking any action
or refraining from taking any action hereunder or for negligence, it being
agreed that Lender shall be liable to Borrower only for gross negligence or
willful misconduct and that, as a condition to the execution of this Agreement,
Borrower has and hereby does waive any liability of Lender except in the case of
gross negligence or willful misconduct.

         11.3 Third Party Beneficiaries.

         Nothing in this Agreement expressed or implied is intended or shall be
construed to give to any Person other than Lender and Borrower any legal or
equitable right, remedy or claim under or in respect of the Note, this
Agreement, the Escrow Agreements, the Guaranty or the Collateral or any
provision therein or herein contained, and such provisions are and shall be held
to be for the sole and exclusive benefit of the Lender and Borrower.

         11.4 Invalidity of Provisions.

         In case anyone or more of the provisions contained in this Agreement
the Note, any Escrow Agreement, or the Guaranty shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein and any other application
thereof shall not in any way be affected or impaired thereby.

         11.5 Notices.

         All notices, requests, and other communications hereunder shall be in
writing and shall be delivered personally, telegraphed, sent by facsimile
transmission (with immediate confirmation thereafter by telephone or otherwise),
or sent by U.S. registered, certified or express mail, postage prepaid, return
receipt requested, or sent by a nationally recognized overnight courier service,
marked for overnight delivery. Any such notice shall be deemed given when so
delivered personally, telegraphed, or sent by facsimile transmission (provided
confirmation is received immediately thereafter); or if sent by express mail or
overnight courier, one (1) Business Day after the date of delivery to a U.S.
Post Office or the courier service

                                      -41-
<PAGE>

marked for overnight delivery; or if so sent by registered or certified mail,
three (3) days after the date of deposit in the mails; in each case addressed as
follows:

         (a) If to the Lender, to:
                                       Chinatrust Bank (U.S.A.)
                                       366 Madison Avenue - 12th Floor
                                       New York, New York 10017
                                       Attention: Warehouse Lending
                                       Phone: (212) 514-8000 Fax: (212) 514-5040

         (b) If to the Borrower, to:
                                       Community Home Mortgage Corp.
                                       510 Broad Hollow Road
                                       Melville, NY 11757
                                       Attention: Mary Heller
                                       Phone: (516) 391-9100 Fax: (516) 391-9111

or to such other address as the parties hereto may specify from time to time by
notice given as provided herein.

         11.6 Additional Warehouse Financing.

         Prior to entering any agreement with any financial institution or group
of financial institutions providing for the extension of credit secured by
Mortgage or Co-Op Loans (whether such agreement would provide for an extension
of credit in an amount l additional to the Investor Take-Out Commitments or
would provide for the repayment of or a f substitution for this Agreement),
Borrower will give Lender notice thereof and will not execute any such agreement
unless Lender shall have declined to make such extension of credit available to
Borrower on terms and in an amount at least as advantageous as those proposed by
such other financial institution or group.

         11.7 Counterparts.

         This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, and such counterparts shall together
constitute but one and the same Agreement. It shall not be necessary in making
proof of this Agreement to produce or account for more than one such counterpart
signed by the party against which enforcement of this Agreement is sought.

         11.8 Binding Nature of Agreement.

         All of the provisions contained herein and in the Note shall be binding
upon and inure to the benefit of the Borrower and the Lender and to their
respective successors and permitted assigns, to the same extent as if each such
successor and permitted assign were in each case named as a party to this
Agreement. The Lender may in its sole option and discretion assign and transfer
in whole or in part this Agreement or any right it may have under this
Agreement, the

                                      -42-
<PAGE>

Note, or any other agreements, documents or instruments delivered in connection
therewith and it may participate out or syndicate any Advance or portion thereof
made or to be made hereunder and under the Note. The Borrower may not assign or
transfer in whole or in part this Agreement, the Note, or any rights or
obligations it may have hereunder or thereunder or under any other agreement,
document or instrument delivered in connection therewith without the prior
written consent of the Lender, and any such attempted assignment or transfer
without such prior consent shall be null and void.

         11.9 Governing Law.

         This Agreement, the Note and all amendments thereto shall be governed
by and construed and enforced in accordance with the law of the State of New
York, without regard to principles of conflicts of laws. The Borrower, for
itself and each Guarantor, agrees to and accepts the nonexclusive jurisdiction
of any court in New York City or the U.S. District Court for the Southern
District of New York in respect of any action or proceeding, expressly waiving
any defense relating to jurisdiction or forum non conveniens, and consents to
service of process by U.S. certified or registered mail at its address for
notices referred to in Section 11.5 hereof in any action or proceeding with
respect to this Agreement in any such court or any other court of competent
jurisdiction. The Borrower, for itself and the Guarantors, waives trial by jury
in any action or proceeding with respect to this Agreement.

         11.10 Headings.

         The headings to the various Articles and Sections of this Agreement
have been inserted for convenient reference only and shall not modify, define,
limit or expand the express provisions of this Agreement.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the day and year above first written.

                                                  CHINATRUST BANK (U.S.A.)

                                                  By  /s/ Paul Eilbacher
                                                     ---------------------------
                                                  Name:  Paul Eilbacher
                                                  Title:  First Vice President

                                                  COMMUNITY HOME MORTGAGE CORP.

                                                  By  /s/ Ira Silverman
                                                     ---------------------------
                                                  Name:  Ira Silverman
                                                  Title:  President

[Community Home Mortgage
  Corp. Corporate Seal]

                                      -43-RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

                                 August 11, 1999

Community Home Mortgage Corporation
510 Broadhollow Road, Suite 100
Melville, NY 11747
Attention: Ira Silverman

                          MORTGAGES PURCHASE AGREEMENT

Dear Mr. Silverman:

                                    OVERVIEW

         Section 1. Warehouse  Facility.  HSA Residential  Mortgage  Services of
Texas, Inc. ("RMST") has established a mortgage  gestation facility with various
financial  institutions  pursuant to which the  institutions,  at the request of
RMST, will purchase  certain  mortgage loans which are originated to finance the
purchase or  re-financing  of  owner-occupied  and  investor  owned,  1-4 family
residential dwellings and the land on which they are situated.

         Section 2.  Certain  Terms.  We are pleased to advise you that RMST has
approved the participation by the Company in the Warehouse Facility on the terms
set  forth  in this  agreement  (as it may  from  time to time be  supplemented,
amended or restated,  this "Agreement").  The following are certain terms of the
Company's participation. (See Section 3 for additional defined terms.)

                  Company                  Community Home Mortgage Corporation

                  Key Principals           Ira Silverman

                  Purchase Limit           Ten Million Dollars ($10,000,000)

                  Second Lien Sub-Limit    Three Million Dollars ($3,000,000);
                                           30% of Purchase Limit

                  Sub-Prime Sub-Limit      Two Million Five Hundred Thousand
                                           Dollars ($2,500,000);  25% of the
                                           Purchase Limit

                  Agency Rate              Prime -25%

                  Non-Agency Rate          Prime + 0%

                  Default Rate             Prime + 3%

                  Loan Set Up Fee          Twenty dollars ($20.00) per Mortgage

                  Minimum Net Worth        Two Million Dollars ($2,000,000)

                  Guarantor(s)             Ira Silverman

         Section 3. Certain Definitions. The following terms shall have the
meaning set forth below in this Agreement:

                  (a) Affected Mortgage. The term "Affected Mortgage" is defined
         in Section 23 and Section 26.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 1

<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

                  (b) Agency Mortgage.  An "Agency  Mortgage" is a Mortgage that
         is eligible for purchase by the Federal Home Loan Mortgage Association,
         the Federal National  Mortgage  Corporation or the Government  National
         Mortgage Association.

                  (c)  Agent.  The person  acting at the time as  administrative
         agent and collateral agent for the Warehouse  Purchasers is referred to
         as the  "Agent."  All  references  to the Agent are to the Agent in its
         capacity as administrative agent and collateral agent for the Warehouse
         Purchasers  and not in its own  capacity  or for its own  account.  The
         Agent currently is Chase Bank of Texas, National Association. RMST will
         promptly advise the Company of any successor Agent.

                  (d)  Applicable   Repurchase   Amount.  The  term  "Applicable
         Repurchase  Amount"  means the payment to the Agent in good,  collected
         Bank funds of the sum of (y) an amount  equal to the  Minimum Net Share
         which  would  have  been  earned in  respect  of that  Mortgage  if its
         purchase by the Investor provided for in the Commitment  represented by
         the  Company to have most  recently  covered it  (whether or not it was
         actually so covered) were completed in strict accordance with its terms
         and on its stated expiration date plus (z) (without  duplication of any
         payment) an amount  equal to any  increase in the Minimum Net Share due
         to the  passage  of time or to RMST's or the  Agent's  having  provided
         additional custodial-type services since that expiration date.

                  (e)  Bank  Prime.  The  "Bank  Prime"  is the  prime  rate  as
         announced  by Chase Bank of Texas,  National  Association  from time to
         time. This rate is a reference rate and does not necessarily  represent
         its best or lowest rate and is not  necessarily  a favored  rate.  Bank
         Prime shall be adjusted as of the effective  date of each change in the
         prime rate announced by Chase Bank of Texas, National Association.

                  (f) Bank. The term "Bank" is defined in Section 19.

                  (g) Banking  Business Day. The term "Banking  Business Day" is
         defined in the RMST Procedures.

                  (h) Bulk Mortgage Takeout Protection  Account.  The term "Bulk
         Mortgage Takeout Protection Account" is defined in Section 33.

                  (i) Bulk  Purchase  Mortgage  Takeout  Date.  The  term  "Bulk
         Purchase Mortgage Takeout Date" is defined in Section 9.

                  (j) Bulk Purchase  Mortgage.  A "Bulk Purchase Mortgage" is an
         Eligible  Mortgage  that meets RMST's  criteria  for funding  without a
         Commitment.

                  (k) Closer. The term "Closer" is defined in Section 12.

                  (1)  Commitment.  A  "Commitment"  is a written  commitment to
         purchase  a  Mortgage  as a whole  loan  obtained  by the  Company  and
         approved  in  writing  by  RMST,  issued  by a  reputable  investor  or
         securities  broker-dealer  (the "Investor")  acceptable to RMST and the
         Agent. In addition to any other criteria  established by RMST from time
         to time by  notice  given  to the  Company,  each  Commitment  shall be
         written,  describe  the  types of  Mortgages  the  Investor  agrees  to
         purchase,  state the settlement  date,  price (including any applicable
         servicing release premium) and expiration date for the purchase, be (or
         be endorsed to be) in favor of RMST and its assigns, be enforceable and
         be irrevocable until a date shown on the Commitment.

                  (m) Debtor Laws.  The term "Debtor Laws" is defined in Section
         44.

                  (n) Default. The term "Default" is defined in Section 44.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 2
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

                  (o) Defective Mortgage.  A "Defective  Mortgage" is a Mortgage
         which has been  purchased by the Warehouse  Purchasers but meets RMST's
         criteria for Defective Mortgages which are attached as Appendix 7. RMST
         may change the criteria by notice given to the Company.

                  (p)  Document  File.  The term  "Document  File" is defined in
         Section 9.

                  (q)  Eligible  Mortgage.  An  "Eligible  Mortgage" is Mortgage
         which meets RMST's  criteria for funding under the Warehouse  Facility.
         RMST's current criteria for Eligible  Mortgages is attached as Appendix
         8. RMST may change the criteria by notice given to the Company.

                  (r) Enclosures. The term "Enclosures" is defined in Section 9.

                  (s)  Failure  Date.  The term  "Failure  Date" is  defined  in
         Section 22.

                  (t) Guide. The term "Guide" is defined in Section 34.

                  (u) Includes. Wherever the words "including," "which includes"
         or any correlative appears in this Agreement, it shall be read to mean,
         "including by way of example but not without limiting the generality of
         the subject or concept referred to."

                  (v) Investor.  An "Investor" is a person  issuing a Commitment
         to the Company or  otherwise  agreeing to purchase a Mortgage  from the
         Warehouse Purchasers.

                  (w)  Lost  Commitment  Mortgages.  The term  "Lost  Commitment
         Mortgages" is defined in Section 20.

                  (x) Make Whole  Payment.  The term  "Make  Whole  Payment"  is
         defined in Section 30.

                  (y) Minimum Net Share. The term "Minimum Net Share" is defined
         in Section 17.

                  (z) Mortgage  Default  Date.  The  "Mortgage  Default Date" is
         defined in Section 20, Section 22 and Section 24.

                  (aa) Mortgage Purchase Cost. The term "Mortgage Purchase Cost"
         is defined in Section 17.

                  (bb)  Mortgage.  A  "Mortgage"  is a mortgage  loan secured by
         residential real property.

                  (cc) Offer. The term "Offer" is defined in Section 9.

                  (dd) Period Held. The term "Period Held" is defined in Section
         17.

                  (ee) Proceeds Account.  The term "Proceeds Account" is defined
         in Section 19.

                  (ff)  Qualified   Substitute  Takeout.   The  term  "Qualified
         Substitute Takeout" is defined in Section 20.

                  (gg) RMST  Advance.  The term  "RMST  Advance"  is  defined in
         Section 13.

                  (hh)  RMST  Procedures.   The  "RMST   Procedures"  are  those
         procedures  promulgated by RMST from time to time  specifying the times
         by which certain  actions are to be taken in connection  with purchases
         under the Warehouse Facility.  The current RMST Procedures are attached
         as Appendix 2.

                  (ii) Sale  Proceeds.  The term "Sales  Proceeds" is defined in
         Section 17.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 3
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

                  (jj) Second  Lien  Mortgage.  A "Second  Lien  Mortgage"  is a
         Mortgage that is secured by a second priority lien on the real property
         that secures it.

                  (kk)  Settlement  Account.  The term  "Settlement  Account" is
         defined in Section 19.

                  (ll) Shortfall Amount.  The term "Shortfall Amount" is defined
         in Section 25.

                  (mm) Substitute  Mortgage.  The term "Substitute  Mortgage" is
         defined in Section 24.

                  (nn) Warehouse  Facility.  The facility described in Section 1
         as it may be amended, supplemented, modified or replaced is referred to
         as the "Warehouse Facility."

                  (oo)  Warehouse   Purchasers.   The  institutions   purchasing
         Eligible  Mortgages under the Warehouse  Facility from time to time are
         referred  to   collectively   as  the   "Warehouse   Purchasers,"   and
         individually as a "Warehouse Purchaser."

                  (pp) Value Replacement  Payments.  The term "Value Replacement
         Payments" is defined in Section 32.

                  (qq) Year 2000  Compliant.  The term "Year 2000  Compliant" is
         defined in Section 48(aa).

                         PURCHASE OF ELIGIBLE MORTGAGES

         Section 4. Revolving Purchase Facility. Although the Company will offer
the  Mortgages  to  RMST  for  purchase  under  the  Warehouse   Facility  on  a
case-by-case  basis and RMST will evaluate each Mortgage to determine whether it
is an Eligible  Mortgage,  the Company and RMST mutually  contemplate  that this
will be a revolving  purchase  facility  pursuant to which the Company will sell
Mortgages to the Warehouse Purchasers.

         Section 5. No  Obligation.  This  Agreement  does not obligate  RMST to
cause the Warehouse Purchasers to purchase Mortgages from the Company.  RMST, in
its sole discretion,  may elect to cause the Warehouse  Purchasers to purchase a
Mortgage  from the  Company  or may  elect  not to cause  them to  purchase  the
Mortgage.

         Section 6. Limits.  The outstanding  balance of the aggregate  purchase
prices paid to the Company by the Warehouse  Purchasers  for Eligible  Mortgages
(including Second Lien Mortgages and Bulk Purchase Mortgages, if any) which have
not yet been sold to an  Investor  shall not  exceed the  Purchase  Limit at any
time.  The  outstanding  balance of the  aggregate  purchase  prices paid to the
Company by the Warehouse Purchasers for Second Lien Mortgages which have not yet
been sold to an Investor shall not exceed the Second Lien Sub-Limit at any time.
The outstanding  balance of the aggregate purchase prices paid to the Company by
the Warehouse  Purchasers  for Bulk Purchase  Mortgages  which have not yet been
sold to an Investor  shall not exceed the Bulk  Purchase  Sub-Limit at any time.
RMST reserves the right to reduce the Purchase Limit,  the Second Lien Sub-Limit
or Bulk  Purchase  Sub-Limit  by giving sixty (60) days'  written  notice to the
Company specifying the new limit at any time and for any reason.

         Section 7. Prior  Approval of Investors.  Each Investor shall have been
approved  by RMST and the Agent prior to the Offer of a Mortgage as to which the
Commitment applies. To be considered for approval by RMST, the Investor must, at
a  minimum,  meet the  criteria  set forth on  Appendix  9. RMST may  change the
minimum criteria for approval of an investor by notice given to the Company. The
approval  of an  Investor by RMST or the Agent shall not cause RMST or the Agent
to be a guarantor  of the  Investor's  performance.  Any dealings by the Company
with an Investor  (whether or not approved by RMST or the Agent) shall be at the
sole risk of the Company.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 4
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         Section 8. Commitment. Each Eligible Mortgage acquired from the Company
under the  Warehouse  Facility  except  Bulk  Purchase  Mortgages  shall  have a
Commitment.  The Company shall provide RMST a copy of the Commitment at the same
time the Company delivers to RMST the Document File. If RMST is dissatisfied, in
its sole discretion,  with either the form or terms of any Commitment,  it shall
have no  obligation  to cause the  Warehouse  Purchasers to acquire any Mortgage
covered by that Commitment.

         Section 9. Offer. If the Company wishes to sell a Mortgage through RMST
to the Warehouse  Purchasers  under this  Agreement,  the Company shall submit a
written  Offer to Sell  Mortgages  in the form  attached  as  Appendix 1 to this
Agreement  (the  "Offer")  with all  enclosures  required  by Appendix 4 to this
Agreement  (the  "Enclosures"),  and with all blocks and blanks in the Offer and
the  Enclosures  properly  completed (the Offer and  Enclosures,  if applicable,
together are called the "Document File").  Appendix 1 and Appendix 4 are subject
to  modification  by RMST by notice  given to the  Company.  If the  Mortgage is
requested  to be a Bulk  Purchase  Mortgage,  the Offer  shall state the date by
which an Investor  will  purchase  the  Mortgage  (the "Bulk  Purchase  Mortgage
Takeout Date").  The purchase price for an Eligible  Mortgage shall be the least
of (i) the price the Investor  has promised to pay for the Mortgage  pursuant to
the Commitment (this factor is inapplicable to a Bulk Purchase  Mortgage);  (ii)
the face principal  amount of the promissory  note  evidencing the Mortgage;  or
(iii) the r unpaid principal  balance of the promissory note. Upon acceptance of
the Offer, any Commitment  referred to in the Offer shall be deemed assigned and
transferred to RMST and its assigns without any further act by the Company.

         Section 10. Acceptance or Rejection. If RMST elects to accept an Offer,
then if the Mortgage is an Eligible  Mortgage  and the Company is in  compliance
with all the terms of this Agreement,  RMST will cause the Warehouse  Purchasers
to pay the purchase  price for the Eligible  Mortgages  stated in the Offer and,
upon. that acceptance,  to cause the Warehouse Purchasers to become the owner of
the Eligible Mortgages. RMST has no obligation to accept any Offer.

         Section 11.  Endorsement  and Closing  Instructions.  The Company shall
endorse in blank the promissory note to evidence each Eligible Mortgage which is
the subject of an accepted  Offer when,  or before,  the note is executed by its
maker.  The Company  hereby  declares its intent that each such  endorsement  be
effective as to each such note from such note's  inception,  regardless  of when
the  endorsement  is actually  made.  The Company  shall give the Closer of each
Eligible  Mortgage the written  instructions  for the closing of the transaction
set  forth on  Appendix  5, and will not give any  rescinding,  inconsistent  or
conflicting  instructions.  Additionally,  should the Closer not comply with the
written instructions for the closing of the transaction as set forth on Appendix
5, the  Company  shall use its best  efforts to insure  compliance  and  provide
timely to RMST the necessary documents as required in the Agreement.  Appendix 5
is subject to modification  by RMST by notice given to the Company.  The Company
or the Closer shall deliver to RMST the Eligible Mortgage and all of its related
documentation  (including  for each Eligible  Mortgage the  documents  listed on
Appendix 4) to be  physically  held by the Agent until the  Mortgages are either
(i) shipped by the Agent to an Investor or its document  custodian  for purchase
or (ii) the Company  repurchases the Mortgage in accordance with its obligations
stated in Section 20, Section 22 or Section 24.

         Section 12.  Payment by Warehouse  Purchasers.  The purchase  price for
Eligible  Mortgages shall be paid at the request of RMST by the Agent (i) to the
Company,  in the case of  Eligible  Mortgages  purchased  after the  Company has
closed them; or (ii) in all other instances, by providing money for the original
funding of the Mortgages directly to the title company or other person or entity
handling the closing (the "Closer"),  net of origination,  discount points,  and
any other fees and other prepaid items the Company may  stipulate.  For purposes
of this  Agreement  the Company may fund the Mortgages at the lesser of the loan
amount or the commitment from the Investor. The payment will be made at the time
and in the manner specified in the RMST Procedures.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 5
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         Section 13. Advances by RMST. In its sole discretion,  RMST may advance
funds to the  Company,  in the case of Eligible  Mortgages  purchased  after the
Company  has closed  them,  or to the  Closer,  in all other  instances,  to pay
amounts  relating to the origination of a Mortgage.  These funds so advanced (an
"RMST Advance") are a loan from RMST to the Company, are secured by the security
interest created by Section 39, bear interest at the Default Rate and are due on
demand  unless  earlier  repaid in  connection  with the sale of the Mortgage to
which the RMST Advance relates.

                                SALE TO INVESTORS

         Section  14.  Sale to  Investors.  The  Company  will  take  all  steps
necessary to cause:

                  (a) all Eligible Mortgages and their related mortgage files to
         be correctly closed, funded, documented and completed;

                  (b) the sale as whole loans of all  Eligible  Mortgages  to be
         timely completed in accordance with any related Commitment;

                  (c) the entire sale price due from Eligible  Mortgages sold to
         be  transferred  by Fed funds wire directly to the account of the Agent
         at Chase Bank of Texas, National Association or at a bank designated by
         RMST.

         Section 15.  Instruction  to  Investors.  Promptly  after any  Eligible
Mortgages  which is  subject  to a  commitment  is  purchased  by the  Warehouse
Purchasers,  the  Company  shall:  (i)  direct  the  Investor  which  issued the
Commitment  to pay the entire  amount of the  purchase  consideration  for those
Eligible  Mortgages  directly  to the  Agent  and to  confirm  receipt  of  that
direction  directly  with the  Agent,  with a copy to RMST;  (ii) not  issue any
conflicting  instructions  to the  Investors;  and (iii) not cause or permit any
cash proceeds of any of those Mortgages to be issued to,  registered in the name
of, or paid to, anyone other than the Agent.

         Section 16. Shipment to Investors.  Mortgages  shipped to Investors for
purchase  shall be shipped  under  letters  substantially  in the form of letter
attached as Appendix 10, in the case of Mortgages sold by the Agent, or Appendix
11, in the case of Mortgages sold by RMST. The letters may be revised by RMST by
notice given to the Company.

                   PAYMENT TO RMST AND DISTRIBUTION TO COMPANY

         Section 17. Minimum Net Share.  The Agent will retain,  for the benefit
of the Warehouse  Purchasers and RMST-or, in the case of Mortgages sold by RMST,
RMST will retain for its  benefit-from  the sale proceeds (the "Sale  Proceeds")
received for and  allocable to each  Mortgage  sold to an Investor  hereunder an
amount (the "Minimum Net Share") equal to the sum of:

                  (i) the purchase  price paid by the Warehouse  Purchasers  for
                  the  Eligible  Mortgage  reduced  by any  amounts  paid to the
                  Warehouse  Purchasers  by  the  obligor  of  the  Mortgage  as
                  principal  or interest on the Mortgage and also reduced by any
                  Value  Replacement  Payments made with respect to the Mortgage
                  (the "Mortgage Purchase Cost");

plus              (ii) a return on the daily  balance of the  Mortgage  Purchase
                  Cost which accrues daily during the period (the "Period Held")
                  consisting of the actual  number of days from (and  including)
                  the  date  on  which  the  Warehouse   Purchasers  funded  the
                  acquisition  of the  Mortgage to (but  excluding)  the date on
                  which the Agent (or RMST)  receives the Sale  Proceeds for the
                  Mortgage,  at a per annum rate equal to the Agency Rate if the
                  Mortgage is an Agency Mortgage or equal to the Non-Agency Rate
                  if the Mortgage is not an Agency Mortgage.  After the Mortgage
                  Default  Date the per annum rate as to any

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 6
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

                  Affected Mortgage shall be the greater of (y) the Default Rate
                  or (z) the annual  interest rate stated on the promissory note
                  related to the Affected  Mortgage.  After the  occurrence of a
                  Default,  the per annum rate as to all Mortgages  shall be the
                  Default Rate.  The  calculations  based on the per annum rates
                  shall be made on a daily  basis  during the Period Held and on
                  the basis of a 360-day year;

plus              (iii) any RMST Advance with respect to that Mortgage  together
                  with interest on the RMST Advance at the Default Rate from the
                  date on which the RMST Advance was made to (but excluding) the
                  date on which the Agent (or RMST)  receives the Sales Proceeds
                  for the Mortgage;

plus              (iv) the Loan Set Up Fee for the Mortgage.

         Section 18.  Interest  Collected and Remitted.  Interest on an Eligible
Mortgage  collected  by the Company  shall be remitted to RMST whereby RMST will
bill the Company on a monthly  basis for its Minimum Net Share for any  Mortgage
that has been  funded  for a period  greater  than  sixty  days and has not been
purchased by the Investor.  Interest collected and remitted by the Company shall
be treated as part of the proceeds  received for the sale of the Mortgage to the
Investor for purposes of determining the Minimum Net Share.

         Section 19. Balance of Sales Proceeds. Provided that the Company is not
then in  default of any of its  obligations  under  this  Agreement,  RMST shall
deposit the balance of the Sales Proceeds  remaining after deducting the Minimum
Net  Share in a demand  deposit  account  maintained  at  Chase  Bank of  Texas,
National Association (in its capacity as a depository  institution,  the "Bank")
in the name of RMST for the benefit of the Company (the "Proceeds Account"), but
as to which the  Company  shall  have no rights  of  withdrawal.  As long as the
Company is not then in default of any of its  obligations  under this Agreement,
RMST shall  transfer the  collected  funds in the  Proceeds  Account to a demand
deposit account (the "Settlement Account") maintained at the Bank in the name of
the Company  and under the  exclusive  control of the  Company.  If,  there is a
Default,  then any amounts then remaining in the Proceeds  Account shall be cash
collateral  securing any rights RMST shall have  pursuant to this  Agreement and
the Company shall not withdraw any funds from the Settlement Account without the
prior consent of RMST.

                              FAILURE OF COMMITMENT

         Section 20. Loss of Commitment.  If for any reason,  except the willful
or  grossly  negligent  act or  omission  of RMST,  the  Agent or the  Warehouse
Purchasers,  any  Commitment  in respect of any  Eligible  Mortgage is canceled,
paired off or revoked by any means,  or if the Investor shall at any time have a
defense to performance of its obligations under the Commitment either on account
of offsetting  obligations  against the Company or for any other reason,  or the
Commitment is terminated for any reason (other than expiration by the passage of
time)  (collectively,  these  Mortgages are referred to as the "Lost  Commitment
Mortgages"),  then, on or before the date (the "Mortgage  Default Date" for that
Mortgage)  that is ten (10)  days  after the date on which  the  Commitment  was
terminated or cancelled or otherwise  lost,  the Company shall either (i) obtain
and  furnish  to RMST for the  Warehouse  Purchasers  a  replacement  Commitment
acceptable  (and  issued by an  Investor  acceptable)  to RMST and the Agent and
having  characteristics  all of which can be satisfied by the Eligible  Mortgage
and  providing for the purchase of the Mortgage for no less than the Minimum Net
Share for that Mortgage (a "Qualified Substitute  Takeout"),  or (ii) repurchase
the Lost Commitment Mortgage from the Warehouse  Purchasers (or RMST if RMST has
purchased the Mortgage) for the Applicable Repurchase Amount.

         Section 21.  Assistance by RMST. RMST will exert reasonable  efforts to
assist the Company to obtain a Qualified  Substitute Takeout,  but RMST shall do
so only as an  accommodation  to the  Company.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 7
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

RMST  shall  have no  additional  obligation  to the  Company as a result of its
efforts and no  liability  to the  Company  for the results (or  failure) of its
efforts.

         Section 22.  Failure to Sell. If for any reason,  except the willful or
grossly  negligent  act  or  omission  of  RMST,  the  Agent  or  the  Warehouse
Purchasers,  the Company has not caused any  Eligible  Mortgage to be sold to an
Investor on or before the date (the "Failure Date") that is the earlier of:

                  (a) ninety (90) days after the Warehouse  Purchasers purchased
         the Eligible Mortgage or

                  (b) (i) in the  case  of Bulk  Purchase  Mortgages,  the  Bulk
         Mortgage Takeout Date or, (ii) as to all other Eligible Mortgages,  the
         date the Commitment which relates to that Eligible Mortgage expires,

then, on or before the date (the "Mortgage Default Date" for that Mortgage) that
is three (3) Banking  Business  Days after the Failure  Date,  the Company shall
repurchase the Eligible Mortgages from the Warehouse Purchasers (or RMST if RMST
has purchased the Mortgage) for the Applicable Repurchase Amount.

         Section 23.  Effect of Company's  Failure.  If by the Mortgage  Default
Date the Company has not repurchased the Lost Commitment  Mortgage or obtained a
Qualified  Substitute  Takeout  in the case of a failure  under  Section  20, or
repurchased  the  Mortgage in the case of a failure  under  Section 22, then the
Company shall be in default of its obligations  under this Agreement with regard
to that  Mortgage  (which shall be "Affected  Mortgage"  after that failure) and
shall have committed a breach of this Agreement.

                               DEFECTIVE MORTGAGES

         Section 24. Defective  Mortgages.  If RMST determines that any Eligible
Mortgage  is a  Defective  Mortgage  the  Company  shall  wholly  cure  (to  the
satisfaction  of RMST and the Agent) such  defects in the  Mortgage  upon notice
from RMST.  If the Company fails to wholly cure such defects by the day which is
three  (3)  Banking  Business  Days  after  the  notice  to cure  from RMST (the
"Mortgage  Default  Date"  for that  Mortgage),  then,  by  notice  given to the
Company,  RMST may require  that by the close of the next  Banking  Business Day
following receipt of RMST's notice,  the Company shall either (i) repurchase the
Defective Mortgage from the Warehouse  Purchasers (or RMST if RMST has purchased
the Mortgage) for the Applicable  Repurchase  Amount,  or (ii)  substitute a new
Eligible  Mortgage  (the  "Substitute  Mortgage"),  which  is  in  all  respects
acceptable to RMST and the Agent in their reasonable discretion.

         Section 25.  Payment of Shortfall  Amount.  If the aggregate  principal
balances  of all  Substitute  Mortgages  are less than the  aggregate  principal
balances of all Defective Mortgages being replaced, then the Company shall remit
with such Substitute Mortgages an amount equal to the difference (the "Shortfall
Amount") between the aggregate principal balance of the Substitute Mortgages and
the  Defective  Mortgages,  plus any fees that would have been earned under this
Agreement on the aggregate principal balance difference calculated as if, on the
date of such remittance,  the Company were  repurchasing a Mortgage in principal
amount equal to the Shortfall  Amount and covered by the same  Commitment as the
Defective  Mortgages  which were only partially  replaced,  with the Period Held
applicable to such hypothetical Mortgage being repurchased ending on the date of
such  remittance.  Absent  manifest  error, or if the Company does not object in
writing to RMST's calculation of a Shortfall Amount and fees on or before thirty
(30) days after RMST gives the Company written notice of RMST's calculated value
of that Shortfall  Amount and fees,  RMST's  calculation of the Shortfall Amount
and fees shall be conclusive and binding.

         Section 26.  Effect of Company's  Failure.  If by the close of the next
Banking Business Day after notice under Section 24 the Company has not delivered
a Substitute Mortgage or repurchased;  the

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 8
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

Defective  Mortgage,  then the  Company  shall be in default of its  obligations
under this  Agreement  with regard to that  Mortgage  (which  shall be "Affected
Mortgage"  after  that  failure)  and  shall  have  committed  a breach  of this
Agreement.

                           REMEDIES-AFFECTED MORTGAGES

         Section 27.  Effect of Breach.  Upon the  occurrence  of a breach under
Section 23 or Section 26, RMST, in addition to its rights otherwise provided for
under  this  Agreement,  may elect  then,  or at any time  thereafter,  to:  (i)
terminate the Company's rights and obligations to service the Affected Mortgage;
(ii)  obtain a new  Commitment  from a third  party  to  purchase  the  Affected
Mortgage; (iii) cause the Warehouse Purchasers to sell-or, if RMST has purchased
the  Affected  Mortgage,  sell-the  Affected  Mortgage  to a third  party;  (iv)
terminate  this  Agreement  by giving  notice to the  Company in which event the
provisions of Section 45 shall apply; or (v) do any combination of those things.

         Section 28.  Effect on Value  Replacement  Obligations.  The  Company's
breach of this  Agreement  under Section 23 or Section 26 shall not terminate or
abate the Company's  value  replacement  obligations  to RMST with regard to the
Affected  Mortgage,  as provided  for in Section 32 of this  Agreement,  and the
value replacement obligations to RMST with regard to the Affected Mortgage shall
only terminate upon (i) the sale of the Affected  Mortgage to a third party,  or
(ii) the  repurchase by the Company of the Affected  Mortgage from the Warehouse
Purchasers  (or RMST if RMST has  purchased  the  Mortgage)  for the  Applicable
Repurchase Amount.

         Section  29.  Sale  to  Third  Party.  If  RMST  causes  the  Warehouse
Purchasers  to sell any Affected  Mortgage to a third party as  permitted  under
Section 27, then, in the absence of manifest error,  the purchase price obtained
by the Warehouse Purchasers shall be conclusively presumed to be the fair market
value of that Affected  Mortgage  (which mayor may not be the same as the quoted
market value for comparable mortgages as quoted on the quotation system which is
used for calculating the value  replacement  obligations to RMST as provided for
in Section 32).

         Section 30. Make Whole Payment.  Upon the sale of any Affected Mortgage
to a third  party,  the Company  shall  promptly pay to the Agent an amount (the
"Make Whole  Payment")  equal to the Minimum Net Share as of the sale date, less
the net  proceeds  realized  by the  Warehouse  Purchasers  upon the sale of the
Affected Mortgage.  RMST may offset any value replacement previously paid by the
Company  with  respect to the to the  Affected  Mortgage  against the  Company's
obligation  to pay the Make Whole  Payment,  and if there is any excess of value
replacement   related  to  the  Affected   Mortgage  after  applying  the  value
replacement  to the Make Whole  Payment,  RMST will  refund  such  excess to the
Company,  provided that the Company is not then in default in performance of any
of  its  obligations  under  this  Agreement  in  any  other  respect.  However,
application  of the value  replacement  related to the Affected  Mortgage to the
Make Whole  Payment  shall in no way limit or waive any rights  RMST may possess
under or diminish any  obligations of the Company with respect to, any provision
of the Agreement for any Mortgage, including the Affected Mortgage.

                                VALUE PROTECTION

         Section  31.  Reliance  by RMST.  The  Company  acknowledges  that when
arranging  for the  purchase  of  Mortgages,  RMST  will  rely on the  Company's
representations  that: (i) the Commitment  obtained by the Company in respect of
each Offer (other than an Offer  relating to a Bulk Purchase  Mortgage)  will be
the source for RMST and the  Warehouse  Purchasers  to recover  the  Minimum Net
Share in respect of the  Mortgage  and the  Mortgage  will be  purchased  by the
Investor no later than the i date  prescribed in the  Commitment;  and (ii) each
Bulk Purchase  Mortgage will be ii acquired by.  Investors by .its Bulk Purchase
Mortgage  Takeout Date for an amount at least  sufficient to permit RMST and the
Warehouse  Purchasers  to recover  the  Minimum  Net Share  with  respect to the
Mortgage.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                              PAGE 9
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         Section 32. Value Replacement  Payment. If the Warehouse  Purchasers or
RMST hold any Bulk  Purchase  Mortgages  or if there are any Lost  Commitment  i
Mortgages  which have not been sold to Investors or  repurchased by the Company,
then  RMST  may  require  the  Company  to  make   payments  to  the   Warehouse
Purchasers-or  to  RMST  if RMST  holds  the  Bulk  Purchase  Mortgages  or Lost
Commitment  Mortgages-to  reduce  the  purchase  price  for the Lost  Commitment
Mortgages and the Bulk Purchase Mortgages ("Value  Replacement  Payments").  The
amount of the Value Replacement  Payment on any day for a Bulk Purchase Mortgage
or Lost Commitment  Mortgage is the amount, if greater than zero,  sufficient to
cause (i) the  Minimum  Net Share  for that day for that  Mortgage  based on the
purchase price paid by the Warehouse  Purchasers  for that Mortgage  (reduced by
this and any prior Value  Replacement  Payment),  to be no greater than (ii) the
value on that day of mortgage-backed  securities based on and backed by mortgage
loans comparable to the Mortgage.  In determining the Value Replacement Payment,
RMST may use such reasonable averaging, allocation and attribution methods as it
shall elect,  and absent  manifest  error,  the market value quoted for any such
security  as quoted on the  quotation  system to which RMST  subscribes  (or any
comparable  system to which RMST may  hereafter  subscribe and RMST may elect to
use  for the  purposes  of  determining  the  market  value  of  mortgage-backed
securities)  shall be conclusive  evidence of the market value of such security.
The Company  shall pay the Value  Replacement  Payment to RMST no later than the
next Banking Business Day after RMST makes demand by notice to the Company.

         Section 33. Bulk Mortgage Takeout  Protection.  The Bank shall maintain
the Bulk Mortgage Protection Amount on deposit in an account (the "Bulk Mortgage
Takeout  Protection  Account")  in a bank  designed by RMST.  The Bulk  Mortgage
Takeout  Protection  Account  shall  be an  account  in the name of RMST for the
benefit  of the  Company  but as to which the  Company  shall  have no rights of
withdrawal.  If there is a Default,  any amounts  remaining in the Bulk Mortgage
Takeout  Protection  Account shall be cash  collateral  securing any rights RMST
shall have pursuant to this Agreement.

                                    SERVICING

         Section 34. Servicing After Purchase.  After the Eligible Mortgages are
purchased,  the Company agrees to service and administer the Eligible  Mortgages
for the benefit of the Warehouse  Purchasers in accordance with prudent mortgage
loan  servicing  standards  and  procedures  generally  accepted in the mortgage
banking  industry  and  in  accordance  with  the  servicing  provisions  of the
applicable GNMA, FNMA or FHLMC mortgage-backed  securities seller/servicer guide
("Guide") for the account, however, of the Warehouse Purchasers instead of GNMA,
FNMA or  FHLMC,  provided  that the  Company  shall  at all  times  comply  with
applicable law, FHA regulations and VA regulations  and: the requirements of any
private  mortgage  insurer so that the FHA insurance,  VA guarantee or any other
applicable  insurance  or guaranty  applicable  to any Mortgage is not voided or
reduced.

         Section 35.  Remittances.  As long as the  Warehouse  Purchasers  own a
Mortgage,  the  Company  agrees  to remit to RMST  according  to the  terms  and
provisions  contained in Section 18. Such sums  received will be for the benefit
of the Warehouse Purchasers.

         Section  36.  Escrow  Accounts.  All  escrow  amounts  relating  to all
Eligible  Mortgages  shall be maintained  on deposit in an individual  custodial
account at a bank that meets the definition of "well capitalized" and is insured
by the Federal Deposit  Insurance  Corporation.  until the Eligible  Mortgage is
sold to an Investor.

         Section  37. No Charge  for  Services.  The  Company's  services  under
Section 34 shall be provided without charge.

         Section 38. Termination of Servicing.  If RMST terminates the Company's
rights and obligations to service a Mortgage, the Company shall promptly deliver
all files and papers  related to that  Mortgage to

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 10
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

RMST.  Any  ancillary  income  received by RMST related to the  servicing of the
Mortgage  shall  not be  applied  to or  reduce  the  Minimum  Net Share for the
Mortgage.

                                    SECURITY

         Section 39.  Security  Agreement.  To secure  performance of all of the
Company's  obligations  under this  Agreement and under each Offer,  the Company
hereby grants to RMST,  for itself,  the Agent and the Warehouse  Purchasers,  a
security  interest in all of the Company's  present and future right,  title and
interest in and to: (i) the Company's share of Sale Proceeds,  if any; (ii) each
unexpired  Commitment;  (iii) the Settlement Account; (iv) the Proceeds Account;
and  (v) the  Bulk  Mortgage  Takeout  Protection  Account.  All  such  security
interests  granted  hereby  shall be first and prior and shall  continue in full
force and effect,  notwithstanding any termination of this Agreement,  until all
of the Company's  obligations  to RMST,  the Agent and the Warehouse  Purchasers
under this  Agreement  and every  accepted  Offer have been fully  performed and
satisfied.  RMST shall have all of the rights of a secured  party under the laws
of the state where such collateral is located,  and shall have the express right
to transfer any collateral into its own name, either before or after default.

         Section  40.  Right of  Offset.  RMST shall also have a right of offset
against the Proceeds Account for, and to secure,  any and all sums due RMST, the
Agent or the Warehouse Purchasers under this Agreement.

         Section  41.  Subrogation  to  Rights  Under  Commitment.  The  Company
recognizes  that  by  virtue  of  the  Warehouse  Purchasers'  ownership  of the
Mortgages  and RMST's  rights  under  this  Agreement,  RMST,  the Agent and the
Warehouse  Purchasers have a valuable  property right in the Commitment,  and to
secure that right the Company  shall  permit RMST to subrogate to all rights the
Company may have in the  Commitment  if the Company  fails to perform any of its
obligations under this Agreement.

         Section 42.  Construction  as  Financing.  Without  limiting any of the
foregoing  provisions,  if for any  reason any court of  competent  jurisdiction
shall  construe  the  purchase  by the  Warehouse  Purchasers  of  any  Eligible
Mortgages  to be a loan or  extension  of credit  rather than the  absolute  and
unconditional  sale to the  Warehouse  Purchasers  which the Company  and:  RMST
expressly  hereby declare that they intend it to be, then the provisions of this
Agreement  shall be  construed  and given  effect so as to create and perfect in
RMST, for itself,  the Agent and the Warehouse  Purchasers,  a first,  prior and
continuous  security  interest in all of the Company's  interests in each of the
affected  Eligible  Mortgages  and all proceeds  from (1) the earlier of (a) the
date the Warehouse  Purchasers  give value for the Eligible  Mortgage or (b) the
date the Company  acquires (or reacquires) an interest in the Eligible  Mortgage
until (2) the  earlier of (x) the sale of the  Eligible  Mortgage to an Investor
pursuant to the terms of this  Agreement or (y) complete  fulfillment  of all of
the Company's  obligations  to RMST under this  Agreement.  The term  "proceeds"
shall be construed to include each  Commitment  related to the Mortgage.  In the
event of such a construction,  the amount of all fees and realizations  owed to,
earned by or payable to RMST or the Warehouse  Purchasers for the transaction or
transactions   so  construed   shall  be  absolutely   limited  to  the  maximum
non-usurious  amount of interest  allowed by whichever of  applicable  Texas (or
other  applicable  state law) or  federal  laws  permit  the higher  amount of r
interest to be contracted for,  reserved,  charged or received (as applicable to
the circumstance), it being the intention of the parties to comply with, and not
to evade, all usury and other applicable laws.

                                    INDEMNITY

         Section 43.  Indemnification  of RMST and Others. The Company agrees to
and does hereby  indemnify and hold harmless  RMST,  the Agent and the Warehouse
Purchasers  against  any  and all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments, suits, claims, cost, expenses and

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 11
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

disbursements  of any  kind or  nature  whatsoever,  which  may be  imposed  on,
incurred by, or assessed against RMST, the Agent or the Warehouse  Purchasers in
any way  related  to,  or  arising  out of any of the loan  papers or any of the
transactions  contemplated  therein,  to the extent that any of the same results
directly or  indirectly  from any claims made or actions,  suits or  proceedings
commenced  by or on behalf  of any  person  other  than  RMST,  the Agent or the
Warehouse Purchasers, provided that RMST, the Agent and the Warehouse Purchasers
shall  not have the  right to be  indemnified  hereunder  for their own fraud or
negligence.  The  indemnities  contained  in  this  section  shall  survive  the
termination of this Agreement.

                                     DEFAULT

         Section  44.  Default.  The  following  shall be a Default  under  this
Agreement:

                  (a) as to any FNMA,  FHLMC, GNMA or HUD programs for which the
         Company  has,  at any time,  represented  to RMST that the  Company was
         eligible  to   participate,   the  Company  loses  its  eligibility  to
         participate in that program;

                  (b) the  Company's  participation  in a take  out  program  is
         suspended by the Investor offering that program for a reason other than
         termination of the program as a whole by the Investor;

                  (c)  anyone  of  the  Key  Principals  ceases  to be  actively
         involved in the  management  of the  Company for any reason  (including
         death,  disability  or  retirement)  or the  ceases  to  own an  equity
         Interest In the Company;

                  (d) any equity interest in the Company is issued to any person
         who is not a Key Principal;

                  (e) there is, in the reasonable  judgement of RMST, a material
         adverse change in the Company's financial condition,  the prospects for
         the Company's timely and complete  performance of its obligations under
         this  Agreement  or the  prospects  for  the  Company's  continuing  in
         business as a going concern;

                  (f)  the  Agent  determines  that  the  Company  is no  longer
         eligible to participate in the Warehouse Facility;

                  (g) the fair value of the  Company's  assets do not exceed its
         liabilities,  or the  Company  does not have  sufficient  cash  flow to
         enable  it to pay  its  debts  as they  mature  or the  Company  has an
         unreasonably small capital to conduct its business;

                  (h) the Company voluntarily seeks,  consents to, or acquiesces
         in  the  benefit  of  any  liquidation,  conservatorship,   bankruptcy,
         moratorium, arrangement,  receivership,  insolvency,  reorganization or
         similar  laws  from  time to time in effect  and  affecting  creditors'
         rights generally (collectively "Debtor Laws") or becomes a party to, or
         is made the subject of, any  proceeding  provided for by any Debtor Law
         (other than as a creditor or claimant) that could stay the  enforcement
         of RMST's rights or the rights of the Warehouse Purchasers;

                  (i) the Company is not, in the  reasonable  judgement of RMST,
         able to comply with the  underwriting,  closing,  delivery  and funding
         requirements of any of its institutional end-loan investors; or

                  (j) the Company  commits a breach of this  Agreement  which is
         not cured  within five (5) Banking  Business  Days of the giving of the
         notice of default by RMST provided  there shall be no cure period for a
         breach under Section 23 or Section 26.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 12
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         Section 45. Remedies.  Upon the occurrence of a Default, in addition to
its  rights  under  Section  27,  RMST may by  notice  given  to the  Company(i)
terminate the Company's  rights and  obligations  to service any or all Eligible
Mortgages purchased by the Warehouse Purchasers;  (ii) terminate any obligations
RMST has to cause  future  purchases to be funded  under this  Agreement;  (iii)
cause the Warehouse  Purchasers to sell-or, if RMST has purchased some or all of
the Eligible Mortgages, sell-any or all of the Eligible Mortgages to one or more
third parties; (iv) terminate this Agreement by giving notice to the Company; or
(v) do any combination of those things.

         Section 46. Effect of  Termination.  Upon  termination,  this Agreement
will survive and  otherwise  remain in full force and effect with respect to all
of Company's  obligations and responsibilities for Mortgages purchased hereunder
except that all monetary  obligations  of the Company to RMST,  the Agent or the
Investors  shall bear  interest at the  Default  Rate and the  determination  of
Minimum Net Share  shall be  determined  using the Default  Rate for all periods
after the occurrence of the Default.  The Company will, after such  termination,
reasonably  cooperate  with RMST,  the Agent,  the Warehouse  Purchasers and the
Investors in completing all transactions, documents, reports,- payments and acts
contemplated or provided hereunder.

         Section 47. Costs of Collection and Enforcement.  The Company shall pay
(i) all fees,  charges,  or taxes for the recording or filing of any document to
create or perfect the security  interest created by Section 39; (ii) all amounts
reasonably  expended,  advanced or incurred by RMST,  the Agent or the Warehouse
Purchasers to satisfy any  obligation of the Company  under this  Agreement,  to
collect  the any  obligations  arising  under this  Agreement  or to enforce the
rights of RMST,  the Agent or the  Warehouse  Purchasers  under this  Agreement,
including all court costs,  attorneys'  fees (whether for trial,  appeal,  other
proceedings or otherwise),  fees of auditors and accountants  and  investigation
expenses reasonably  incurred by RMST, the Agent or the Warehouse  Purchasers in
connection with any such matters;  and (iii) interest at an annual interest rate
equal to the Default  Rate on each item  specified in clauses (i) and (ii) above
from ten (10) days after the date of written demand or request for reimbursement
to the date of reimbursement.

                    REPRESENTATIONS AND WARRANTIES; COVENANTS

         Section 48. Representations and Warranties.  The Company represents and
warrants (and such  representations and warranties shall be deemed remade at the
time  any  Mortgage  is  sold  to the  Warehouse  Purchasers  pursuant  to  this
Agreement) as set forth below.

                  (a) Blank  Assignments'  Validity.  The written  assignment of
         each Mortgage in blank from the Company is valid and effective and RMST
         or the Agent and each of its  successors,  substitutes  and assigns are
         each duly authorized to complete the blanks in each such assignment and
         to take  such  other  steps as are  necessary  or  appropriate,  in the
         judgment of the person acting, to transfer the Mortgage and any related
         Commitment,  as  contemplated  by the Specific  Power of Attorney  form
         attached as Appendix 3 (and the Company hereby agrees to execute one or
         more originals of such Specific Power of Attorney and any supplement to
         it which RMST may from time to time request from the Company.)

                  (b)  Documents   Genuine,   Statements   True.  All  documents
         submitted in  connection  with each Offer are genuine,  the  statements
         contained in the Offer  submitted to RMST and all other  statements and
         representations as to any such Mortgages are accurate, true and correct
         in  all  material  respects  and  meet  each  of the  requirements  and
         specifications of this Agreement.

                  (c) Delivery Risk and  Responsibility.  All  deliveries of all
         Mortgage  documents shall be at the Company's risk and (except only for
         deliveries  of Mortgages  required to be made by the Agent as custodian
         under  the  relevant   GNMA,   FNMA  or  FHLMC  Guide)  the   Company's

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 13
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         responsibility, and the Company agrees to indemnify RMST, the Agent and
         the Warehouse  Purchasers  and hold each of them harmless from all bona
         fide and reasonable  claims,  loss, cost, damage or expense  (including
         reasonable  attorneys'  fees)  arising out of or incurred in connection
         therewith, including any resulting in whole or in part from RMST's, the
         Agent's or the  Warehouse  Purchaser's  own acts  except  only to i the
         extent that any such loss,  cost or expense  results  solely from their
         negligent acts or omissions or breach of this Agreement.

                  (d) Each Mortgage  Valid.  Each Mortgage sold to the Warehouse
         Purchasers has been duly executed by the mortgagor(s), acknowledged and
         recorded (or duly sent by the Closer to be  recorded)  and is valid and
         binding upon such  mortgagor(s)  and enforceable in accordance with its
         terms.

                  (e) Mortgage  Guaranty and  Insurance.  Each Mortgage that the
         Company  represents  to be  insurable  by FHA or by a private  mortgage
         insurer,  or  sufficient  to be  guaranteed by the VA, is or will be so
         insured or guaranteed as represented.

                  (f) Mortgages'  Characteristics.  The full principal amount of
         each Mortgage has been (or when funded by the  Warehouse  Purchasers if
         so requested,  will be) advanced to the  mortgagor  under the Mortgage,
         either by payment  directly to the  mortgagor or by payment made on the
         mortgagor's  request or approval;  the unpaid  principal  balance is as
         stated in the Offer; all costs,  fees and expenses  incurred in making,
         closing and  recording  the Mortgage have been paid (or will be paid at
         the closing);  no part of the property covered by the Mortgage has been
         or will be released from its lien; the terms of the Mortgage have in no
         way been  changed or  modified  and the  Mortgage is current and not in
         default.

                  (g) Mortgages Comply with Law. As to each individual  Mortgage
         offered to or purchased  by the  Warehouse  Purchasers,  and all escrow
         balances related to the Mortgages,  all applicable  federal,  state and
         local laws,  rules and regulations  have been complied with,  including
         the Real Estate Settlement Procedures Act, the Equal Credit Opportunity
         Act, the Flood Disaster  Protection  Act, the Truth-  in-Lending Act of
         1968, the Depository Institutions Deregulatory and Monetary Control Act
         of 1980, all as amended,  and regulations  issued pursuant to them; and
         all usury laws and  limitations,  all conditions  within the control of
         the Company as to the validity of the insurance or guaranty required by
         the  National  Housing  Act of 1934,  as  amended,  and the  rules  and
         regulations thereunder,  and the Servicemen's Readjustment Act of 1944,
         as  amended,  and  the  rules  and  regulations  thereunder,   and  all
         requirements  of the mortgage  insurance  companies or other  insurers,
         have been properly  satisfied,  and such insurance or guaranty is valid
         or enforceable.  All escrow balances have been calculated in accordance
         with  the  contractual   provisions  of  the  Mortgage,   or,  if  more
         restrictive,  in accordance  with any  applicable  GNMA,  FNMA or FHLMC
         Guides.

                  (h)  Title  Insurance.  There  is in  force  a  paid-up  title
         insurance policy on each Mortgage issued by an accredited title insurer
         in an amount at least  equal to the  outstanding  principal  balance of
         such Mortgage. The title insurance policy has been, or shall be, issued
         by a  title  insurance  underwriter  duly  authorized  to  issue  title
         insurance in the state where the real property  covered by the Mortgage
         is located.

                  (i) Hazard  Insurance.  Hazard insurance  policies meeting the
         requirements  of each the Mortgage and of the  relevant  GNMA,  FNMA or
         FHLMC Guide and the Investor's requirements are in force.

                  (j)  Servicing  Not  Otherwise  Pledged.  If  applicable,  the
         Company has not directly or  indirectly  pledged any  servicing  rights
         with respect to any Mortgages  offered to or purchased

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 14
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         by the  Warehouse  Purchasers  under  this  Agreement  to any person or
         entity other than the Warehouse  Purchasers pursuant to this Agreement,
         nor will the Company do so without RMST's prior written approval.

                  (k) Commitments. The Company warrants that each Commitment is,
         and will remain forever, free of any security interest, lien, claim, or
         encumbrance  of any kind and may be assigned by the Company to RMST and
         its assigns.

                  (l)  Appraisals  Satisfy  Applicable  Requirements.  A written
         appraisal  of the  real  property  securing  each  :Mortgage  has  been
         prepared by a  duly-licensed  appraiser and satisfies all  requirements
         for any  applicable  VA guaranty,  FHA  insurance  or private  mortgage
         insurance and all requirements imposed by the Investor which issued the
         Commitment  covering such Mortgage,  as well as the  requirements of 12
         C.F.R.,  Part 323,  as  amended or  replaced  (if the  Mortgage  is two
         hundred fifty thousand dollars ($250,000) or more).

                  (m) Quality  Control  Reports.  The Company  agrees at its own
         cost to provide periodic reports to RMST as requested by RMST from time
         to time, of the Company's  Mortgage loan  origination,  acquisition and
         servicing operations performed by the quality-control  reviewer,  which
         is satisfactory to the applicable governing agency and RMST.

                  (n) Eligibility.  The Company will be approved,  qualified and
         in good standing as:

                           (i)      an   FHA-approved   mortgage,   eligible  to
                                    originate,  purchase, hold, sell and service
                                    FHA loans;

                           (ii)     a VA-approved (not VA automatic)  mortgagee,
                                    eligible to originate,  purchase, hold, sell
                                    and service VA loans;

         prior to making an Offer for a FHA or VA loan,  as the case may be, and
         at the time of making that Offer meets all  requirements  applicable to
         its status as such.  The Company agrees not to take or omit to take any
         act  which  would  result  in its  losing  its  status  as an  eligible
         mortgagee, seller and issuer as described above.

                  (o)  Organization;   Good  Standing.  The  Company  (i)  is  a
         corporation duly organized, validly existing and in good standing under
         the  laws  of the  jurisdiction  of its  incorporation;  (ii)  has  the
         requisite legal power and authority to own its property and to carry on
         its business as currently  conducted  and (iii) is duly  qualified as a
         foreign  corporation  to do  business  and is in good  standing in each
         jurisdiction  in which  the  transaction  of its  business  makes  such
         qualification  necessary,  except  in  jurisdictions,  if any,  where a
         failure to be in good  standing has no material  adverse  effect on its
         financial condition.

                  (p)  Licensed.  The  Company  is  licensed  and  qualified  to
         transact the mortgage  origination business in, and is in good standing
         under,  the laws of each state in which  real  estate  which  secures a
         Mortgage is located or is otherwise  exempt under  applicable  law from
         such licensing and qualification.  There has been no unsatisfied demand
         made upon the Company by any state in which real estate which secures a
         Mortgage  is located  that the  Company be  licensed  or  qualified  to
         transact  the  mortgage  origination  business  under  the laws of that
         state.  The  Company  is in  compliance  with  the  laws of all  states
         necessary to insure the enforceability of each Mortgage.

                  (q) Authorization;  No Conflict. The Company has the power and
         authority  to  execute,  deliver  and  comply  with  the  terms of this
         Agreement.  The Company's  execution,  delivery and performance of this
         Agreement:  (i) have been duly and validly  authorized by all necessary
         corporate  action on the Company's  part (none of which action has been
         modified or

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 15
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         rescinded  and all of which is in full force and  effect);  (ii) do not
         and will not: (1) conflict  with or violate any laws or court orders of
         which the Company is, or in the normal  course of its  business  should
         be, aware of, or the Company's articles of incorporation or bylaws; (2)
         either  conflict  with,  result in a breach  of,  constitute  a default
         under, require any consent under, or result in the creation of any lien
         or security  interest (other than the security interest created by this
         Agreement)  upon any of the  Company's  property  under any  agreement,
         indenture or other papers to which the Company is party or by which the
         Company or its property may be bound or affected;  and (iii) do not and
         will not  result  in,  or  permit  the  holder  of any such  agreement,
         indenture  or other  papers to cause,  the  acceleration  of any of the
         Company's:  (1) debt; (2)  obligations in respect of letters of credit,
         acceptances or similar  obligations issued or created for the Company's
         account;  (3) direct or  indirect  guaranties  of debt of  others;  (4)
         liabilities  secured  by any  lien or  security  interest  existing  on
         property owned by the Company, including secured liabilities which have
         not been assumed by the Company or with respect to which the Company is
         not personally  liable; or (5) liabilities in respect l of unfunded and
         vested benefits-under ERISA plans.

                  (r) Enforceability.  This Agreement  constitutes the valid and
         binding I obligation of the Company  enforceable in accordance with its
         terms,  except as,  limited  by (i)  bankruptcy,  insolvency  or  other
         similar laws now or hereafter in effect  affecting the  enforcement  of
         creditors' rights and (ii) the application of equitable principles.

                  (s)  Approvals.  The Company's  execution and delivery of this
         Agreement  and the  Company's  performance  of its  obligations  do not
         require any license,  consent, approval or other action of any court or
         other  governmental  authority other than those that the Company is, or
         in the normal  course of its  business  should be, aware of, other than
         those which have been obtained and remain in full force and effect.

                  (t)  Financial  Statements.  The  Company's  annual  financial
         statements for the most recent two fiscal years ending more than ninety
         (90) days prior to the date of this  Agreement  have been  furnished to
         RMST. The annual financial statements are audited.

                  (u)  Presentation.   The  financial  statements  furnished  as
         described in (t) above and any  financial  statements  provided to RMST
         pursuant to Section 49 fairly present the Company's financial condition
         and the results of the  Company's  operations  as of and for the fiscal
         period ended on the respective dates of such financial  statements.  On
         the dates of such  financial  statements,  the Company  was, and on the
         date of any sale of any Mortgage  hereunder is, solvent (i.e.,  able to
         pay its debts as they mature and having  assets with value greater than
         its liabilities). Such financial statements were prepared in accordance
         with generally-accepted  accounting principles.  Since the date of such
         financial  statements,  nothing has  occurred  which has had a material
         adverse effect on the Company's  operations or financial  condition nor
         is the  Company  aware of any  state of facts  which  (with or  without
         notice  or  lapse of time or both)  would  or  could  result  in such a
         material  adverse effect,  and the Company is solvent as of the date of
         this  Agreement and will  maintain its solvency on a continuing  basis.
         Notwithstanding any of the aforementioned the Company further agrees to
         maintain  its  tangible  net worth at a minimum of Two Million  Dollars
         ($2,000,000).

                  (v)  Litigation.  There  are  no  actions,  claims,  suits  or
         proceedings  pending,  or to the  Company's  knowledge,  threatened  or
         reasonably anticipated, against or affecting the Company by any person,
         entity or governmental authority, other than those disclosed in (i) its
         most recent  audited annual  financial  statements or (ii) as listed on
         Appendix 6 which, if adversely  determined,  may reasonably be expected
         to result in a material  adverse effect on the Company's  operations or
         financial condition.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 16
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

                  (w)  Payment of Taxes.  The  Company has filed or caused to be
         filed  all of the  Company's  federal,  state  and  other  tax  returns
         required  to be filed,  all such  returns  are true and correct and the
         Company has paid (or caused to be paid) all material taxes that are due
         and payable as shown on such  returns,  including all  applicable  FICA
         payments and  withholding  taxes,  except taxes being contested in good
         faith.  The amounts  reserved as a liability  for taxes  payable in the
         financial  statements described above are sufficient for payment of all
         of the Company's unpaid taxes, whether or not disputed,  accrued for or
         applicable to the period and on the dates of such financial  statements
         and all years and  periods  prior to them and for which the Company may
         be liable in its own right or as  transferee  of the  assets  of, or as
         successor to, any other person or entity.

                  (x) VA and FHA  Loans.  The  Company  has  complied,  and will
         continue  to  comply,  with all  applicable  laws in respect of the FHA
         insurance  or VA  guaranty  of  each  Mortgage  offered  or sold to the
         Warehouse  Purchasers and designated by the Company as an FHA loan or a
         VA loan,  respectively,  and such  insurance  or  guaranty  is and will
         continue to be in full force and effect. All such FHA loans or VA loans
         comply and will continue to comply in all respects with all  applicable
         requirements for purchase under the industry  standard forms of selling
         contracts for FHA loans or VA loans,  respectively,  and any supplement
         to  them  then  in  effect.  All  Mortgages  offered  to the  Warehouse
         Purchasers  under this Agreement and represented to be (i) VA loans are
         currently  guaranteed by VA or (ii) FHA loans are currently  insured by
         FHA.  With respect to Mortgages  not yet endorsed by FHA for  insurance
         and  Mortgages  for which the Company has not yet obtained  evidence of
         guaranty  from VA or  insurance  from FHA,  the Company  shall  proceed
         diligently and promptly to comply with the  documentation  requirements
         and all  other  applicable  requirements  in order to  procure  the FHA
         endorsement  for insurance or evidence of VA guaranty or FHA insurance,
         as the case may be and, in the event that the  Company  ever has reason
         to  believe  that  any  such   endorsement  or  evidence  will  not  be
         forthcoming,  the Company shall  promptly so notify RMST and repurchase
         the related FHA loan or VA loan.

                  (y) Fire and Casualty Policies. All fire and casualty policies
         covering  the  premises  encumbered  by  each  Mortgage  offered  to or
         purchased  by  the  Warehouse  Purchasers  under  this  Agreement:  (i)
         presently  name  and  will  continue  to  name  the  Company  "and  its
         successors  and/ or assigns in  interest as they may appear" of each as
         the  insured  under a standard  mortgage  clause  or, for newly  funded
         Mortgages, a notice for an endorsement changing the named mortgagee has
         been  submitted  to the  carrier and will be pursued  diligently  until
         issued;  (ii) are and will continue to be in full force and effect; and
         (iii)  afford and will  continue to afford  insurance  against fire and
         such other risks as are usually  insured,  against in the broad form of
         extended  coverage  insurance from time-to-time  available,  as well as
         insurance  against  flood  hazards if it is  required by FHA, VA or any
         applicable law, court or other governmental authority.

                  (z) Flood Insurance.  Mortgages offered to or purchased by the
         Warehouse Purchasers under this Agreement which are secured by premises
         located  in a  special  flood  hazard  are  designated  as  such by the
         Secretary of HUD which require flood  insurance are and shall  continue
         to be covered by  special  flood  insurance  under the  National  Flood
         Insurance Program.

                  (aa)  Year  2000.   The  Company  has  undertaken  a  detailed
         inventory, review, and assessment of all areas within and affecting the
         Company's  business and operations that could be adversely  affected by
         the failure of the Company to be Year 2000 Compliant on a timely basis;
         has  developed  a detailed  plan and time line for  becoming  Year 2000
         Compliant on a timely basis; and, to date, has implemented that plan in
         accordance with the specified  timetable in all material respects.  The
         Company  has  made  written  inquiry  of  each  of  the  Company's  key
         suppliers,  vendors and  customers as to whether they will be Year 2000
         Compliant in all  material  respects on

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 17
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

         a timely  basis and on the basis of that inquiry  believes  that all of
         them will be so compliant.  As used herein, "Year 2000 Compliant" shall
         mean  that all  software,  embedded  microchips  and  other  processing
         capabilities  utilized by the Company or the Company's  key  suppliers,
         vendors and customers will correctly process,  sequence, and calculate,
         without interruption,  all date and date related data for all dates to,
         through and after January 1, 2000,  including  leap year  calculations,
         and  recognize,  store and transmit date data in a format which clearly
         indicates the correct century. As used herein, "key suppliers,  vendors
         and customers"  means those  suppliers,  vendors,  and customers of the
         Company whose business failure or material  business  disruption would,
         in RMST's  judgment,  be  reasonably  likely  to  result in a  material
         adverse  change in the business,  properties,  condition  (financial or
         otherwise), or prospects of the Company.

         Section 49. Covenants.

                  (a)  Servicing.  The Company agrees to service (or cause to be
         serviced) all Mortgages  purchased by the  Warehouse  Purchasers  under
         this  Agreement  which  the  Company  has  the  right  to  service,  in
         accordance with the servicing  standards stated above in this Agreement
         and  all  applicable  GNMA,  FNMA,  FHLMC,  FHA  and  VA  requirements,
         including  taking all actions  necessary to enforce the  obligations of
         the obligors under such Mortgage.

                  (b) Comply  with  Commitments.  The  Company  agrees to timely
         comply in all respects with all terms and conditions of all Commitments
         covering  any  Eligible  Mortgage  (and any  renewals,  extensions,  or
         modifications  of  them or  substitutions  for  them),  and  cause  the
         Mortgages  covered by and intended to be sold under each  Commitment to
         be so sold  before  its  expiration  date and in the  manner  and order
         contemplated by the Commitment.

                  (c) Maintain Commitments.  The Company agrees to maintain each
         Commitment and all of the Company's rights and obligations  under it in
         full force and effect,  not to pair off or otherwise cause or acquiesce
         in the effective  partial or complete  cancellation  of any  Commitment
         without RMST's specific  written  consent,  not to suffer or permit any
         default under any Commitment,  and to enforce performance by the issuer
         of each Commitment. Without limitation, the Company expressly agrees to
         timely  deliver  any and  all  margin  required  by the  terms  of each
         Commitment.

                  (d)  Change in  Status.  The  Company  agrees  to give  prompt
         written  notice to RMST of any  change in its  status as such or in the
         relationship between the Company and any Investor approved by RMST.

                  (e) Notification of Mortgage  Defaults.  The Company agrees to
         immediately  notify RMST upon  learning of any default under any of the
         Mortgages  purchased  (or  agreed  to be  purchased)  by the  Warehouse
         Purchasers, or of the institution of any proceeding before any court or
         other  governmental  authority in respect of a claimed violation by the
         Company or any other person of any statute, rule or regulation relating
         to any the Mortgage or a claimed defense or offset to any Mortgage.

                  (f) Loan  Documents.  The Company  agrees to maintain  -at the
         Company's  principal  office  or in the  office of a  computer  service
         bureau  engaged by the Company  -the  originals  (or copies in any case
         where the  original  has been  delivered  to RMST or the  Agent) of all
         promissory notes and mortgages or deeds of trust for the Mortgages, and
         all  Commitments  related to them, and all related  papers,  as well as
         files,  surveys,  certificates,  correspondence,  appraisals,  computer
         programs, tapes, disks, cards, accounting records and other information
         and data  relating  to such  Mortgages  for a period  not to exceed one
         year. Upon RMST's written request,  the Company will promptly make them
         conveniently available to RMST.

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 18
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

                  (g)  Current  Financial  Information.  The  Company  agrees to
         furnish  RMST,  within  ninety (90) days after the end of the Company's
         fiscal year,  audited  annual  financial  statements for that year end,
         reflecting the  corresponding  figures for the preceding fiscal year in
         comparative form,  accompanied by the related report acceptable to RMST
         prepared by the  Company's  independent  certified  public  accountants
         stating  that the  statements  were  prepared  according  to  generally
         accepted  account  principles  applied on a basis consistent with prior
         periods  except  for such  changes  in  generally  accepted  accounting
         principles   concurred   in  by  the   Company's   independent   public
         accountants.  Promptly when  available and least within sixty (60) days
         after  the  end of each  of the  first  three  fiscal  quarters  in the
         Company's  fiscal year,  the Company  shall  furnish RMST its financial
         statements for that quarter and the year to date,  each  reflecting the
         corresponding figures for the same quarter in the preceding fiscal year
         in  comparative  form.  If requested by RMST,  the Company will provide
         RMST monthly financial  statements no later than twenty (20) days after
         the close of each month in its fiscal year.

                  (h) Year 2000.  The  Company  shall  deliver to RMST  promptly
         after they become available the Company's Year 2000 plan and time line,
         all  periodic  internally  and  externally  prepared   evaluations  and
         progress reports  concerning the Company's Year 2000 plan and Year 2000
         readiness,   any   management  or  other  letters  from  the  Company's
         accountants   addressing   or  mentioning   the  Company's   Year  2000
         Compliance, and such other information,  documentation and materials as
         RMST may reasonably  request from time to time in order to confirm that
         the Company is Year 2000  Compliant and the methods used by the Company
         to become Year 2000 Compliant.

                  (i) Other  Information.  Promptly  upon  request,  the Company
         agrees to furnish such other information as RMST may request concerning
         the Company,  its business affairs,  the Mortgages and its relationship
         with any Investor.

         Section 50.  Adjustment  to Loan Set Up Fee. RMST may elect to increase
or decrease the Loan Set Up Fee from time to time by giving the Company  written
notice of the change  specifying  a date when the change will  become  effective
which is at least thirty (30) days after the notice.  Any change in the Loan Set
Up Fee  shall  be  effective  only as to  Mortgages  acquired  by the  Warehouse
Purchasers on or after the effective date of the change.

                                  MISCELLANEOUS

         Section 51. Assignment  Prohibited.  This Agreement may not be assigned
by the Company.

         Section 52. Notices. All notices, demands, consents, requests and other
communications  required or permitted to be given or made hereunder  shall be in
writing and shall be delivered in person or telecopied  (with an additional copy
to be  mailed as  provided  herein)  or  mailed,  first  class,  return  receipt
requested,  postage prepaid, addressed to the respective parties hereto at their
respective  addresses  hereinafter  set forth or, as to any such party,  at such
other  address as may be  designated by it in a notice to the other given in the
manner  provided in this Section.  All notices shall be  conclusively  deemed to
have been properly given or made when duly delivered, in person, to an Executive
Vice  President or more senior officer of the  addressee,  or if mailed,  on the
first Banking  Business Day after being  deposited in the mails or if telecopied
when transmitted, addressed as follows:

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 19
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

If to the Company:       Ira Silverman
                         President
                         And/or
                         Daniel Silverman
                         Executive Vice President
                         Community Home Mortgage Corporation
                         510 Broadhollow Road, Suite 100
                         Melville, NY 11747
                         Telephone: (516) 391-9100
                         Telecopy: (516) 391-9119

If to RMST:              HSA Residential Mortgage Services of Texas, Inc.
                         4550 Post Oak Place Drive, Suite 335
                         Houston, Texas 77027
                         Attention: Lawrence J. Trevino
                         Telephone: (713) 843- 7301
                         Telecopy: (713) 888-9014

If to Guarantor          Ira Silverman
                         Community Home Mortgage Corporation
                         510 Broadhollow Road, Suite 100
                         Melville, NY 11747
                         Telephone: (516) 391-9100
                         Telecopy: (516) 391-9119

With Copies to           Howard M. Sommers, Esq.
                         950 3rd Avenue
                         New York, NY 10022
                         Telephone: (212)-935-9060
                         Telecopy: (212)-421-1650

No notice to or demand on the  Company or any other  person  shall  entitle  the
Company or any other person to any other or further  notice or demand in similar
or other circumstances.

         Section 53. No Financing Intended.  This Agreement evidences a facility
for the sale of Mortgages to the  Warehouse  Purchasers,  and is not intended by
the Company or RMST to evidence a financing arrangement. The Company will report
the sale of the Mortgages under generally accepted accounting principles and for
federal  income  tax  purposes  as a sale of the entire  mortgage,  subject to a
limited  right of RMST to require the  repurchase  of Defective  Mortgages,  and
subject to a Make Whole Payment for breach of the warranties, representations or
covenants given by the Company in this Agreement.  The consideration received by
the Company upon the sale of each Mortgage will constitute reasonably equivalent
value and fair consideration for the transfer of ownership of the Mortgages. The
Company  warrants and covenants  that it is solvent at all times relevant to the
sale  of any  Mortgage,  and  will  not be  made  insolvent  by the  sale of any
Mortgage.  The Company  will not sell any Mortgage to the  Warehouse  Purchasers
with any intent to hinder, delay or defraud any of the Company's creditors.

         Section 54.  Confidential/Proprietary  Information.  This  Agreement is
considered the confidential and proprietary information of RMST, and the Company
may not reveal this Agreement or its contents to any person other than employees
of the  Company  who need to have  knowledge  of its  content to  perform  their
duties,  or to the  attorneys  and auditors of the Company  solely in connection
with

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 20
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

their representation of the Company.  This Agreement is subject to the copyright
of RMST and may not be reproduced without the express permission of RMST.

         Section  55.   Unilateral   Amendment.   RMST  reserves  the  right  to
unilaterally  amend this Agreement in its sole discretion to comply (to the sole
satisfaction of RMST) with any law, rule or regulation  affecting RMST in effect
now or hereafter.  Any such amendment shall be effective  immediately.  However,
and  notwithstanding  any other provision of this  Agreement,  in the event of a
unilateral  amendment,  the  Company  shall  have the  right to  terminate  this
Agreement  by  written  notice to RMST  within  ten (10)  days of the  Company's
receipt of notice of such amendment. Termination shall not affect any obligation
of the Company incurred prior to RMST's receipt of notice of termination.

         Section 56. Binding.  This Agreement  supersedes and replaces  entirely
any and all similar agreements and arrangements  heretofore existing between the
Agent and the Company or between RMST and the Company and shall bind and benefit
the Company,  RMST and their  respective  successors,  trustees,  receivers  and
permitted assigns.

         Section 57.  Governing Law; Venue.  This Agreement shall be governed by
applicable  United  States and Texas law with specific  venue in Harris  County,
Texas.

         Section 58. Headings.  The headings and captions used in this Agreement
are for convenience only and shall not be deemed to limit, amplify or modify the
terms of l this Agreement, nor shall they effect their meaning.

         Section  59.  Number;  Gender.  Whenever  the  singular  number is used
herein, it includes the plural where appropriate,  and words of any gender shall
include each i other gender where appropriate.

         Section  60.   Counterparts.   This   Agreement   may  be  executed  in
counterparts each of which shall constitute an original instrument.

         Section 61.  Severability.  If any provision of this  Agreement is held
invalid,  illegal or unenforceable,  the remaining  provisions shall be enforced
and shall not be affected or impaired thereby.

         Section  62.  Incorporated  Documents.  Each  reference  made  in  this
Agreement  to any  Appendix,  Exhibit,  Schedule  or  Annex  shall  be read as a
reference to that Appendix,  Exhibit, Schedule or Annex to this Agreement except
where otherwise expressly specified,  and each Appendix,  Exhibit,  Schedule and
Annex to this  Agreement is hereby  incorporated  into this  Agreement as if set
forth  verbatim at each place in this  Agreement  where it is referred  to. Each
Appendix,  Exhibit, Schedule or Annex which is a form to be completed,  executed
and delivered  pursuant to this  Agreement  may be completed in accordance  with
this  Agreement  by  either  the  Company  or RMST  before,  when or after it is
executed and delivered.

         Section 63.  Guaranty.  The Guarantor  unconditionally  guarantees  the
payment  when  due  of  any  and  all  indebtedness  and  the  satisfaction  and
performance  when  required  of  all  covenants,   obligations  and  liabilities
(collectively,  the  "Obligations  and  Liabilities")  of the Company under this
Agreement.  If any or all Obligations  and Liabilities of the Company  hereunder
are not timely satisfied by the Company, the Guarantor  unconditionally promises
to perform or cause to be performed such  Obligations and Liabilities to RMST or
to pay to RMST,  without  deduction  of any kind,  in lawful money of the United
States, the amount of the Obligation and Liability if the same shall be monetary
in nature.  The Guarantor  acknowledges that a separate action or actions may be
brought and  prosecuted  against  him/her/them  whether or not action is brought
against  the  Company  and  whether  or not the  Company  is  joined in any such
separate action or actions.  The Guarantor  authorizes  RMST,  without notice or
demand  (except as shall be required by applicable law providing the same cannot
be waived),  and without  affecting or impairing  the liability of the Guarantor
under this Section,  from time to time in accordance  with this  Agreement or by
mutual  agreement  with the Company,  to renew,  compromise,  extend,  increase,

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 21
<PAGE>

RESIDENTIAL MORTGAGE SERVICES
================================================================================
                                                                        of Texas

accelerate or otherwise change the time for payment of, or otherwise .change the
terms of, any  indebtedness  of the  Company or to modify the terms and time for
performance of any or all Obligations and Liabilities under this Agreement.  The
Guarantor waives notice of dishonor, notice of acceptance,  any right to require
RMST to proceed  against the  Company,  or to pursue any other  remedy in RMST's
power  whatsoever.  Until all of the Obligations and Liabilities shall have been
fully  performed,  and  until  all  periods  under  applicable  law  to  contest
preferential or fraudulent payments have expired, Guarantor waives all rights of
contribution and subrogation from the Company.

         Section  64.  Entire  Agreement.  This  Agreement  represent  the final
agreement  between the parties and may not be  contradicted by evidence of prior
contemporaneous,  or subsequent  oral  agreements  of the parties.  There are no
unwritten oral agreements between the parties.

COMMUNITY HOME MORTGAGE                         HSA RESIDENTIAL MORTGAGE
CORPORATION                                     SERVICES OF TEXAS, INC.

By: /s/ Ira Silverman                           By: /s/ Lawrence J. Trevino
    ----------------------                          -----------------------
Name:  Ira Silverman                            Name:  Lawrence J. Trevino
Title:  President                               Title:  President
Date: 08/27/99                                  Date:  08/30/99
      --------------------                             --------

GUARANTOR

By: /s/ Ira Silverman
   ------------------------
Name:  Ira Silverman

Attached:
         Appendix 1               Offer to Sell Mortgage
         Appendix 2               RMST Procedures
         Appendix 3               Specific Power of Attorney
         Appendix 4               Collateral/Credit Documents
         Appendix 5               Special Closing Instructions
         Appendix 6               Pending or Threatened Litigation
         Appendix 7               Defective Mortgage Criteria
         Appendix 8               Eligible Mortgage Criteria
         Appendix 9               Minimum Criteria for Investors
         Appendix 10              Bailee Letter (from Agent)
         Appendix 11              Bailee Letter (from RMST)

283172..093098.12085

--------------------------------------------------------------------------------
MORTGAGES PURCHASE AGREEMENT                                             PAGE 22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}]]