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                        BEI MEDICAL SYSTEMS COMPANY, INC.

                          REGISTRATION RIGHTS AGREEMENT

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                        BEI MEDICAL SYSTEMS COMPANY, INC.

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is entered into as
of the 4th day of September, 2001, by and among BEI MEDICAL SYSTEMS COMPANY,
INC., a Delaware corporation (the "COMPANY") and the investors listed on EXHIBIT
A hereto, referred to hereinafter as the "INVESTORS" and each individually as an
"INVESTOR."

                                    RECITALS

     WHEREAS, in connection with the Securities Purchase Agreement, dated
September 4, 2001, by and among the Company and the Investors (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Investors up to (i)
2,169,197 shares of its the Company's common stock, par value $.001 per share
("COMMON STOCK"), and (ii) warrants (the "WARRANTS") to acquire shares of Common
Stock. The shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants are referred to herein as the "WARRANT SHARES";

     WHEREAS, to induce the Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws.

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

SECTION 1.  GENERAL.

     1.1    DEFINITIONS(A) As used in this Agreement the following terms shall
have the following respective meanings:

            "COMMON SHARES" shall mean the Company's Common Stock issued
pursuant to the Securities Purchase Agreement and held by the Investors listed
on EXHIBIT A hereto and their permitted assigns.

            "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

            "FORM S-3" means such form under the Securities Act as in effect
on the date hereof or any successor or similar registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

                                       1.
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            "HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with SECTION 2.11 hereof.

            "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.

            "REGISTRABLE SECURITIES" means (a) the Common Shares, (b) the
Warrant Shares, and (c) any Common Stock of the Company issued or issuable, from
time to time (with any adjustments), as a distribution on or in exchange for or
otherwise with respect to any of the foregoing. Notwithstanding the foregoing,
Registrable Securities shall not include any securities sold by a person to the
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferor's rights under SECTION 2 of this
Agreement are not assigned.

            "REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.

            "REGISTRATION EXPENSES" shall mean, except as otherwise provided
herein, all expenses incurred by the Company in complying with SECTIONS 2.2 and
2.3 hereof, including, without limitation, all registration and filing fees,
fees and expenses of compliance with securities laws, listing application fees,
transfer agent's and registrar's fees, costs of distributing prospectuses in
preliminary and final form as well as any supplements thereto, printing
expenses, fees and disbursements of counsel for the Company, reasonable fees and
disbursements of a single special counsel for the Holders to review and comment
on the Registration Statement and related documents, and to advise the Holders
in connection therewith and the offering contemplated thereby (not to exceed
$25,000 in the case of a registration on Form S-3 and $75,000 in the case of a
registration on Form S-1, PROVIDED, HOWEVER, that such reimbursement is
contingent upon the receipt by the Company of an itemized invoice from such
special counsel), blue sky fees and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).

            "REGISTRATION PERIOD" means the period between the date of this
Agreement and the earlier of (i) the date on which all of the Registrable
Securities have been sold and no further Registrable Securities may be issued in
the future, or (ii) the date on which all the Registrable Securities (in the
opinion of the Investors' counsel) may be immediately sold without registration
and without restriction (including without limitation as to volume by each
holder thereof) as to the number of Registrable Securities to be sold, pursuant
to Rule 144; PROVIDED, HOWEVER, that such Registration Period as it relates to
the Warrant Shares shall expire in the event of (a) an acquisition of the
Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than 50% of the voting power of the corporation or
other entity surviving such transaction, or (b) upon a sale, lease or other
disposition of all or substantially all of the assets of the Company.

            "SEC" or "COMMISSION" means the Securities and Exchange Commission.

                                       2.
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            "SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.

            "SPECIAL REGISTRATION STATEMENT" shall mean a registration statement
relating to any employee benefit plan or with respect to any corporate
reorganization or other transaction under Rule 145 of the Securities Act.

            "WARRANT SHARES" shall mean the Company's Common Stock from time
to time issuable upon exercise of the Warrants issued pursuant to the Securities
Purchase Agreement and held by the Investors listed on EXHIBIT A hereto and
their permitted assigns.

            (B) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.

SECTION 2.  REGISTRATION; RESTRICTIONS ON TRANSFER.

       2.1  RESTRICTIONS ON TRANSFER.

            (A) Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities unless and until:

                  (I)    There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or

                  (II)   (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a statement
in reasonable detail describing the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such Securities under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances; or

                  (III)  Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (C) to the Holder's family member
or trust for the benefit of an individual Holder; PROVIDED, that in each case
the Holder shall have notified the Company of the proposed transfer or
disposition at least 10 days prior to such transfer and the transferee will be
subject to the terms of this Agreement to the same extent as if he were an
original Holder hereunder.

            (B) Each certificate representing Securities shall (unless otherwise
permitted by the provisions of the Agreement) be stamped or otherwise imprinted
with a legend substantially similar to the following (in addition to any legend
required under applicable state securities laws):

       THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
       SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
       OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
       UNTIL REGISTERED UNDER THE ACT OR

                                       3.
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       UNLESS THE COMPANY IS SATISFIED THAT SUCH REGISTRATION IS NOT REQUIRED.

       THE TRANSFER OF SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
       TO CERTAIN RESTRICTIONS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT
       DATED SEPTEMBER 4, 2001, BETWEEN THE COMPANY AND CERTAIN INVESTORS, AND
       NO TRANSFER OF SHARES SHALL BE VALID OR EFFECTIVE ABSENT COMPLIANCE
       WITH SUCH RESTRICTIONS.

            (C) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that, or the Company is
otherwise satisfied that, the securities proposed to be disposed of may lawfully
be so disposed of without registration, qualification or legend.

            (D) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.

       2.2  REGISTRATION.

            (A) MANDATORY REGISTRATION. The Company shall prepare and file with
the SEC as soon as practicable, but in no event later than October 19, 2001, a
registration statement on Form S-3 covering the resale of all of the Registrable
Securities ("S-3 REGISTRATION STATEMENT") or if the Company is not eligible to
file an S-3 Registration Statement, then it shall prepare and file with the SEC
a registration statement on Form S-1 ("S-1 REGISTRATION STATEMENT") as soon as
practicable, but in no event later than November 3, 2001 (each of the S-3
Registration Statement and S-1 Registration Statement is referred to herein as
the "REGISTRATION STATEMENT") to permit the sale of such securities in
accordance with the methods of distribution provided by the Holders.

            (B) EFFECTIVENESS OF REGISTRATION STATEMENT. The Company shall use
its best efforts to cause the S-3 Registration Statement to become effective
within 75 days after the Closing (or 120 days after the Closing in the event the
SEC reviews the S-3 Registration Statement) or cause the S-1 Registration
Statement to become effective within 120 days after the Closing (or 150 days
after the Closing in the event the SEC reviews the S-1 Registration Statement
("REQUIRED EFFECTIVE DATE"). Once the Registration Statement is declared
effective by the SEC, the Company will cause the Registration Statement to
remain effective throughout the Registration Period, except as permitted under
SECTION 2.8.

            (C) PAYMENTS BY THE COMPANY. If (i) at any time after effectiveness
of the Registration Statement and prior to fourth anniversary of the date
hereof, sales cannot be made thereunder for any reason, other than one
permissible suspension of effectiveness of the Registration Statement as
described in SECTION 2.8 (B) which does not exceed 30 trading days, for a period
of more than 20 consecutive trading days, or 60 trading days in the aggregate,
during any 12-month, then the Company will thereafter make a cash payment to
each Investor as damages for such delay. The amount of the cash payment made to
each Investor will be equal to 1% of the purchase price paid for the Common
Shares purchased by the Investor at the Closing and which remain in the
possession of such Investor at the time any penalty accrues for each 20
consecutive trading day period or 60 nonconsecutive trading days during any
12-month period, as the case may be, and shall be prorated for partial periods
in excess of 20 consecutive or 60 nonconsecutive trading days, as the case may
be.

                                       4.
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            (D) EFFECT OF LATE REGISTRATION. If the Registration Statement has
not been declared effective by the Required Effective Date, then the Company
will make a cash payment to each Investor as damages for such delay (the "LATE
REGISTRATION PAYMENT"). The Late Registration Payment will be equal to 1% of the
purchase price paid for the Common Shares purchased by such Investor at the
Closing and which remain in the possession of such Investor at the time any
penalty accrues for each 30-day period after the expiration of the Required
Effective Date that such Registration Statement has not been declared effective
(such payments to be prorated on a daily basis for partial periods in excess of
30 days with the understanding that the Company shall have one 30-day grace
period for Permissible Delays before any penalty payment begins to accrue). A
Permissible Delay is defined as a delay caused by the Company after, in its
reasonable judgement after consultation with counsel, it believes that there is
or may be in existence material nonpublic information or events involving the
Company, the failure of which to be disclosed in the prospectus included in the
Registration Statement could result in a violation of the Securities Act, the
Exchange Act or any provision of any state securities law and the disclosure of
which would be detrimental to the Company.

       2.3  PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least 10 days prior to the filing of any
registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within 10 days after the above-described notice
from the Company, so notify the Company in writing. Such notice shall state the
intended method of disposition of the Registrable Securities by such Holder. If
a Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.

            (A) UNDERWRITING. If the registration statement under which the
Company gives notice under this SECTION 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
SECTION 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. In the event, the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Company; second, be made
pro rata among all holders of the Company securities seeking to include shares
of Common Stock in proportion to the number of shares of Common Stock sought to
be included by those holders. No such reduction shall reduce the securities
being offered by the Company for its own account to be included in the
registration and underwriting. However, the Company will not exclude any
Registrable Securities unless the Company has first excluded all outstanding
securities the holders of which are not entitled by right to inclusion of
securities in such registration statement or are not entitled pro rata inclusion
with the Registrable Securities. If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written notice
to the Company and the underwriter, delivered at least 10 business days prior to
the effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation, the
partners, retired partners and stockholders of

                                       5.
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such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing person shall be
deemed to be a single "HOLDER," and any PRO RATA reduction with respect to such
"HOLDER" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"HOLDER," as defined in this sentence.

            (B) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
SECTION 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with SECTION 2.5 hereof.

            (C) EXPIRATION OF PIGGYBACK REGISTRATION RIGHTS. The registration
rights described under SECTION 2.3 shall expire upon the earlier of (i) the date
on which all of the Registrable Securities have been sold and no further
Registrable Securities may be issued in the future, or (ii) the date on which
all the Registrable Securities (in the opinion of the Investors' counsel) may be
immediately sold without registration and without restriction (including without
limitation as to volume by each holder thereof) as to the number of Registrable
Securities to be sold, pursuant to Rule 144.

       2.4  ELIGIBILITY FOR FORM S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the sale
by the Investors of the Registrable Securities. The Company will file all
reports required to be filed by the Company with the SEC in a timely manner so
as to preserve its eligibility for the use of Form S-3.

       2.5  EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
SECTION 2.2 or any registration under SECTION 2.3 herein shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
hereunder, shall be borne by the holders of the securities so registered PRO
RATA on the basis of the number of shares so registered. In addition, the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officer and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which they are to be
listed. If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the Holders of securities in proportion to the number
of shares being registered.

       2.6  OBLIGATIONS OF THE COMPANY.  Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

            (A) Prepare promptly and file with the SEC the Registration
Statement required by SECTION 2.2, and cause the Registration Statement to
become effective as soon as practicable after such filing, and keep the
Registration Statement effective pursuant to Rule 415 and immediately available
for use at all times during the Registration Period. The Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein and all documents incorporated by reference therein) shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.

            (B) Prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the sale or disposition of all securities covered
by the Registration Statement for the Registration Period.

                                       6.
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            (C) Furnish to the Holders such number of copies of a prospectus and
any amendments and supplements thereto in conformity with the requirements of
the Securities Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned by them.

            (D) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; PROVIDED, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.

            (E) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

            (F) Notify each Holder of Registrable Securities covered by the
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company will use best efforts to amend or supplement such
prospectus within 5 business days in order to cause such prospectus not to
include any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.

            (G) Furnish to the Holders of Registrable Securities being
registered, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters,
(i) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and (ii) a letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering addressed to the underwriters.

            (H) Permit a single firm of counsel designated by each class of
Registrable Securities covered by such Registration Statement, to review the
Registration Statement and all amendments and supplements thereto a reasonable
period of time prior to its filing with the SEC, and not file any document in a
form to which such counsel reasonably objects.

            (I) Notify the selling holders of Registrable Securities and the
managing underwriter or underwriters, if any, and (if requested) confirm such
advice in writing as soon as reasonably practicable after notice thereof is
received by the Company (A) when the applicable Registration Statement or any
amendment thereto has been filed or becomes effective and when the applicable
prospectus or any amendment or supplement thereto had been filed, or (B) of any
written comments by the SEC or any request by the SEC or any other federal or
state governmental authority for amendments or supplements to such Registration
Statement or prospectus or for additional information.

                                       7.
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            (J) Furnish to each selling holder of Registrable Securities and
each managing underwriter, if any, without charge, as many conformed copies as
such holder or managing underwriter may reasonable request of the applicable
Registration Statement.

            (K) Cooperate with the selling holders of Registrable Securities and
the managing underwriter, underwriters or agent, if any, to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold (not bearing any restrictive legends to the extent
permitted by the Securities Purchase Agreement);

            (L) Not later than the effective date of the applicable Registration
Statement, provide a CUSIP number for all Registrable Securities and provide the
applicable transfer agent with printed certificates for the Registrable
Securities which certificates shall be in a form eligible for deposit with The
Depository Trust Company;

            (M) Cooperate with each seller of Registrable Securities and each
underwriter or agent, if any, participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD.

            (N) Use its reasonable efforts to comply with all applicable rules
and regulations of the SEC and make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a 12-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement which compliance will
be met through the Company's filing, on an appropriate form, the appropriate
report of the Company as required by the Securities Exchange of 1934, as
amended.

            (O) Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by the applicable Registration
Statement from and after a date not later than the effective date of such
Registration Statement.

            (P) Cause all Registrable Securities of a class covered by the
applicable Registration Statement to be listed on each securities exchange or
automated over-the-counter trading system on which similar securities issued by
the Company are then listed and use its best efforts to maintain such listing
for so long as any Purchaser holds any Registrable Securities.

            (Q) Make available upon reasonable notice at reasonable times and
for reasonable periods for inspection by a representative appointed by the
holders of a majority of the Registrable Securities of each class covered by the
applicable Registration Statement, by any managing underwriter or underwriters
participating in any disposition to be effected pursuant to such Registration
Statement and by any attorney, accountant or other agent retained by such
sellers or any such managing underwriter, all pertinent financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees and the independent
public accountants who have certified its financial statements to make
themselves available to discuss the business of the Company and to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such Registration Statement as shall be
necessary to enable them to exercise their due diligence responsibility (subject
to the entry by each party referred to in this clause (q) into customary
confidentiality agreements in a form reasonably acceptable to the Company).

                                       8.
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            (R) In the case of an underwritten public offering, cause the senior
executive officers of the Company to participate in the customary "road show"
presentations that may be reasonably requested by the managing underwriter in
any such underwritten public offering and otherwise to facilitate, cooperate
with, and participate in each proposed offering contemplated herein and
customary selling efforts related thereto.

       2.7  HOLDER'S OBLIGATIONS. In connection with the Registration Statement
referred above, the Holders shall each:

            (A) Complete, execute, acknowledge and/or deliver such
questionnaires, indemnification agreements, custody agreements, underwriting
agreements (if the registration is underwritten) and other documents,
certificates and instruments as are reasonably required by the Company or any
underwriters(s) or are otherwise necessary in connection with the registration
and offering. Each Holder shall promptly provide to the Company such information
concerning such Holder, its ownership of the Company's securities, the intended
method of distribution and such other information as may be required by
application law or regulation as may be reasonably requested by the Company.

            (B) Upon receipt of any notice from the Company (i) of the happening
of any event of the kind described in SECTION 2.6(F) or (ii) that the Company no
longer qualifies to use Form S-3, immediately discontinue disposition of the
Registrable Securities pursuant to the Registration Statements covering such
shares until the Holders' receipt of the copies of the supplemented or amended
prospectus contemplated by SECTION 2.6(F) or until such time the Company can
make an appropriate filing with the SEC or take such further action so as to
qualify the Company to use of Form S-3, and if so directed by the Company,
deliver to the Company or destroy all copies of the prospectus covering such
Registrable Securities in such Holder's possession at the time of receipt of
such notice.

            (C) No Holder and no person or entity acting on any Holder's behalf
(other than underwriter selected by the Company or approved by the Company)
shall offer any Registrable Securities by means of any preliminary prospectus.

       2.8  SUSPENSION OF REGISTRATION.

            (A) Company will notify (by telephone and also by facsimile and
reputable overnight courier) each Investor who holds Registrable Securities
being sold pursuant to a Registration Statement of the happening of any event of
which the Company has knowledge as a result of which the prospectus included in
the Registration Statement as then in effect includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company will make such notification as
promptly as practicable after the Company becomes aware of the event (but in no
event, without the prior written consent of the Investor, will the Company
disclose to any Investor any of the facts or circumstances regarding the event),
will promptly (but in no event more than five business days) prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and will deliver a number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request. The Company
will also notify each Investor who holds Registrable Securities being sold
pursuant to a Registration Statement of the issuance by the SEC of any stop
order suspending the effectiveness of such Registration Statement or any order
preventing or suspending the use of any preliminary or final prospectus or the
initiation or threat of any proceedings for such purposes and of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the

                                       9.
<PAGE>

Registrable Securities for offering or sale in any jurisdiction or the
initiation or threat of any proceeding for such purpose.

            (B) Notwithstanding the obligations under SECTION 2.8(A), for a
period not to exceed 30 trading days, the Company may suspend the use of the
Registration Statement at any time when the Company, in its reasonable judgement
after consultation with legal counsel, believes that there is or may be in
existence material nonpublic information or events involving the Company, the
failure of which to be disclosed in the prospectus included in the Registration
Statement could result in a violation of the Securities Act, the Exchange Act or
any provision of any state securities law ("PERMISSIBLE BLACKOUT PERIOD"). Such
suspension of the Registration Statement shall continue for the period of time
that is reasonably necessary for disclosure to occur at a time that is not
detrimental to the Company or its stockholders or until such time as the
information or event is no longer material, each as determined in good faith by
the Company after consultation with counsel, PROVIDED, HOWEVER, that the Company
agrees to use its best efforts to limit such time to 30 days.

            (C) Subject to the Company's rights under this Section 2.8, the
Company will use its best efforts to prevent the issuance of any stop order or
other suspension of effectiveness of a Registration Statement and, if such an
order is issued, will use its best efforts to obtain the withdrawal of such
order at the earliest possible time and to notify each Investor that holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.

            (D) Notwithstanding anything to the contrary contained herein or in
the Securities Purchase Agreement, if the use of the Registration Statement is
suspended by the Company, the Company will promptly give notice of the
suspension to all Investors whose securities are covered by the Registration
Statement, and will promptly notify each such Investor as soon as the use of the
Registration Statement may be resumed. Notwithstanding anything to the contrary
contained herein or in the Securities Purchase Agreement, the Company will cause
the Transfer Agent to deliver unlegended shares of Common Stock to a transferee
of an Investor in accordance with the terms of the Securities Purchase Agreement
in connection with any sale of Registrable Securities with respect to which such
Investor has entered into a contract for sale prior to receipt of notice of such
suspension and for which such Investor has not yet settled.

       2.9  INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Agreement:

            (A) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and

                                      10.
<PAGE>

the Company will pay as incurred to each such Holder, partner, officer,
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this SECTION 2.9(A) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder; provided further, however, that the
foregoing indemnity agreement with respect to any preliminary prospectus shall
not inure to the benefit of any Holder or underwriter, or any person controlling
such Holder or underwriter, from whom the person asserting any such losses,
claims, damages or liabilities purchased shares in the offering, if a copy of
the prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Holder or underwriter to such person, if required by law so to
have been delivered by such Holder or underwriter, at or prior to the written
confirmation of the sale of the shares to such person, and if the prospectus (as
so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability.

            (B) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers and each person, if
any, who controls the Company within the meaning of the Securities Act, any
underwriter and any other Holder selling securities under such registration
statement or any of such other Holder's partners, directors or officers or any
person who controls such Holder, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; PROVIDED, HOWEVER,
that the indemnity agreement contained in this SECTION 2.9(B) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; PROVIDED FURTHER, that in no event shall any
indemnity under this SECTION 2.9 exceed the net proceeds from the offering
received by such Holder.

            (C) Promptly after receipt by an indemnified party under this
SECTION 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this SECTION 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified

                                      11.
<PAGE>

party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this SECTION 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this SECTION 2.9.

            (D) If the indemnification provided for in this SECTION 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; PROVIDED, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.

             (E) The obligations of the Company and Holders under this SECTION
2.9 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.

       2.10  FURNISHING INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to SECTIONS 2.2 and 2.3
that the selling Holder shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.

       2.11  ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this SECTION 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least 100,000 shares of
Registrable Securities (as adjusted for stock splits and combinations);
PROVIDED, HOWEVER, (i) the transferor shall, within 10 days after such transfer,
furnish to the Company written notice of the name and address of such transferee
or assignee and the securities with respect to which such registration rights
are being assigned and (ii) such transferee shall agree to be subject to all
restrictions set forth in this Agreement.

       2.12  AMENDMENT OF REGISTRATION RIGHTS. Any provision of this SECTION 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities then outstanding, so long as all Holders of Registrable
Securities are

                                      12.
<PAGE>

treated equally by such amendment. Any amendment or waiver effected in
accordance with this SECTION 2.12 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this SECTION 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.

       2.13  RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:

             (A) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;

             (B) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and

             (C) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.

SECTION 3.   COVENANTS OF THE COMPANY.

       3.1   BASIC FINANCIAL INFORMATION AND REPORTING. The Company will
maintain true books and records of account in which full and correct entries
will be made of all its business transactions pursuant to a system of accounting
established and administered in accordance with generally accepted accounting
principles consistently applied, and will set aside on its books all such proper
accruals and reserves as shall be required under generally accepted accounting
principles consistently applied;

       3.2   CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this SECTION 3.2.

       3.3   RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the exercise of the
Warrants.

       3.4   TERMINATION OF COVENANTS. All covenants of the Company contained in
SECTION 3 of this Agreement shall expire and terminate as to each Investor upon
(i) the sale, lease or other disposition of all or substantially all of the
assets of the Company or (ii) an acquisition of the Company by another
corporation or entity by consolidation, merger or other reorganization in which
the holders of the Company's outstanding voting stock immediately prior to such
transaction own, immediately after such transaction, securities representing
less than 50% of the voting power of the corporation or other entity

                                      13.
<PAGE>

surviving such transaction, PROVIDED that this SECTION 3.4 shall not apply to a
merger effected exclusively for the purpose of changing the domicile of the
Company.

SECTION 4.   MISCELLANEOUS.

       4.1   GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware (without giving effect to principles of
conflict of laws).

       4.2   SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.

       4.3   HOLDER INFORMATION. Each Holder covenants that it will promptly
notify the Company in writing of any changes in the information set forth in the
Registration Statement Questionnaire or Registration Statement regarding such
Holder or such Holder's "PLAN OF DISTRIBUTION."

       4.4   SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
PROVIDED, HOWEVER, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.

       4.5   ENTIRE AGREEMENT. This Agreement, the Exhibits, Appendices and
Schedules hereto, the Securities Purchase Agreement and the other documents
delivered pursuant thereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein and
therein.

       4.6   SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

       4.7   AMENDMENT AND WAIVER.

             (A) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities.

             (B) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.

                                      14.
<PAGE>

             (C) This Agreement may be amended with the written consent of the
Company as provided in SECTION 4.12 hereof.

             (D) For the purposes of determining the number of Holder or
Investors entitled to vote or exercise any rights hereunder, the Company shall
be entitled to rely solely on the list of record holders of its stock as
maintained by or on behalf of the Company.

       4.8   DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.

       4.9   NOTICES. Any notices required or permitted to be given under the
terms of this Agreement will be given as set forth in the Securities Purchase
Agreement.

       4.10  ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

       4.11  TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

       4.12  ADDITIONAL INVESTORS. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Common
Stock and Warrants pursuant to the Securities Purchase Agreement, any purchaser
of such shares of Common Stock and Warrants may become a party to this Agreement
by executing and delivering an additional counterpart signature page to this
Agreement and shall be deemed an "Investor" hereunder.

       4.13  COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

                  [Remainder of Page Intentionally Left Blank]

                                      15.
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.

<TABLE>
<CAPTION>

<S>                                                   <C>
COMPANY:                                               PURCHASERS:

BEI MEDICAL SYSTEMS COMPANY, INC.                      BROOKSIDE CAPITAL PARTNERS FUND L.P.
Signature:  /s/ Richard Turner
           ----------------------------------
Name: Richard Turner                                   By:  /s/ Ed Brakeman
                                                           ------------------------------------
Title:  President and Chief Executive Officer          Name:  Ed Brakeman
                                                             ----------------------------------
100 Hollister Road                                     Its:  Managing Director
                                                            -----------------------------------
Teterboro, New Jersey 07608
                                                       RADIUS VENTURE PARTNERS I, L.P.

                                                       By:  /s/ Jordan S. Davis
                                                            -----------------------------------
                                                       Name:  Jordan S. Davis
                                                            -----------------------------------
                                                       Its:  General Partner
                                                            -----------------------------------

                                                       DELTA OPPORTUNITY FUND, LTD.
                                                       C/O DIAZ & ALTSCHUL ADVISORS, LLC

                                                       By:  /s/ Christopher S. Mooney
                                                            -----------------------------------
                                                       Name:  Christopher S. Mooney
                                                            -----------------------------------
                                                       Its:  Chief Financial Officer
                                                            -----------------------------------

                                                       DELTA OPPORTUNITY FUND (INSTITUTIONAL), LLC  C/O DIAZ &
                                                       ALTSCHUL ADVISORS, LLC

                                                       By:  /s/ Christopher S. Mooney
                                                            -----------------------------------
                                                       Name:  Christopher S. Mooney
                                                            -----------------------------------
                                                       Its:  Chief Financial Officer
                                                            -----------------------------------

                                                       PRO MED PARTNERS, L.P.

                                                       By:  /s/ David B. Musket
                                                            -----------------------------------
                                                       Name:  David B. Musket
                                                            -----------------------------------
                                                       Its:  Managing Member
                                                            -----------------------------------

                                                       PRO MED PARTNERS, II, L.P.

                                                       By:  /s/ David B. Musket
                                                            -----------------------------------
                                                       Name:  David B. Musket
                                                            -----------------------------------
                                                       Its:  Managing Member
                                                            -----------------------------------

</TABLE>

                                      16.
<PAGE>

                              DEUTSCHE ASSET MANAGEMENT
                              HEALTH SCIENCES FUND I, INC.

                              By:  /s/ David B. Musket
                                  -----------------------------------------
                              Name:  David B. Musket
                                  -----------------------------------------
                              Its:  Managing Member
                                  -----------------------------------------

                              HEALTHSOUTH CORPORATION

                              By: /s/ William G. Hicks
                                  -----------------------------------------
                              Name:  William G. Hicks
                                   ----------------------------------------
                              Its:  Vice President
                                   ----------------------------------------

                              LANCE WILLSEY

                              By: /s/ Lance Willsey
                                 ------------------------------------------
                                      LANCE WILLSEY

                              WILLIAM G. HICKS

                              By: /s/ William G. Hicks
                                 ------------------------------------------
                                      WILLIAM G. HICKS

                              BARRY BERGMAN AND LISA HANDLER BERGMAN JTWROS

                              By: /s/ Barry Bergman
                                 ------------------------------------------
                                      BARRY BERGMAN

                              By: /s/ Lisa Handler Bergman
                                 ------------------------------------------
                                      LISA HANDLER BERGMAN

                                      17.
<PAGE>

                                    EXHIBIT A

                              SCHEDULE OF INVESTORS

<TABLE>
<CAPTION>

                                                              COMMON            WARRANT A            WARRANT B

                                                              SHARES              SHARES               SHARES

<S>                                                       <C>                <C>                  <C>
NAME AND ADDRESS                                                                   32%                  24%

FIRST CLOSING - SEPTEMBER 4, 2001

BROOKSIDE CAPITAL PARTNERS FUND, L.P.
Two Copley Place                                           1,328,633          425,162              318,871
Boston, MA 02116
Attention: Matthew McPherron
Phone: (617) 572-3988
Fax: (617) 572-3274

RADIUS VENTURE PARTNERS I, L.P.                            65,076             20,824               15,618
One Rockefeller Plaza
Suite 920
New York, NY 10020
Attn:  Jordan S. Davis
Phone: (212) 897-7783
Fax: (212) 397-2656

DELTA OPPORTUNITY FUND, LTD.                               136,609            43,714               32,786
c/o Diaz & Altschul Advisors, LLC
Attn: Reinaldo M. Diaz
950 Third Avenue, 16th Floor
New York, NY 10022
Phone: (212) 751-1011
Fax: (212) 751-5757

DELTA OPPORTUNITY FUND (INSTITUTIONAL), LLC                80,310             25,699               19,274
c/o Diaz & Altschul Advisors, LLC
Attn: Chris Mooney
950 Third Avenue, 16th Floor
New York, NY 10022
Phone: (212) 751-1011
Fax: (212) 751-5757
</TABLE>

                                       A-1
                          REGISTRATION RIGHTS AGREEMENT

<PAGE>

<TABLE>
<CAPTION>

<S>                                         <C>               <C>                  <C>
PROMED PARTNERS, L.P.                        66,432            21,258               15,943
Attn: David Musket
125 Cambridgepark Drive
Cambridge, MA 02140
Phone: (617) 441-0259
Fax: (617) 441-0855

PROMED PARTNERS, II, L.P.                    6,778             2,168                1,626
Attn: David Musket
125 Cambridgepark Drive
Cambridge, MA 02140
Phone: (617) 441-0259
Fax: (617) 441-0855

DEUTSCHE ASSET MANAGEMENT                    62,364            19,956               14,967
HEALTH SCIENCES FUND I, INC.
Attn: David Musket
125 Cambridgepark Drive
Cambridge, MA 02140
Phone: (617) 441-0259
Fax: (617) 441-0855

HEALTHSOUTH CORPORATION                      135,574           43,383               32,537
Attn: William W. Horton, Esq.
One HealthSouth Parkway
Birmingham, AL 35243
Phone: (205) 969-4977
Fax: (205) 969-4732

WILLIAM G. HICKS                             2,711             867                  650
3801 10th Avenue South
Birmingham, AL 35222
Phone: (205) 592-4147
Fax: (205) 592-4147

LANCE WILLSEY                                54,229            17,353               13,014
1 Newbrook Circle
Chestnut Hill, MA 02467
Phone: (617) 413-6333
Fax: (617) 964-4456
</TABLE>

                                       A-2
                          REGISTRATION RIGHTS AGREEMENT

<PAGE>

<TABLE>
<CAPTION>

<S>                                                      <C>             <C>           <C>
BARRY BERGMAN AND LISA HANDLER BERGMAN  JTWROS           13,557          4,338         3,253
1111 Park Avenue
Apartment #11A
New York, NY 10128
Phone: (212) 987-0540
Fax: (212) 987-3502

FIRST CLOSING TOTAL                                      1,952,273       624,722       468,539
SECOND CLOSING - SEPTEMBER 28, 2001
DELTA OPPORTUNITY FUND, LTD.                             70,498          22,559        16,919
DELTA OPPORTUNITY FUND (INSTITUTIONAL), LLC              37,960          12,147        9,110

DELTA PRIVATE EQUITY FUND, L.P.                          9,490           3,036         2,277
c/o Diaz & Altschul Advisors, LLC
Attn: Chris Mooney
950 Third Avenue, 16th Floor
New York, NY 10022
Phone: (212) 751-1011
Fax: (212) 751-5757

SECOND CLOSING TOTAL                                     117,948         37,742        28,306

                                                         ============    ===========   ===========
TOTAL                                                    2,070,221       662,464       496,845
                                                         ============    ===========   ===========
</TABLE>

                                       A-3
                          REGISTRATION RIGHTS AGREEMENT

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

SECTION 1.        GENERAL.....................................................1

         1.1      Definitions.................................................1

SECTION 2.        REGISTRATION; RESTRICTIONS ON TRANSFER......................3

         2.1      Restrictions on Transfer....................................3

         2.2      Registration................................................4

         2.3      Piggyback Registrations.....................................5

         2.4      Eligibility for Form S-3....................................6

         2.5      Expenses of Registration....................................6

         2.6      Obligations of the Company..................................6

         2.7      Holder's Obligations........................................9

         2.8      Suspension of Registration..................................9

         2.9      Indemnification.............................................0

         2.10     Furnishing Information......................................2

         2.11     Assignment of Registration Rights...........................2

         2.12     Amendment of Registration Rights............................3

         2.13     Rule 144 Reporting..........................................3

SECTION 3.        COVENANTS OF THE COMPANY....................................3

         3.1      Basic Financial Information and Reporting...................3

         3.2      Confidentiality of Records..................................3

         3.3      Reservation of Common Stock.................................3

         3.4      Termination of Covenants....................................3

SECTION 4.        MISCELLANEOUS...............................................4

         4.1      Governing Law...............................................14

         4.2      Survival....................................................14

         4.3      Holder Information..........................................14

         4.4      Successors and Assigns......................................14

         4.5      Entire Agreement............................................14

         4.6      Severability................................................14

         4.7      Amendment and Waiver........................................14

         4.8      Delays or Omissions.........................................15

         4.9      Notices.....................................................15

                                       i

<PAGE>

                                TABLE OF CONTENTS
                                   (CONTINUED)

         4.10     Attorneys' Fees.............................................15

         4.11     Titles and Subtitles........................................15

         4.12     Additional Investors........................................15

         4.13     Counterparts................................................15

                                       ii

<PAGE>

An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

                                    Depositor

                             OCWEN FEDERAL BANK FSB

                                 Master Servicer

                                       and

                         U. S. BANK NATIONAL ASSOCIATION

                                     Trustee

                         POOLING AND SERVICING AGREEMENT
                          Dated as of September 1, 2001

               New Century Home Equity Loan Trust, Series 2001-NC2
                     Asset Backed Pass-Through Certificates

                                 Series 2001-NC2

<PAGE>

<TABLE>
<CAPTION>

                                                  TABLE OF CONTENTS

                                                      ARTICLE I

                                                     DEFINITIONS
<S>      <C>                                                                                                    <C>
         SECTION 1.01.     Defined Terms..........................................................................1
                  Accepted Servicing Practices....................................................................1
                  Accrued Certificate Interest....................................................................1
                  Adjustable-Rate Mortgage Loan...................................................................1
                  Adjustment Date.................................................................................1
                  Advancing Person................................................................................1
                  Affiliate.......................................................................................1
                  Aggregate Loss Severity Percentage..............................................................2
                  Assignment......................................................................................2
                  Available Distribution Amount...................................................................2
                  Bankruptcy Code.................................................................................3
                  Bankruptcy Loss.................................................................................3
                  Book-Entry Certificate..........................................................................3
                  Book-Entry Custodian............................................................................3
                  Business Day....................................................................................3
                  Cash-Out Refinancing............................................................................3
                  Certificate.....................................................................................3
                  Certificate Factor..............................................................................3
                  Certificate Margin..............................................................................3
                  Certificateholder...............................................................................4
                  Holder..........................................................................................4
                  Certificate Owner...............................................................................4
                  Certificate Principal Balance...................................................................4
                  Certificate Register............................................................................5
                  Class...........................................................................................5
                  Class A Certificate.............................................................................5
                  Class A Principal Distribution Amount...........................................................5
                  Class CE Certificate............................................................................5
                  Class A-IO Certificate..........................................................................5
                  Class M-1 Certificate...........................................................................6
                  Class M-1 Principal Distribution Amount.........................................................6
                  Class M-2 Certificate...........................................................................6
                  Class M-2 Principal Distribution Amount.........................................................6
                  Class M-3 Certificate...........................................................................7
                  Class M-3 Principal Distribution Amount.........................................................7
                  Class P Certificate.............................................................................7
                  Class R-I Certificate...........................................................................7
                  Class R-II Certificate..........................................................................7
                  Class R-III Certificate.........................................................................7
                  Closing Date....................................................................................7
                  Collection Account..............................................................................7

                                                         -i-

<PAGE>

                  Commission......................................................................................7
                  Corporate Trust Office..........................................................................8
                  Corresponding Certificate.......................................................................8
                  Credit Enhancement Percentage...................................................................8
                  Cumulative Loss Percentage......................................................................8
                  Cut-off Date....................................................................................8
                  Definitive Certificates.........................................................................8
                  Deleted Mortgage Loan...........................................................................8
                  Depositor.......................................................................................9
                  Depository......................................................................................9
                  Depository Institution..........................................................................9
                  Depository Participant..........................................................................9
                  Determination Date..............................................................................9
                  Directly Operate................................................................................9
                  Disqualified Organization.......................................................................9
                  Distribution Account...........................................................................10
                  Distribution Date..............................................................................10
                  Due Date.......................................................................................10
                  Due Period.....................................................................................10
                  Eligible Account...............................................................................10
                  ERISA..........................................................................................10
                  Excess Overcollateralized Amount...............................................................10
                  Expense Adjusted Mortgage Rate.................................................................11
                  Expense Adjusted Maximum Mortgage Rate.........................................................11
                  Fannie Mae.....................................................................................11
                  FDIC...........................................................................................11
                  Fitch..........................................................................................11
                  Formula Rate...................................................................................11
                  Freddie Mac....................................................................................11
                  Gross Margin...................................................................................11
                  Independent....................................................................................12
                  Independent Contractor.........................................................................12
                  Index..........................................................................................12
                  Insurance Proceeds.............................................................................12
                  Interest Accrual Period........................................................................12
                  Interest Carry Forward Amount..................................................................13
                  Interest Determination Date....................................................................13
                  Interest Distribution Amount...................................................................13
                  Interest Remittance Amount.....................................................................13
                  Late Collections...............................................................................13
                  Liquidation Event..............................................................................13
                  Liquidation Proceeds...........................................................................13
                  Loan-to-Value Ratio............................................................................14
                  Loss Severity Percentage.......................................................................14
                  Marker Rate....................................................................................14
                  Master Servicer................................................................................14

                                                        -ii-

<PAGE>

                  Master Servicer Event of Default...............................................................14
                  Master Servicer Prepayment Charge Payment Amount...............................................14
                  Master Servicer Remittance Date................................................................14
                  Master Servicer Termination Test...............................................................14
                  Maximum Cap Rate...............................................................................14
                  Maximum II-LT6 Uncertificated Interest Deferral Amount.........................................15
                  Mezzanine Certificate..........................................................................15
                  Minimum Mortgage Rate..........................................................................15
                  Monthly Payment................................................................................15
                  Moody's........................................................................................15
                  Mortgage.......................................................................................15
                  Mortgage File..................................................................................15
                  Mortgage Loan..................................................................................15
                  Mortgage Loan Purchase Agreement...............................................................16
                  Mortgage Loan Schedule.........................................................................16
                  Mortgage Note..................................................................................18
                  Mortgage Rate..................................................................................18
                  Mortgaged Property.............................................................................18
                  Mortgagor......................................................................................18
                  Net Monthly Excess Cashflow....................................................................18
                  Net Mortgage Rate..............................................................................18
                  Net WAC Pass-Through Rate......................................................................19
                  Net WAC Rate Carryover Amount..................................................................19
                  New Lease......................................................................................19
                  Nonrecoverable P& I Advance....................................................................19
                  Nonrecoverable Servicing Advance...............................................................19
                  Notional Amount................................................................................19
                  Officers'Certificate...........................................................................19
                  One-Month LIBOR................................................................................19
                  Opinion of Counsel.............................................................................20
                  Original Mortgage Loan.........................................................................20
                  Originator.....................................................................................20
                  Overcollateralized Amount......................................................................20
                  Overcollateralization Deficiency Amount........................................................20
                  Overcollateralization Increase Amount..........................................................20
                  Overcollateralization Reduction Amount.........................................................21
                  Ownership Interest.............................................................................21
                  Pass-Through Rate..............................................................................21
                  Percentage Interest............................................................................22
                  Periodic Rate Cap..............................................................................22
                  Permitted Investments..........................................................................22
                  Permitted Transferee...........................................................................23
                  Person.........................................................................................23
                  P&I Advance....................................................................................23
                  Plan...........................................................................................23
                  PMI Insurer....................................................................................23

                                                        -iii-

<PAGE>

                  PMI Insurer Fee................................................................................23
                  PMI Insurer Fee Rate...........................................................................24
                  PMI Mortgage Loans.............................................................................24
                  PMI Policy"....................................................................................24
                  Prepayment Assumption..........................................................................24
                  Prepayment Charge Schedule.....................................................................24
                  Prepayment Interest Shortfall..................................................................24
                  Prepayment Period..............................................................................25
                  Principal Distribution Amount..................................................................25
                  Principal Prepayment...........................................................................26
                  PTCE...........................................................................................26
                  Purchase Price.................................................................................26
                  Qualified Substitute Mortgage Loan.............................................................26
                  Rate/Term Refinancing..........................................................................27
                  Rating Agency or Rating Agencies...............................................................27
                  Realized Loss..................................................................................27
                  Record Date....................................................................................28
                  Reference Banks................................................................................28
                  Refinanced Mortgage Loan.......................................................................29
                  Regular Certificate............................................................................29
                  Regular Interest...............................................................................29
                  Relief Act.....................................................................................29
                  Relief Act Interest Shortfall..................................................................29
                  REMIC..........................................................................................29
                  REMIC I Regular Interest.......................................................................29
                  REMIC I Regular Interest I-LT1.................................................................30
                  REMIC I Regular Interest I-LT2"................................................................30
                  REMIC I Regular Interest I-LTP.................................................................30
                  REMIC I Remittance Rate........................................................................30
                  REMIC II Interest Loss Allocation Amount.......................................................30
                  REMIC II Overcollateralized Amount.............................................................30
                  REMIC II Principal Loss Allocation Amount......................................................31
                  REMIC II Regular Interest......................................................................31
                  REMIC II Regular Interest II-LT1...............................................................31
                  REMIC II Regular Interest II-LT2...............................................................31
                  REMIC II Regular Interest II-LT3...............................................................31
                  REMIC II Regular Interest II-LT4...............................................................31
                  REMIC II Regular Interest II-LT5...............................................................32
                  REMIC II Regular Interest II-LT6...............................................................32
                  REMIC II Regular Interest II-LTIO..............................................................32
                  Regular........................................................................................32
                  REMIC II Regular Interest II-LTP...............................................................32
                  REMIC II Remittance Rate.......................................................................32
                  REMIC II Required Overcollateralized Amount....................................................32
                  REMIC III......................................................................................32
                  REMIC III Certificate..........................................................................32

                                                        -iv-

<PAGE>

                  REMIC Provisions...............................................................................32
                  Remittance Report..............................................................................33
                  Rents from Real Property.......................................................................33
                  REO Account....................................................................................33
                  REO Imputed Interest...........................................................................33
                  REO Principal Amortization.....................................................................33
                  REO Property...................................................................................33
                  Request for Release............................................................................33
                  Required Overcollateralized Amount.............................................................33
                  Reserve Fund...................................................................................34
                  Reserve Interest Rate..........................................................................34
                  Residential Dwelling...........................................................................34
                  Residual Certificate...........................................................................34
                  Residual Interest..............................................................................34
                  Responsible Officer............................................................................34
                  S& P...........................................................................................34
                  Scheduled Principal Balance....................................................................34
                  Seller.........................................................................................35
                  Senior Interest Distribution Amount............................................................35
                  Servicing Account..............................................................................35
                  Servicing Advances.............................................................................35
                  Servicing Fee Rate.............................................................................36
                  Servicing Officer..............................................................................36
                  Single Certificate.............................................................................36
                  Startup Day....................................................................................36
                  Stated Principal Balance.......................................................................36
                  Stayed Funds...................................................................................37
                  Stepdown Date..................................................................................37
                  Sub-Servicer...................................................................................37
                  Sub-Servicing Account..........................................................................37
                  Sub-Servicing Agreement........................................................................37
                  Tax Returns....................................................................................37
                  Telerate Page 3750.............................................................................37
                  Termination Price..............................................................................37
                  Terminator.....................................................................................37
                  Transfer.......................................................................................37
                  Transferee.....................................................................................37
                  Transferor.....................................................................................38
                  Trust Fund.....................................................................................38
                  Trustee........................................................................................38
                  Trustee Fee....................................................................................38
                  Trustee Fee Rate...............................................................................38
                  Uncertificated Interest........................................................................38
                  Uncertificated Notional Amount.................................................................39
                  Underwriters'Exemption.........................................................................39
                  Uninsured Cause................................................................................39

                                                         -v-

<PAGE>

                  Value..........................................................................................40
                  Voting Rights..................................................................................40
                  Weighted Average Expense Adjusted Mortgage Rate................................................40
         SECTION 1.02.     Allocation of Certain Interest Shortfalls.............................................40

                                                     ARTICLE II

                                            CONVEYANCE OF MORTGAGE LOANS;
                                          ORIGINAL ISSUANCE OF CERTIFICATES
         SECTION 2.01.     Conveyance of the Mortgage Loans......................................................42
         SECTION 2.02.     Acceptance of REMIC I by Trustee......................................................44
         SECTION 2.03.     Repurchase or Substitution of Mortgage Loans by the
                                    Originator or the Seller.....................................................45
         SECTION 2.04.     Reserved..............................................................................47
         SECTION 2.05.     Representations, Warranties and Covenants of the Master
                                    Servicer.....................................................................47
         SECTION 2.06.     Issuance of the REMIC I Regular Interests and the Class R-I
                           Certificates..........................................................................49
         SECTION 2.07.     Conveyance of the REMIC I Regular Interests; Acceptance of
                           REMIC II by the Trustee...............................................................50
         SECTION 2.08.     Issuance of Class R-II Certificates...................................................50
         SECTION 2.09.     Conveyance of the REMIC II Regular Interests; Acceptance of
                           REMIC III by the Trustee..............................................................50
         SECTION 2.10.     Issuance of Class R-III Certificates..................................................51

                                                     ARTICLE III

                                            ADMINISTRATION AND SERVICING
                                                OF THE MORTGAGE LOANS
         SECTION 3.01.     Master Servicer to Act as Master Servicer.............................................52
         SECTION 3.02.     Sub-Servicing Agreements Between Master Servicer and Sub-
                           Servicers.............................................................................54
         SECTION 3.03.     Successor Sub-Servicers...............................................................55
         SECTION 3.04.     Liability of the Master Servicer......................................................55
         SECTION 3.05.     No Contractual Relationship Between Sub-Servicers and the
                           Trustee or Certificateholders.........................................................56
         SECTION 3.06.     Assumption or Termination of Sub-Servicing Agreements by
                           Trustee...............................................................................56
         SECTION 3.07.     Collection of Certain Mortgage Loan Payments..........................................56
         SECTION 3.08.     Sub-Servicing Accounts................................................................57
         SECTION 3.09.     Collection of Taxes, Assessments and Similar Items; Servicing
                           Accounts..............................................................................57
         SECTION 3.10.     Collection Account and Distribution Account...........................................58
         SECTION 3.11.     Withdrawals from the Collection Account and Distribution
                                    Account......................................................................60
         SECTION 3.12.     Investment of Funds in the Collection Account and the Distribution

                                                        -vi-

<PAGE>

                           Account...............................................................................62
         SECTION 3.13.     [Reserved]............................................................................64
         SECTION 3.14.     Maintenance of Hazard Insurance and Errors and Omissions and
                           Fidelity Coverage.....................................................................64
         SECTION 3.15.     Enforcement of Due-On-Sale Clauses; Assumption
                                    Agreements...................................................................65
         SECTION 3.16.     Realization Upon Defaulted Mortgage Loans.............................................66
         SECTION 3.17.     Trustee to Cooperate; Release of Mortgage Files.......................................68
         SECTION 3.18.     Servicing Compensation................................................................69
         SECTION 3.19.     Reports to the Trustee; Collection Account Statements.................................70
         SECTION 3.20.     Statement as to Compliance............................................................70
         SECTION 3.21.     Independent Public Accountants' Servicing Report......................................70
         SECTION 3.22.     Access to Certain Documentation.......................................................71
         SECTION 3.23.     Title, Management and Disposition of REO Property.....................................71
         SECTION 3.24.     Obligations of the Master Servicer in Respect of Prepayment
                           Interest Shortfalls...................................................................74
         SECTION 3.25.     Obligations of the Master Servicer in Respect of Mortgage Rates
                           and Monthly Payments..................................................................74
         SECTION 3.26.     Advance Facility......................................................................75
         SECTION 3.27.     PMI Policy; Claims Under the PMI Policy...............................................75
         SECTION 3.28      Reserve Fund..........................................................................76

                                                     ARTICLE IV

                                           PAYMENTS TO CERTIFICATEHOLDERS
         SECTION 4.01.     Distributions.........................................................................78
         SECTION 4.02.     Statements to Certificateholders......................................................84
         SECTION 4.03.     Remittance Reports; P& I Advances.....................................................88
         SECTION 4.04.     Allocation of Realized Losses.........................................................89
         SECTION 4.05.     Compliance with Withholding Requirements..............................................91

                                                      ARTICLE V

                                                  THE CERTIFICATES
         SECTION 5.01.     The Certificate.......................................................................92
         SECTION 5.02.     Registration of Transfer and Exchange of Certificates.................................93
         SECTION 5.03.     Mutilated, Destroyed, Lost or Stolen Certificates.....................................98
         SECTION 5.04.     Persons Deemed Owners.................................................................98
         SECTION 5.05.     Certain Available Information.........................................................99

                                                     ARTICLE VI

                                        THE DEPOSITOR AND THE MASTER SERVICER
         SECTION 6.01.     Liability of the Depositor and the Master Servicer...................................100
         SECTION 6.02.     Merger or Consolidation of the Depositor or the Master
                                    Servicer....................................................................100

                                                        -vii-

<PAGE>

         SECTION 6.03.     Limitation on Liability of the Depositor, the Master Servicer
                                    and Others..................................................................100
         SECTION 6.04.     Limitation on Resignation of the Master Servicer.....................................101
         SECTION 6.05.     Rights of the Depositor in Respect of the Master Servicer............................102

                                                     ARTICLE VII

                                                       DEFAULT
         SECTION 7.01.     Master Servicer Events of Default....................................................103
         SECTION 7.02.     Trustee to Act; Appointment of Successor.............................................105
         SECTION 7.03.     Notification to Certificateholders...................................................106
         SECTION 7.04.     Waiver of Master Servicer Events of Default..........................................106

                                                    ARTICLE VIII

                                 CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR
         SECTION 8.01.     Duties of Trustee....................................................................107
         SECTION 8.02.     Certain Matters Affecting the Trustee................................................108
         SECTION 8.03.     Trustee not Liable for Certificates or Mortgage Loans................................109
         SECTION 8.04.     Trustee May Own Certificates.........................................................109
         SECTION 8.05.     Trustee's Fees and Expenses..........................................................109
         SECTION 8.06.     Eligibility Requirements for Trustee.................................................110
         SECTION 8.07.     Resignation and Removal of the Trustee...............................................110
         SECTION 8.08.     Successor Trustee....................................................................111
         SECTION 8.09.     Merger or Consolidation of Trustee...................................................112
         SECTION 8.10.     Appointment of Co-Trustee or Separate Trustee........................................112
         SECTION 8.11.     Appointment of Office or Agency......................................................113
         SECTION 8.12.     Representations and Warranties.......................................................113

                                                     ARTICLE IX

                                                     TERMINATION
         SECTION 9.01      Termination Upon Repurchase or Liquidation of All Mortgage
                                    Loans.......................................................................115
         SECTION 9.02      Additional Termination Requirements..................................................117

                                                      ARTICLE X

                                                  REMIC PROVISIONS
         SECTION 10.01.             REMIC Administration........................................................118
         SECTION 10.02.             Prohibited Transactions and Activities......................................120
         SECTION 10.03.             Master Servicer and Trustee Indemnification.................................121

                                                     ARTICLE XI

                                              MISCELLANEOUS PROVISIONS

                                                       -viii-

<PAGE>

         SECTION 11.01.             Amendment...................................................................122
         SECTION 11.02.             Recordation of Agreement; Counterparts......................................123
         SECTION 11.03.             Limitation on Rights of Certificateholders..................................123
         SECTION 11.04.             Governing Law...............................................................124
         SECTION 11.05.             Notices.....................................................................124
         SECTION 11.06.             Severability of Provisions..................................................124
         SECTION 11.07.             Notice to Rating Agencies...................................................125
         SECTION 11.08.             Article and Section References..............................................125
         SECTION 11.09.             Grant of Security Interest..................................................126
</TABLE>

<TABLE>
<CAPTION>

Exhibits

<S>               <C>
Exhibit A-1       Form of Class A Certificate
Exhibit A-2       Form of Class M-1 Certificate
Exhibit A-3       Form of Class M-2 Certificate
Exhibit A-4       Form of Class M-3 Certificate
Exhibit A-5       Form of Class CE Certificate
Exhibit A-6       Form of Class P Certificate
Exhibit A-7       Form of Class A-IO Certificate
Exhibit A-8       Form of Class R-I Certificate
Exhibit A-9       Form of Class R-II Certificate
Exhibit A-10      Form of Class R-III Certificate
Exhibit B         [Reserved]
Exhibit C-1       Form of Trustee's Initial Certification
Exhibit C-2       Form of Trustee's Final Certification
Exhibit D         Form of Mortgage Loan Purchase Agreement
Exhibit E-1       Request for Release
Exhibit E-2       Request for Release Mortgage Loans paid in full
Exhibit F-1       Form of Transferor Representation Letter and Form of Transferee Representation
                  Letter in Connection with Transfer of the Class CE Certificates, Class P
                  Certificates or Residual Certificates Pursuant to Rule 144A Under the 1933 Act
Exhibit F-2       Form of Transfer Affidavit and Agreement and Form of Transferor Affidavit in
                  Connection with Transfer of Residual Certificates
Exhibit G         Form of Certification with respect to ERISA and the Code
Exhibit H         Form of Report Pursuant to Section 4.06
Exhibit I         [Reserved]
Exhibit J         [Reserved]
Exhibit K         Form of Lost Note Affidavit
Schedule 1        Mortgage Loan Schedule
Schedule 2        Prepayment Charge Schedule
Schedule 3        PMI Mortgage Loans
</TABLE>

                                      -ix-

<PAGE>

                  This Pooling and Servicing Agreement, is dated and effective
as of September 1, 2001, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, OCWEN FEDERAL BANK FSB as Master Servicer and U. S. BANK NATIONAL
ASSOCIATION as Trustee.

                             PRELIMINARY STATEMENT:

                  The Depositor intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest in each REMIC (as defined herein) created
hereunder. The Trust Fund will consist of a segregated pool of assets comprised
of the Mortgage Loans and certain other related assets subject to this
Agreement.

                                     REMIC I

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets (other than the Master Servicer Prepayment Charge Payment Amount
and the Reserve Fund) subject to this Agreement as a REMIC for federal income
tax purposes, and such segregated pool of assets will be designated as "REMIC
I." The Class R-I Certificates will be the sole class of "residual interests" in
REMIC I for purposes of the REMIC Provisions (as defined herein). The following
table irrevocably sets forth the designation, the REMIC I Remittance Rate, the
initial Uncertificated Balance and, solely for purposes of satisfying Treasury
regulation section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for
each of the REMIC I Regular Interests (as defined herein). None of the REMIC I
Regular Interests will be certificated.

                       REMIC I               Initial           Latest Possible
     Designation   Remittance Rate   Uncertificated Balance   Maturity Date(1)
     -----------   ---------------   ----------------------   -------------
        I-LT1        Variable(2)         $466,201,879.85     September 25, 2031
        I-LT2        Variable(2)         $ 51,800,220.00     September 25, 2031
        I-LTP        Variable(2)            $ 100.00         September 25, 2031
---------------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC I
         Regular Interest.
(2)      Calculated in accordance with the definition of "REMIC I Remittance
         Rate" herein.

                                       -x-

<PAGE>

                                    REMIC II

               As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II". The Class R-II Certificates will be the sole class of
"residual interests" in REMIC II for purposes of the REMIC Provisions (as
defined herein). The following table irrevocably sets forth the designation, the
REMIC II Remittance Rate, the initial Uncertificated Balance and, solely for
purposes of satisfying Treasury regulation section 1.860G-1(a)(4)(iii), the
"latest possible maturity date" for each of the REMIC II Regular Interests (as
defined herein). None of the REMIC II Regular Interests will be certificated.

                      REMIC II              Initial            Latest Possible
  Designation      Remittance Rate  Uncertificated Balance    Maturity Date(1)
  -----------      ---------------  ----------------------    -------------
       II-LT1        Variable(2)        $507,642,057.85      September 25, 2031
       II-LT2        Variable(2)        $ 4,713,820.00       September 25, 2031
       II-LT3        Variable(2)         $ 207,200.00        September 25, 2031
       II-LT4        Variable(2)          $ 12,500.00        September 25, 2031
       II-LT5        Variable(2)          $ 90,650.00        September 25, 2031
       II-LT6        Variable(2)        $ 5,218,872.00       September 25, 2031
      II-LTIO        Variable(2)              N/A            September 25, 2031
       II-LTP        Variable(2)           $ 100.00          September 25, 2031
---------------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each REMIC II
         Regular Interest.
(2)      Calculated in accordance with the definition of "REMIC II Remittance
         Rate" herein.
(3)      REMIC II Regular Interest II-LTIO will not have an Initial
         Uncertificated Balance, but will accrue interest on its respective
         Uncertificated Notional Amount outstanding from time to time which in
         each case shall equal the Initial Uncertificated Balance of REMIC I
         Regular Interest I-LT2.

                                      -xi-

<PAGE>

                                    REMIC III

               As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC II Regular Interests as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC III." The Class R-III Certificates will evidence the
sole class of "residual interests" in REMIC III for purposes of the REMIC
Provisions under federal income tax law. The following table irrevocably sets
forth the designation, the Pass-Through Rate, the initial aggregate Certificate
Principal Balance and, solely for purposes of satisfying Treasury regulation
section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for the
indicated Classes of Certificates.

                                      Initial Aggregate
                                     Certificate Principal    Latest Possible
   Designation    Pass-Through Rate         Balance          Maturity Date(1)
   -----------    -----------------         -------          -------------
       Class A       Variable(2)        $471,382,000.00     September 25, 2031
      Class M-1      Variable(2)        $ 20,720,000.00     September 25, 2031
      Class M-2      Variable(2)        $ 12,950,000.00     September 25, 2031
      Class M-3      Variable(2)        $ 9,065,000.00      September 25, 2031
      Class A-IO     Variable(2)        $ 51,800,219.96     September 25, 2031
       Class CE      Variable(2)        $ 3,885,099.85      September 25, 2031
       Class P       Variable(2)            $100.00         September 25, 2031
---------------
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date immediately following the maturity
         date for the Mortgage Loans with the latest maturity date has been
         designated as the "latest possible maturity date" for each Class of
         Certificates.
(2)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.
(3)      The Class A-IO Certificates will not have a Certificate Principal
         Balance, but will receive all amounts distributed to REMIC II Regular
         Interest II-LTIO.
(4)      The Class CE Certificates will accrue interest at their variable
         Pass-Through Rate on the Notional Amount of the Class CE Certificates
         outstanding from time to time which shall equal the Uncertificated
         Balance of the REMIC II Regular Interests. The Class CE Certificates
         will not accrue interest on their Certificate Principal Balance.
(5)      The Class P Certificates will not accrue interest.

               As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal | Balance equal to $518,002,199.85.

               In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer and the Trustee agree as follows:

                                      -xii-

<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

               SECTION 1.01.          Defined Terms.

               Whenever used in this Agreement, including, without limitation,
in the Preliminary Statement hereto, the following words and phrases, unless the
context otherwise requires, shall have the meanings specified in this Article.
Unless otherwise specified, all calculations described herein shall be made on
the basis of a 360-day year consisting of twelve 30-day months.

               "Accepted Servicing Practices": The servicing standards set forth
in Section 3.01.

               "Accrued Certificate Interest": With respect to any Class A
Certificate, Mezzanine Certificate, Class A-IO Certificate or Class CE
Certificate and each Distribution Date, interest accrued during the related
Interest Accrual Period at the Pass-Through Rate for such Certificate for such
Distribution Date on the Certificate Principal Balance, in the case of the Class
A Certificates and the Mezzanine Certificates, or on the Notional Amount, in the
case of the Class A-IO Certificates and the Class CE Certificates, of such
Certificate immediately prior to such Distribution Date. The Class P
Certificates are not entitled to distributions in respect of interest and,
accordingly, will not accrue interest. All distributions of interest on the
Class A Certificates and the Mezzanine Certificates will be calculated on the
basis of a 360-day year and the actual number of days in the applicable Interest
Accrual Period. All distributions of interest on the Class A-IO Certificates and
the Class CE Certificates will be based on a 360-day year consisting of twelve
30-day months. Accrued Certificate Interest with respect to each Distribution
Date, as to any Class A Certificate, Mezzanine Certificate, Class A-IO
Certificate or Class CE Certificate, shall be reduced by an amount equal to the
portion allocable to such Certificate pursuant to Section 1.02 hereof of the sum
of (a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution Date to the extent not covered by payments pursuant to Section 3.24
and (b) the aggregate amount of any Relief Act Interest Shortfall, if any, for
such Distribution Date. In addition, Accrued Certificate Interest with respect
to each Distribution Date, as to any Class CE Certificate, shall be reduced by
an amount equal to the portion allocable to such Class CE Certificate of
Realized Losses, if any, pursuant to Section 4.04 hereof. Notwithstanding the
foregoing, for federal income tax purposes and under the REMIC Provisions, the
Accrued Certificate Interest for the Class A-IO Certificates and any
Distribution Date will be deemed to be 100% of the Uncertificated Interest for
REMIC II Regular Interest II-LTIO for such Distribution Date.

               "Adjustable-Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.

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

               "Advancing Person": As defined in Section 3.26 hereof.

                                       -1-

<PAGE>

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

               "Aggregate Loss Severity Percentage": With respect to any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Realized Losses incurred on any Mortgage Loans
from the Cut-off Date to the last day of the preceding calendar month and the
denominator of which is the aggregate principal balance of such Mortgage Loans
immediately prior to the liquidation of such Mortgage Loans.

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

               "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form (excepting therefrom, if applicable,
the mortgage recordation information which has not been required pursuant to
Section 2.01 hereof or returned by the applicable recorder's office), which is
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect of record the sale of the Mortgage, which
assignment, notice of transfer or equivalent instrument may be in the form of
one or more blanket assignments covering Mortgages secured by Mortgaged
Properties located in the same county, if permitted by law.

               "Available Distribution Amount": With respect to any Distribution
Date, an amount equal to (1) the sum of (a) the aggregate of the amounts on
deposit in the Collection Account and Distribution Account as of the close of
business on the related Determination Date, (b) the aggregate of any amounts
received in respect of an REO Property withdrawn from any REO Account and
deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Master Servicer in respect of Prepayment Interest Shortfalls for
such Distribution Date pursuant to Section 3.24, (d) the aggregate of any P& I
Advances made by the Master Servicer for such Distribution Date pursuant to
Section 4.03 and (e) the aggregate of any advances made by the Trustee for such
Distribution Date pursuant to Section 7.02(b) reduced (to not less than zero),
by (2) the sum of (x) the portion of the amount described in clause (1)(a) above
that represents (i) Monthly Payments on the Mortgage Loans received from a
Mortgagor on or prior to the Determination Date but due during any Due Period
subsequent to the related Due Period, (ii) Principal Prepayments on the Mortgage
Loans received after the related Prepayment Period (together with any interest
payments received with such Principal Prepayments to the extent they represent
the payment of interest accrued on the Mortgage Loans during a period subsequent
to the related Prepayment Period), (iii) Liquidation Proceeds and Insurance
Proceeds received in respect of the Mortgage Loans after the related Prepayment
Period, (iv) amounts reimbursable or payable to the Depositor, the Master
Servicer, the Trustee, the Originator, the Seller or any Sub-Servicer pursuant
to Section 3.11 or Section 3.12 or otherwise payable in respect of Extraordinary
Trust Fund Expenses, (v) Stayed Funds (vi) the PMI Insurer Fee payable from the
Distribution Account, (vii) the Trustee Fee payable from the Distribution
Account

                                       -2-

<PAGE>

pursuant to Section 8.05, (viii) amounts deposited in the Collection Account or
the Distribution Account in error and (ix) the amount of any Prepayment Charges
collected by the Master Servicer in connection with the Principal Prepayment of
any of the Mortgage Loans or any Master Servicer Prepayment Charge Payment
Amount, and (y) amounts reimbursable to the Trustee for an advance made pursuant
to Section 7.02(b) which advance the Trustee has determined to be nonrecoverable
from the Stayed Funds in respect of which it was made.

               "Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of
the United States Code), as amended.

               "Bankruptcy Loss": With respect to any Mortgage Loan, a Realized
Loss resulting from a Deficient Valuation or Debt Service Reduction.

               "Book-Entry Certificate": The Class A Certificates and the
Mezzanine Certificates for so long as the Certificates of such Class shall be
registered in the name of the Depository or its nominee.

               "Book-Entry Custodian": The custodian appointed pursuant to
Section 5.01.

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

               "Cash-Out Refinancing": A Refinanced Mortgage Loan the proceeds
of which are more than a nominal amount in excess of the principal balance of
any existing first mortgage or subordinate mortgage on the related Mortgaged
Property and related closing costs.

               "Certificate": Any one of the Asset Backed Pass-Through
Certificates, Series 2001- NC2, Class A, Class M-1, Class M-2, Class M-3, Class
A-IO, Class CE, Class P, Class R-I, Class R-II, or Class R-III issued under this
Agreement.

               "Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (or the Notional Amount, in the case of the Class A-IO
Certificates and the Class CE Certificates) of such Class of Certificates on
such Distribution Date (after giving effect to any distributions of principal
and allocations of Realized Losses in reduction of the Certificate Principal
Balance (or the Notional Amount, in the case of the Class A-IO Certificates and
the Class CE Certificates) of such Class of Certificates to be made on such
Distribution Date), and the denominator of which is the initial aggregate
Certificate Principal Balance (or the Notional Amount, in the case of the Class
A-IO Certificates and the Class CE Certificates) of such Class of Certificates
as of the Closing Date.

               "Certificate Margin": With respect to the Class A Certificates
and REMIC II Regular Interest II-LT2, 0.35% in the case of each Distribution
Date through and including the Distribution Date on which the aggregate
principal balance of the Mortgage Loans (and properties acquired in

                                       -3-

<PAGE>

respect thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate principal balance of the Mortgage Loans as of the Cut-off Date and
0.70% in the case of each Distribution Date thereafter.

               With respect to the Class M-1 Certificates and REMIC II Regular
Interest II-LT3, 0.82% in the case of each Distribution Date through and
including the Distribution Date on which the aggregate principal balance of the
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Mortgage Loans as of the Cut-off Date and 1.23% in the case of each Distribution
Date thereafter.

               With respect to the Class M-2 Certificates and REMIC II Regular
Interest II-LT4, 1.25% in the case of each Distribution Date through and
including the Distribution Date on which the aggregate principal balance of the
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the sum of the aggregate principal
balance of the Mortgage Loans as of the Cut-off Date and 1.875% in the case of
each Distribution Date thereafter.

               With respect to the Class M-3 Certificates and REMIC II Regular
Interest II-LT5, 2.00% in the case of each Distribution Date through and
including the Distribution Date on which the aggregate principal balance of the
Mortgage Loans (and properties acquired in respect thereof) remaining in the
Trust Fund is reduced to less than 10% of the aggregate principal balance of the
Mortgage Loans as of the Cut-off Date and 3.00% in the case of each Distribution
Date thereafter.

               "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Master Servicer or any Affiliate thereof shall be
deemed not to be outstanding and the Voting Rights to which it is entitled shall
not be taken into account in determining whether the requisite percentage of
Voting Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 11.01. The Trustee may conclusively rely upon a
certificate of the Depositor or the Master Servicer in determining whether a
Certificate is held by an Affiliate thereof. All references herein to "Holders"
or "Certificateholders" shall reflect the rights of Certificate Owners as they
may indirectly exercise such rights through the Depository and participating
members thereof, except as otherwise specified herein; provided, however, that
the Trustee shall be required to recognize as a "Holder" or "Certificateholder"
only the Person in whose name a Certificate is registered in the Certificate
Register.

               "Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.

               "Certificate Principal Balance": With respect to each Class A
Certificate, Mezzanine Certificate or Class P Certificate as of any date of
determination, the Certificate Principal Balance

                                       -4-

<PAGE>

of such Certificate on the Distribution Date immediately prior to such date of
determination, minus all distributions allocable to principal made thereon and
Realized Losses allocated thereto on such immediately prior Distribution Date
(or, in the case of any date of determination up to and including the first
Distribution Date, the initial Certificate Principal Balance of such
Certificate, as stated on the face thereof). With respect to each Class CE
Certificate as of any date of determination, an amount equal to the Percentage
Interest evidenced by such Certificate times the excess, if any, of (A) the then
aggregate Uncertificated Balances of the REMIC II Regular Interests over (B) the
then aggregate Certificate Principal Balances of the Class A Certificates, the
Mezzanine Certificates and the Class P Certificates then outstanding.

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

               "Class": Collectively, all of the Certificates bearing the same
class designation.

               "Class A Certificate": Any one of the Class A Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-1 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

               "Class A Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the Certificate Principal Balance of the
Class A Certificates immediately prior to such Distribution Date over (y) the
lesser of (A) the product of (i) 82.00% and (ii) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period and
(B) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period minus $2,590,010.99.

               "Class CE Certificate": Any one of the Class CE Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-5 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

               "Class A-IO Certificate": Any one of the Class A-IO Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-7 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

               "Class A-IO Rate": With respect to REMIC II Regular Interest
II-LTIO and the Class A-IO Certificates:

               (A)     in the case of the Distribution Dates beginning in
                       October 2001 and ending in March 2002, a per annum rate
                       equal to the excess of (i) the Weighted Average Expense
                       Adjusted Mortgage Rate over (ii) the excess (but not less
                       than zero) of (x) the Weighted Average Expense Adjusted
                       Mortgage Rate over (y) 4.50% per annum;

               (B)     in the case of the Distribution Dates beginning in April
                       2002 and ending in September 2002, a per annum rate equal
                       to the excess of (i) the Weighted Average Expense
                       Adjusted Mortgage Rate over (ii) the excess (but not less
                       than zero) of (x) the Weighted Average Expense Adjusted
                       Mortgage Rate

                                       -5-

<PAGE>

                       over (y) 4.00% per annum;

               (C)     in the case of the Distribution Dates beginning in
                       October 2002 and ending in March 2003, a per annum rate
                       equal to the excess of (i) the Weighted Average Expense
                       Adjusted Mortgage Rate over (ii) the excess (but not less
                       than zero) of (x) the Weighted Average Expense Adjusted
                       Mortgage Rate over (y) 3.50% per annum;

               (D)     in the case of the Distribution Dates beginning in April
                       2003 and ending in September 2003, a per annum rate equal
                       to the excess of (i) the Weighted Average Expense
                       Adjusted Mortgage Rate over (ii) the excess (but not less
                       than zero) of (x) the Weighted Average Expense Adjusted
                       Mortgage Rate over (y) 3.00% per annum;

               (E)     in the case of the Distribution Dates beginning in
                       October 2003 and ending in March 2004, a per annum rate
                       equal to the excess of (i) the Weighted Average Expense
                       Adjusted Mortgage Rate over (ii) the excess (but not less
                       than zero) of (x) the Weighted Average Expense Adjusted
                       Mortgage Rate over (y) 2.50% per annum; and

               (F) in the case of each Distribution Date thereafter, 0.00% per
annum.

               "Class M-1 Certificate": Any one of the Class M-1 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-2 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

               "Class M-1 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date) and (ii)
the Certificate Principal Balance of the Class M-1 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
90.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period minus
$2,590,010.99.

               "Class M-2 Certificate": Any one of the Class M-2 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

               "Class M-2 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (iii) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 95.00% and (ii) the aggregate Stated Principal

                                       -6-

<PAGE>

Balance of the Mortgage Loans as of the last day of the related Due Period and
(B) the aggregate Stated Principal Balance of the Mortgage | Loans as of the
last day of the related Due Period minus $2,590,010.99.

               "Class M-3 Certificate": Any one of the Class M-3 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-4 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

               "Class M-3 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date) and (iv) the Certificate
Principal Balance of the Class M-3 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 98.50% and (ii)
the aggregate Stated Principal Balance of the Mortgage Loans as of the last day
of the related Due Period and (B) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period minus $2,590,010.99.

               "Class P Certificate": Any one of the Class P Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-6 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

               "Class R-I Certificate": Any one of the Class R-I Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-8 and evidencing the Residual Interest in REMIC I
for purposes of the REMIC Provisions.

               "Class R-II Certificate": Any one of the Class R-II Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-9 and evidencing the Residual Interest in REMIC II
for purposes of the REMIC Provisions.

               "Class R-III Certificate": Any one of the Class R-III
Certificates executed, authenticated and delivered by the Trustee, substantially
in the form annexed hereto as Exhibit A-10 and evidencing the Residual Interest
in REMIC III for purposes of the REMIC Provisions.

               "Closing Date": September 27, 2001.

               "Code": The Internal Revenue Code of 1986.

               "Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Master Servicer
pursuant to Section 3.10(a), which shall be entitled "Ocwen Federal Bank FSB, as
Master Servicer for U. S. Bank National Association, as Trustee, in trust for
the registered holders of Salomon Brothers Mortgage Securities VII, Inc., New
Century Home Equity Loan Trust, Series 2001-NC2, Asset Backed Pass-Through
Certificates." The Collection Account must be an Eligible Account.

                                       -7-

<PAGE>

               "Commission": The Securities and Exchange Commission.

               "Corporate Trust Office": The principal corporate trust office of
the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office, at the date
of the execution of this instrument is located at 180 East Fifth Street, St.
Paul, Minnesota 55101, or at such other address as the Trustee may designate
from time to time by notice to the Certificateholders, the Depositor and the
Master Servicer.

               "Corresponding Certificate": With respect to (i) REMIC II Regular
Interest II-LT2, (ii) REMIC II Regular Interest II-LT3, (iii) REMIC II Regular
Interest II-LT4, (iv) REMIC II Regular Interest II-LT5 and (v) REMIC II Regular
Interest II-LTP, (i) the Class A Certificates, (ii) Class M-1 Certificates,
(iii) Class M-2 Certificates, (iv) Class M-3 Certificates and (v) Class P
Certificates, respectively.

               "Credit Enhancement Percentage": For any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the sum of the
aggregate Certificate Principal Balances of the Mezzanine Certificates and the
Class CE Certificates, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans, calculated after taking into account
distributions of principal on the Mortgage Loans and distribution of the
Principal Distribution Amount to the Certificates then entitled to distributions
of principal on such Distribution Date.

               "Cumulative Loss Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Realized Losses incurred from the Cut-off Date to the last
day of the preceding calendar month and the denominator of which is the sum of
the aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off
Date.

               "Cut-off Date": With respect to each Original Mortgage Loan,
September 1, 2001. With respect to all Qualified Substitute Mortgage Loans,
their respective dates of substitution. References herein to the "Cut-off Date,"
when used with respect to more than one Mortgage Loan, shall be to the
respective Cut-off Dates for such Mortgage Loans.

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

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

               "Definitive Certificates": As defined in Section 5.01(b).

               "Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.

                                       -8-

<PAGE>

               "Delinquency Percentage": As of the last day of the related Due
Period, the percentage equivalent of a fraction, the numerator of which is the
aggregate Stated Principal Balance of all Mortgage Loans that, as of the last
day of the previous calendar month, are 60 or more days delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the last day of
the previous calendar month; provided, however, that any Mortgage Loan purchased
by the Master Servicer pursuant to Section 3.16(c) shall not be included in
either the numerator or the denominator for purposes of calculating the
Delinquency Percentage.

               "Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.

               "Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.

               "Depository Institution": Any depository institution or trust
company, including the Trustee that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated F-1 by Fitch and A-1+ by
S& P (or comparable ratings if Fitch and S& P are not the Rating Agencies).

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

               "Determination Date": With respect to each Distribution Date, the
sixth Business Day preceding the related Distribution Date.

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

                                       -9-

<PAGE>

               "Disqualified Organization": Any of the following: (i) the United
States, any State or political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than an
instrumentality which is a corporation if all of its activities are subject to
tax and, except for Freddie Mac, a majority of its board of directors is not
selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers'cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing
large partnership" and (vi) any other Person so designated by the Trustee based
upon an Opinion of Counsel that the holding of an Ownership Interest in a
Residual Certificate by such Person may cause any of REMIC I, REMIC II or REMIC
III or any Person having an Ownership Interest in any Class of Certificates
(other than such Person) to incur a liability for any federal tax imposed under
the Code that would not otherwise be imposed but for the Transfer of an
Ownership Interest in a Residual Certificate to such Person. The terms "United
States," "State" and "international organization" shall have the meanings set
forth in Section 7701 of the Code or successor provisions.

               "Distribution Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 3.10(b), which shall be entitled
"U. S. Bank National Association, as Trustee, in trust for the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., New Century Home
Equity Loan Trust, Series 2001-NC2, Asset Backed Pass-Through Certificates." The
Distribution Account must be an Eligible Account.

               "Distribution Date": The 20 th day of any month, or if such 20 th
day is not a Business Day, the Business Day immediately following such 20th day,
commencing in October 2001.

               "Due Date": With respect to each Distribution Date, the first day
of the calendar month in which such Distribution Date occurs, which is generally
the day of the month on which the Monthly Payment is due on a Mortgage Loan,
exclusive of any days of grace.

               "Due Period": With respect to any Distribution Date, the period
commencing on the second day of the month immediately preceding the month in
which such Distribution Date occurs and ending on the related Due Date.

               "Eligible Account": Any of (i) an account or accounts maintained
with a Depository Institution, (ii) an account or accounts the deposits in which
are fully insured by the FDIC or (iii) a trust account or accounts maintained
with the corporate trust department of a federal or state chartered depository
institution or trust company acting in its fiduciary capacity. Eligible Accounts
may bear interest.

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

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

                                      -10-

<PAGE>

               "Excess Overcollateralized Amount": With respect to the Class A
Certificates and the Mezzanine Certificates and any Distribution Date, the
excess, if any, of (i) the Overcollateralized Amount for such Distribution Date
over (ii) the Required Overcollateralized Amount for such Distribution Date.

               "Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan (or the related REO Property), as of any date of determination, a per annum
rate of interest equal to the applicable Mortgage Rate thereon as of the first
day of the month preceding the month in which the Distribution Date occurs minus
the sum of (i) the Trustee Fee Rate, (ii) the Servicing Fee Rate and (iii) the
PMI Insurer Fee Rate, if applicable.

               "Expense Adjusted Maximum Mortgage Rate": With respect to any
Mortgage Loan (or the related REO Property), as of any date of determination, a
per annum rate of interest equal to the applicable Maximum Mortgage Rate (in the
case any Adjustable-Rate Mortgage Loan) or Mortgage Rate (in the case of any
Fixed Rate Mortgage Loan) thereon as of the first day of the month preceding the
month in which the Distribution Date occurs minus the sum of (i) the Trustee Fee
Rate, (ii) the Servicing Fee Rate and (iii) the PMI Insurer Fee Rate, if
applicable.

               "Extraordinary Trust Fund Expense": Any amounts reimbursable to
the Trustee, or any director, officer, employee or agent of the Trustee from the
Trust Fund pursuant to Section 8.05 or Section 10.01(c) and any amounts payable
from the Distribution Account in respect of taxes pursuant to Section
10.01(g)(iii) and any costs of the Trustee for the recording of the Assignments
pursuant to Section 2.01 (to the extent the Seller is unable to pay such costs).

               "Fannie Mae": Fannie Mae, formally known as the Federal National
Mortgage Association, or any successor thereto.

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

               "Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Originator, the Seller, the Depositor or the Master Servicer
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section
9.01), a determination made by the Master Servicer that all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries which the Master Servicer,
in its reasonable good faith judgment, expects to be finally recoverable in
respect thereof have been so recovered. The Master Servicer shall maintain
records, prepared by a Servicing Officer, of each Final Recovery Determination
made thereby.

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

               "Formula Rate": For any Distribution Date and the Class A
Certificates and the Mezzanine Certificates, the lesser of (i) One-Month LIBOR
plus the related Certificate Margin and (ii) the Maximum Cap Rate.

               "Freddie Mac": Freddie Mac, formally known as the Federal Home
Loan Mortgage Corporation, or any successor thereto.

                                      -11-

<PAGE>

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

               "Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Master
Servicer, the Originator and their respective Affiliates, (b) does not have any
direct financial interest in or any material indirect financial interest in the
Depositor, the Originator, the Master Servicer or any Affiliate thereof, and (c)
is not connected with the Depositor, the Originator, the Master Servicer or any
Affiliate thereof as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions; provided, however,
that a Person shall not fail to be Independent of the Depositor, the Originator,
the Master Servicer or any Affiliate thereof merely because such Person is the
beneficial owner of 1% or less of any class of securities issued by the
Depositor, the Originator, the Master Servicer or any Affiliate thereof, as the
case may be.

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

               "Index": With respect to each Adjustable-Rate Mortgage Loan and
each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in The
Wall Street Journal and as most recently available either (i) as of the first
business day 45 days prior to such Adjustment Date or (ii) as of the first
business day of the month preceding the month of such Adjustment Date, as
specified in the related Mortgage Note.

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

               "Interest Accrual Period": With respect to any Distribution Date
and the Class A

                                      -12-

<PAGE>

Certificates and the Mezzanine Certificates, the period commencing on the
Distribution Date of the month immediately preceding the month in which such
Distribution Date occurs (or, in the case of the first Distribution Date,
commencing on the Closing Date) and ending on the day preceding such
Distribution Date. With respect to any Distribution Date and the Class A-IO
Certificates, the Class CE Certificates, the REMIC II Regular Interests and the
REMIC I Regular Interests, the one-month period ending on the last day of the
calendar month preceding the month in which such Distribution Date occurs.

               "Interest Carry Forward Amount": With respect to any Distribution
Date and the Class A Certificates, Class A-IO Certificates or Mezzanine
Certificates, the sum of (i) the amount, if any, by which (a) the Interest
Distribution Amount for such Class of Certificates as of the immediately
preceding Distribution Date exceeded (b) the actual amount distributed on such
Class of Certificates in respect of interest on such immediately preceding
Distribution Date, (ii) the amount of any Interest Carry Forward Amount for such
Class of Certificates remaining unpaid from the previous Distribution Date and
(iii) accrued interest on the sum of (i) and (ii) above calculated at the
related Pass-Through Rate for the most recently ended Interest Accrual Period.

               "Interest Determination Date": With respect to the Class A
Certificates, the Mezzanine Certificates, REMIC II Regular Interest II-LT2,
REMIC II Regular Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II
Regular II-LT5 and any Interest Accrual Period therefor, the second London
Business Day preceding the commencement of such Interest Accrual Period.

               "Interest Distribution Amount": With respect to any Distribution
Date and any Class A Certificates, any Mezzanine Certificates, any Class A-IO
Certificates and any Class CE Certificates, the aggregate Accrued Certificate
Interest on the Certificates of such Class for such Distribution Date.

               "Interest Remittance Amount": With respect to any Distribution
Date, that portion of the Available Distribution Amount for such Distribution
Date attributable to interest received or advanced on the Mortgage Loans.

               "Late Collections": With respect to any Mortgage Loan and any Due
Period, all amounts received subsequent to the Determination Date immediately
following such Due Period, whether as late payments of Monthly Payments or as
Insurance Proceeds, Liquidation Proceeds or otherwise, which represent late
payments or collections of principal and/or interest due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) but
delinquent for such Due Period and not previously recovered.

               "Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from REMIC I by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section 9.01.
With respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 9.01.

                                      -13-

<PAGE>

               "Liquidation Proceeds": The amount (other than Insurance Proceeds
or amounts received in respect of the rental of any REO Property prior to REO
Disposition) received by the Master Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan
through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
9.01.

               "Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.

               "London Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.

               "Loss Severity Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
amount of Realized Losses incurred on a Mortgage Loan and the denominator of
which is the principal balance of such Mortgage Loan immediately prior to the
liquidation of such Mortgage Loan.

               "Marker Rate": With respect to the Class CE Certificates and any
Distribution Date, a per annum rate equal to two (2) times the weighted average
of the REMIC II Remittance Rate for each of the REMIC II Regular Interests, with
the rate on each REMIC II Regular Interest (other than REMIC II Regular Interest
II-LT6) subject to a cap equal to the related Formula Rate for the purpose of
this calculation for such Distribution Date and with the rate on REMIC II
Regular Interest II-LT6 subject to a cap of zero for the purpose of this
calculation; provided, however, each cap shall be multiplied by a fraction, the
numerator of which is the actual number of days in the related Interest Accrual
Period and the denominator of which is 30.

               "Master Servicer": Ocwen Federal Bank FSB or any successor master
servicer appointed as herein provided, in its capacity as Master Servicer
hereunder.

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

               "Master Servicer Prepayment Charge Payment Amount": The amounts
payable by the Master Servicer in respect of any waived Prepayment Charges
pursuant to Section 2.05 or Section 3.01.

               "Master Servicer Remittance Date": With respect to any
Distribution Date, by 3: 00 p. m. New York time on the fifth Business Day
preceding the related Distribution Date.

               "Master Servicer Termination Test": With respect to any
Distribution Date, the Master Servicer Termination Test will be failed if the
Cumulative Loss Percentage exceeds 7.10%.

                                      -14-

<PAGE>

               "Maximum Cap Rate": For any Distribution Date, a per annum rate
equal to the product of (x) the weighted average of the Expense Adjusted Maximum
Mortgage Rates of the Mortgage Loans, weighted based on their Scheduled
Principal Balances as of the first day of the calendar month preceding the month
in which the Distribution Date occurs (after giving effect to unscheduled
collections of principal received during the related Prepayment Period) and (y)
a fraction, the numerator of which is 30 and the denominator of which is the
actual number of days elapsed in the related Interest Accrual Period.

               "Maximum II-LT6 Uncertificated Interest Deferral Amount": With
respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC II Remittance Rate applicable to REMIC II Regular Interest II-LT6 for such
Distribution Date on a balance equal to the Uncertificated Balance of REMIC II
Regular Interest II-LT6 minus the REMIC II Overcollateralization Amount, in each
case for such Distribution Date, over (ii) Uncertificated Interest on REMIC II
Regular Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II Regular
Interest II-LT4 and REMIC II Regular Interest II-LT5 for such Distribution Date,
with the rate on each of REMIC II Regular Interest II-LT2, REMIC II Regular
Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II Regular Interest
II-LT5 subject to a cap equal to the related Formula Rate; provided, however,
each cap shall be multiplied by a fraction, the numerator of which is the actual
number of days in the related Interest Accrual Period and the denominator of
which is 30.

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

               "Mezzanine Certificate": Any Class M-1 Certificate, Class M-2
Certificate or Class M-3 Certificate.

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

               "Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07 and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.

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

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

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

                                      -15-

<PAGE>

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

               "Mortgage Loan Purchase Agreement": The agreement among the
Seller, the Originator and the Depositor, regarding the sale of the Mortgage
Loans by the Seller to the Depositor, substantially in the form of Exhibit D
annexed hereto.

               "Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, attached hereto as Schedule 1. The
Mortgage Loan Schedule shall set forth the following information with respect to
each Mortgage Loan:

               (i)    the Mortgage Loan identifying number;

               (ii)   the Mortgagor's name;

               (iii)  the street address of the Mortgaged Property including the
                      state and zip code;

               (iv)   a code indicating whether the Mortgaged Property is
                      owner-occupied;

               (v)    the type of Residential Dwelling constituting the
                      Mortgaged Property;

               (vi)   the original months to maturity;

               (vii)  the stated remaining months to maturity from the Cut-off
                      Date based on the original amortization schedule;

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

               (ix)   the Mortgage Rate in effect immediately following the
                      Cut-off Date;

               (x)    (A) the date on which the first Monthly Payment was due on
                      the Mortgage Loan and (B) if such date is not consistent
                      with the Due Date currently in effect, such Due Date;

               (xi)   the stated maturity date;

               (xii)  the amount of the Monthly Payment at origination;

               (xiii) the amount of the Monthly Payment due on the first Due
                      Date after the Cut- off Date;

               (xiv)  the last Due Date on which a Monthly Payment was actually
                      applied to the unpaid Stated Principal Balance;

                                      -16-

<PAGE>

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

               (xvi)  the Scheduled Principal Balance of the Mortgage Loan as of
                      the close of business on the Cut-off Date;

               (xvii) with respect to each Adjustable-Rate Mortgage Loan, the
                      Adjustment Dates;

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

               (xix)  a code indicating the purpose of the Mortgage Loan (i. e.,
                      purchase financing, Rate/Term Refinancing, Cash-Out
                      Refinancing);

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

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

               (xxii)  the Mortgage Rate at origination;

               (xxiii) with respect to each Adjustable-Rate Mortgage Loan, the
                       Periodic Rate Cap and the maximum first Adjustment Date
                       Mortgage Rate adjustment;

               (xxiv)  a code indicating the documentation program (i. e., Full
                       Documentation, Limited Documentation, Stated Income
                       Documentation);

               (xxv)   the first Adjustment Date immediately following the
                       Cut-off Date;

               (xxvi)  the risk grade;

               (xxvii) the Value of the Mortgaged Property;

               (xxviii) the sale price of the Mortgaged Property, if applicable;

               (xxix)  the actual unpaid principal balance of the Mortgage Loan
                       as of the Cut-off Date;

               (xxx)   the type and term of the related Prepayment Charge;

               (xxxi)  the rounding code (i. e., nearest 0.125%, next highest
                       0.125%);

               (xxxii) whether such Mortgage Loan is covered under the PMI
                       Policy;

               (xxxiii)  the program code.

               The Mortgage Loan Schedule shall set forth the following
information with respect

                                      -17-

<PAGE>

to the Mortgage Loans in the aggregate as of the Cut-off Date: (1) the number of
Mortgage Loans; (2) the current principal balance of the Mortgage Loans; (3) the
weighted average Mortgage Rate of the Mortgage Loans and (4) the weighted
average maturity of the Mortgage Loans. The Mortgage Loan Schedule shall be
amended from time to time by the Depositor in accordance with the provisions of
this Agreement. With respect to any Qualified Substitute Mortgage Loan, the
Cut-off Date shall refer to the related Cut-off Date for such Mortgage Loan,
determined in accordance with the definition of Cut-off Date herein.

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

               "Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 and existing from time to time thereafter, and any REO Properties
acquired in respect thereof.

               "Mortgage Rate": With respect to each Mortgage Loan, the annual
rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate with
respect to the Adjustable-Rate Mortgage Loans, (A) as of any date of
determination until the first Adjustment Date following the Cut-off Date shall
be the rate set forth in the Mortgage Loan Schedule as the Mortgage Rate in
effect immediately following the Cut-off Date and (B) as of any date of
determination thereafter shall be the rate as adjusted on the most recent
Adjustment Date equal to the sum, rounded to the nearest 0.125% as provided in
the Mortgage Note, of the Index, as most recently available as of a date prior
to the Adjustment Date as set forth in the related Mortgage Note, plus the
related Gross Margin; provided that the Mortgage Rate on such Adjustable-Rate
Mortgage Loan on any Adjustment Date shall never be more than the lesser of (i)
the sum of the Mortgage Rate in effect immediately prior to the Adjustment Date
plus the related Periodic Rate Cap, if any, and (ii) the related Maximum
Mortgage Rate, and shall never be less than the greater of (i) the Mortgage Rate
in effect immediately prior to the Adjustment Date less the Periodic Rate Cap,
if any, and (ii) the related Minimum Mortgage Rate. With respect to each
Mortgage Loan that becomes an REO Property, as of any date of determination, the
annual rate determined in accordance with the immediately preceding sentence as
of the date such Mortgage Loan became an REO Property.

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

               "Mortgagor": The obligor on a Mortgage Note.

               "Net Monthly Excess Cashflow": With respect to any Distribution
Date, the sum of (i) any Overcollateralization Reduction Amount for such
Distribution Date and (ii) the excess of (x) the Available Distribution Amount
for such Distribution Date over (y) the sum for such Distribution Date of (A)
the Senior Interest Distribution Amount payable to the holders of the Class A
Certificates and the Interest Distribution Amount payable to the holders of the
Mezzanine Certificates and (B) the sum of the amounts described in clauses
(b)(i) through (iii) of the definition of Principal Distribution Amount.

               "Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO

                                      -18-

<PAGE>

Property) as of any date of determination, a per annum rate of interest equal to
the then applicable Mortgage Rate for such Mortgage Loan minus the Servicing Fee
Rate.

               "Net WAC Pass-Through Rate": The Net WAC Pass-Through Rate for
any Distribution Date is a rate per annum equal to the weighted average of (x)
the REMIC I Remittance Rate with respect to REMIC I Regular Interest I-LT1 for
such Distribution Date and (y) the excess, if any, of (i) the REMIC I Remittance
Rate with respect to REMIC I Regular Interest I-LT2 for such Distribution Date
over (ii) the Class A-IO Rate, weighted, in the case of clause (x), on the basis
of the aggregate Uncertificated Balance of REMIC I Regular Interest I-LT1, and
in the case of clause (y), on the basis of the Uncertificated Balance of REMIC I
Regular Interest I-LT2, respectively.

               "Net WAC Rate Carryover Amount": With respect to the Class A
Certificates and the Mezzanine Certificates and any Distribution Date, the sum
of (A) the positive excess of (i) the amount of interest payable to such Class
of Certificates on such Distribution Date calculated at the related Pass-Through
Rate for such Distribution Date and (B) the related Net WAC Rate Carryover
Amount for the previous Distribution Date not previously paid, together with
interest thereon at a rate equal to the related Pass-Through Rate for such Class
of Certificates for such Distribution Date.

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

               "Nonrecoverable P& I Advance": Any P& I Advance previously made
or proposed to be made in respect of a Mortgage Loan or REO Property that, in
the good faith business judgment of the Master Servicer, will not or, in the
case of a proposed P& I Advance, would not be ultimately recoverable from
related Late Collections, Insurance Proceeds or Liquidation Proceeds on such
Mortgage Loan or REO Property as provided herein.

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

               "Non-United States Person": Any Person other than a United States
Person.

               "Notional Amount": With respect to the Class CE Certificates and
any Distribution Date, the Uncertificated Balance of the REMIC II Regular
Interests for such Distribution Date. With respect to the Class A-IO
Certificates and any Distribution Date, an amount equal to the Uncertificated
Notional Amount for the REMIC II Regular Interest II-LTIO.

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

                                      -19-

<PAGE>

               "One-Month LIBOR": With respect to the Class A Certificates, the
Mezzanine Certificates, REMIC II Regular Interest II-LT2, REMIC II Regular
Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II Regular Interest
II-LT5 and any Interest Accrual Period therefor, the rate determined by the
Trustee on the related Interest Determination Date on the basis of the offered
rate for one-month U. S. dollar deposits, as such rate appears on Telerate Page
3750 as of 11: 00 a. m. (London time) on such Interest Determination Date;
provided that if such rate does not appear on Telerate Page 3750, the rate for
such date will be determined on the basis of the offered rates of the Reference
Banks for one-month U. S. dollar deposits, as of 11: 00 a. m. (London time) on
such Interest Determination Date. In such event, the Trustee will request the
principal London office of each of the Reference Banks to provide a quotation of
its rate. If on such Interest Determination Date, two or more Reference Banks
provide such offered quotations, One-Month LIBOR for the related Interest
Accrual Period shall be the arithmetic mean of such offered quotations (rounded
upwards if necessary to the nearest whole multiple of 1/16%). If on such
Interest Determination Date, fewer than two Reference Banks provide such offered
quotations, One-Month LIBOR for the related Interest Accrual Period shall be the
higher of (i) LIBOR as determined on the previous Interest Determination Date
and (ii) the Reserve Interest Rate. Notwithstanding the foregoing, if, under the
priorities described above, LIBOR for an Interest Determination Date would be
based on LIBOR for the previous Interest Determination Date for the third
consecutive Interest Determination Date, the Trustee shall select an alternative
comparable index (over which the Trustee has no control), used for determining
one-month Eurodollar lending rates that is calculated and published (or
otherwise made available) by an independent party.

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

               "Original Mortgage Loan": Any of the Mortgage Loans included in
REMIC I as of the Closing Date.

               "Originator": New Century Mortgage Corporation, or its successor
in interest, in its capacity as originator under the Mortgage Loan Purchase
Agreement.

               "Overcollateralized Amount": With respect to any Distribution
Date, the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans and REO Properties immediately following such Distribution Date
over (b) the sum of the aggregate Certificate Principal Balances of the Class A
Certificates, the Mezzanine Certificates and the Class P Certificates as of such
Distribution Date (after taking into account the payment of the amounts
described in clauses (b)(i) through (iv) of the definition of Principal
Distribution Amount on such Distribution Date).

               "Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Overcollateralized
Amount applicable to such Distribution Date over (b) the Overcollateralized
Amount applicable to such Distribution Date prior to taking into account the
payment of any Overcollateralization Increase Amount on such

                                      -20-

<PAGE>

Distribution Date.

               "Overcollateralization Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such Distribution Date (after taking into account the payment of the
Principal Distribution Amount on such Distribution Date, exclusive of the
payment of any Overcollateralization Increase Amount) and (b) the amount of
Accrued Certificate Interest for the Class CE Certificates for such Distribution
Date as reduced by Realized Losses allocated thereto with respect to such
Distribution Date pursuant to Section 4.04.

               "Overcollateralization Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess
Overcollateralized Amount and (b) the sum of the amounts available for
distribution specified in clauses (b)(i) through (iii) of the definition of
Principal Distribution Amount.

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

               "Pass-Through Rate": With respect to the Class A Certificates and
the Mezzanine Certificates and any Distribution Date, a rate per annum equal to
the lesser of (i) the related Formula Rate for such Distribution Date and (ii)
the Net WAC Pass-Through Rate for such Distribution Date. With respect to the
Class A-IO Certificates and any Distribution Date, a per annum rate equal to the
Class A-IO Rate. With respect to the Class CE Certificates and any Distribution
Date, a rate per annum equal to the percentage equivalent of a fraction, the
numerator of which is the sum of the amounts calculated pursuant to clauses (A)
through (G) below, and the denominator of which is the Uncertificated Balance of
the REMIC II Regular Interests. For purposes of calculating the Pass-Through
Rate for the Class CE Certificates, the numerator is equal to the sum of the
following components:

               (A)     the Uncertificated REMIC II Pass-Through Rate for REMIC
                       II Regular Interest II-LT1 minus the Marker Rate, applied
                       to an amount equal to the Uncertificated Principal
                       Balance of REMIC I Regular Interest II-LT1;

               (B)     the Uncertificated REMIC II Pass-Through Rate for REMIC
                       II Regular Interest II-LT2 minus the Marker Rate, applied
                       to an amount equal to the Uncertificated Principal
                       Balance of REMIC II Regular Interest II-LT2;

               (C)     the Uncertificated REMIC II Pass-Through Rate for REMIC
                       II Regular Interest II-LT3 minus the Marker Rate, applied
                       to an amount equal to the Uncertificated Principal
                       Balance of REMIC II Regular Interest II-LT3;

               (D)     the Uncertificated REMIC II Pass-Through Rate for REMIC
                       II Regular Interest II-LT4 minus the Marker Rate, applied
                       to an amount equal to the Uncertificated Principal
                       Balance of REMIC II Regular Interest II-LT4;

                                      -21-

<PAGE>

               (E)     the Uncertificated REMIC II Pass-Through Rate for REMIC
                       II Regular Interest II-LT5 minus the Marker Rate, applied
                       to an amount equal to the Uncertificated Principal
                       Balance of REMIC II Regular Interest II-LT5;

               (F)     the Uncertificated REMIC II Pass-Through Rate for REMIC
                       II Regular Interest II-LT6 minus the Marker Rate, applied
                       to an amount equal to the Uncertificated Principal
                       Balance of REMIC II Regular Interest II-LT6; and

               (G) 100% of the interest on REMIC II Regular Interest II-LTP.

               "Percentage Interest": With respect to any Class of Certificates
(other than the Residual Certificates), the undivided percentage ownership in
such Class evidenced by such Certificate, expressed as a percentage, the
numerator of which is the initial Certificate Principal Balance or Notional
Amount represented by such Certificate and the denominator of which is the
aggregate initial Certificate Principal Balance or Notional Amount of all of the
Certificates of such Class. The Class A Certificates and the Mezzanine
Certificates are issuable only in minimum Percentage Interests corresponding to
minimum initial Certificate Principal Balances of $10,000 and integral multiples
of $1.00 in excess thereof. The Class A-IO Certificates are issuable only in
minimum Percentage Interests corresponding to minimum initial Notional Amounts
of $10,000 and integral multiples of $1.00 in excess thereof. The Class P
Certificates are issuable only in Percentage Interests corresponding to initial
Certificate Principal Balances of $20 and integral multiples thereof. The Class
CE Certificates are issuable only in minimum Percentage Interests corresponding
to minimum initial Certificate Principal Balances of $10,000 and integral
multiples of $1.00 in excess thereof; provided, however, that a single
Certificate of each such Class of Certificates may be issued having a Percentage
Interest corresponding to the remainder of the aggregate initial Certificate
Principal Balance or Notional Amount of such Class or to an otherwise authorized
denomination for such Class plus such remainder. With respect to any Residual
Certificate, the undivided percentage ownership in such Class evidenced by such
Certificate, as set forth on the face of such Certificate. The Residual
Certificates are issuable in Percentage Interests of 20% and multiples thereof.

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

               "Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the Trustee
or any of their respective Affiliates:

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

               (ii) demand and time deposits in, certificates of deposit of, or
        bankers' acceptances issued by, any Depository Institution;

                                      -22-

<PAGE>

               (iii) repurchase obligations with respect to any security
        described in clause (i) above entered into with a Depository Institution
        (acting as principal);

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

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

               (vi) units of money market funds that have been rated "AAA" by
        Fitch (if rated by Fitch) and "AAAm" or "AAAm-G" by S& P; and

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

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

               "Permitted Transferee": Any Transferee of a Residual Certificate
other than a Disqualified Organization or Non-United States Person.

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

               "P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date pursuant
to Section 4.03.

               "Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the Code.
                "PMI Insurer": Mortgage Guaranty Insurance Corporation, a
monoline private insurance company organized and created under the laws of the
State of Wisconsin, or its

                                      -23-

<PAGE>

successors in interest.

               "PMI Insurer Fee": The amount payable to the PMI Insurer on each
Distribution Date, which amount shall equal the product of (i) the PMI Insurer
Fee Rate, multiplied by (ii) the aggregate Scheduled Principal Balance of the
PMI Mortgage Loans and any related REO Properties as of the first day of the
related Due Period.

               "PMI Insurer Fee Rate": 1.50% per annum.

               "PMI Mortgage Loans": The list of Mortgage Loans insured by the
PMI Insurer attached hereto as Schedule 1.

               "PMI Policy": The Primary Mortgage Insurance Policy
No.22-590-4-1590 with respect to the PMI Mortgage Loans and all endorsements
thereto dated the Closing Date, issued by the PMI Insurer.

               "Prepayment Assumption": A prepayment rate for the Mortgage Loans
of 28% CPR. The Prepayment Assumption is used solely for determining the accrual
of original issue discount on the Certificates for federal income tax purposes.
A CPR (or Constant Prepayment Rate) represents an annualized constant assumed
rate of prepayment each month of a pool of mortgage loans relative to its
outstanding principal balance for the life of such pool.

               "Prepayment Charge": With respect to any Prepayment Period, any
prepayment premium, penalty or charge payable by a Mortgagor in connection with
any Principal Prepayment on a Mortgage Loan pursuant to the terms of the related
Mortgage Note (other than any Master Servicer Prepayment Charge Payment Amount).

               "Prepayment Charge Schedule": As of any date, the list of
Prepayment Charges on the Mortgage Loans included in REMIC I on such date,
attached hereto as Schedule 2 (including the Prepayment Charge Summary attached
thereto). The Prepayment Charge Schedule shall set forth the following
information with respect to each related Mortgage Loan:

               (i)     the Mortgage Loan identifying number;

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

               (iii)   the state of origination of the related Mortgage Loan;

               (iv)    the date on which the first monthly payment was due on
                       the related Mortgage Loan;

               (v)     the term of the related Mortgage Loan; and

               (vi)    the principal balance of the related Mortgage Loan as of
                       the Cut-off Date.

               The Prepayment Charge Schedule shall be amended from time to time
by the

                                      -24-

<PAGE>

Depositor in accordance with the provisions of this Agreement.

               "Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was during the related Prepayment Period the
subject of a Principal Prepayment in full or in part that was applied by the
Master Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the succeeding Prepayment Period, an amount equal
to interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment for the number of days commencing on the date on which the prepayment
is applied and ending on the last day of the related Prepayment Period. The
obligations of the Master Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.

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

               "Principal Distribution Amount": With respect to any Distribution
Date, the lesser of:

               (a) the excess of the Available Distribution Amount over the
amount payable on the Class A Certificates, the Mezzanine Certificates and the
Class A-IO Certificates pursuant to Section 4.01(a)(2); and

               (b)     the sum of:

                       (i) the principal portion of each Monthly Payment on the
                       Mortgage Loans due during the related Due Period, whether
                       or not received on or prior to the related Determination
                       Date;

                       (ii) the Stated Principal Balance of any Mortgage Loan
                       that was purchased during the related Prepayment Period
                       pursuant to or as contemplated by Section 2.03, Section
                       3.16(c) or Section 9.01 and the amount of any shortfall
                       deposited in the Collection Account in connection with
                       the substitution of a Deleted Mortgage Loan pursuant to
                       Section 2.03 during the related Prepayment Period;

                       (iii) the principal portion of all other unscheduled
                       collections (including, without limitation, Principal
                       Prepayments, Insurance Proceeds, Liquidation Proceeds and
                       REO Principal Amortization) received during the related
                       Prepayment Period, net of any portion thereof that
                       represents a recovery of principal for which an advance
                       was made by the Master Servicer pursuant to Section 4.03
                       in respect of a preceding Distribution Date;

                       (iv) the principal portion of any Realized Losses
                       incurred on the Mortgage Loans in the calendar month
                       preceding such Distribution Date; and

                       (v) the amount of any Overcollateralization Increase
                       Amount for such Distribution Date;

                                      -25-

<PAGE>

                       minus:

                       (vi)   the amount of any Overcollateralization Reduction
                       Amount for such Distribution Date.

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

               "PTCE": A Prohibited Transaction Class Exemption issued by the
United States Department of Labor which provides that exemptive relief is
available to any party to any transaction which satisfies the conditions of the
exemption.

               "Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 9.01, and as confirmed by an Officers'Certificate from the
Master Servicer and to the Trustee an amount equal to the sum of (i) 100% of the
Stated Principal Balance thereof as of the date of purchase (or such other price
as provided in Section 9.01), (ii) in the case of (x) a Mortgage Loan, accrued
interest on such Stated Principal Balance at the applicable Net Mortgage Rate in
effect from time to time from the Due Date as to which interest was last covered
by a payment by the Mortgagor or an advance by the Master Servicer, which
payment or advance had as of the date of purchase been distributed pursuant to
Section 4.01, through the end of the calendar month in which the purchase is to
be effected and (y) an REO Property, the sum of (1) accrued interest on such
Stated Principal Balance at the applicable Net Mortgage Rate in effect from time
to time from the Due Date as to which interest was last covered by a payment by
the Mortgagor or an advance by the Master Servicer through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, plus (2) REO Imputed Interest for such REO Property for
each calendar month commencing with the calendar month in which such REO
Property was acquired and ending with the calendar month in which such purchase
is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and P& I Advances that as of the date of purchase
had been distributed as or to cover REO Imputed Interest pursuant to Section
4.01, (iii) any unreimbursed Servicing Advances and P& I Advances (including
Nonrecoverable P& I Advances and Nonrecoverable Servicing Advances) and any
unpaid Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any
amounts previously withdrawn from the Collection Account in respect of such
Mortgage Loan or REO Property pursuant to Section 3.11(a)(ix) and Section
3.16(b), and (v) in the case of a Mortgage Loan required to be purchased
pursuant to Section 2.03, expenses reasonably incurred or to be incurred by the
Master Servicer or the Trustee in respect of the breach or defect giving rise to
the purchase obligation.

               "Qualified Substitute Mortgage Loan": A mortgage loan substituted
for a Deleted Mortgage Loan pursuant to the terms of this Agreement which must,
on the date of such substitution, (i) have an outstanding principal balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Scheduled Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Rate not less than
(and not more than one percentage point

                                      -26-

<PAGE>

in excess of) the Mortgage Rate of the Deleted Mortgage Loan, (iii) with respect
to any Adjustable- Rate Mortgage Loan, have a Maximum Mortgage Rate not less
than the Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) with respect
to any Adjustable-Rate Mortgage Loan, have a Minimum Mortgage Rate not less than
the Minimum Mortgage Rate of the Deleted Mortgage Loan, (v) with respect to any
Adjustable-Rate Mortgage Loan, have a Gross Margin equal to the Gross Margin of
the Deleted Mortgage Loan, (vi) with respect to any Adjustable-Rate Mortgage
Loan, have a next Adjustment Date not more than two months later than the next
Adjustment Date on the Deleted Mortgage Loan, (vii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (viii) have the same Due Date as the Due Date on the
Deleted Mortgage Loan, (ix) have a Loan-to-Value Ratio as of the date of
substitution equal to or lower than the Loan-to-Value Ratio of the Deleted
Mortgage Loan as of such date, (x) have a risk grading determined by the
Originator at least equal to the risk grading assigned on the Deleted Mortgage
Loan, (xi) be covered by the PMI Policy if the Deleted Mortgage Loan was covered
by the PMI Policy and (xii) conform to each representation and warranty set
forth in Section 6 of the Mortgage Loan Purchase Agreement applicable to the
Deleted Mortgage Loan. In the event that one or more mortgage loans are
substituted for one or more Deleted Mortgage Loans, the amounts described in
clause (i) hereof shall be determined on the basis of aggregate principal
balances, the Mortgage Rates described in clause (ii) hereof shall be determined
on the basis of weighted average Mortgage Rates, the terms described in clause
(vii) hereof shall be determined on the basis of weighted average remaining term
to maturity, the Loan-to-Value Ratios described in clause (ix) hereof shall be
satisfied as to each such mortgage loan, the risk gradings described in clause
(x) hereof shall be satisfied as to each such mortgage loan and, except to the
extent otherwise provided in this sentence, the representations and warranties
described in clause (xi) hereof must be satisfied as to each Qualified
Substitute Mortgage Loan or in the aggregate, as the case may be.

               "Rate/Term Refinancing": A Refinanced Mortgage Loan, the proceeds
of which are not more than a nominal amount in excess of the existing first
mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for such
nominal amount) to satisfy the then existing first mortgage loan and any
subordinate mortgage loan of the Mortgagor on the related Mortgaged Property and
to pay related closing costs.

               "Rating Agency or Rating Agencies": Fitch and S&P or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor, notice of
which designation shall be given to the Trustee and the Master Servicer.

               "Realized Loss": With respect to each Mortgage Loan as to which a
Final Recovery Determination has been made, an amount (not less than zero) equal
to (i) the unpaid principal balance of such Mortgage Loan as of the commencement
of the calendar month in which the Final Recovery Determination was made, plus
(ii) accrued interest from the Due Date as to which interest was last paid by
the Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) any amounts

                                      -27-

<PAGE>

previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final Recovery Determination was made, net of amounts that
are payable therefrom to the Master Servicer with respect to such Mortgage Loan
pursuant to Section 3.11(a)(iii).

               With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus
(v) the aggregate of all P& I Advances and Servicing Advances (in the case of
Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) made by the Master Servicer in respect of such REO Property or the
related Mortgage Loan for which the Master Servicer has been or, in connection
with such Final Recovery Determination, will be reimbursed pursuant to Section
3.23 out of rental income, Insurance Proceeds and Liquidation Proceeds received
in respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Distribution Account pursuant to Section 3.23.

               With respect to each Mortgage Loan which has become the subject
of a Deficient Valuation, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation.

               With respect to each Mortgage Loan which has become the subject
of a Debt Service Reduction, the portion, if any, of the reduction in each
affected Monthly Payment attributable to a reduction in the Mortgage Rate
imposed by a court of competent jurisdiction. Each such Realized Loss shall be
deemed to have been incurred on the Due Date for each affected Monthly Payment.

               "Record Date": With respect to each Distribution Date and any
Book-Entry Certificate (other than the Class A-IO Certificates), the Business
Day immediately preceding such Distribution Date. With respect to each
Distribution Date and any other Certificates, including any Definitive
Certificates, the last Business Day of the month immediately preceding the month
in which such Distribution Date occurs.

                                      -28-

<PAGE>

               "Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The
Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors in
interest; provided, however, that if any of the foregoing banks are not suitable
to serve as a Reference Bank, then any leading banks selected by the Trustee
which are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Depositor
or any Affiliate thereof and (iii) which have been designated as such by the
Trustee.

               "Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which
were not used to purchase the related Mortgaged Property.

               "Regular Certificate": Any Class A Certificate, Mezzanine
Certificate, Class A-IO Certificate, Class CE Certificate or Class P
Certificate.

               "Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.

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

               "Relief Act Interest Shortfall": With respect to any Distribution
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.

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

               "REMIC I": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans and Prepayment Charges as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof; (ii) any REO Property, together
with all collections thereon and proceeds thereof; (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies, including the
PMI Policy, required to be maintained pursuant to this Agreement and any
proceeds thereof; (iv) the Depositor's rights under the Mortgage Loan Purchase
Agreement (including any security interest created thereby); (v) the Collection
Account (other than any amounts representing any Master Servicer Prepayment
Charge Payment Amount), the Distribution Account (other than any amounts
representing any Master Servicer Prepayment Charge Payment Amount) and any REO
Account, and such assets that are deposited therein from time to time and any
investments thereof, together with any and all income, proceeds and payments
with respect thereto. Notwithstanding the foregoing, however, REMIC I
specifically excludes the Reserve Fund, all payments and other collections of
principal and interest due on the Mortgage Loans on or before the Cut-off Date
and all Prepayment Charges payable in connection with Principal Prepayments made
before the Cut-off Date.

               "REMIC I Regular Interest": Any of the three separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC

                                      -29-

<PAGE>

I. Each REMIC I Regular Interest shall accrue interest at the related REMIC I
Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary Statement hereto. The designations for the respective REMIC I
Regular Interests are set forth in the Preliminary Statement hereto.

               "REMIC I Regular Interest I-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC I Regular Interest I-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC I Regular Interest I-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTP
shall be entitled to the Prepayment Charges collected by the Master Servicer,
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to a distribution of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC I Remittance Rate": With respect to any Distribution Date,
a per annum rate equal to the Weighted Average Expense Adjusted Mortgage Rate
for such Distribution Date.

               "REMIC II": The segregated pool of assets consisting of all of
the REMIC I Regular Interests conveyed in trust to the Trustee, for the benefit
of REMIC III, as holder of the REMIC III Regular Interests, and the Class R-III
Certificateholders pursuant to Section 2.09, and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.

               "REMIC II Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount (subject to adjustment based on the actual number
of days elapsed in the respective Interest Accrual Periods for the indicated
Regular Interests for such Distribution Date) equal to (a) the product of (i)
the aggregate Stated Principal Balance of the Mortgage Loans and REO Properties
then outstanding and (ii) the REMIC II Remittance Rate for REMIC II Regular
Interest II-LT1 minus the Marker Rate, divided by (b) 12.

               "REMIC II Overcollateralized Amount": With respect to any date of
determination, (i) 1% of the aggregate Uncertificated Balances of the REMIC II
Regular Interests minus (ii) the aggregate of the Uncertificated Balances of
REMIC II Regular Interest II-LT2,

                                      -30-

<PAGE>

REMIC II Regular Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II
Regular Interest II-LT5, in each case as of such date of determination.

               "REMIC II Principal Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to the product of (i) the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties then outstanding and
(ii) 1 minus a fraction, the numerator of which is two times the aggregate of
the Uncertificated Balances of REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II Regular
Interest II-LT5 and the denominator of which is the aggregate of the
Uncertificated Balances of REMIC II Regular Interest II-LT2, REMIC II Regular
Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest
II-LT5 and REMIC II Regular Interest II-LT6.

               "REMIC II Regular Interest": Any of the eight separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. Each REMIC II Regular Interest
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time or shall otherwise be entitled to interest as set forth herein, and
shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto. The designations for
the respective REMIC II Regular Interests are set forth in the Preliminary
Statement hereto.

               "REMIC II Regular Interest II-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT1
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC II Regular Interest II-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC II Regular Interest II-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC II Regular Interest II-LT4": One of the separate
non-certificated beneficial ownership interests in REMIC III issued hereunder
and designated as a Regular Interest in REMIC II. REMIC II Regular Interest
II-LT4 shall accrue interest at the related REMIC II Remittance Rate in effect
from time to time, and shall be entitled to distributions of principal, subject
to the terms and

                                      -31-

<PAGE>

conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

               "REMIC II Regular Interest II-LT5": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT5
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC II Regular Interest II-LT6": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT6
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

               "REMIC II Regular Interest II-LTIO": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTIO
shall be entitled to receive all interest distributed to REMIC I Regular
Interest I-LTIO. REMIC II Regular Interest II-LTIO has no principal balance and
is not entitled to distributions of principal.

               "REMIC II Regular Interest II-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTP
shall be entitled to any Prepayment Charges collected by the Master Servicer and
to a distribution of principal, subject to the terms and conditions hereof, in
an aggregate amount equal to its initial Uncertificated Balance as set forth in
the Preliminary Statement hereto.

               "REMIC II Remittance Rate": With respect to each REMIC II Regular
Interest (other than REMIC II Regular Interest II-LTIO) and any Distribution
Date, the Net WAC Pass-Through Rate. With respect to REMIC II Regular Interest
II-LTIO, the Class A-IO Rate.

               "REMIC II Required Overcollateralized Amount": 1% of the Required
Overcollateralization Amount.

               "REMIC III": The segregated pool of assets consisting of all of
the REMIC II Regular Interests conveyed in trust to the Trustee, for the benefit
of the REMIC III Certificateholders pursuant to Section 2.13, and all amounts
deposited therein, with respect to which a separate REMIC election is to be
made.

               "REMIC III Certificate": Any Regular Certificate or Class R-III
Certificate.

               "REMIC III Certificateholder": The Holder of any REMIC III
Certificate.

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<PAGE>

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

               "Remittance Report": A report in form and substance acceptable to
the Trustee on a magnetic disk or tape prepared by the Master Servicer pursuant
to Section 4.03 with such additions, deletions and modifications as agreed to by
the Trustee and the Master Servicer.

               "Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."

               "REO Account": The account or accounts maintained, or caused to
be maintained, by the Master Servicer in respect of an REO Property pursuant to
Section 3.23.

               "REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I.

               "REO Imputed Interest": As to any REO Property, for any calendar
month during which such REO Property was at any time part of REMIC I, one
month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan, if appropriate) as of the close of business on the
Distribution Date in such calendar month.

               "REO Principal Amortization": With respect to any REO Property,
for any calendar month, the excess, if any, of (a) the aggregate of all amounts
received in respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without limitation, that
portion of the Termination Price paid in connection with a purchase of all of
the Mortgage Loans and REO Properties pursuant to Section 9.01 that is allocable
to such REO Property) or otherwise, net of any portion of such amounts (i)
payable pursuant to Section 3.23(c) in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Master Servicer pursuant to Section 3.23(d) for unpaid Servicing Fees in
respect of the related Mortgage Loan and unreimbursed Servicing Advances and P&
I Advances in respect of such REO Property or the related Mortgage Loan, over
(b) the REO Imputed Interest in respect of such REO Property for such calendar
month.

               "REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of REMIC I through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.

               "Request for Release": A release signed by a Servicing Officer,
in the form of Exhibit E-1 or Exhibit E-2 attached hereto.

               "Required Overcollateralized Amount": With respect to any
Distribution Date (i) prior to the Stepdown Date, $3,885,099.85, (ii) on or
after the Stepdown Date provided a Trigger Event is not in effect, the greater
of (x) 1.50% of the aggregate Stated Principal Balance of the

                                      -33-

<PAGE>

Mortgage Loans as of the last day of the related Due Period and (y)
$2,590,010.99, and (iii) on or after the Stepdown Date if a Trigger Event is in
effect, the Required Overcollateralized Amount for the immediately preceding
Distribution Date.

               "Reserve Fund": The Reserve Fund established and maintained
pursuant to Section 3.28.

               "Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U. S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U. S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.

               "Residential Dwelling": Any one of the following: (i) an
attached, detached or semi- detached one-family dwelling, (ii) an attached,
detached or semi-detached two-to four-family dwelling, (iii) a one-family
dwelling unit in a Fannie Mae eligible condominium project, or (iv) an attached,
detached or semi-detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).

               "Residual Certificate": Any one of the Class R-I, Class R-II or
Class R-III.

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

               "Responsible Officer": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters, any
vice president, any assistant vice president, the Secretary, any assistant
secretary, the Treasurer, any assistant treasurer, the Cashier, any assistant
cashier, any trust officer or assistant trust officer, the Controller and any
assistant controller or any other officer of the Trustee, customarily performing
functions similar to those performed by any of the above designated officers
and, with respect to a particular matter, to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.

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

               "Scheduled Principal Balance": With respect to any Mortgage Loan:
(a) as of the Cut- off Date, the outstanding principal balance of such Mortgage
Loan as of such date, net of the principal portion of all unpaid Monthly
Payments, if any, due on or before such date; (b) as of any Due Date subsequent
to the Cut-off Date up to and including the Due Date in the calendar month in

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<PAGE>

which a Liquidation Event occurs with respect to such Mortgage Loan, the
Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date, minus
the sum of (i) the principal portion of each Monthly Payment due on or before
such Due Date but subsequent to the Cut-off Date, whether or not received, (ii)
all Principal Prepayments received before such Due Date but after the Cut-off
Date, (iii) the principal portion of all Liquidation Proceeds and Insurance
Proceeds received before such Due Date but after the Cut-off Date, net of any
portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before the date on which such proceeds were received and
(iv) any Realized Loss incurred with respect thereto as a result of a Deficient
Valuation occurring before such Due Date, but only to the extent such Realized
Loss represents a reduction in the portion of principal of such Mortgage Loan
not yet due (without regard to any acceleration of payments under the related
Mortgage and Mortgage Note) as of the date of such Deficient Valuation; and (c)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such Mortgage Loan, zero. With respect to any REO Property: (a) as of
any Due Date subsequent to the date of its acquisition on behalf of the Trust
Fund up to and including the Due Date in the calendar month in which a
Liquidation Event occurs with respect to such REO Property, an amount (not less
than zero) equal to the Scheduled Principal Balance of the related Mortgage Loan
as of the Due Date in the calendar month in which such REO Property was
acquired, minus the aggregate amount of REO Principal Amortization, if any, in
respect of such REO Property for all previously ended calendar months; and (b)
as of any Due Date subsequent to the occurrence of a Liquidation Event with
respect to such REO Property, zero.

               "Seller": NC Capital Corporation or its successor in interest, in
its capacity as seller under the Mortgage Loan Purchase Agreement.

               "Senior Interest Distribution Amount": With respect to any
Distribution Date, an amount equal to the sum of (i) the Interest Distribution
Amount for such Distribution Date for the Class A Certificates and the Class
A-IO Certificates and (ii) the Interest Carry Forward Amount, if any, for such
Distribution Date for the Class A Certificates and the Class A-IO Certificates.

               "Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.

               "Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in connection with a default,
delinquency or other unanticipated event by the Master Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including but not
limited to foreclosures, in respect of a particular Mortgage Loan, (iii) the
management (including reasonable fees in connection therewith) and liquidation
of any REO Property and (iv) the performance of its obligations under Section
3.01, Section 3.09, Section 3.14, Section 3.16 and Section 3.23. The Master
Servicer shall not be required to make any Nonrecoverable Servicing Advances.

               "Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to the Servicing Fee Rate accrued for one month
(or in the event of any payment of interest which accompanies a Principal
Prepayment in full or in part made by the Mortgagor

                                      -35-

<PAGE>

during such calendar month, interest for the number of days covered by such
payment of interest) on the same principal amount on which interest on such
Mortgage Loan accrues for such calendar month, calculated on the basis of a
360-day year consisting of twelve 30-day months. A portion of such Servicing Fee
may be retained by any Sub-Servicer as its servicing compensation.

               "Servicing Fee Rate": 0.50% per annum.

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

               "Single Certificate": With respect to any Class of Certificates
(other than the Class P Certificates and the Residual Certificates), a
hypothetical Certificate of such Class evidencing a Percentage Interest for such
Class corresponding to an initial Certificate Principal Balance (or Notional
Amount in the case of the Class A-IO Certificates) of $1,000. With respect to
the Class P Certificates and the Residual Certificates, a hypothetical
Certificate of such Class evidencing a 100% Percentage Interest in such Class.

               "Startup Day": With respect to each of REMIC I, REMIC II and
REMIC III, the day designated as such pursuant to Section 10.01(b) hereof.

               "Stated Principal Balance": With respect to any Mortgage Loan:
(a) as of any date of determination up to but not including the Distribution
Date on which the proceeds, if any, of a Liquidation Event with respect to such
Mortgage Loan would be distributed, the Scheduled Principal Balance of such
Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule,
minus the sum of (i) the principal portion of each Monthly Payment due on a Due
Date subsequent to the Cut-off Date, to the extent received from the Mortgagor
or advanced by the Master Servicer and distributed pursuant to Section 4.01 on
or before such date of determination, (ii) all Principal Prepayments received
after the Cut-off Date, to the extent distributed pursuant to Section 4.01 on or
before such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the Master Servicer as recoveries of principal in accordance
with the provisions of Section 3.16, to the extent distributed pursuant to
Section 4.01 on or before such date of determination, and (iv) any Realized Loss
incurred with respect thereto as a result of a Deficient Valuation made during
or prior to the Prepayment Period for the most recent Distribution Date
coinciding with or preceding such date of determination; and (b) as of any date
of determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such Mortgage Loan
would be distributed, zero. With respect to any REO Property: (a) as of any date
of determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of REMIC I, minus the sum of (i) if such REO Property was
acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent advanced by the Master Servicer and distributed
pursuant to Section 4.01 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for

                                      -36-

<PAGE>

all previously ended calendar months, to the extent distributed pursuant to
Section 4.01 on or before such date of determination; and (b) as of any date of
determination coinciding with or subsequent to the Distribution Date on which
the proceeds, if any, of a Liquidation Event with respect to such REO Property
would be distributed, zero.

               "Stayed Funds": If the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of a Remittance (as
defined in Section 7.02(b)) is prohibited by Section 362 of the federal
Bankruptcy Code, funds that are in the custody of the Master Servicer, a trustee
in bankruptcy or a federal bankruptcy court and should have been the subject of
such Remittance absent such prohibition.

               "Stepdown Date": The later to occur of (i) the Distribution Date
occurring in October 2004 and (ii) the first Distribution Date on which the
Credit Enhancement Percentage (calculated for this purpose only after taking
into account distributions of principal on the Mortgage Loans but prior to any
distribution of the Principal Distribution Amount to the Certificates then
entitled to distributions of principal on such Distribution Date) is equal to or
greater than 18.00%.

               "Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub- Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.

               "Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the Master Servicer.

               "Sub-Servicing Agreement": The written contract between the
Master Servicer and a Sub-Servicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02.

               "Substitution Shortfall Amount": As defined in Section 2.03(b).

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

               "Telerate Page 3750": The display designated as page "3750" on
the Dow Jones Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).

               "Termination Price": As defined in Section 9.01.

               "Terminator": As defined in Section 9.01.

                                      -37-

<PAGE>

               "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation, or other form of assignment of any Ownership Interest in a
Certificate.

               "Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.

               "Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.

               "Trigger Event": A Trigger Event has occurred with respect to a
Distribution Date if the Delinquency Percentage exceeds 15.00%.

               "Trust Fund": Collectively, all of the assets of REMIC I, REMIC
II and REMIC III, and the other assets conveyed by the Depositor to the Trustee
pursuant to Section 2.01.

               "Trustee": U. S. Bank National Association, a national banking
association, or its successor in interest, or any successor trustee appointed as
herein provided.

               "Trustee Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal the Trustee Fee Rate accrued for one month on the aggregate
Scheduled Principal Balance of the Mortgage Loans and any REO Properties as of
the second preceding Due Date (or, in the case of the initial Distribution Date,
as of the Cut-off Date), calculated on the basis of a 360-day year consisting of
twelve 30-day months.

               "Trustee Fee Rate":  0.0105% per annum.

               "Uncertificated Balance": The amount of any REMIC I Regular
Interest or REMIC II Regular Interest (other than REMIC II Regular Interest
II-LTIO) outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Balance of each REMIC I Regular Interest and each REMIC II
Regular Interest (other than REMIC II Regular Interest II-LTIO) shall equal the
amount set forth in the Preliminary Statement hereto as its initial
uncertificated balance. On each Distribution Date, the Uncertificated Balance of
each REMIC I Regular Interest and each REMIC II Regular Interest (other than
REMIC II Regular Interest II-LTIO) shall be reduced by all distributions of
principal made on such REMIC I Regular Interest or such REMIC II Regular
Interest, as applicable, on such Distribution Date pursuant to Section 4.01 and,
if and to the extent necessary and appropriate, shall be further reduced on such
Distribution Date by Realized Losses as provided in Section 4.04. The
Uncertificated Balance of REMIC II Regular Interest II-LT6 shall be increased by
interest deferrals as provided in Section 4.01(a)(1)(A)(i) and Section
4.01(a)(1)(B)(i), respectively. The Uncertificated Balance of each REMIC I
Regular Interest and each REMIC II Regular Interest shall never be less than
zero.

               "Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof

                                      -38-

<PAGE>

immediately prior to such Distribution Date. With respect to any REMIC II
Regular Interest for any Distribution Date, one month's interest at the REMIC II
Remittance Rate applicable to such REMIC II Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance or Uncertificated
Notional Amount thereof immediately prior to such Distribution Date.
Uncertificated Interest in respect of any REMIC I Regular Interest, REMIC II
Regular Interest, shall accrue on the basis of a 360-day year consisting of
twelve 30-day months. Uncertificated Interest with respect to each Distribution
Date, as to any REMIC I Regular Interest or REMIC II Regular Interest, shall be
reduced by an amount equal to the sum of (a) the aggregate Prepayment Interest
Shortfall, if any, for such Distribution Date to the extent not covered by
payments pursuant to Section 3.24 and (b) the aggregate amount of any Relief Act
Interest Shortfall, if any allocated, in each case, to such REMIC I Regular
Interest or REMIC II Regular Interest pursuant to Section 1.02. In addition,
Uncertificated Interest with respect to each Distribution Date, as to any REMIC
I Regular Interest or REMIC II Regular Interest shall be reduced by Realized
Losses, if any, allocated to such REMIC I Regular Interest or REMIC II Regular
Interest pursuant to Section 1.02 and Section 4.04.

               "Uncertificated Notional Amount": With respect to REMIC II
Regular Interest II- LTIO, shall equal the Uncertificated Balance of REMIC I
Regular Interest I-LT2.

               "Underwriters'Exemption": An individual exemption issued by the
United States Department of Labor, Prohibited Transaction Exemption 91-23 (56
Fed. Reg. 15936, April 19, 1991), as amended, to Salomon Smith Barney Inc.
(formerly known as Smith Barney Inc.), for specific offerings in which Salomon
Smith Barney Inc. or any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Salomon
Smith Barney Inc. is an underwriter, placement agent or a manager or co-manager
of the underwriting syndicate or selling group where the trust and the offered
certificates meet specified conditions. The Underwriters'Exemption, as amended,
provides a partial exemption for transactions involving certificates
representing a beneficial interest in a trust and entitling the holder to
pass-through payments of principal, interest and/or other payments with respect
to the trust's assets.

               "Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.

               "United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States, any state thereof or, District of Columbia
(except, in the case of a partnership, to the extent provided in regulations)
provided that, for purposes solely of the restrictions on the transfer of Class
R Certificates, no partnership or other entity treated as a partnership for
United States federal income tax purposes shall be treated as a United States
Person unless all persons that own an interest in such partnership either
directly or through any entity that is not a corporation for United States
federal income tax purposes are required by the applicable operative agreement
to be United States Persons or an estate whose income is subject to United
States federal income tax regardless of its source, or a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. To the extent
prescribed in regulations by the Secretary of the Treasury, which have not yet
been issued, a trust which was in existence on August 20, 1996 (other

                                      -39-

<PAGE>

than a trust treated as owned by the grantor under subpart E of part I of
subchapter J of chapter 1 of the Code), and which was treated as a United States
person on August 20, 1996 may elect to continue to be treated as a United States
person notwithstanding the previous sentence. The term "United States" shall
have the meaning set forth in Section 7701 of the Code.

               "Value": With respect to any Mortgaged Property, the lesser of
(i) the lesser of (a) the value thereof as determined by an appraisal made for
the Originator of the Mortgage Loan at the time of origination of the Mortgage
Loan by an appraiser who met the minimum requirements of Fannie Mae and Freddie
Mac and (b) the value thereof as determined by a review appraisal conducted by
the Master Servicer (in its capacity as Originator) in accordance with the
Master Servicer's underwriting guidelines, and (ii) the purchase price paid for
the related Mortgaged Property by the Mortgagor with the proceeds of the
Mortgage Loan; provided, however, (A) in the case of a Refinanced Mortgage Loan,
such value of the Mortgaged Property is based solely upon the lesser of (1) the
value determined by an appraisal made for the Originator of such Refinanced
Mortgage Loan at the time of origination of such Refinanced Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae and Freddie Mac and (2)
the value thereof as determined by a review appraisal conducted by the Master
Servicer (in its capacity as Originator) in accordance with the Master
Servicer's underwriting guidelines, and (B) in the case of a Mortgage Loan
originated in connection with a "lease-option purchase," such value of the
Mortgaged Property is based on the lower of the value determined by an appraisal
made for the Originator of such Mortgage Loan at the time of origination or the
sale price of such Mortgaged Property if the "lease option purchase price" was
set less than 12 months prior to origination, and is based on the value
determined by an appraisal made for the Originator of such Mortgage Loan at the
time of origination if the "lease option purchase price" was set 12 months or
more prior to origination.

               "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. With respect to any date of
determination, 97% of all Voting Rights will be allocated among the holders of
the Class A Certificates, the Mezzanine Certificates and the Class CE
Certificates in proportion to the then outstanding Certificate Principal
Balances of their respective Certificates, 1% of all Voting Rights will be
allocated to the holders of the Class A-IO Certificates in proportion to the
then outstanding Notional Amount of their Certificates, 1% of all Voting Rights
will be allocated to the holders of the Class P Certificates and 1/3 of 1% of
all Voting Rights will be allocated among the holders of each Class of Residual
Certificates. The Voting Rights allocated to each Class of Certificate shall be
allocated among Holders of each such Class in accordance with their respective
Percentage Interests as of the most recent Record Date.

               "Weighted Average Expense Adjusted Mortgage Rate": The weighted
average of the Expense Adjusted Mortgage Rates on the then outstanding Mortgage
Loans, weighted based on their Scheduled Principal Balances as of the first day
of the calendar month preceding the month in which the Distribution Date occurs.

               SECTION 1.02.          Allocation of Certain Interest Shortfalls.

               For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class A
Certificates, the Mezzanine Certificates, the Class A-IO Certificates and the
Class CE Certificates for any Distribution Date, (1) the aggregate

                                      -40-

<PAGE>

amount of any Prepayment Interest Shortfalls (to the extent not covered by
payments by the Master Servicer pursuant to Section 3.24) and any Relief Act
Interest Shortfall incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, among the Class CE Certificates on a
pro rata basis based on, and to the extent of, one month's interest at the then
applicable respective Pass-Through Rate on the respective Notional Amount of
each such Certificate and, thereafter, among the Class A Certificates, the
Mezzanine Certificates and the Class A-IO Certificates on a pro rata basis based
on, and to the extent of, one month's interest at the then applicable respective
Pass-Through Rate on the respective Certificate Principal Balance or Notional
Amount, as applicable, of each such Certificate and (2) the aggregate amount of
any Realized Losses and Net WAC Rate Carryover Amounts incurred for any
Distribution Date shall be allocated among the Class CE Certificates on a pro
rata basis based on, and to the extent of, one month's interest at the then
applicable respective Pass-Through Rate on the respective Notional Amount of
each such Certificate.

               For purposes of calculating the amount of Uncertificated Interest
for the REMIC I Regular Interests for any Distribution Date, the aggregate
amount of any Prepayment Interest Shortfalls (to the extent not covered by
payments by the Master Servicer pursuant to Section 3.24) and any Relief Act
Interest Shortfalls incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated to Uncertificated Interest payable to the
REMIC I Regular Interests (other than REMIC I Regular Interest I-LTP) pro rata
based on, and to the extent of, one month's interest at the then applicable
respective Pass-Through Rate on the respective Uncertificated Balance of each
such REMIC I Regular Interest (other than REMIC I Regular Interest I-LTP).

               For purposes of calculating the amount of Uncertificated Interest
for the REMIC II Regular Interests for any Distribution Date, the aggregate
amount of any Prepayment Interest Shortfalls (to the extent not covered by
payments by the Master Servicer pursuant to Section 3.24) and any Relief Act
Interest Shortfalls incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, to Uncertificated Interest payable
to REMIC II Regular Interest II-LT1 and REMIC II Regular Interest II-LT6 up to
an aggregate amount equal to the REMIC II Interest Loss Allocation Amount, 98%
and 2%, respectively, and thereafter among REMIC II Regular Interest II-LT1,
REMIC II Regular Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II
Regular Interest II-LT4, REMIC II Regular Interest II-LT5 and REMIC II Regular
Interest II-LT6 pro rata based on, and to the extent of, one month's interest at
the then applicable respective Pass- Through Rate on the respective
Uncertificated Balance of each such REMIC II Regular Interest.

                                      -41-

<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

               SECTION 2.01.          Conveyance of the Mortgage Loans.

               The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse, for the benefit of the Certificateholders, all the
right, title and interest of the Depositor, including any security interest
therein for the benefit of the Depositor, in and to the Mortgage Loans
identified on the Mortgage Loan Schedule, the rights of the Depositor under the
Mortgage Loan Purchase Agreement, and all other assets included or to be
included in REMIC I. Such assignment includes all interest and principal
received by the Depositor or the Master Servicer on or with respect to the
Mortgage Loans (other than payments of principal and interest due on such
Mortgage Loans on or before the Cut-off Date). The Depositor herewith delivers
to the Trustee an executed copy of the Mortgage Loan Purchase Agreement and the
PMI Policy.

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

                    (i) the original Mortgage Note, endorsed in blank or in the
               following form: "Pay to the order of U. S. Bank National
               Association, as Trustee under the applicable agreement, without
               recourse," with all prior and intervening endorsements showing a
               complete chain of endorsement from the originator to the Person
               so endorsing to the Trustee;

                    (ii) the original Mortgage with evidence of recording
               thereon, and the original recorded power of attorney, if the
               Mortgage was executed pursuant to a power of attorney, with
               evidence of recording thereon;

                    (iii) an original Assignment in blank;

                    (iv) the original recorded Assignment or Assignments showing
               a complete chain of assignment from the originator to the Person
               assigning the Mortgage to the Trustee as contemplated by the
               immediately preceding clause (iii);

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

                    (vi) the original lender's title insurance policy, together
               with all endorsements or riders that were issued with or
               subsequent to the issuance of such policy, insuring the priority
               of the Mortgage as a first lien on the Mortgaged Property
               represented therein as a fee interest vested in the Mortgagor, or
               in the event such original title policy is unavailable, a written
               commitment or uniform binder or

                                      -42-

<PAGE>

               preliminary report of title issued by the title insurance or
               escrow company.

               The Trustee, at the expense of the Seller, shall promptly (within
sixty Business Days following the later of the Closing Date and the date of
receipt by the Trustee of the recording information for a Mortgage, but in no
event later than ninety days following the Closing Date) submit or cause to be
submitted for recording, at no expense to the Trust Fund, the Trustee or the
Depositor, in the appropriate public office for real property records, each
Assignment referred to in Sections 2.01(iii) and (iv) above and the Depositor
shall execute each original Assignment in the following form: "U. S. Bank
National Association, as Trustee under the applicable agreement." In the event
that any such Assignment is lost or returned unrecorded because of a defect
therein, the Seller shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded. If the Seller is
unable to pay the cost of recording the Assignments, such expense will be paid
by the Trustee and shall be reimbursable to the Trustee as an Extraordinary
Trust Fund Expense.

               With respect to a maximum of approximately 2.0% of the Original
Mortgage Loans, by outstanding principal balance of the Original Mortgage Loans
as of the Cut-off Date, if any original Mortgage Note referred to in Section
2.01(i) above cannot be located, the obligations of the Depositor to deliver
such documents shall be deemed to be satisfied upon delivery to the Trustee of a
photocopy of such Mortgage Note, if available, with a lost note affidavit
substantially in the form of Exhibit I attached hereto. If any of the original
Mortgage Notes for which a lost note affidavit was delivered to the Trustee is
subsequently located, such original Mortgage Note shall be delivered to the
Trustee within three Business Days. If any of the documents referred to in
Sections 2.01(ii), (iii) or (iv) above has, as of the Closing Date, been
submitted for recording but either (x) has not been returned from the applicable
public recording office or (y) has been lost or such public recording office has
retained the original of such document, the obligations of the Depositor to
deliver such documents shall be deemed to be satisfied upon (1) delivery to the
Trustee of a copy of each such document certified by the Originator in the case
of (x) above or the applicable public recording office in the case of (y) above
to be a true and complete copy of the original that was submitted for recording
and (2) if such copy is certified by the Originator, delivery to the Trustee
promptly upon receipt thereof of either the original or a copy of such document
certified by the applicable public recording office to be a true and complete
copy of the original. Notice shall be provided to the Trustee and the Rating
Agencies by the Originator if delivery pursuant to clause (2) above will be made
more than 180 days after the Closing Date. If the original lender's title
insurance policy was not delivered pursuant to Section 2.01(vi) above, the
Depositor shall deliver or cause to be delivered to the Trustee, promptly after
receipt thereof, the original lender's title insurance policy. The Depositor
shall deliver or cause to be delivered to the Trustee promptly upon receipt
thereof any other original documents constituting a part of a Mortgage File
received with respect to any Mortgage Loan, including, but not limited to, any
original documents evidencing an assumption or modification of any Mortgage
Loan.

               All original documents relating to the Mortgage Loans that are
not delivered to the Trustee are and shall be held by or on behalf of the
Originator, the Seller, the Depositor or the Master Servicer, as the case may
be, in trust for the benefit of the Trustee on behalf of the Certificateholders.
In the event that any such original document is required pursuant to the terms
of this Section to be a part of a Mortgage File, such document shall be
delivered promptly to the Trustee. Any such

                                      -43-

<PAGE>

original document delivered to or held by the Depositor that is not required
pursuant to the terms of this Section to be a part of a Mortgage File, shall be
delivered promptly to the Master Servicer.

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

               SECTION 2.02.          Acceptance of REMIC I by Trustee.

               The Trustee acknowledges receipt, subject to the provisions of
Section 2.01 and subject to any exceptions noted on the exception report
described in the next paragraph below, the documents referred to in Section 2.01
(other than such documents described in Section 2.01(v)) above and all other
assets included in the definition of "REMIC I" under clauses (i), (iii), (iv)
and (v) (to the extent of amounts deposited into the Distribution Account) and
declares that it holds and will hold such documents and the other documents
delivered to it constituting a Mortgage File, and that it holds or will hold all
such assets and such other assets included in the definition of "REMIC I" in
trust for the exclusive use and benefit of all present and future
Certificateholders.

               The Trustee agrees, for the benefit of the Certificateholders, to
review each Mortgage File on or before the Closing Date and to certify in
substantially the form attached hereto as Exhibit C-1 that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the exception report
annexed thereto as not being covered by such certification), (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(v)) required to be delivered to it pursuant to this Agreement are
in its possession, (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan and (iii) based on its
examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedule that corresponds to items (i) through (iii), (vi),
(x)(A), (xi), (xii), (xv), (xvii), (xviii), (xx) through (xxiii) and (xxv) of
the definition of "Mortgage Loan Schedule" accurately reflects information set
forth in the Mortgage File. It is herein acknowledged that, in conducting such
review, the Trustee was under no duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine whether they are genuine, enforceable, or appropriate for the
represented purpose or whether they have actually been recorded or that they are
other than what they purport to be on their face or (ii) to determine whether
any Mortgage File should include any of the documents specified in clause (v) of
Section 2.01.

               Prior to the first anniversary date of this Agreement the Trustee
shall deliver to the Depositor and the Master Servicer a final certification in
the form annexed hereto as Exhibit C-2 evidencing the completeness of the
Mortgage Files, with any applicable exceptions noted thereon, and the Master
Servicer shall forward a copy thereof to any Sub-Servicer.

               If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trustee
finds any document or documents constituting a part of a Mortgage File to be
missing or defective in any material respect, at the conclusion of its review
the Trustee shall so notify the Depositor and the Master Servicer. In addition,
upon the discovery by the Depositor, the Master Servicer or the Trustee of a
breach of any of the representations and warranties made by the Originator or
the Seller in the Mortgage Loan

                                      -44-

<PAGE>

Purchase Agreement in respect of any Mortgage Loan which materially adversely
affects such Mortgage Loan or the interests of the related Certificateholders in
such Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties.

               The Trustee shall, at the written request and expense of any
Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the Master Servicer for servicing purposes.

               SECTION 2.03. Repurchase or Substitution of Mortgage Loans by the
Originator or the Seller.

                      (a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Originator or the Seller of any representation, warranty or
covenant under the Mortgage Loan Purchase Agreement in respect of any Mortgage
Loan that materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Trustee shall promptly notify
the Originator, the Seller and the Master Servicer of such defect, missing
document or breach and request that the Originator or the Seller, as the case
may be, deliver such missing document or cure such defect or breach within 60
days from the date the Originator or the Seller, as the case may be, was
notified of such missing document, defect or breach, and if the Originator or
the Seller, as the case may be, does not deliver such missing document or cure
such defect or breach in all material respects during such period, the Master
Servicer, to the extent it is not the Originator, the Seller or an Affiliate of
the Seller, and otherwise the Trustee, in accordance with Section 3.02(b), shall
enforce the obligations of the Originator or the Seller, as the case may be,
under the Mortgage Loan Purchase Agreement to repurchase such Mortgage Loan from
REMIC I at the Purchase Price within 90 days after the date on which the
Originator or the Seller, as the case may be, was notified (subject to Section
2.03(c)) of such missing document, defect or breach, if and to the extent that
the Originator or the Seller, as the case may be, is obligated to do so under
the Mortgage Loan Purchase Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be deposited in the Collection Account and the Trustee, upon
receipt of written certification from the Master Servicer of such deposit, shall
release to the Originator or the Seller, as the case may be, the related
Mortgage File and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Originator or the
Seller, as the case may be, shall furnish to it and as shall be necessary to
vest in the Originator or the Seller, as the case may be, any Mortgage Loan
released pursuant hereto. The Trustee shall not have any further responsibility
with regard to such Mortgage File. In lieu of repurchasing any such Mortgage
Loan as provided above, if so provided in the Mortgage Loan Purchase Agreement,
the Originator or the Seller, as the case may be, may cause such Mortgage Loan
to be removed from REMIC I (in which case it shall become a Deleted Mortgage
Loan) and substitute one or more Qualified Substitute

               Mortgage Loans in the manner and subject to the limitations set
forth in Section 2.03(b). It is understood and agreed that the obligation of the
Originator or the Seller, as the case may be, to cure or to repurchase (or to
substitute for) any Mortgage Loan as to which a document is missing, a material
defect in a constituent document exists or as to which such a breach has
occurred and is continuing shall constitute the sole remedy respecting such
omission, defect or breach available to the Trustee and the Certificateholders.

                                      -45-

<PAGE>

               (b) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.03(a) must be effected prior
to the date which is two years after the Startup Day for REMIC I.

               As to any Deleted Mortgage Loan for which the Originator or the
Seller substitutes a Qualified Substitute Mortgage Loan or Loans, such
substitution shall be effected by the Originator or the Seller, as the case may
be, delivering to the Trustee, for such Qualified Substitute Mortgage Loan or
Loans, the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such
other documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers'Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Shortfall Amount (as described below), if any,
in connection with such substitution. The Trustee shall acknowledge receipt for
such Qualified Substitute Mortgage Loan or Loans and, within ten Business Days
thereafter, review such documents as specified in Section 2.02 and deliver to
the Depositor and the Master Servicer, with respect to such Qualified Substitute
Mortgage Loan or Loans, a certification substantially in the form attached
hereto as Exhibit C-1, with any applicable exceptions noted thereon. Within one
year of the date of substitution, the Trustee shall deliver to the Depositor and
the Master Servicer a certification substantially in the form of Exhibit C-2
hereto with respect to such Qualified Substitute Mortgage Loan or Loans, with
any applicable exceptions noted thereon. Monthly Payments due with respect to
Qualified Substitute Mortgage Loans in the month of substitution are not part of
REMIC I and will be retained by the Originator or the Seller, as the case may
be. For the month of substitution, distributions to Certificateholders will
reflect the Monthly Payment due on such Deleted Mortgage Loan on or before the
Due Date in the month of substitution, and the Originator or the Seller, as the
case may be, shall thereafter be entitled to retain all amounts subsequently
received in respect of such Deleted Mortgage Loan. The Depositor shall give or
cause to be given written notice to the Certificateholders that such
substitution has taken place, shall amend the Mortgage Loan Schedule to reflect
the removal of such Deleted Mortgage Loan from the terms of this Agreement and
the substitution of the Qualified Substitute Mortgage Loan or Loans and shall
deliver a copy of such amended Mortgage Loan Schedule to the Trustee. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall constitute
part of the Mortgage Pool and shall be subject in all respects to the terms of
this Agreement and the Mortgage Loan Purchase Agreement, including, all
applicable representations and warranties thereof included in the Mortgage Loan
Purchase Agreement.

               For any month in which the Originator or the Seller substitutes
one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage
Loans, the Master Servicer will determine the amount (the "Substitution
Shortfall Amount"), if any, by which the aggregate Purchase Price of all such
Deleted Mortgage Loans exceeds the aggregate of, as to each such Qualified
Substitute Mortgage Loan, the Scheduled Principal Balance thereof as of the date
of substitution, together with one month's interest on such Scheduled Principal
Balance at the applicable Net Mortgage Rate, plus all outstanding P& I Advances
and Servicing Advances (including Nonrecoverable P& I Advances and
Nonrecoverable Servicing Advances) related thereto. On the date of such
substitution, the Originator or the Seller, as the case may be, will deliver or
cause to be delivered to the Master Servicer for deposit in the Collection
Account an amount equal to the Substitution Shortfall Amount, if any, and the
Trustee, upon receipt of the related Qualified Substitute Mortgage Loan or Loans
and certification by the Master Servicer of such deposit, shall

                                      -46-

<PAGE>

release to the Originator or the Seller, as the case may be, the related
Mortgage File or Files and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, the
Originator or the Seller, as the case may be, shall deliver to it and as shall
be necessary to vest therein any Deleted Mortgage Loan released pursuant hereto.

               In addition, the Originator or the Seller, as the case may be,
shall obtain at its own expense and deliver to the Trustee an Opinion of Counsel
to the effect that such substitution will not cause (a) any federal tax to be
imposed on any of REMIC I, REMIC II or REMIC III, including without limitation,
any federal tax imposed on "prohibited transactions" under Section 860F(a)(1) of
the Code or on "contributions after the startup date" under Section 860G(d)(1)
of the Code, or (b) any of REMIC I, REMIC II or REMIC III to fail to qualify as
a REMIC at any time that any Certificate is outstanding.

               (c) Upon discovery by the Depositor, the Originator, the Seller,
the Master Servicer or the Trustee that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the
party discovering such fact shall within two Business Days give written notice
thereof to the other parties. In connection therewith, the Originator, the
Seller or the Depositor shall repurchase or, subject to the limitations set
forth in Section 2.03(b), substitute one or more Qualified Substitute Mortgage
Loans for the affected Mortgage Loan within 90 days of the earlier of discovery
or receipt of such notice with respect to such affected Mortgage Loan. Such
repurchase or substitution shall be made by (i) the Originator or the Seller, as
the case may be, if the affected Mortgage Loan's status as a non-qualified
mortgage is or results from a breach of any representation, warranty or covenant
made by the Originator or the Seller, as the case may be, under the Mortgage
Loan Purchase Agreement, or (ii) the Depositor, if the affected Mortgage Loan's
status as a non-qualified mortgage is a breach of no representation or warranty.
Any such repurchase or substitution shall be made in the same manner as set
forth in Section 2.03(a). The Trustee shall reconvey to the Depositor, the
Originator or the Seller, as the case may be, the Mortgage Loan to be released
pursuant hereto in the same manner, and on the same terms and conditions, as it
would a Mortgage Loan repurchased for breach of a representation or warranty.

               SECTION 2.04.          Reserved

               SECTION 2.05.          Representations, Warranties and Covenants
                                      of the Master Servicer.

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

               (i) The Master Servicer is a federally chartered savings bank
        duly organized and validly existing under the laws of the United States
        and is duly authorized and qualified to transact any and all business
        contemplated by this Agreement to be conducted by the Master Servicer in
        any state in which a Mortgaged Property is located or is otherwise not
        required under applicable law to effect such qualification and, in any
        event, is in compliance with the doing business laws of any such State,
        to the extent necessary to ensure its ability to enforce each Mortgage
        Loan and to service the Mortgage Loans in accordance with the terms of
        this

                                      -47-

<PAGE>

        Agreement;

               (ii) The Master Servicer has the full power and authority to
        conduct its business as presently conducted by it and to execute,
        deliver and perform, and to enter into and consummate, all transactions
        contemplated by this Agreement. The Master Servicer has duly authorized
        the execution, delivery and performance of this Agreement, has duly
        executed and delivered this Agreement, and this Agreement, assuming due
        authorization, execution and delivery by the Depositor and the Trustee,
        constitutes a legal, valid and binding obligation of the Master
        Servicer, enforceable against it in accordance with its terms except as
        the enforceability thereof may be limited by bankruptcy, insolvency,
        reorganization or similar laws affecting the enforcement of
        creditors'rights generally and by general principles of equity;

               (iii) The execution and delivery of this Agreement by the Master
        Servicer, the servicing of the Mortgage Loans by the Master Servicer
        hereunder, the consummation by the Master Servicer of any other of the
        transactions herein contemplated, and the fulfillment of or compliance
        with the terms hereof are in the ordinary course of business of the
        Master Servicer and will not (A) result in a breach of any term or
        provision of the charter or by-laws of the Master Servicer or (B)
        conflict with, result in a breach, violation or acceleration of, or
        result in a default under, the terms of any other material agreement or
        instrument to which the Master Servicer is a party or by which it may be
        bound, or any statute, order or regulation applicable to the Master
        Servicer of any court, regulatory body, administrative agency or
        governmental body having jurisdiction over the Master Servicer; and the
        Master Servicer is not a party to, bound by, or in breach or violation
        of any indenture or other agreement or instrument, or subject to or in
        violation of any statute, order or regulation of any court, regulatory
        body, administrative agency or governmental body having jurisdiction
        over it, which materially and adversely affects or, to the Master
        Servicer's knowledge, would in the future materially and adversely
        affect, (x) the ability ofthe Master Servicer to perform its obligations
        under this Agreement or (y) the business, operations, financial
        condition, properties or assets of the Master Servicer taken as a whole;

               (iv) The Master Servicer is a HUD approved servicer. No event has
        occurred, including but not limited to a change in insurance coverage,
        that would make the Master Servicer unable to comply with HUD
        eligibility requirements or that would require notification to HUD;

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

               (vi)    [Reserved];

               (vii) No litigation is pending against the Master Servicer that
        would materially and adversely affect the execution, delivery or
        enforceability of this Agreement or the ability of the Master Servicer
        to service the Mortgage Loans or to perform any of its other obligations
        hereunder in accordance with the terms hereof;

                                      -48-

<PAGE>

               (viii) There are no actions or proceedings against, or
        investigations known to it of, the Master Servicer before any court,
        administrative or other tribunal (A) that might prohibit its entering
        into this Agreement, (B) seeking to prevent the consummation of the
        transactions contemplated by this Agreement or (C) that might prohibit
        or materially and adversely affect the performance by the Master
        Servicer of its obligations under, or validity or enforceability of,
        this Agreement;

               (ix) No consent, approval, authorization or order of any court or
        governmental agency or body is required for the execution, delivery and
        performance by the Master Servicer of, or compliance by the Master
        Servicer with, this Agreement or the consummation by it of the
        transactions contemplated by this Agreement, except for such consents,
        approvals, authorizations or orders, if any, that have been obtained
        prior to the Closing Date; and

               (x) The Master Servicer will not waive any Prepayment Charge
        unless it is waived in accordance with the standard set forth in Section
        3.01.

               It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.05 shall survive delivery of the
Mortgage Files to the Trustee and shall inure to the benefit of the Trustee, the
Depositor and the Certificateholders. Upon discovery by any of the Depositor,
the Master Servicer or the Trustee of a breach of any of the foregoing
representations, warranties and covenants which materially and adversely affects
the value of any Mortgage Loan or the interests therein of the
Certificateholders, the party discovering such breach shall give prompt written
notice (but in no event later than two Business Days following such discovery)
to the Trustee. Subject to Section 7.01, unless such breach shall not be
susceptible of cure within 90 days, the obligation of the Master Servicer set
forth in this Section 2.05 to cure breaches shall constitute the sole remedy
against the Master Servicer available to the Certificateholders, the Depositor
and the Trustee on behalf of the Certificateholders respecting a breach of the
representations, warranties and covenants contained in this Section 2.05.
Notwithstanding the foregoing, within 90 days of the earlier of discovery by the
Master Servicer or receipt of notice by the Master Servicer of the breach of the
representation or covenant of the Master Servicer set forth in Section 2.05(x)
above, which breach materially and adversely affects the interests of the
Holders of the Class P Certificates in any Prepayment Charge, the Master
Servicer must pay the amount of such waived Prepayment Charge, for the benefit
of the holders of the Class P Certificates, by depositing such amount into the
Collection Account.

               SECTION 2.06. Issuance of the REMIC I Regular Interests and the
                             Class R- I Certificates.

               The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it of the Mortgage Files, subject to the provisions of
Section 2.01 and Section 2.02, together with the assignment to it of all other
assets included in REMIC I, the receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the written request of the Depositor executed by an officer
of the Depositor, has executed, authenticated and delivered to or upon the order
of the Depositor, the Class R-I Certificates in authorized denominations. The
interests evidenced by the Class R-I Certificates,

                                      -49-

<PAGE>

together with the REMIC I Regular Interests, constitute the entire beneficial
ownership interest in REMIC I. The rights of the Class R-I Certificateholders
and REMIC II (as holder of the REMIC I Regular Interests) to receive
distributions from the proceeds of REMIC I in respect of the Class R-I
Certificates and the REMIC I Regular Interests, respectively, and all ownership
interests evidenced or constituted by the Class R-I Certificates and the REMIC I
Regular Interests, shall be as set forth in this Agreement.

               SECTION 2.07. Conveyance of the REMIC I Regular Interests;
                             Acceptance of REMIC II by the Trustee.

               The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the REMIC I Regular Interests for the benefit of the Class R-II
Certificateholders and REMIC II (as holder of the REMIC I Regular Interests).
The Trustee acknowledges receipt of the REMIC I Regular Interests and declares
that it holds and will hold the same in trust for the exclusive use and benefit
of all present and future Class R-II Certificateholders and REMIC II (as holder
of the REMIC I Regular Interests). The rights of the Class R-II
Certificateholders and REMIC II (as holder of the REMIC I Regular Interests) to
receive distributions from the proceeds of REMIC II in respect of the Class R-II
Certificates and REMIC II Regular Interests, respectively, and all ownership
interests evidenced or constituted by the Class R-II Certificates and the REMIC
II Regular Interests, shall be as set forth in this Agreement.

               SECTION 2.08.   Issuance of Class R-II Certificates.

               The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the Class R-II Certificates in authorized denominations. The
interests evidenced by the Class R-II Certificates, together with the REMIC II
Regular Interests, constitute the entire beneficial ownership interest in REMIC
II.

               SECTION 2.09. Conveyance of the REMIC II Regular Interests;
                             Acceptance of REMIC III by the Trustee.

               The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the REMIC II Regular Interests for the benefit of the Class R-III
Certificateholders and REMIC III (as holder of the REMIC II Regular Interests).
The Trustee acknowledges receipt of the REMIC II Regular Interests and declares
that it holds and will hold the same in trust for the exclusive use and benefit
of all present and future Class R-III Certificateholders and REMIC III (as
holder of the REMIC II Regular Interests). The rights of the Class R-III
Certificateholders and REMIC III (as holder of the REMIC II Regular Interests)
to receive distributions from the proceeds of REMIC III in respect of the Class
R-III Certificates and REMIC III Regular Interests, respectively, and all
ownership interests evidenced or constituted by the Class R-III Certificates and
the REMIC III Regular Interests, shall be as set forth in this Agreement.

                                      -50-

<PAGE>

               SECTION 2.10.  Issuance of Class R-III Certificates.

               The Trustee acknowledges the assignment to it of the REMIC II
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the Class R-III Certificates in authorized denominations. The
interests evidenced by the Class R-III Certificates, together with the REMIC III
Regular Interests, constitute the entire beneficial ownership interest in REMIC
III.

                                      -51-

<PAGE>

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

               SECTION 3.01.  Master Servicer to Act as Master Servicer.

               The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and in the best interests of and for the benefit
of the Certificateholders (as determined by the Master Servicer in its
reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of mortgage lenders and loan servicers administering similar mortgage
loans but without regard to:

               (i) any relationship that the Master Servicer, any Sub-Servicer
          or any Affiliate of the Master Servicer or any Sub-Servicer may have
          with the related Mortgagor;

               (ii) the ownership or non-ownership of any Certificate by the
          Master Servicer or any Affiliate of the Master Servicer;

               (iii) the Master Servicer's obligation to make P& I Advances or
          Servicing Advances; or

               (iv) the Master Servicer's or any Sub-Servicer's right to receive
          compensation for its services hereunder or with respect to any
          particular transaction.

               To the extent consistent with the foregoing, the Master Servicer
(a) shall seek to maximize the timely and complete recovery of principal and
interest on the Mortgage Notes and (b) shall waive (or permit a subservicer to
waive) a Prepayment Charge only under the following circumstances: (i) such
waiver is standard and customary in servicing similar Mortgage Loans and (ii)
either (A) such waiver would, in the reasonable judgement of the Master
Servicer, maximize recovery of total proceeds taking into account the value of
such Prepayment Charge and the related Mortgage Loan and, if such waiver is made
in connection with a refinancing of the related Mortgage Loan, such refinancing
is related to a default or a reasonably foreseeable default or (B) such waiver
is made in connection with a refinancing of the related Mortgage Loan unrelated
to a default or a reasonably foreseeable default where (x) the related mortgagor
has stated to the Master Servicer or an applicable subservicer an intention to
refinance the related Mortgage Loan and (y) the Master Servicer has concluded in
its reasonable judgement that the waiver of such Prepayment Charge would induce
such mortgagor to refinance with the Master Servicer or (iii) collection of the
related Prepayment Charge would violate applicable law. If a Prepayment Charge
is waived as permitted by meeting both of the standards described in clauses (i)
and (ii)(B) above, then the Master Servicer is required to pay the amount of
such waived Prepayment Charge, for the benefit of the Holders of the Class P
Certificates, by depositing such amount into the Collection Account together
with and at the time that the amount prepaid on the related Mortgage Loan is
required to be deposited into the Collection Account. Notwithstanding any other
provisions of this Agreement, any payments made

                                      -52-

<PAGE>

by the Master Servicer in respect of any waived Prepayment Charges pursuant to
clauses (i) and (ii)(B) shall be deemed to be paid outside of the Trust Fund.
Subject only to the above-described servicing standards and the terms of this
Agreement and of the respective Mortgage Loans, the Master Servicer shall have
full power and authority, acting alone or through Sub-Servicers as provided in
Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Master Servicer in its own
name or in the name of a Sub-Servicer is hereby authorized and empowered by the
Trustee when the Master Servicer believes it appropriate in its best judgment in
accordance with the servicing standards set forth above, to execute and deliver,
on behalf of the Certificateholders and the Trustee, and upon notice to the
Trustee any and all instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments, with respect
to the Mortgage Loans and the Mortgaged Properties and to institute foreclosure
proceedings or obtain a deed-in-lieu of foreclosure so as to convert the
ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee and Certificateholders. The Master Servicer
shall service and administer the Mortgage Loans in accordance with applicable
state and federal law and shall provide to the Mortgagors any reports required
to be provided to them thereby. The Master Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.17, the
Trustee shall execute, at the written request of the Master Servicer, and
furnish to the Master Servicer and any Sub-Servicer any special or limited
powers of attorney and other documents necessary or appropriate to enable the
Master Servicer or any Sub-Servicer to carry out their servicing and
administrative duties hereunder and the Trustee shall not be liable for the
actions of the Master Servicer or any Sub-Servicers under such powers of
attorney.

               Subject to Section 3.09 hereof, in accordance with the standards
of the preceding paragraph, the Master Servicer shall advance or cause to be
advanced funds as necessary for the purpose of effecting the timely payment of
taxes and assessments on the Mortgaged Properties, which advances shall be
Servicing Advances reimbursable in the first instance from related collections
from the Mortgagors pursuant to Section 3.09, and further as provided in Section
3.11. Any cost incurred by the Master Servicer or by Sub-Servicers in effecting
the timely payment of taxes and assessments on a Mortgaged Property shall not,
for the purpose of calculating distributions to Certificateholders, be added to
the unpaid principal balance of the related Mortgage Loan, notwithstanding that
the terms of such Mortgage Loan so permit.

               Notwithstanding anything in this Agreement to the contrary, the
Master Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.03) and the Master Servicer shall not (i)
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance (except for reductions
resulting from actual payments of principal) or change the final maturity date
on such Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment of
the Master Servicer, reasonably foreseeable) or (ii) permit any modification,
waiver or amendment of any term of any Mortgage Loan that would both (A) effect
an exchange or reissuance of such Mortgage Loan under Section 1001 of the Code
(or Treasury regulations promulgated thereunder) and (B) cause any of REMIC I,
REMIC II or REMIC III to fail to qualify as a REMIC under the Code or the
imposition of any tax on "prohibited transactions" or

                                      -53-

<PAGE>

"contributions after the startup date" under the REMIC Provisions.

               The Master Servicer may delegate its responsibilities under this
Agreement; provided, however, that no such delegation shall release the Master
Servicer from the responsibilities or liabilities arising under this Agreement.

               SECTION 3.02.  Sub-Servicing Agreements Between Master Servicer
                              and Sub-Servicers.

               (a) The Master Servicer may enter into Sub-Servicing Agreements
with Sub- Servicers for the servicing and administration of the Mortgage Loans;
provided, however, that such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the rating on any Class of Certificates. The
Trustee is hereby authorized to acknowledge, at the request of the Master
Servicer, any Sub-Servicing Agreement that meets the requirements applicable to
Sub- Servicing Agreements set forth in this Agreement and that is otherwise
permitted under this Agreement.

               Each Sub-Servicer shall be (i) authorized to transact business in
the state or states where the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub- Servicing
Agreement and (ii) a Freddie Mac or Fannie Mae approved mortgage servicer. Each
Sub- Servicing Agreement must impose on the Sub-Servicer requirements conforming
to the provisions set forth in Section 3.08 and provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Master Servicer
will examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub-Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Master Servicer and the
Sub-Servicers may enter into and make amendments to the Sub-Servicing Agreements
or enter into different forms of Sub- Servicing Agreements; provided, however,
that any such amendments or different forms shall be consistent with and not
violate the provisions of this Agreement, and that no such amendment or
different form shall be made or entered into which could be reasonably expected
to be materially adverse to the interests of the Certificateholders without the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights; provided, further, that the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights shall not be required (i) to cure
any ambiguity or defect in a Sub-Servicing Agreement, (ii) to correct, modify or
supplement any provisions of a Sub-Servicing Agreement, or (iii) to make any
other provisions with respect to matters or questions arising under a
Sub-Servicing Agreement, which, in each case, shall not be inconsistent with the
provisions of this Agreement. Any variation without the consent of the Holders
of Certificates entitled to at least 66% of the Voting Rights from the
provisions set forth in Section 3.08 relating to insurance or priority
requirements of Sub-Servicing Accounts, or credits and charges to the
Sub-Servicing Accounts or the timing and amount of remittances by the
Sub-Servicers to the Master Servicer, are conclusively deemed to be inconsistent
with this Agreement and therefore prohibited. The Master Servicer shall deliver
to the Trustee copies of all Sub-Servicing Agreements, and any amendments or
modifications thereof, promptly upon the Master Servicer's execution and
delivery of such instruments.

               (b) As part of its servicing activities hereunder, the Master
Servicer, for the

                                      -54-

<PAGE>

benefit of the Trustee and the Certificateholders, shall enforce the obligations
of each Sub-Servicer under the related Sub-Servicing Agreement and of the
Originator and the Seller under the Mortgage Loan Purchase Agreement, including,
without limitation, any obligation of a Sub-Servicer to make advances in respect
of delinquent payments as required by a Sub-Servicing Agreement, or any
obligation of the Originator or the Seller to purchase a Mortgage Loan on
account of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.03(a). Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements, and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. The Master Servicer shall pay
the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement, to
the extent, if any, that such recovery exceeds all amounts due in respect of the
related Mortgage Loans, or (ii) from a specific recovery of costs, expenses or
attorneys'fees against the party against whom such enforcement is directed.
Enforcement of the Mortgage Loan Purchase Agreement against the Seller and the
Originator shall be effected by the Master Servicer to the extent it is not the
Originator, the Seller or an Affiliate of the Seller, and otherwise by the
Trustee in accordance with the foregoing provisions of this paragraph.

               SECTION 3.03.          Successor Sub-Servicers.

               The Master Servicer shall be entitled to terminate any
Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Master Servicer without any act or deed on the part of
such Sub-Servicer or the Master Servicer, and the Master Servicer either shall
service directly the related Mortgage Loans or shall enter into a Sub-Servicing
Agreement with a successor Sub-Servicer which qualifies under Section 3.02.

               Any Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Trustee (if the Trustee is acting
as Master Servicer) without fee, in accordance with the terms of this Agreement,
in the event that the Master Servicer (or the Trustee, if it is then acting as
Master Servicer) shall, for any reason, no longer be the Master Servicer
(including termination due to a Master Servicer Event of Default).

               SECTION 3.04.          Liability of the Master Servicer.

               Notwithstanding any Sub-Servicing Agreement or the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer and a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Master Servicer shall remain obligated and primarily liable to
the Trustee and the Certificateholders for the servicing and administering of
the Mortgage Loans in accordance with the provisions of Section 3.01 without
diminution of such obligation or liability by virtue of such Sub-Servicing
Agreements or arrangements or by virtue of indemnification from the Sub-Servicer
and to the same extent and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the Mortgage Loans. The

                                      -55-

<PAGE>

Master Servicer shall be entitled to enter into any agreement with a
Sub-Servicer for indemnification of the Master Servicer by such Sub-Servicer and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.

               SECTION 3.05. No Contractual Relationship Between Sub-Servicers
                             and the Trustee or Certificateholders.

               Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trustee or the Certificateholders shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Sub-Servicer except as set forth in Section
3.06. The Master Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.

               SECTION 3.06.  Assumption or Termination of Sub-Servicing
                              Agreements by Trustee.

               In the event the Master Servicer shall for any reason no longer
be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Trustee or its designee shall thereupon assume
all of the rights and obligations of the Master Servicer under each
Sub-Servicing Agreement that the Master Servicer may have entered into, unless
the Trustee elects to terminate any Sub-Servicing Agreement in accordance with
its terms as provided in Section 3.03. Upon such assumption, the Trustee, its
designee or the successor servicer for the Trustee appointed pursuant to Section
7.02 shall be deemed, subject to Section 3.03, to have assumed all of the Master
Servicer's interest therein and to have replaced the Master Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each Sub-Servicing
Agreement had been assigned to the assuming party, except that (i) the Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement that arose before it ceased to be the Master Servicer
and (ii) none of the Trustee, its designee or any successor Master Servicer
shall be deemed to have assumed any liability or obligation of the Master
Servicer that arose before it ceased to be the Master Servicer.

               The Master Servicer at its expense shall, upon request of the
Trustee, deliver to the assuming party all documents and records relating to
each Sub-Servicing Agreement and the Mortgage Loans then being serviced and an
accounting of amounts collected and held by or on behalf of it, and otherwise
use its best efforts to effect the orderly and efficient transfer of the Sub-
Servicing Agreements to the assuming party.

               SECTION 3.07.   Collection of Certain Mortgage Loan Payments.

               The Master Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement and
the terms and provisions of any applicable insurance policies, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Master Servicer

                                      -56-

<PAGE>

may in its discretion (i) waive any late payment charge or, if applicable, any
penalty interest, or (ii) extend the due dates for the Monthly Payments due on a
Mortgage Note for a period of not greater than 180 days; provided, however, that
any extension pursuant to clause (ii) above shall not affect the amortization
schedule of any Mortgage Loan for purposes of any computation hereunder, except
as provided below. In the event of any such arrangement pursuant to clause (ii)
above, the Master Servicer shall make timely advances on such Mortgage Loan
during such extension pursuant to Section 4.03 and in accordance with the
amortization schedule of such Mortgage Loan without modification thereof by
reason of such arrangement. Notwithstanding the foregoing, in the event that any
Mortgage Loan is in default or, in the judgment of the Master Servicer, such
default is reasonably foreseeable, the Master Servicer, consistent with the
standards set forth in Section 3.01, may also waive, modify or vary any term of
such Mortgage Loan (including modifications that would change the Mortgage Rate,
forgive the payment of principal or interest or extend the final maturity date
of such Mortgage Loan), accept payment from the related Mortgagor of an amount
less than the Stated Principal Balance in final satisfaction of such Mortgage
Loan (such payment, a "Short Pay- off"), or consent to the postponement of
strict compliance with any such term or otherwise grant indulgence to any
Mortgagor.

               SECTION 3.08.          Sub-Servicing Accounts.

               In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub- Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer shall deposit in the clearing account in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Sub-Servicer's receipt thereof, all
proceeds of Mortgage Loans received by the Sub-Servicer less its servicing
compensation to the extent permitted by the Sub-Servicing Agreement, and shall
thereafter deposit such amounts in the Sub-Servicing Account, in no event more
than two Business Days after the receipt of such amounts. The Sub-Servicer shall
thereafter deposit such proceeds in the Collection Account or remit such
proceeds to the Master Servicer for deposit in the Collection Account not later
than two Business Days after the deposit of such amounts in the Sub-Servicing
Account. For purposes of this Agreement, the Master Servicer shall be deemed to
have received payments on the Mortgage Loans when the Sub-Servicer receives such
payments.

               SECTION 3.09. Collection of Taxes, Assessments and Similar Items;
                             Servicing Accounts.

               The Master Servicer shall establish and maintain, or cause to be
established and maintained, one or more accounts (the "Servicing Accounts"),
into which all collections from the Mortgagors (or related advances from
Sub-Servicers) for the payment of taxes, assessments, hazard insurance premiums
and comparable items for the account of the Mortgagors (" Escrow Payments")
shall be deposited and retained. Servicing Accounts shall be Eligible Accounts.
The Master Servicer shall deposit in the clearing account in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Master Servicer's receipt thereof, all
Escrow Payments

                                      -57-

<PAGE>

collected on account of the Mortgage Loans and shall thereafter deposit such
Escrow Payments in the Servicing Accounts, in no event more than two Business
Days after the receipt of such Escrow Payments, all Escrow Payments collected on
account of the Mortgage Loans for the purpose of effecting the timely payment of
any such items as required under the terms of this Agreement. Withdrawals of
amounts from a Servicing Account may be made only to (i) effect timely payment
of taxes, assessments, hazard insurance premiums, and comparable items; (ii)
reimburse the Master Servicer (or a Sub-Servicer to the extent provided in the
related Sub-Servicing Agreement) out of related collections for any advances
made pursuant to Section 3.01 (with respect to taxes and assessments) and
Section 3.14 (with respect to hazard insurance); (iii) refund to Mortgagors any
sums as may be determined to be overages; (iv) pay interest, if required and as
described below, to Mortgagors on balances in the Servicing Account; or (v)
clear and terminate the Servicing Account at the termination of the Master
Servicer's obligations and responsibilities in respect of the Mortgage Loans
under this Agreement in accordance with Article IX. As part of its servicing
duties, the Master Servicer or Sub-Servicers shall pay to the Mortgagors
interest on funds in the Servicing Accounts, to the extent required by law and,
to the extent that interest earned on funds in the Servicing Accounts is
insufficient, to pay such interest from its or their own funds, without any
reimbursement therefor.

               SECTION 3.10.     Collection Account and Distribution Account.

               (a) On behalf of the Trust Fund, the Master Servicer shall
establish and maintain, or cause to be established and maintained, one or more
accounts (such account or accounts, the "Collection Account"), held in trust for
the benefit of the Trustee and the Certificateholders. On behalf of the Trust
Fund, the Master Servicer shall deposit or cause to be deposited in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Master Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the Master Servicer's receipt thereof,
as and when received or as otherwise required hereunder, the following payments
and collections received or made by it subsequent to the Cut-off Date (other
than in respect of principal or interest on the related Mortgage Loans due on or
before the Cut-off Date), or payments (other than Principal Prepayments)
received by it on or prior to the Cut-off Date but allocable to a Due Period
subsequent thereto:

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

               (ii) all payments on account of interest (net of the related
          Servicing Fee) on each Mortgage Loan;

               (iii) all Insurance Proceeds and Liquidation Proceeds (other than
          proceeds collected in respect of any particular REO Property and
          amounts paid in connection with a purchase of Mortgage Loans and REO
          Properties pursuant to Section 9.01);

               (iv) any amounts required to be deposited pursuant to Section
          3.12 in connection

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<PAGE>

          with any losses realized on Permitted Investments with respect to
          funds held in the Collection Account;

               (v) any amounts required to be deposited by the Master Servicer
          pursuant to the second paragraph of Section 3.14(a) in respect of any
          blanket policy deductibles;

               (vi) all proceeds of any Mortgage Loan repurchased or purchased
          in accordance with Section 2.03 or Section 9.01;

               (vii) all amounts required to be deposited in connection with
          shortfalls in principal amount of Qualified Substitute Mortgage Loans
          pursuant to Section 2.03;

               (viii) all Prepayment Charges collected by the Master Servicer in
          connection with the Principal Prepayment of any of the Mortgage Loans;
          and

               (ix) without duplication, all payments of claims received by the
          Master Servicer under the PMI Policy.

               The foregoing requirements for deposit in the Collection Accounts
shall be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges,
modification or assumption fees, or insufficient funds charges need not be
deposited by the Master Servicer in the Collection Account and may be retained
by the Master Servicer as additional compensation. In the event the Master
Servicer shall deposit in the Collection Account any amount not required to be
deposited therein, it may at any time withdraw such amount from the Collection
Account, any provision herein to the contrary notwithstanding.

               (b) On behalf of the Trust Fund, the Trustee shall establish and
maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders. On behalf of
the Trust Fund, the Master Servicer shall deliver to the Trustee in immediately
available funds for deposit in the Distribution Account by 3: 00 p. m. New York
time (i) on the Master Servicer Remittance Date, that portion of the Available
Distribution Amount (calculated without regard to the references in clause (2)
of the definition thereof to amounts that may be withdrawn from the Distribution
Account) for the related Distribution Date then on deposit in the Collection
Account and the amount of all Prepayment Charges collected by the Master
Servicer in connection with the Principal Prepayment of any of the Mortgage
Loans then on deposit in the Collection Account and the amount of any funds
reimbursable to an Advancing Person pursuant to Section 3.26 and (ii) on each
Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Master Servicer shall,
by 3: 00 p. m. New York time on such Business Day, withdraw from the Collection
Account any and all amounts payable or reimbursable to the Depositor, the Master
Servicer, the Trustee, the Originator,

                                      -59-

<PAGE>

the Seller or any Sub-Servicer pursuant to Section 3.11 and shall pay such
amounts to the Persons entitled thereto.

               (c) Funds in the Collection Account and the Distribution Account
may be invested in Permitted Investments in accordance with the provisions set
forth in Section 3.12. The Master Servicer shall give notice to the Trustee of
the location of the Collection Account maintained by it when established and
prior to any change thereof. The Trustee shall give notice to the Master
Servicer and the Depositor of the location of the Distribution Account when
established and prior to any change thereof.

               (d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee shall have the sole authority to
withdraw any funds held pursuant to this subsection (d). In the event the Master
Servicer shall deliver to the Trustee for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that
the Trustee withdraw such amount from the Distribution Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Master Servicer shall deliver to the Trustee from time to time for
deposit, and the Trustee shall so deposit, in the Distribution Account:

               (i) any P& I Advances, as required pursuant to Section 4.03;

               (ii) any amounts required to be deposited pursuant to Section
          3.23(d) or (f) in connection with any REO Property;

               (iii) any amounts to be paid in connection with a purchase of
          Mortgage Loans and REO Properties pursuant to Section 9.01;

               (iv) any amounts required to be deposited pursuant to Section
          3.24 in connection with any Prepayment Interest Shortfall; and

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

               (e) Promptly upon receipt of any Stayed Funds, whether from the
Master Servicer, a trustee in bankruptcy, federal bankruptcy court or other
source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder.

               (f) The Master Servicer shall deposit in the Collection Account
or Distribution Account, as the case may be, any amounts required to be
deposited pursuant to Section 3.12(b) in connection with losses realized on
Permitted Investments with respect to funds held in the Collection Account or
Distribution Account, respectively.

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<PAGE>

               SECTION 3.11. Withdrawals from the Collection Account and
                             Distribution Account.

               (a) The Master Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 4.03:

                    (i) to remit to the Trustee for deposit in the Distribution
               Account the amounts required to be so remitted pursuant to
               Section 3.10(b) or permitted to be so remitted pursuant to the
               first sentence of Section 3.10(d);

                    (ii) subject to Section 3.16(d), to reimburse the Master
               Servicer for P& I Advances, but only to the extent of amounts
               received which represent Late Collections (net of the related
               Servicing Fees) of Monthly Payments on Mortgage Loans with
               respect to which such P& I Advances were made in accordance with
               the provisions of Section 4.03;

                    (iii) subject to Section 3.16(d), to pay the Master Servicer
               or any Sub- Servicer (a) any unpaid Servicing Fees, (b) any
               unreimbursed Servicing Advances with respect to each Mortgage
               Loan, but only to the extent of any Late Collections, Liquidation
               Proceeds and Insurance Proceeds received with respect to such
               Mortgage Loan and (c) any Nonrecoverable Servicing Advances with
               respect to the final liquidation of a Mortgage Loan, but only to
               the extent that Late Collections, Liquidation Proceeds and
               Insurance Proceeds received with respect to such Mortgage Loan
               are insufficient toreimburse the Master Servicer or any
               Sub-Servicer for Servicing Advances;

                    (iv) to pay to the Master Servicer as servicing compensation
               (in addition to the Servicing Fee) on the Master Servicer
               Remittance Date any interest or investment income earned on funds
               deposited in the Collection Account;

                    (v) to pay to the Master Servicer, the Depositor, the
               Originator or the Seller, as the case may be, with respect to
               each Mortgage Loan that has previously been purchased or replaced
               pursuant to Section 2.03 or Section 3.16(c) all amounts received
               thereon subsequent to the date of purchase or substitution, as
               the case may be;

                    (vi) to reimburse the Master Servicer for any P& I Advance
               previously made which the Master Servicer has determined to be a
               Nonrecoverable P& I Advance in accordance with the provisions of
               Section 4.03;

                    (vii) to reimburse the Master Servicer or the Depositor for
               expenses incurred by or reimbursable to the Master Servicer or
               the Depositor, as the case may be, pursuant to Section 6.03;

                    (viii) to reimburse the Master Servicer or the Trustee, as
               the case may be, for expenses reasonably incurred in connection
               with any breach or defect giving rise

                                      -61-

<PAGE>

               to the purchase obligation under Section 2.03 of this Agreement,
               including any expenses arising out of the enforcement of the
               purchase obligation;

                    (ix) to pay, or to reimburse the Master Servicer for
               Servicing Advances in respect of, expenses incurred in connection
               with any Mortgage Loan pursuant to Section 3.16(b); and

                    (x) to clear and terminate the Collection Account pursuant
               to Section 9.01.

        The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (iv), (v), (vi), (viii) and (ix) above.
The Master Servicer shall provide written notification to the Trustee on or
prior to the next succeeding Master Servicer Remittance Date, upon making any
withdrawals from the Collection Account pursuant to subclauses (vi) and (vii)
above; provided that an Officer's Certificate in the form described under
Section 4.03(d) shall suffice for such written notification to the Trustee
respect of clause (vi) hereof.

               (b) The Trustee shall, from time to time, make withdrawals from
the Distribution Account, for any of the following purposes, without priority:

                    (i) to make distributions to Certificateholders in
                    accordance with Section 4.01;

                    (ii) to pay to itself amounts to which each is entitled
                    pursuant to Section 8.05 or for Extraordinary Trust Fund
                    Expenses;

                    (iii) to pay to the Master Servicer on each Distribution
                    Date as servicing compensation any interest or investment
                    income earned on funds deposited in the Distribution Account
                    pursuant to Section 3.12(b);

                    (iv) to reimburse itself pursuant to Section 7.02;

                    (v) to pay any amounts in respect of taxes pursuant to
                    Section 10.01(g)(iii);

                    (vi) to pay to an Advancing Person reimbursements for P& I
                    Advances and/or Servicing Advances pursuant to Section 3.26;

                    (vii) to clear and terminate the Distribution Account
                    pursuant to Section 9.01; and

                    (vii) to pay the PMI Insurer the PMI Insurer Fee based on
                    information received from the Master Servicer.

                                      -62-

<PAGE>

               SECTION 3.12. Investment of Funds in the Collection Account and
                             the Distribution Account.

               (a) The Master Servicer may direct any depository institution
maintaining the Collection Account and the Distribution Account (each, for
purposes of this Section 3.12, an "Investment Account") to invest the funds in
such Investment Account in one or more Permitted Investments bearing interest or
sold at a discount, and maturing, unless payable on demand, (i) no later than
the Business Day immediately preceding the date on which such funds are required
to be withdrawn from such account pursuant to this Agreement, if a Person other
than the Trustee is the obligor thereon, and (ii) no later than the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Trustee is the obligor thereon. All such Permitted Investments
shall be held to maturity, unless payable on demand. Any investment of funds in
an Investment Account shall be made in the name of the Trustee for the benefit
of the Certificateholders. The Trustee shall be entitled to sole possession
(except with respect to investment direction of funds held in the Collection
Account and the Distribution Account and any income and gain realized thereon)
over each such investment, and any certificate or other instrument evidencing
any such investment shall be delivered directly to the Trustee or its agent,
together with any document of transfer necessary to transfer title to such
investment to the Trustee or its nominee. In the event amounts on deposit in an
Investment Account are at any time invested in a Permitted Investment payable on
demand, the Trustee shall:

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

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

               (b) All income and gain realized from the investment of funds
deposited in the | Collection Account, the Distribution Account and any REO
Account held by or on behalf of the Master Servicer shall be for the benefit of
the Master Servicer and shall be subject to its withdrawal in accordance with
Section 3.11 or Section 3.23, as applicable, or withdrawal by the Trustee in
accordance with Section 3.11 or Section 3.25, as applicable. The Master Servicer
shall deposit in the Collection | Account, the Distribution Account or any REO
Account, as applicable, the amount of any loss of principal incurred in respect
of any such Permitted Investment made with funds in such accounts immediately
upon realization of such loss.

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

                                      -63-

<PAGE>

appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings.

               SECTION 3.13. [Reserved].

               SECTION 3.14. Maintenance of Hazard Insurance and Errors and
                             Omissions and Fidelity Coverage.

               (a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the lesser of the current
principal balance of such Mortgage Loan and the amount necessary to fully
compensate for any damage or loss to the improvements that are a part of such
property on a replacement cost basis, in each case in an amount not less than
such amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. The Master Servicer shall also
cause to be maintained fire insurance with extended coverage on each REO
Property in an amount which is at least equal to the lesser of (i) the maximum
insurable value of the improvements which are a part of such property and (ii)
the outstanding principal balance of the related Mortgage Loan at the time it
became an REO Property, plus accrued interest at the Mortgage Rate and related
Servicing Advances. The Master Servicer will comply in the performance of this
Agreement with all reasonable rules and requirements of each insurer under any
such hazard policies. Any amounts to be collected by the Master Servicer under
any such policies (other than amounts to be applied to the restoration or repair
of the property subject to the related Mortgage or amounts to be released to the
Mortgagor in accordance with the procedures that the Master Servicer would
follow in servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if received
in respect of a Mortgage Loan, or in the REO Account, subject to withdrawal
pursuant to Section 3.23, if received in respect of an REO Property. Any cost
incurred by the Master Servicer in maintaining any such insurance shall not, for
the purpose of calculating distributions to Certificateholders, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. If the Mortgaged
Property or REO Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards and flood insurance has been made available, the Master Servicer will
cause to be maintained a flood insurance policy in respect thereof. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid principal
balance of the related Mortgage Loan and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program).

               In the event that the Master Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A: X or better
in Best's Key Rating Guide (or such other rating that is comparable to such
rating) insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.14, it being understood and agreed that
such policy may contain a

                                      -64-

<PAGE>

deductible clause, in which case the Master Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property or REO
Property a policy complying with the first two sentences of this Section 3.14,
and there shall have been one or more losses which would have been covered by
such policy, deposit to the Collection Account from its own funds the amount not
otherwise payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Master Servicer agrees to prepare and present, on behalf of itself,
the Trustee and Certificateholders, claims under any such blanket policy in a
timely fashion in accordance with the terms of such policy.

                  (b) The Master Servicer shall keep in force during the term of
this Agreement a policy or policies of insurance covering errors and omissions
for failure in the performance of the Master Servicer's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the requirements of Fannie Mae or Freddie Mac if it were the purchaser of
the Mortgage Loans, unless the Master Servicer has obtained a waiver of such
requirements from Fannie Mae or Freddie Mac. The Master Servicer shall also
maintain a fidelity bond in the form and amount that would meet the requirements
of Fannie Mae or Freddie Mac, unless the Master Servicer has obtained a waiver
of such requirements from Fannie Mae or Freddie Mac. The Master Servicer shall
be deemed to have complied with this provision if an Affiliate of the Master
Servicer has such errors and omissions and fidelity bond coverage and, by the
terms of such insurance policy or fidelity bond, the coverage afforded
thereunder extends to the Master Servicer. Any such errors and omissions policy
and fidelity bond shall by its terms not be cancelable without thirty days'prior
written notice to the Trustee. The Master Servicer shall also cause each
Sub-Servicer to maintain a policy of insurance covering errors and omissions and
a fidelity bond which would meet such requirements.

               SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
                             Agreements.

               The Master Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Master Servicer shall not be required to take such action if in its
sole business judgment the Master Servicer believes it is not in the best
interests of the Trust Fund and shall not exercise any such rights if prohibited
by law from doing so. If the Master Servicer reasonably believes it is unable
under applicable law to enforce such "due-on-sale" clause, or if any of the
other conditions set forth in the proviso to the preceding sentence apply, the
Master Servicer will enter into an assumption and modification agreement from or
with the person to whom such property has been conveyed or is proposed to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, to the extent permitted by applicable state law, the Mortgagor remains
liable thereon. The Master Servicer is also authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
the Mortgagor and becomes liable under the Mortgage Note, provided that no such
substitution shall be effective unless such person satisfies the underwriting
criteria of the Master Servicer and has a

                                      -65-

<PAGE>

credit risk rating at least equal to that of the original Mortgagor. In
connection with any assumption or substitution, the Master Servicer shall apply
such underwriting standards and follow such practices and procedures as shall be
normal and usual in its general mortgage servicing activities and as it applies
to other mortgage loans owned solely by it. The Master Servicer shall not take
or enter into any assumption and modification agreement, however, unless (to the
extent practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy. Any fee collected by the Master Servicer in respect of an assumption,
modification or substitution of liability agreement shall be retained by the
Master Servicer as additional servicing compensation. In connection with any
such assumption, no material term of the Mortgage Note (including but not
limited to the related Mortgage Rate and the amount of the Monthly Payment) may
be amended or modified, except as otherwise required pursuant to the terms
thereof. The Master Servicer shall notify the Trustee that any such
substitution, modification or assumption agreement has been completed by
forwarding to the Trustee the executed original of such substitution,
modification or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.

               Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or by the terms of the Mortgage Note or
any assumption which the Master Servicer may be restricted by law from
preventing, for any reason whatever. For purposes of this Section 3.15, the term
"assumption" is deemed to also include a sale (of the Mortgaged Property)
subject to the Mortgage that is not accompanied by an assumption or substitution
of liability agreement.

               SECTION 3.16.          Realization Upon Defaulted Mortgage Loans.

               (a) The Master Servicer shall use its best efforts, consistent
with Accepted Servicing Practices, to foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans as come
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 3.07. The Master
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Master Servicer as contemplated in
Section 3.11 and Section 3.23. The foregoing is subject to the provision that,
in any case in which Mortgaged Property shall have suffered damage from an
Uninsured Cause, the Master Servicer shall not be required to expend its own
funds toward the restoration of such property unless it shall determine in its
discretion that such restoration will increase the proceeds of liquidation of
the related Mortgage Loan after reimbursement to itself for such expenses.

               (b) Notwithstanding the foregoing provisions of this Section 3.16
or any other provision of this Agreement, with respect to any Mortgage Loan as
to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous substance on the related
Mortgaged Property, the Master Servicer shall not, on behalf of the Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged

                                      -66-

<PAGE>

Property, if, as a result of any such action, the Trustee, the Trust Fund or the
Certificateholders would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Master Servicer has also previously
determined, based on its reasonable judgment and a report prepared by a Person
who regularly conducts environmental audits using customary industry standards,
that:

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

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

               The cost of the environmental audit report contemplated by this
Section 3.16 shall be advanced by the Master Servicer, subject to the Master
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(a)(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans.

               If the Master Servicer determines, as described above, that it is
in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund; provided that any amounts disbursed by the
Master Servicer pursuant to this Section 3.16(b) shall constitute Servicing
Advances, subject to Section 4.03(d). The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(a)(iii) and (a)(ix), such right
of reimbursement being prior to the rights of Certificateholders to receive any
amount in the Collection Account received in respect of the affected Mortgage
Loan or other Mortgage Loans.

               (c) The Master Servicer may at its option purchase from REMIC I
any Mortgage Loan or related REO Property that is 90 days or more delinquent,
which the Master Servicer determines in good faith will otherwise become subject
to foreclosure proceedings (evidence of such determination to be delivered in
writing to the Trustee prior to purchase), at a price equal to the

                                      -67-

<PAGE>

Purchase Price; provided, however, that the Master Servicer shall purchase any
such Mortgage Loans or related REO Properties on the basis of delinquency,
purchasing the most delinquent Mortgage Loans or related REO Properties first.
The Purchase Price for any Mortgage Loan or related REO Property purchased
hereunder shall be deposited in the Collection Account, and the Trustee, upon
receipt of written certification from the Master Servicer of such deposit, shall
release or cause to be released to the Master Servicer the related Mortgage File
and the Trustee shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Master Servicer shall furnish
and as shall be necessary to vest in the Master Servicer title to any Mortgage
Loan or related REO Property released pursuant hereto.

               (d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P& I Advances, pursuant to Section 3.11(a)(ii) or (a)(iii); second,
to accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and third, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: first, to
unpaid Servicing Fees; and second, to the balance of the interest then due and
owing. The portion of the recovery so allocated to unpaid Servicing Fees shall
be reimbursed to the Master Servicer or any Sub-Servicer pursuant to Section
3.11(a)(iii).

               SECTION 3.17. Trustee to Cooperate; Release of Mortgage Files.

               (a) Upon the payment in full of any Mortgage Loan, or the receipt
by the Master Servicer of a notification that payment in full shall be escrowed
in a manner customary for such purposes, the Master Servicer will immediately
notify or cause to be notified the Trustee by a certification in the form of
Exhibit E-2 (which certification shall include a statement to the effect that
all amounts received or to be received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 3.10 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Mortgage File. Upon receipt of such certification and request, the
Trustee shall promptly release the related Mortgage File to the Master Servicer.
No expenses incurred in connection with any instrument of satisfaction or deed
of reconveyance shall be chargeable to the Collection Account or the
Distribution Account.

               (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee shall, upon any
request made by or on behalf of the Master Servicer and delivery to the Trustee
of a Request for Release in the form of Exhibit E-l, release the related
Mortgage File to the Master Servicer, and the Trustee shall, at the direction of
the Master Servicer, execute such documents as shall be necessary to the
prosecution of any such proceedings. Such Request for Release shall obligate the
Master Servicer to return each and every document previously requested from the
Mortgage File to the Trustee when the need therefor by the Master Servicer no
longer exists, unless the Mortgage Loan has been liquidated and the Liquidation
Proceeds relating

                                      -68-

<PAGE>

to the Mortgage Loan have been deposited in the Collection Account or the
Mortgage File or such document has been delivered to an attorney, or to a public
trustee or other public official as required by law, for purposes of initiating
or pursuing legal action or other proceedings for the foreclosure of the
Mortgaged Property either judicially or non-judicially, and the Master Servicer
has delivered, or caused to be delivered, to the Trustee an additional Request
for Release certifying as to such liquidation or action or proceedings. Upon the
request of the Trustee, the Master Servicer shall provide notice to the Trustee
of the name and address of the Person to which such Mortgage File or such
document was delivered and the purpose or purposes of such delivery. Upon
receipt of a certificate of a Servicing Officer stating that such Mortgage Loan
was liquidated and that all amounts received or to be received in connection
with such liquidation that are required to be deposited into the Collection
Account have been so deposited, or that such Mortgage Loan has become an REO
Property, any outstanding Requests for Release with respect to such Mortgage
Loan shall be released by the Trustee to the Master Servicer or its designee.

               (c) Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Master Servicer or the Sub-Servicer, as
the case may be, any court pleadings, requests for trustee's sale or other
documents necessary to the foreclosure or trustee's sale in respect of a
Mortgaged Property or to any legal action brought to obtain judgment against any
Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment,
or to enforce any other remedies or rights provided by the Mortgage Note or
Mortgage or otherwise available at law or in equity. Each such certification
shall include a request that such pleadings or documents be executed by the
Trustee and a statement as to the reason such documents or pleadings are
required and that the execution and delivery thereof by the Trustee will not
invalidate or otherwise affect the lien of the Mortgage, except for the
termination of such a lien upon completion of the foreclosure or trustee's sale.

               SECTION 3.18.          Servicing Compensation.

               As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.11(a)(iii)
and out of amounts derived from the operation and sale of an REO Property to the
extent permitted by Section 3.23. The right to receive the Servicing Fee may not
be transferred in whole or in part except in connection with the transfer of all
of the Master Servicer's responsibilities and obligations under this Agreement;
provided, however, that the Master Servicer may pay from the Servicing Fee any
amounts due to a Sub-Servicer pursuant to a Sub-Servicing Agreement entered into
under Section 3.02.

               Additional servicing compensation in the form of assumption or
modification fees, late payment charges, insufficient funds charges or otherwise
(subject to Section 3.24 and other than Prepayment Charges) shall be retained by
the Master Servicer only to the extent such fees or charges are received by the
Master Servicer. The Master Servicer shall also be entitled pursuant to Section
3.11(a)(iv) to withdraw from the Collection Account, pursuant to Section 3.11 to
be paid by the Trustee from the Distribution Account and pursuant to Section
3.23(b) to withdraw from any REO Account, as additional servicing compensation,
interest or other income earned on deposits therein,

                                      -69-

<PAGE>

subject to Section 3.12 and Section 3.24. The Master Servicer shall be required
to pay all expenses incurred by it in connection with its servicing activities
hereunder (including premiums for the insurance required by Section 3.14, to the
extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, servicing compensation of each Sub-Servicer, and to the extent
provided herein in Section 8.05, the fees and expenses of the Trustee) and shall
not be entitled to reimbursement therefor except as specifically provided
herein.

               SECTION 3.19. Reports to the Trustee; Collection Account
                             Statements.

               Not later than twenty days after each Distribution Date, the
Master Servicer shall forward to the Trustee and the Depositor the most current
available bank statement for the Collection Account. Copies of such statement
shall be provided by the Trustee to any Certificateholder and to any Person
identified to the Trustee as a prospective transferee of a Certificate, upon
request at the expense of the requesting party, provided such statement is
delivered by the Master Servicer to the Trustee.

               SECTION 3.20. Statement as to Compliance.

               The Master Servicer will deliver to the Trustee and the Depositor
not later than 90 days following the end of the fiscal year of the Master
Servicer, which as of the Closing Date ends on the last day in December, an
Officers'Certificate stating, as to each signatory thereof, that (i) a review of
the activities of the Master Servicer during the preceding year and of
performance under this Agreement has been made under such officers'supervision
and (ii) to the best of such officers'knowledge, based on such review, the
Master Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Copies of any such statement shall be provided by the
Trustee to any Certificateholder and to any Person identified to the Trustee as
a prospective transferee of a Certificate, upon request at the expense of the
requesting party, provided such statement is delivered by the Master Servicer to
the Trustee.

               SECTION 3.21. Independent Public Accountants' Servicing Report.

               Not later than 90 days following the end of each fiscal year of
the Master Servicer, the Master Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Master Servicer a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer which includes an assertion that the Master Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public

                                      -70-

<PAGE>

accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Sub-Servicers. Immediately upon receipt of such report, the Master
Servicer shall, at its own expense, furnish a copy of such report to the Trustee
and each Rating Agency. Copies of such statement shall be provided by the
Trustee to any Certificateholder upon request, provided that such statement is
delivered by the Master Servicer to the Trustee.

               SECTION 3.22. Access to Certain Documentation.

               The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation in the Master Servicer's possession regarding the
Mortgage Loans required by applicable laws and regulations. Such access shall be
afforded without charge, but only upon reasonable request and during normal
business hours at the offices of the Master Servicer designated by it. In
addition, access to the documentation in the Master Servicer's possession
regarding the Mortgage Loans will be provided to any Certificateholder, the
Trustee, and to any Person identified to the Master Servicer as a prospective
transferee of a Certificate; provided, however, that providing access to such
Person will not violate any applicable laws, upon reasonable request during
normal business hours at the offices of the Master Servicer designated by it at
the expense of the Person requesting such access.

               SECTION 3.23. Title, Management and Disposition of REO Property.

               (a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders. The Master Servicer, on behalf of REMIC I, shall either
sell any REO Property prior to the end of the third taxable year after REMIC I
acquires ownership of such REO Property for purposes of Section 860G(a)(8) of
the Code or request from the Internal Revenue Service, no later than 60 days
before the day on which the three-year grace period would otherwise expire, an
extension of the three-year grace period, unless the Master Servicer shall have
delivered to the Trustee an Opinion of Counsel, addressed to the Trustee and the
Depositor, to the effect that the holding by REMIC I of such REO Property
subsequent to three years after its acquisition will not result in the
imposition on REMIC I, REMIC II or REMIC III of taxes on "prohibited
transactions" thereof, as defined in Section 860F of the Code, or cause any of
REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC under Federal law
at any time that any Certificates are outstanding. The Master Servicer shall
manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by REMIC I, REMIC II or REMIC III of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.

               (b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain, or cause to be established and maintained, with respect to REO
Properties an account held in trust for the Trustee for the benefit of the

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Certificateholders (the "REO Account"), which shall be an Eligible Account. The
Master Servicer shall be permitted to allow the Collection Account to serve as
the REO Account, subject to separate ledgers for each REO Property. The Master
Servicer shall be entitled to retain or withdraw any interest income paid on
funds deposited in the REO Account.

               (c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited in the clearing account in which it customarily
deposits payments and collections on mortgage loans in connection with its
mortgage loan servicing activities on a daily basis, and in no event more than
one Business Day after the Master Servicer's receipt thereof, and shall
thereafter deposit in the REO Account, in no event more than two Business Days
after the Master Servicer's receipt thereof, all revenues received by it with
respect to an REO Property and shall withdraw therefrom funds necessary for the
proper operation, management and maintenance of such REO Property including,
without limitation:

               (i) all insurance premiums due and payable in respect of such REO
               Property;

               (ii) all real estate taxes and assessments in respect of such REO
               Property that may result in the imposition of a lien thereon; and

               (iii) all costs and expenses necessary to maintain such REO
               Property.

               To the extent that amounts on deposit in the REO Account with
respect to an REO Property are insufficient for the purposes set forth in
clauses (i) through (iii) above with respect to such REO Property, the Master
Servicer shall advance from its own funds such amount as is necessary for such
purposes if, but only if, the Master Servicer would make such advances if the
Master Servicer owned the REO Property and if in the Master Servicer's judgment,
the payment of such amounts will be recoverable from the rental or sale of the
REO Property.

               Notwithstanding the foregoing, none of the Master Servicer or the
Trustee shall:

               (i) authorize the Trust Fund to enter into, renew or extend any
          New Lease with respect to any REO Property, if the New Lease by its
          terms will give rise to any income that does not constitute Rents from
          Real Property;

               (ii) authorize any amount to be received or accrued under any New
          Lease other than amounts that will constitute Rents from Real
          Property;

               (iii) authorize any construction on any REO Property, other than
          the completion of a building or other improvement thereon, and then
          only if more than ten percent of the construction of such building or
          other improvement was completed before default on the related Mortgage
          Loan became imminent, all within the meaning of Section 856(e)(4)(B)
          of the Code; or

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<PAGE>

               (iv) authorize any Person to Directly Operate any REO Property on
          any date more than 90 days after its date of acquisition by the Trust
          Fund;

unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trustee, to the effect that such action will not cause
such REO Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code at any time that it is held by REMIC
I, in which case the Master Servicer may take such actions as are specified in
such Opinion of Counsel.

               The Master Servicer may contract with any Independent Contractor
for the operation and management of any REO Property, provided that:

               (i) the terms and conditions of any such contract shall not be
          inconsistent herewith;

               (ii) any such contract shall require, or shall be administered to
          require, that the Independent Contractor pay all costs and expenses
          incurred in connection with the operation and management of such REO
          Property, including those listed above and remit all related revenues
          (net of such costs and expenses) to the Master Servicer as soon as
          practicable, but in no event later than thirty days following the
          receipt thereof by such Independent Contractor;

               (iii) none of the provisions of this Section 3.23(c) relating to
          any such contract or to actions taken through any such Independent
          Contractor shall be deemed to relieve the Master Servicer of any of
          its duties and obligations to the Trustee on behalf of the
          Certificateholders with respect to the operation and management of any
          such REO Property; and

               (iv) the Master Servicer shall be obligated with respect thereto
          to the sameextent as if it alone were performing all duties and
          obligations in connection with the operation and management of such
          REO Property.

               The Master Servicer shall be entitled to enter into any agreement
with any Independent Contractor performing services for it related to its duties
and obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees; provided, however, that to the extent that any payments made by such
Independent Contractor would constitute Servicing Advances if made by the Master
Servicer, such amounts shall be reimbursable as Servicing Advances made by the
Master Servicer.

               (d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P& I

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<PAGE>

Advances made in respect of such REO Property or the related Mortgage Loan. On
the Master Servicer Remittance Date, the Master Servicer shall withdraw from
each REO Account maintained by it and deposit into the Distribution Account in
accordance with Section 3.10(d)(ii), for distribution on the related
Distribution Date in accordance with Section 4.01, the income from the related
REO Property received during the prior calendar month, net of any withdrawals
made pursuant to Section 3.23(c) or this Section 3.23(d).

               (e) Subject to the time constraints set forth in Section 3.23(a),
each REO Disposition shall be carried out by the Master Servicer at such price
and upon such terms and conditions as the Master Servicer shall deem necessary
or advisable, as shall be normal and usual in its Accepted Servicing Practices.

               (f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).

               (g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.

               SECTION 3.24. Obligations of the Master Servicer in Respect of
                             Prepayment Interest Shortfalls.

               The Master Servicer shall deliver to the Trustee for deposit into
the Distribution Account by 3: 00 p. m. New York time on the Master Servicer
Remittance Date from its own funds an amount equal to the lesser of (i) the
aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting from full or partial Principal Prepayments during the related
Prepayment Period and (ii) the aggregate Servicing Fee for the related
Prepayment Period. Any amounts paid by the Master Servicer pursuant to this
Section 3.24 shall not be reimbursed by REMIC I.

               SECTION 3.25. Obligations of the Master Servicer in Respect of
                             Mortgage Rates and Monthly Payments.

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

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<PAGE>

the Trust Fund, the Trustee, the Depositor and any successor master servicer in
respect of any such liability. Such indemnities shall survive the termination or
discharge of this Agreement. Notwithstanding the foregoing, this Section 3.25
shall not limit the ability of the Master Servicer to seek recovery of any such
amounts from the related Mortgagor under the terms of the related Mortgage Note,
as permitted by law.

               SECTION 3.26.          Advance Facility.

               (a) The Trustee on behalf of the Trust Fund, with the consent of
the Master Servicer, is hereby authorized to enter into a facility with any
Person which provides that such Person (an "Advancing Person") may make all or a
portion of the P& I Advances and/or Servicing Advances to the Trust Fund under
this Agreement, although no such facility shall reduce or otherwise affect the
Master Servicer's obligation to fund such P& I Advances and/or Servicing
Advances. To the extent that an Advancing Person makes all or a portion of any
P& I Advance or any Servicing Advance and provides the Trustee with notice
acknowledged by the Master Servicer that such Advancing Person is entitled to
reimbursement, such Advancing Person shall be entitled to receive reimbursement
pursuant to this Agreement for such amount to the extent provided in Section
3.26(b). Such notice from the Advancing Person must specify the amount of the
reimbursement and must specify which Section of this Agreement permits the
applicable P& I Advance or Servicing Advance to be reimbursed. The Trustee shall
have no duty or liability with respect to any calculation of any reimbursement
to be paid to an Advancing Person and shall be entitled to rely without
independent investigation on the Advancing Person's notice provided pursuant to
this Section 3.26. An Advancing Person whose obligations hereunder are limited
to the funding of P& I Advances and/or Servicing Advances shall not be required
to meet the qualifications of a Sub-Servicer pursuant to Section 3.02 hereof.

               (b) If an Advancing Person is entitled to reimbursement for any
particular P& I Advance or Servicing Advance, then the Master Servicer shall not
be permitted to reimburse itself therefor under Section 3.11(a)(ii), Section
3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix), but instead the Master
Servicer shall include such amounts in the applicable remittance to the Trustee
made pursuant to Section 3.10(b) to the extent of amounts on deposit in the
Collection Account on the related Master Servicer Remittance Date. The Trustee
is hereby authorized to pay to an Advancing Person, reimbursements for P& I
Advances and Servicing Advances from the Distribution Account to the same extent
the Master Servicer would have been permitted to reimburse itself for such P& I
Advances and/or Servicing Advances in accordance with Section 3.11(a)(ii),
Section 3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix), as the case
may be, had the Master Servicer made such P& I Advance or Servicing Advance.
Notwithstanding the foregoing, an Advancing Person is not entitled to be
reimbursed by the Trustee from the Distribution Account for any unreimbursed
Advances from funds held in the Collection Account for future distribution
pursuant to the provisions of Section 3.11(a)(ii) and Section 3.13.

               Section 3.27.  PMI Policy; Claims Under the PMI Policy.

               Notwithstanding anything to the contrary elsewhere in this
Article III, the Master Servicer shall not agree to any modification or
assumption of a PMI Mortgage Loan or take any other action with respect to a PMI
Mortgage Loan that could result in denial of coverage under the PMI

                                      -75-

<PAGE>

Policy. The Master Servicer shall notify the PMI Insurer that the Trustee, on
behalf of the Certificateholders, is the insured, as that term is defined in the
PMI Policy, of each PMI Mortgage Loan. The Master Servicer shall, on behalf of
the Trustee, prepare and file on a timely basis with the PMI Insurer, with a
copy to the Trustee, all claims which may be made under the PMI Policy with
respect to the PMI Mortgage Loans. The Master Servicer shall take all actions
required under the PMI Policy as a condition to the payment of any such claim.
Any amount received from the PMI Insurer with respect to any such PMI Mortgage
Loan shall be deposited by the Master Servicer, no later than two Business Days
following receipt thereof, into the Collection Account.

               SECTION 3.28           Reserve Fund.

               (a) No later than the Closing Date, the Trustee shall establish
and maintain a separate, segregated trust account titled, "Reserve Fund, U.S.
Bank National Association, in trust for the registered holders of Salomon
Brothers Mortgage Securities VII, Inc., New Century Home Equity Loan Trust,
Series 2001-NC2, Asset Backed Pass-Through Certificates." On the Closing Date,
the Depositor will deposit, or cause to be deposited, into the Reserve Fund
$1,000.

               (b) On each Distribution Date as to which there is a Net WAC Rate
Carryover Amount payable to the Class A Certificates or the Mezzanine
Certificates, the Trustee has been directed by the Class CE Certificateholders
to, and therefore will, deposit into the Reserve Fund the amounts described in
Section 4.01(a)(4)(x), rather than distributing such amounts to the Class CE
Certificateholders. On each such Distribution Date, the Trustee shall hold all
such amounts for the benefit of the Holders of the Class A Certificates and the
Mezzanine Certificates, and will distribute such amounts to the Holders of the
Class A Certificates and the Mezzanine Certificates in the amounts and
priorities set forth in Section 4.01(a). If no Net WAC Rate Carryover Amounts
are payable on a Distribution Date, the Trustee shall deposit into the Reserve
Fund on behalf of the Class CE Certificateholders, from amounts otherwise
distributable to the Class CE Certificateholders, an amount such that when added
to other amounts already on deposit in the Reserve Fund, the aggregate amount on
deposit therein is equal to $1,000.

               (c) For federal and state income tax purposes, the Class CE
Certificateholders will be deemed to be the owners of the Reserve Fund and all
amounts deposited into the Reserve Fund (other than the initial deposit therein
of $1,000) shall be treated as amounts distributed by REMIC III to the Holders
of the Class CE Certificates. Upon the termination of the Trust Fund, or the
payment in full of the Class A Certificates and the Mezzanine Certificates, all
amounts remaining on deposit in the Reserve Fund will be released by the Trust
Fund and distributed to the Class CE Certificateholders or their designees. The
Reserve Fund will be part of the Trust Fund but not part of any REMIC and any
payments to the Holders of the Class A Certificates or the Mezzanine
Certificates of Net WAC Rate Carryover Amounts will not be payments with respect
to a "regular interest" in a REMIC within the meaning of Code Section
860(G)(a)(1).

               (d) By accepting a Class CE Certificate, each Class CE
Certificateholder hereby agrees to direct the Trustee, and the Trustee hereby is
directed, to deposit into the Reserve Fund the amounts described above on each
Distribution Date as to which there is any Net WAC Rate Carryover Amount rather
than distributing such amounts to the Class CE Certificateholders. By

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<PAGE>

accepting a Class CE Certificate, each Class CE Certificateholder further agrees
that such direction is given for good and valuable consideration, the receipt
and sufficiency of which is acknowledged by such acceptance.

               (e) At the direction of the Holders of a majority in Percentage
Interest in the Class CE Certificates, the Trustee shall direct any depository
institution maintaining the Reserve Fund to invest the funds in such account in
one or more Permitted Investments bearing interest or sold at a discount, and
maturing, unless payable on demand, (i) no later than the Business Day
immediately preceding the date on which such funds are required to be withdrawn
from such account pursuant to this Agreement, if a Person other than the Trustee
or an Affiliate manages or advises such investment, and (ii) no later than the
date on which such funds are required to be withdrawn from such account pursuant
to this Agreement, if the Trustee or an Affiliate manages or advises such
investment. If no investment direction of the Holders of a majority in
Percentage Interest in the Class CE Certificates with respect to the Reserve
Fund is received by the Trustee, the Trustee shall invest the funds in such
account in Permitted Investments managed by the Trustee or an Affiliate of the
kind described in clause (vi) of the definition of Permitted Investments. All
income and gain earned upon such investment shall be deposited into the Reserve
Fund.

               (f) For federal tax return and information reporting, the right
of the Class A Certificateholders and the Mezzanine Certificateholders to
receive payments from the Reserve Fund in respect of any Net Wac Rate Carryover
Amount shall be assigned a value of zero.

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<PAGE>

                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

               SECTION 4.01.          Distributions.

               (a)(1)(A) On each Distribution Date, the following amounts, in
the following order of priority, shall be distributed by REMIC I to REMIC II on
account of the REMIC I Regular Interests or withdrawn from the Distribution
Account and distributed to the holders of the Class R-I Certificates, as the
case may be:

               (i) first, to the Holders of REMIC I Regular Interest I-LT2, in
        an amount equal to (A) the Uncertificated Interest for such Distribution
        Date, plus (B) any amounts in respect thereof remaining unpaid from
        previous Distribution Dates and second, to the Holders of REMIC I
        Regular Interest I-LT1 and I-LTP, in an amount equal to (A) the
        Uncertificated Interest for such Distribution Date, plus (B) any amounts
        in respect thereof remaining unpaid from previous Distribution Dates;

               (ii) to the Holders of the REMIC I Regular Interest I-LTP, on the
        Distribution Date immediately following the expiration of the latest
        Prepayment Charge term as identified on the Mortgage Loan Schedule or
        any Distribution Date thereafter until $100 has been distributed
        pursuant to this clause;

               (iii) on each Distribution Date, the remainder of the Available
        Distribution Amount for such Distribution Date after the distributions
        made pursuant to clause (i) and clause (ii) above, first, to the Holders
        of REMIC I Regular Interest I-LT1 until the principal balance of such
        REMIC I Regular Interest is reduced to zero and second, to the Holders
        of REMIC I Regular Interest I-LT2 until the principal balance of such
        REMIC I Regular Interest is reduced to zero; and

               (iv) to the Holders of the Class R-I Certificates, any amounts
        remaining after the distributions pursuant to clauses (i) through (iii)
        above.

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

               (B) On each Distribution Date, the following amounts, in the
following order of priority, shall be distributed by REMIC II to REMIC III on
account of the REMIC II Regular Interests or withdrawn from the Distribution
Account and distributed to the holders of the Class R-II Certificates, as the
case may be:

               (i) first, to the Holders of REMIC II Regular Interest II-LTIO,
        in an amount equal to (A) the Uncertificated Interest for such
        Distribution Date, plus (B) any amounts in respect thereof remaining
        unpaid from previous Distribution Dates and then to Holders of REMIC

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<PAGE>

        II Regular Interest II-LT1, REMIC Regular Interest II-LT2, REMIC II
        Regular Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II
        Regular Interest II-LT5, REMIC II Regular Interest II-LT6 and REMIC II
        Regular Interest II-LTP, pro rata, in an amount equal to (A) the
        Uncertificated Accrued Interest for such Distribution Date, plus (B) any
        amounts in respect thereof remaining unpaid from previous Distribution
        Dates. Amounts payable as Uncertificated Interest in respect of REMIC II
        Regular Interest II-LT6 shall be reduced when the REMIC II
        Overcollateralized Amount is less than the REMIC II Required
        Overcollateralized Amount, by the lesser of (x) the amount of such
        difference and (y) the Maximum II-LT6 Uncertificated Interest Deferral
        Amount;

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

               (a) to the Holders of REMIC II Regular Interest II-LT1, 98.00% of
such remainder, until the Uncertificated Balance of such Uncertificated REMIC II
Regular Interest is reduced to zero;

               (b) to the Holders of REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II Regular
Interest II-LT5, 1.00% of such remainder, in the same proportion as principal
payments are allocated to the Corresponding Certificates, until the
Uncertificated Balances of such REMIC II Regular Interests are reduced to zero;

               (c) to the Holders of REMIC II Regular Interest II-LT6, 1.00% of
such remainder, until the Uncertificated Balance of such REMIC II Regular
Interest is reduced to zero;

               (d) to the Holders of REMIC II Regular Interest II-LTP, on the
Distribution Date immediately following the expiration of the latest Prepayment
Charge as identified on the Prepayment Charge Schedule or any Distribution Date
thereafter until $100 has been distributed pursuant to this clause; then

               (e) any remaining amount to the Holders of the Class R-II
Certificates; and

               (iii) third, to REMIC II Regular Interest II-LTP, 100% of the
        amount paid in respect of REMIC I Regular Interest I-LTP; provided,
        however, that 98.00% and 2.00% of any principal payments that are
        attributable to an Overcollateralization Reduction Amount shall be
        allocated to Holders of REMIC II Regular Interest II-LT1 and REMIC II
        Regular Interest II-LT6, respectively.

               (2) On each Distribution Date, prior to making the distributions
set forth below, the Trustee shall withdraw the PMI Insurer Fee from the
Distribution Account and pay such amount to the PMI Insurer, based on
information received from the Master Servicer. On each Distribution Date, the
Trustee shall withdraw from the Distribution Account an amount equal to the
Interest Remittance Amount and distribute to the Certificateholders the
following amounts, in the following order of priority:

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<PAGE>

               (i) to the Holders of the Class A-IO Certificates, an amount
               equal to the Senior Interest Distribution Amount allocable to the
               Class A-IO Certificates;

               (ii) to the Holders of the Class A Certificates, an amount equal
               to the Senior Interest Distribution Amount allocable to the Class
               A Certificates;

               (iii) to the Holders of the Class M-1 Certificates, an amount
               equal to the Interest Distribution Amount allocable to the Class
               M-1 Certificates;

               (iv) to the Holders of the Class M-2 Certificates, an amount
               equal to the Interest Distribution Amount allocable to the Class
               M-2 Certificates; and

               (v) to the Holders of the Class M-3 Certificates, an amount equal
               to the Interest Distribution Amount allocable to the Class M-3
               Certificates.

               (3) On each Distribution Date, the Trustee shall withdraw from
the Distribution Account an amount equal to the Principal Distribution Amount
and distribute to the Certificateholders the following amounts, in the following
order of priority:

               (i) On each Distribution Date (a) prior to the Stepdown Date or
               (b) on which a Trigger Event is in effect, the Principal
               Distribution Amount shall be distributed in the following order
               of priority;

                       first, to the Holders of the Class A Certificates, until
                       the Certificate Principal Balance of such Class has been
                       reduced to zero;

                       second, to the Holders of the Class M-1 Certificates,
                       until the Certificate Principal Balance of such Class has
                       been reduced to zero;

                       third, to the Holders of the Class M-2 Certificates,
                       until the Certificate Principal Balance of such Class has
                       been reduced to zero; and

                       fourth, to the Holders of the Class M-3 Certificates,
                       until the Certificate Principal Balance of such Class has
                       been reduced to zero.

               (ii) On each Distribution Date (a) on or after the Stepdown Date
               and (b) on which a Trigger Event is not in effect, the Principal
               Distribution Amount shall be distributed in the following order
               of priority;

                       first, the lesser of (x) the Principal Distribution
                       Amount and (y) the Class A Principal Distribution Amount
                       shall be distributed to the Holders of the Class A
                       Certificates, until the Certificate Principal Balance of
                       such Class has been reduced to zero;

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<PAGE>

                       second, the lesser of (x) the excess of (i) the Principal
                       Distribution Amount over (ii) the amount distributed to
                       the Holders of the Class A Certificates pursuant to
                       clause first above and (y) the Class M-1 Principal
                       Distribution Amount shall be distributed to the Holders
                       of the Class M-1 Certificates, until the Certificate
                       Principal Balance of such Class has been reduced to zero;

                       third, the lesser of (x) the excess of (i) the Principal
                       Distribution Amount over (ii) the sum of the amounts
                       distributed to the Holders of the Class A Certificates
                       pursuant to clause first above and to the Holders of the
                       Class M-1 Certificates pursuant to clause second above
                       and (y) the Class M-2 Principal Distribution Amount shall
                       be distributed to the Holders of the Class M-2
                       Certificates, until the Certificate Principal Balance of
                       such Class has been reduced to zero; and

                       fourth, the lesser of (x) the excess of (i) the Principal
                       Distribution Amount over (ii) the sum of the amounts
                       distributed to the Holders of the Class A Certificates
                       pursuant to clause first above, to the Holders of the
                       Class M-1 Certificates pursuant to clause second above
                       and to the Holders of the Class M-2 Certificates pursuant
                       to clause third above and (y) the Class M-3 Principal
                       Distribution Amount shall be distributed to the Holders
                       of the Class M-3 Certificates, until the Certificate
                       Principal Balance of such Class has been reduced to zero.

               (4) On each Distribution Date, the Net Monthly Excess Cashflow
(or, in the case of clause (i) below, the Net Monthly Excess Cashflow exclusive
of any Overcollateralization Reduction Amount) shall be distributed as follows:

                       (i) to the Holders of the Class or Classes of
                       Certificates then entitled to receive distributions in
                       respect of principal, in an amount equal to the principal
                       portion of any Realized Losses incurred or deemed to have
                       been incurred on the Mortgage Loans, applied to reduce
                       the Certificate Principal Balance of such Certificates
                       until the aggregate Certificate Principal Balance of such
                       Certificates is reduced to zero;

                       (ii) to the Holders of the Class or Classes of
                       Certificates then entitled to receive distributions in
                       respect of principal, in an amount equal to the
                       Overcollateralization Increase Amount, applied to reduce
                       the Certificate Principal Balance of such Certificates
                       until the aggregate Certificate Principal Balance of such
                       Certificates is reduced to zero;

                       (iii) to the Holders of the Class M-1 Certificates, in an
                       amount equal to the Interest Carry Forward Amount
                       allocable to such Class of Certificates;

                       (iv) to the Holders of the Class M-2 Certificates, in an
                       amount equal to the Interest Carry Forward Amount
                       allocable to such Class of Certificates;

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<PAGE>

                       (v) to the Holders of the Class M-3 Certificates, in an
                       amount equal to the Interest Carry Forward Amount
                       allocable to such Class of Certificates;

                       (vi) CONCURRENTLY, to the Holders of the Class A
                       Certificates and the Class A-IO Certificates pro rata, in
                       an amount equal to the aggregate of any Prepayment
                       Interest Shortfalls (to the extent not covered by
                       payments pursuant to Section 3.24) and any Relief Act
                       Interest Shortfall allocated to such Certificates;

                       (vii) to the Holders of the Class M-1 Certificates, in an
                       amount equal to the aggregate of any Prepayment Interest
                       Shortfalls (to the extent not covered by payments
                       pursuant to Section 3.24) and any Relief Act Interest
                       Shortfall allocated to such Certificates;

                       (viii) to the Holders of the Class M-2 Certificates, in
                       an amount equal to the aggregate of any Prepayment
                       Interest Shortfalls (to the extent not covered by
                       payments pursuant to Secti on 3.24) and any Relief Act
                       Interest Shortfall allocated to such Certificates;

                       (ix) to the Holders of the Class M-3 Certificates, in an
                       amount equal to the aggregate of any Prepayment Interest
                       Shortfalls (to the extent not covered by payments
                       pursuant to Section 3.24) and any Relief Act Interest
                       Shortfall allocated to such Certificates;

                       (x) to the Reserve Fund, the amount required by
                       Section 3.28(b);

                       (xi) to the Holders of the Class CE Certificates the
                       Interest Distribution Amount and any
                       Overcollateralization Reduction Amount for such
                       Distribution Date; and

                       (xii) to the Holders of the Class R-III Certificates, any
                       remaining amounts; provided that if such Distribution
                       Date is the Distribution Date immediately following the
                       expiration of the latest Prepayment Charge term as
                       identified on the Mortgage Loan Schedule or any
                       Distribution Date thereafter, then any such remaining
                       amounts will be distributed first, to the Holders of the
                       Class P Certificates, until the Certificate Principal
                       Balance thereof has been reduced to zero; and second, to
                       the Holders of the Class R-III Certificates.

               (b) On each Distribution Date, after making the distributions of
the Available Funds as set forth above, the Trustee will FIRST, withdraw from
the Reserve Fund all income from the investment of funds in the Reserve Fund and
distribute such amount to the Holders of the Class CE Certificates, and SECOND,
withdraw from the Reserve Fund, to the extent of amounts remaining on deposit
therein, the amount of any Net WAC Rate Carryover Amount for such Distribution
Date and distribute such amount first, to the Class A Certificates; second, to
the Class M-1 Certificates, third, to the Class M-2 Certificates and fourth, to
the Class M-3 Certificates, in each case to the extent the Net WAC Carryover
Amount is allocable to each such Class.

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<PAGE>

               On each Distribution Date, the Trustee shall withdraw any amounts
then on deposit in the Distribution Account that represent Prepayment Charges
collected by the Master Servicer in connection with the Principal Prepayment of
any of the Mortgage Loans or any Master Servicer Prepayment Charge Payment
Amount and shall distribute such amounts to the Holders of the Class P
Certificates. Such distributions shall not be applied to reduce the Certificate
Principal Balance of the Class P Certificates.

               (c) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated pro rata among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(e) or
Section 9.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Certificates having an initial
aggregate Certificate Principal Balance or Notional Amount that is in excess of
the lesser of (i) $5,000,000 or (ii) two-thirds of the initial Certificate
Principal Balance or Notional Amount of such Class of Certificates, or otherwise
by check mailed by first class mail to the address of such Holder appearing in
the Certificate Register. The final distribution on each Certificate will be
made in like manner, but only upon presentment and surrender of such Certificate
at the Corporate Trust Office of the Trustee or such other location specified in
the notice to Certificateholders of such final distribution.

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

               (d) The rights of the Certificateholders to receive distributions
in respect of the Certificates, and all interests of the Certificateholders in
such distributions, shall be as set forth in this Agreement. None of the Holders
of any Class of Certificates, the Trustee or the Master Servicer shall in any
way be responsible or liable to the Holders of any other Class of Certificates
in respect of amounts properly previously distributed on the Certificates.

               (e) Except as otherwise provided in Section 9.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than three (3) days before the related Distribution Date, mail to each
Holder on such date of such Class of Certificates a notice to the effect that:

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<PAGE>

               (i) the Trustee expects that the final distribution with respect
        to such Class of Certificates will be made on such Distribution Date but
        only upon presentation and surrender of such Certificates at the office
        of the Trustee therein specified, and

               (ii) no interest shall accrue on such Certificates from and after
        the end of the related Interest Accrual Period.

               Any funds not distributed to any Holder or Holders of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust by the Trustee and credited to the account of the
appropriate non-tendering Holder or Holders. If any Certificates as to which
notice has been given pursuant to this Section 4.01(e) shall not have been
surrendered for cancellation within six months after the time specified in such
notice, the Trustee shall mail a second notice to the remaining non-tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trustee shall, directly or through an agent, mail a final
notice to the remaining non-tendering Certificateholders concerning surrender of
their Certificates but shall continue to hold any remaining funds for the
benefit of non-tendering Certificateholders. The costs and expenses of
maintaining the funds in trust and of contacting such Certificateholders shall
be paid out of the assets remaining in such trust fund. If within one year after
the final notice any such Certificates shall not have been surrendered for
cancellation, the Trustee shall pay to Salomon Smith Barney Inc. all such
amounts, and all rights of non-tendering Certificateholders in or to such
amounts shall thereupon cease. No interest shall accrue or be payable to any
Certificateholder on any amount held in trust by the Trustee as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 4.01(e). Any such amounts held in trust
by the Trustee shall be held in an Eligible Account and the Trustee may direct
any depository institution maintaining such account to invest the funds in one
or more Permitted Investments. All income and gain realized from the investment
of funds deposited in such accounts held in trust by the Trustee shall be for
the benefit of the Trustee; provided, however, that the Trustee shall deposit in
such account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon the
realization of such loss.

               (f) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate or a
Mezzanine Certificate be reduced more than once in respect of any particular
amount both (a) allocated to such Certificate in respect of Realized Losses
pursuant to Section 4.04 and (b) distributed to the Holder of such Certificate
in reduction of the Certificate Principal Balance thereof pursuant to this
Section 4.01 from Net Monthly Excess Cashflow and (ii) in no event shall the
Uncertificated Balance of a REMIC I Regular Interest or REMIC II Regular
Interest be reduced more than once in respect of any particular amount both (a)
allocated to such REMIC I Regular Interest or REMIC II Regular Interest in
respect of Realized Losses pursuant to Section 4.04 and (b) distributed on such
REMIC I Regular Interest or REMIC II Regular Interest in reduction of the
Uncertificated Balance thereof pursuant to this Section 4.01.

               SECTION 4.02.          Statements to Certificateholders.

                                      -84-

<PAGE>

               On each Distribution Date, the Trustee shall prepare and forward
by mail to each Holder of the Regular Certificates, a statement as to the
distributions made on such Distribution Date setting forth:

               (i) the amount of the distribution made on such Distribution Date
               to the Holders of the Certificates of each Class allocable to
               principal, and the amount of the distribution made on such
               Distribution Date to the Holders of the Class P Certificates
               allocable to Prepayment Charges;

               (ii) the amount of the distribution made on such Distribution
               Date to the Holders of the Certificates of each Class allocable
               to interest;

               (iii) the aggregate Servicing Fee received by the Master Servicer
               during the related Due Period and such other customary
               information as the Trustee deems necessary or desirable, or which
               a Certificateholder reasonably requests, to enable
               Certificateholders to prepare their tax returns;

               (iv) the aggregate amount of P& I Advances for such Distribution
               Date;

               (v) the aggregate Stated Principal Balance of the Mortgage Loans
               and any REO Properties as of the close of business on such
               Distribution Date;

               (vi) the number, aggregate principal balance, weighted average
               remaining term to maturity and weighted average Mortgage Rate of
               the Mortgage Loans as of the related Due Date;

               (vii) the number and aggregate unpaid principal balance of
               Mortgage Loans (a) delinquent 30 to 59 days, (b) delinquent 60 to
               89 days, (c) delinquent 90 or more days, in each case, as of the
               last day of the preceding calendar month, (d) as to which
               foreclosure proceedings have been commenced and (e) with respect
               to which the related Mortgagor has filed for protection under
               applicable bankruptcy laws, with respect to whom bankruptcy
               proceedings are pending or with respect to whom bankruptcy
               protection is in force;

               (viii) with respect to any Mortgage Loan that became an REO
               Property during the preceding calendar month, the loan number of
               such Mortgage Loan, the unpaid principal balance and the Stated
               Principal Balance of such Mortgage Loan as of the date it became
               an REO Property;

               (ix) the book value of any REO Property as of the close of
               business on the last Business Day of the calendar month preceding
               the Distribution Date;

               (x) the aggregate amount of Principal Prepayments made during the
               related Prepayment Period;

                                      -85-

<PAGE>

               (xi) the aggregate amount of Realized Losses incurred during the
               related Prepayment Period (or, in the case of Bankruptcy Losses
               allocable to interest, during the related Due Period), separately
               identifying whether such Realized Losses constituted Bankruptcy
               Losses and the aggregate amount of Realized Losses incurred since
               the Closing Date;

               (xii) the aggregate amount of Extraordinary Trust Fund Expenses
               withdrawn from the Collection Account or the Distribution Account
               for such Distribution Date;

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

               (xiv) the Certificate Factor for each such Class of Certificates
               applicable to such Distribution Date;

               (xv) the Interest Distribution Amount in respect of the Class A
               Certificates, the Mezzanine Certificates and the Class CE
               Certificates for such Distribution Date and the Interest Carry
               Forward Amount, if any, with respect to the Class A Certificates,
               the Mezzanine Certificates and the Class A-IO Certificates on
               such Distribution Date, and in the case of the Class A
               Certificates, the Mezzanine Certificates, the Class A- IO
               Certificates and the Class CE Certificates, separately
               identifying any reduction thereof due to allocations of Realized
               Losses, Prepayment Interest Shortfalls and Relief Act Interest
               Shortfalls;

               (xvi) the aggregate amount of any Prepayment Interest Shortfall
               for such Distribution Date, to the extent not covered by payments
               by the Master Servicer pursuant to Section 3.24;

               (xvii) the aggregate amount of Relief Act Interest Shortfalls for
               such Distribution Date;

               (xviii) the Required Overcollateralized Amount and the Credit
               Enhancement Percentage for such Distribution Date;

               (xix) the Overcollateralization Increase Amount, if any, for such
               Distribution Date;

               (xx) the Overcollateralization Reduction Amount, if any, for such
               Distribution Date;

               (xxi) the respective Pass-Through Rates applicable to the Class A
               Certificates, the Mezzanine Certificates, the Class A-IO
               Certificates and the Class CE Certificates for such Distribution
               Date and the Pass-Through Rate applicable to the Class A
               Certificates and the Mezzanine Certificates for the immediately
               succeeding Distribution Date;

                                      -86-

<PAGE>

               (xxii) the Loss Severity Percentage with respect to each Mortgage
               Loan;

               (xxiii) the Aggregate Loss Severity Percentage;

               (xxiv) (A) the dollar amount of payments received related to
               claims under the PMI Policy during the related Prepayment Period
               (and the number of Mortgage Loans to which such payments related)
               and (B) the cumulative amount of payments received related to
               claims under the PMI Policy since the Closing Date (and the
               number of Mortgage Loans to which such payments related);

               (xxiii) (A) the dollar amount of claims made under the PMI Policy
               that were denied during the Prepayment Period (and the number of
               Mortgage Loans to which such denials related) and (B) the dollar
               amount of the cumulative claims made under the PMI Policy that
               were denied since the Closing Date (and the number of Mortgage
               Loans to which such denials related); and

               (xxiv) the Net WAC Rate Carryover Amount for the Class A
               Certificates and the Mezzanine Certificates, if any, for such
               Distribution Date and the amount remaining unpaid after
               reimbursements therefor on such Distribution Date.

               In the case of information furnished pursuant to subclauses (i)
through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.

               Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Regular Certificate a statement containing the
information set forth in subclauses (i) through (iii) above, aggregated for such
calendar year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time are in force.

               On each Distribution Date, the Trustee shall forward to the
Depositor, the Trustee, to each Holder of a Residual Certificate and to the
Master Servicer, a copy of the reports forwarded to the Regular
Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed with respect to the Residual Certificates,
respectively, on such Distribution Date.

               Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Residual Certificate a statement setting forth
the amount, if any, actually distributed with respect to the Residual
Certificates, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder.

               The Trustee shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for

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<PAGE>

herein, as shall be reasonable with respect to the Certificateholder, or
otherwise with respect to the purposes of this Agreement, all such reports or
information to be provided at the expense of the Certificateholder in accordance
with such reasonable and explicit instructions and directions as the
Certificateholder may provide. For purposes of this Section 4.02, the Trustee's
duties are limited to the extent that the Trustee receives timely reports as
required from the Master Servicer.

               On each Distribution Date the Trustee shall provide Bloomberg
Financial Markets, L. P. (" Bloomberg") CUSIP level factors for each class of
Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg.

               SECTION 4.03.          Remittance Reports; P& I Advances.

               (a) On the tenth day of each calendar month, the Master Servicer
shall deliver to the Trustee in an electronic format acceptable to the Trustee,
information with respect to each Mortgage Loan as is mutually agreed upon
between the Master Servicer and the Trustee. On the Business Day following each
Determination Date, the Master Servicer shall deliver to the Trustee by telecopy
(or by such other means as the Master Servicer or the Trustee, as the case may
be, may agree from time to time) a Remittance Report with respect to the related
Distribution Date. On the same date, the Master Servicer shall forward to the
Trustee by overnight mail a computer readable magnetic tape or electronically
transmit (in a format acceptable to the Trustee) on the day thereafter, a data
file containing the information set forth in such Remittance Report with respect
to the related Distribution Date. Such Remittance Report will include (i) the
amount of P& I Advances to be made by the Master Servicer in respect of the
related Distribution Date, the aggregate amount of P& I Advances outstanding
after giving effect to such P& I Advances, and the aggregate amount of
Nonrecoverable P& I Advances in respect of such Distribution Date and (ii) such
other information with respect to the Mortgage Loans as the Trustee may
reasonably require to perform the calculations necessary to make the
distributions contemplated by Section 4.01 and to prepare the statements to
Certificateholders contemplated by Section 4.02. The Trustee shall not be
responsible (except with regard to any information regarding the Prepayment
Charges to the extent set forth below) to recompute, recalculate or verify any
information provided to it by the Master Servicer. Notwithstanding the
foregoing, in connection with any Principal Prepayment on any Mortgage Loan
listed on Schedule 2 hereto, the Trustee shall verify that the related
Prepayment Charge was delivered to the Trustee for deposit in the Distribution
Account in the amount set forth on such Schedule 2 or that such Prepayment
Charge was waived in accordance with the terms hereof.

               (b) The amount of P& I Advances to be made by the Master Servicer
for any Distribution Date shall equal, subject to Section 4.03(d), the sum of
(i) the aggregate amount of Monthly Payments (with each interest portion thereof
net of the related Servicing Fee), due on the related Due Date in respect of the
Mortgage Loans, which Monthly Payments were delinquent as of the close of
business on the related Determination Date and (ii) with respect to each REO
Property, which REO Property was acquired during or prior to the related
Prepayment Period and as to which REO Property an REO Disposition did not occur
during the related Prepayment Period, an amount equal to the excess, if any, of
the REO Imputed Interest on such REO Property for the most recently ended
calendar month, over the net income from such REO Property transferred to the
Distribution Account pursuant to Section 3.23 for distribution on such
Distribution Date.

                                      -88-

<PAGE>

               By 3: 00 p.m. New York time on the Master Servicer Remittance
Date, the Master Servicer shall remit in immediately available funds to the
Trustee for deposit in the Distribution Account an amount equal to the aggregate
amount of P& I Advances, if any, to be made in respect of the Mortgage Loans and
REO Properties for the related Distribution Date either (i) from its own funds
or (ii) from the Collection Account, to the extent of funds held therein for
future distribution (in which case it will cause to be made an appropriate entry
in the records of Collection Account that amounts held for future distribution
have been, as permitted by this Section 4.03, used by the Master Servicer in
discharge of any such P& I Advance) or (iii) in the form of any combination of
(i) and (ii) aggregating the total amount of P& I Advances to be made by the
Master Servicer with respect to the Mortgage Loans and REO Properties. Any
amounts held for future distribution and so used shall be appropriately
reflected in the Master Servicer's records and replaced by the Master Servicer
by deposit in the Collection Account on or before any future Master Servicer
Remittance Date to the extent that the Available Distribution Amount for the
related Distribution Date (determined without regard to P& I Advances to be made
on the Master Servicer Remittance Date) shall be less than the total amount that
would be distributed to the Classes of Certificateholders pursuant to Section
4.01 on such Distribution Date if such amounts held for future distributions had
not been so used to make P& I Advances. The Trustee will provide notice to the
Master Servicer by telecopy by the close of business on the third Business Day
prior to the Distribution Date in the event that the amount remitted by the
Master Servicer to the Trustee on such date is less than the P& I Advances
required to be made by the Master Servicer for the related Distribution Date.

               (c) The obligation of the Master Servicer to make such P& I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from the Trust Fund pursuant to any applicable provision of
this Agreement, except as otherwise provided in this Section.

               (d) Notwithstanding anything herein to the contrary, no P& I
Advance or Servicing Advance shall be required to be made hereunder by the
Master Servicer if such P& I Advance or Servicing Advance would, if made,
constitute a Nonrecoverable P& I Advance or Nonrecoverable Servicing Advance,
respectively. The determination by the Master Servicer that it has made a
Nonrecoverable P& I Advance or a Nonrecoverable Servicing Advance or that any
proposed P& I Advance or Servicing Advance, if made, would constitute a
Nonrecoverable P& I Advance or Nonrecoverable Servicing

               Advance, respectively, shall be evidenced by an
Officers'Certificate of the Master Servicer delivered to the Depositor and the
Trustee.

               SECTION 4.04.          Allocation of Realized Losses.

               (a) Prior to each Determination Date, the Master Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Bankruptcy Losses; and (iii)
the respective portions of such Realized Losses allocable to interest and
allocable to principal. Prior to each Determination Date, the Master Servicer
shall also determine as to each Mortgage Loan: (i) the

                                      -89-

<PAGE>

total amount of Realized Losses, if any, incurred in connection with any
Deficient Valuations made during the related Prepayment Period; and (ii) the
total amount of Realized Losses, if any, incurred in connection with Debt
Service Reductions in respect of Monthly Payments due during the related Due
Period. The information described in the two preceding sentences that is to be
supplied by the Master Servicer shall be evidenced by an Officers' Certificate
delivered to the Trustee by the Master Servicer prior to the Determination Date
immediately following the end of (i) in the case of Bankruptcy Losses allocable
to interest, the Due Period during which any such Realized Loss was incurred,
and (ii) in the case of all other Realized Losses, the Prepayment Period during
which any such Realized Loss was incurred.

               (b) All Realized Losses on the Mortgage Loans shall be allocated
by the Trustee on each Distribution Date as follows: first, to Net Monthly
Excess Cashflow; second, to the Class CE Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; third, to the Class M-3
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; fourth, to the Class M-2 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; and fifth, to the Class M-1
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero. All Realized Losses to be allocated to the Certificate Principal
Balances of all Classes on any Distribution Date shall be so allocated after the
actual distributions to be made on such date as provided above. All references
above to the Certificate Principal Balance of any Class of Certificates shall be
to the Certificate Principal Balance of such Class immediately prior to the
relevant Distribution Date, before reduction thereof by any Realized Losses, in
each case to be allocated to such Class of Certificates, on such Distribution
Date.

               Any allocation of Realized Losses to a Mezzanine Certificate on
any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated; any allocation of Realized Losses to
a Class CE Certificate shall be made by reducing the amount otherwise payable in
respect thereof pursuant to Section 4.01(a)(4)(x). No allocations of any
Realized Losses shall be made to the Certificate Principal Balances of the Class
A Certificates or the Class P Certificates.

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

               (c) All Realized Losses on the Mortgage Loans shall be allocated
by the Trustee on each Distribution Date to the REMIC I Regular Interest I-LT1
and REMIC I Regular Interest I-LT2 on a pro rata basis based on their respective
Uncertificated Balances.

               (d) All Realized Losses on the Mortgage Loans shall be allocated
by the Trustee on each Distribution Date to the following REMIC II Regular
Interests in the specified percentages, as follows: first, to Uncertificated
Interest payable to the REMIC II Regular Interest II-LT1 and REMIC II Regular
Interest II-LT6 up to an aggregate amount equal to the REMIC II Interest Loss

                                      -90-

<PAGE>

Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated
Balances of the REMIC II Regular Interest II-LT1 and REMIC II Regular Interest
II-LT6 up to an aggregate amount equal to the REMIC II Principal Loss Allocation
Amount, 98% and 2%, respectively; third, to the Uncertificated Balances of REMIC
II Regular Interest II-LT1, REMIC II Regular Interest II-LT5 and REMIC II
Regular Interest II-LT6, 98%, 1% and 1%, respectively, until the Uncertificated
Balance of REMIC II Regular Interest II-LT5 has been reduced to zero; fourth to
the Uncertificated Balances of REMIC II Regular Interest II-LT1, REMIC II
Regular Interest II-LT4 and REMIC II Regular Interest II-LT6, 98%, 1% and 1%,
respectively, until the Uncertificated Balance of REMIC II Regular Interest
II-LT4 has been reduced to zero; and fifth to the Uncertificated Balances of
REMIC II Regular Interest II-LT1, REMIC II Regular Interest II-LT3 and REMIC II
Regular Interest II-LT6, 98%, 1% and 1%, respectively, until the Uncertificated
Balance of REMIC II Regular Interest II-LT3 has been reduced to zero.

               SECTION 4.05.    Compliance with Withholding Requirements

               Notwithstanding any other provision of this Agreement, the
Trustee shall comply with all federal withholding requirements respecting
payments to Certificateholders of interest or original issue discount that the
Trustee reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Trustee shall indicate the amount withheld to such
Certificateholders.

               SECTION 4.06.   Exchange Commission; Additional Information.

               Within 15 days after each Distribution Date, the Trustee shall
file with the Commission via the Electronic Data Gathering and Retrieval System,
a Form 8-K with a copy of the statement to Certificateholders for such
Distribution Date as an exhibit thereto. Prior to January 30, 2002, the Trustee
shall file a Form 15 Suspension Notification with respect to the Trust Fund, if
applicable. Prior to March 30, 2002, the Trustee shall file a Form 10-K,
substantially in the form attached hereto as Exhibit H, with respect to the
Trust Fund. The Depositor hereby grants to the Trustee a limited power of
attorney to execute and file each such document on behalf of the Depositor. Such
power of attorney shall continue until the earlier of (i) receipt by the Trustee
from the Depositor of written termination of such power of attorney and (ii) the
termination of the Trust Fund. Upon request, the Trustee shall deliver to the
Depositor a copy of any Form 8-K or Form 10-K filed pursuant to this Section
4.06.

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<PAGE>

                                    ARTICLE V

                                THE CERTIFICATES

               SECTION 5.01  The Certificates.

               (a) The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I.

               The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-10. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.

               Upon original issue, the Certificates shall be executed by the
Trustee and authenticated and delivered by the Trustee to or upon the order of
the Depositor. The Certificates shall be executed by manual or facsimile
signature on behalf of the Trustee by an authorized signatory. Certificates
bearing the manual or facsimile signatures of individuals who were at any time
the proper officers of the Trustee shall bind the Trustee notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form provided
herein executed by the Trustee by manual signature, and such certificate of
authentication shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.

               (b) The Class A Certificates and the Mezzanine Certificates shall
initially be issued as one or more Certificates held by the Book-Entry Custodian
or, if appointed to hold such Certificates as provided below, the Depository and
registered in the name of the Depository or its nominee and, except as provided
below, registration of such Certificates may not be transferred by the Trustee
except to another Depository that agrees to hold such Certificates for the
respective Certificate Owners with Ownership Interests therein. The Certificate
Owners shall hold their respective Ownership Interests in and to such
Certificates through the book-entry facilities of the Depository and, except as
provided below, shall not be entitled to definitive, fully registered
Certificates (" Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The Trustee is hereby
initially appointed as the Book-Entry Custodian and hereby agrees to act as such
in accordance herewith and in accordance with the agreement that it has with the
Depository authorizing it to act as such. The Book-Entry Custodian may, and, if
it is no longer qualified to act as such, the Book- Entry Custodian shall,
appoint, by a written instrument delivered to the Depositor, the Master Servicer
and the Trustee, any other transfer agent (including the Depository or any
successor

                                      -92-

<PAGE>

Depository) to act as Book-Entry Custodian under such conditions as the
predecessor Book-Entry Custodian and the Depository or any successor Depository
may prescribe, provided that the predecessor Book-Entry Custodian shall not be
relieved of any of its duties or responsibilities by reason of any such
appointment of other than the Depository. If the Trustee resigns or is removed
in accordance with the terms hereof, the Trustee, the successor trustee or, if
it so elects, the Depository shall immediately succeed to its predecessor's
duties as Book-Entry Custodian. The Depositor shall have the right to inspect,
and to obtain copies of, any Certificates held as Book-Entry Certificates by the
Book-Entry Custodian.

               The Trustee, the Master Servicer and the Depositor may for all
purposes (including the making of payments due on the Book-Entry Certificates)
deal with the Depository as the authorized representative of the Certificate
Owners with respect to the Book-Entry Certificates for the purposes of
exercising the rights of Certificateholders hereunder. The rights of Certificate
Owners with respect to the Book-Entry Certificates shall be limited to those
established by law and agreements between such Certificate Owners and the
Depository Participants and brokerage firms representing such Certificate
Owners. Multiple requests and directions from, and votes of, the Depository as
Holder of the Book-Entry Certificates with respect to any particular matter
shall not be deemed inconsistent if they are made with respect to different
Certificate Owners. The Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by Certificateholders
and shall give notice to the Depository of such record date.

               If (i)(A) the Depositor advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Master Servicer Event of Default, Certificate
Owners representing in the aggregate not less than 51% of the Ownership
Interests of the Book-Entry Certificates advise the Trustee through the
Depository, in writing, that the continuation of a book-entry system through the
Depository is no longer in the best interests of the Certificate Owners, the
Trustee shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
Book- Entry Certificates by the Book-Entry Custodian or the Depository, as
applicable, accompanied by registration instructions from the Depository for
registration of transfer, the Trustee shall cause the Definitive Certificates to
be issued. Such Definitive Certificates will be issued in minimum denominations
of $10,000, except that any beneficial ownership that was represented by a Book-
Entry Certificate in an amount less than $10,000 immediately prior to the
issuance of a Definitive Certificate shall be issued in a minimum denomination
equal to the amount represented by such Book-Entry Certificate. None of the
Depositor, the Master Servicer, the Trustee shall be liable for any delay in the
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates, and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.

               SECTION 5.02  Registration of Transfer and Exchange of
                             Certificates.

                                      -93-

<PAGE>

               (a) The Trustee shall cause to be kept at one of the offices or
agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11, a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided.

               (b) No transfer of any Class CE Certificate, Class P Certificate
or Residual Certificate shall be made unless that transfer is made pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), and effective registration or qualification under applicable
state securities laws, or is made in a transaction that does not require such
registration or qualification. In the event that such a transfer of a Class A-IO
Certificate, Class CE Certificate, Class P Certificate or Residual Certificate
is to be made without registration or qualification (other than in connection
with the initial transfer of any such Certificate by the Depositor to an
affiliate of the Depositor), the Trustee shall require receipt of: (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Certificateholder desiring to effect the
transfer and from such Certificateholder's prospective transferee, substantially
in the forms attached hereto as Exhibit F-1; and (ii) in all other cases, an
Opinion of Counsel satisfactory to it that such transfer may be made without
such registration or qualification (which Opinion of Counsel shall not be an
expense of the Trust Fund or of the Depositor, the Trustee, the Master Servicer
in its capacity as such or any Sub-Servicer), together with copies of the
written certification(s) of the Certificateholder desiring to effect the
transfer and/or such Certificateholder's prospective transferee upon which such
Opinion of Counsel is based, if any. None of the Depositor, the Trustee is
obligated to register or qualify any such Certificates under the 1933 Act or any
other securities laws or to take any action not otherwise required under this
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Certificateholder desiring to effect the transfer of any such
Certificate shall, and does hereby agree to, indemnify the Trustee, the
Depositor and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

               (c) No transfer of a Class CE Certificate, Class P Certificate or
Residual Certificate or any interest therein shall be made to any Plan subject
to ERISA or Section 4975 of the Code, any Person acting, directly or indirectly,
on behalf of any such Plan or any Person acquiring such Certificates with "Plan
Assets" of a Plan within the meaning of the Department of Labor regulation
promulgated at 29 C. F. R. ss. 2510.3-101 ("Plan Assets") unless the Depositor,
the Trustee and the Master Servicer are provided with an Opinion of Counsel
which establishes to the satisfaction of the Depositor, the Trustee and the
Master Servicer that the purchase of such Certificates is permissible under
applicable law, will not constitute or result in any prohibited transaction
under ERISA or Section 4975 of the Code and will not subject the Depositor, the
Master Servicer, the Trustee or the Trust Fund to any obligation or liability
(including obligations or liabilities under ERISA or Section 4975 of the Code)
in addition to those undertaken in this Agreement, which Opinion of Counsel
shall not be an expense of the Depositor, the Master Servicer, the Trustee or
the Trust Fund. In lieu of such Opinion of Counsel, any prospective Transferee
of such Certificates may provide a certification in the form of Exhibit G to
this Agreement (or other form acceptable to the Depositor, the Trustee and the
Master Servicer), which the Trustee may rely upon without further inquiry or
investigation. Neither an Opinion of Counsel nor any certification will be

                                      -94-

<PAGE>

required in connection with the initial transfer of any such Certificate by the
Depositor to an affiliate of the Depositor (in which case, the Depositor or any
affiliate thereof shall have deemed to have represented that such affiliate is
not a Plan or a Person investing Plan Assets) and the Trustee shall be entitled
to conclusively rely upon a representation (which, upon the request of the
Trustee, shall be a written representation) from | the Depositor of the status
of such transferee as an affiliate of the Depositor.

               Each beneficial owner of a Mezzanine Certificates or any interest
therein shall be deemed to have represented, by virtue of its acquisition or
holding of that certificate or interest therein, that either (i) it is not a
Plan investor, (ii) it has acquired and is holding such Mezzanine Certificates
in reliance on the Underwriters'Exemption, and that it understands that there
are certain conditions to the availability of the Underwriters'Exemption,
including that the Mezzanine Certificates must be rated, at the time of
purchase, | not lower than" BBB-" (or its equivalent) by Fitch, Moody's or S& P
or (iii) (1) it is an insurance company, (2) the source of funds used to acquire
or hold the certificate or interest therein is an "insurance company general
account," as such term is defined in PTCE 95-60, and (3) the conditions in
Sections I and III of PTCE 95-60 have been satisfied.

               If any Class CE Certificate, Class P Certificate or Residual
Certificate or any interest therein is acquired or held in violation of the
provisions of the preceding paragraph, the next preceding permitted beneficial
owner will be treated as the beneficial owner of that Certificate retroactive to
the date of transfer to the purported beneficial owner. Any purported beneficial
owner whose acquisition or holding of any such Certificate or interest therein
was effected in violation of the provisions of the preceding paragraph shall
indemnify and hold harmless the Depositor, the Master Servicer, the Trustee and
the Trust Fund from and against any and all liabilities, claims, costs or
expenses incurred by those parties as a result of that acquisition or holding.

               (d) (i) Each Person who has or who acquires any Ownership
Interest in a Residual Certificate shall be deemed by the acceptance or
acquisition of such Ownership Interest to have agreed to be bound by the
following provisions and to have irrevocably authorized the Trustee or its
designee under clause (iii)(A) below to deliver payments to a Person other than
such Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of Transfer and to do all other
things necessary in connection with any such sale. The rights of each Person
acquiring any Ownership Interest in a Residual Certificate are expressly subject
to the following provisions:

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

                       (B) In connection with any proposed Transfer of any
               Ownership Interest in a Residual Certificate, the Trustee shall
               require delivery to it, and shall not register the Transfer of
               any Residual Certificate until its receipt of, an affidavit and
               agreement (a "Transfer Affidavit and Agreement," in the form
               attached hereto as Exhibit F-2) from the proposed Transferee, in
               form and substance satisfactory to the Trustee, representing and
               warranting, among other things, that such Transferee is a
               Permitted

                                      -95-

<PAGE>

               Transferee, that it is not acquiring its Ownership Interest in
               the Residual Certificate that is the subject of the proposed
               Transfer as a nominee, trustee or agent for any Person that is
               not a Permitted Transferee, that for so long as it retains its
               Ownership Interest in a Residual Certificate, it will endeavor to
               remain a Permitted Transferee, and that it has reviewed the
               provisions of this Section 5.02(d) and agrees to be bound by
               them.

                       (C) Notwithstanding the delivery of a Transfer Affidavit
               and Agreement by a proposed Transferee under clause (B) above, if
               a Responsible Officer of the Trustee who is assigned to this
               transaction has actual knowledge that the proposed Transferee is
               not a Permitted Transferee, no Transfer of an Ownership Interest
               in a Residual Certificate to such proposed Transferee shall be
               effected.

                       (D) Each Person holding or acquiring any Ownership
               Interest in a Residual Certificate shall agree (x) to require a
               Transfer Affidavit and Agreement in the form attached hereto as
               Exhibit F-2 from any other Person to whom such Person attempts to
               transfer its Ownership Interest in a Residual Certificate and (y)
               not to transfer its Ownership Interest unless it provides a
               Transferor Affidavit (in the form attached hereto as Exhibit F-2)
               to the Trustee stating that, among other things, it has no actual
               knowledge that such other Person is not a Permitted Transferee.

                       (E) Each Person holding or acquiring an Ownership
               Interest in a Residual Certificate, by purchasing an Ownership
               Interest in such Certificate, agrees to give the Trustee written
               notice that it is a "pass-through interest holder" within the
               meaning of temporary Treasury regulation Section
               1.67-3T(a)(2)(i)(A) immediately upon acquiring an Ownership
               Interest in a Residual Certificate, if it is, or is holding an
               Ownership Interest in a Residual Certificate on behalf of, a
               "pass-through interest holder."

               (ii) The Trustee will register the Transfer of any Residual
        Certificate only if it shall have received the Transfer Affidavit and
        Agreement and all of such other documents as shall have been reasonably
        required by the Trustee as a condition to such registration. In
        addition, no Transfer of a Residual Certificate shall be made unless the
        Trustee shall have received a representation letter from the Transferee
        of such Certificate to the effect that such Transferee is a Permitted
        Transferee.

               (iii) (A) If any purported Transferee shall become a Holder of a
        Residual Certificate in violation of the provisions of this Section
        5.02(d), then the last preceding Permitted Transferee shall be restored,
        to the extent permitted by law, to all rights as holder thereof
        retroactive to the date of registration of such Transfer of such
        Residual Certificate. The Trustee shall be under no liability to any
        Person for any registration of Transfer of a Residual Certificate that
        is in fact not permitted by this Section 5.02(d) or for making any
        payments due on such Certificate to the holder thereof or for taking any
        other action with respect to such holder under the provisions of this
        Agreement.

                                      -96-

<PAGE>

                       (B) If any purported Transferee shall become a holder of
               a Residual Certificate in violation of the restrictions in this
               Section 5.02(d) and to the extent that the retroactive
               restoration of the rights of the holder of such Residual
               Certificate as described in clause (iii)(A) above shall be
               invalid, illegal or unenforceable, then the Trustee shall have
               the right, without notice to the holder or any prior holder of
               such Residual Certificate, to sell such Residual Certificate to a
               purchaser selected by the Trustee on such terms as the Trustee
               may choose. Such purported Transferee shall promptly endorse and
               deliver each Residual Certificate in accordance with the
               instructions of the Trustee. Such purchaser may be the Trustee
               itself or any Affiliate of the Trustee. The proceeds of such
               sale, net of the commissions (which may include commissions
               payable to the Trustee or its Affiliates), expenses and taxes
               due, if any, will be remitted by the Trustee to such purported
               Transferee. The terms and conditions of any sale under this
               clause (iii)(B) shall be determined in the sole discretion of the
               Trustee, and the Trustee shall not be liable to any Person having
               an Ownership Interest in a Residual Certificate as a result of
               its exercise of such discretion.

               (iv) The Trustee shall make available to the Internal Revenue
        Service and those Persons specified by the REMIC Provisions all
        information necessary to compute any tax imposed (A) as a result of the
        Transfer of an Ownership Interest in a Residual Certificate to any
        Person who is a Disqualified Organization, including the information
        described in Treasury regulations sections 1.860D-1(b)(5) and
        1.860E-2(a)(5) with respect to the "excess inclusions" of such Residual
        Certificate and (B) as a result of any regulated investment company,
        real estate investment trust, common trust fund, partnership, trust,
        estate or organization described in Section 1381 of the Code that holds
        an Ownership Interest in a Residual Certificate having as among its
        record holders at any time any Person which is a Disqualified
        Organization. Reasonable compensation for providing such information may
        be accepted by the Trustee.

               (v) The provisions of this Section 5.02(d) set forth prior to
        this subsection (v) may be modified, added to or eliminated, provided
        that there shall have been delivered to the Trustee at the expense of
        the party seeking to modify, add to or eliminate any such provision the
        following:

                       (A) written notification from each Rating Agency to the
               effect that the modification, addition to or elimination of such
               provisions will not cause such Rating Agency to downgrade its
               then-current ratings of any Class of Certificates; and

                       (B) an Opinion of Counsel, in form and substance
               satisfactory to the Trustee, to the effect that such modification
               of, addition to or elimination of such provisions will not cause
               any of REMIC I, REMIC II, or REMIC III to cease to qualify as a
               REMIC and will not cause any of REMIC I, REMIC II or REMIC III as
               the case may be, to be subject to an entity-level tax caused by
               the Transfer of any Residual Certificate to a Person that is not
               a Permitted Transferee or a Person other than the prospective
               transferee to be subject to a REMIC-tax caused by the Transfer of
               a Residual Certificate to a Person that is not a Permitted
               Transferee.

                                      -97-

<PAGE>

               (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 8.11, the Trustee shall
execute, authenticate and deliver, in the name of the designated Transferee or
Transferees, one or more new Certificates of the same Class of a like aggregate
Percentage Interest.

               (f) At the option of the Holder thereof, any Certificate may be
exchanged for other Certificates of the same Class with authorized denominations
and a like aggregate Percentage Interest, upon surrender of such Certificate to
be exchanged at any office or agency of the Trustee maintained for such purpose
pursuant to Section 8.11. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver, the Certificates
which the Certificateholder making the exchange is entitled to receive. Every
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee) be duly endorsed by, or be accompanied by a written
instrument of transfer in the form satisfactory to the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing.

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

               (h) All Certificates surrendered for transfer and exchange shall
be canceled and destroyed by the Trustee in accordance with its customary
procedures.

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

               If (i) any mutilated Certificate is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (ii) there is delivered to the Trustee such
security or indemnity as may be required by it to save it harmless, then, in the
absence of actual knowledge by the Trustee that such Certificate has been
acquired by a bona fide purchaser or the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of the same Class and of like denomination
and Percentage Interest. Upon the issuance of any new Certificate under this
Section, the Trustee may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. Any replacement Certificate issued pursuant to this Section shall
constitute complete and indefeasible evidence of ownership in the applicable
REMIC created hereunder, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.

               SECTION 5.04.          Persons Deemed Owners.

               The Depositor, the Master Servicer, the Trustee and any agent of
any of them may treat the Person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 4.01 and for all other purposes whatsoever,

                                      -98-

<PAGE>

and none of the Depositor, the Master Servicer, the Trustee or any agent of any
of them shall be affected by notice to the contrary.

               SECTION 5.05.          Certain Available Information.

               On or prior to the date of the first sale of any Class CE
Certificate, Class P Certificate or Residual Certificate to an Independent third
party, the Depositor shall provide to the Trustee ten copies of any private
placement memorandum or other disclosure document used by the Depositor in
connection with the offer and sale of such Certificates. In addition, if any
such private placement memorandum or disclosure document is revised, amended or
supplemented at any time following the delivery thereof to the Trustee, the
Depositor promptly shall inform the Trustee of such event and shall deliver to
the Trustee ten copies of the private placement memorandum or disclosure
document, as revised, amended or supplemented. The Trustee shall maintain at its
Corporate Trust Office and shall make available free of charge during normal
business hours for review by any Holder of a Certificate or any Person
identified to the Trustee as a prospective transferee of a Certificate,
originals or copies of the following items: (i) in the case of a Holder or
prospective transferee of a Class CE Certificate, Class P Certificate or
Residual Certificate, the related private placement memorandum or other
disclosure document relating to such Class of Certificates, in the form most
recently provided to the Trustee; and (ii) in all cases, (A) this Agreement and
any amendments hereof entered into pursuant to Section 11.01, (B) all monthly
statements required to be delivered to Certificateholders of the relevant Class
pursuant to Section 4.02 since the Closing Date, and all other notices, reports,
statements and written communications delivered to the Certificateholders of the
relevant Class pursuant to this Agreement since the Closing Date, (C) all
certifications delivered by a Responsible Officer of the Trustee since the
Closing Date pursuant to Section 10.01(h), (D) any and all Officers'Certificates
delivered to the Trustee by the Master Servicer since the Closing Date to
evidence the Master Servicer's determination that any P& I Advance or Servicing
Advance was, or if made, would be a Nonrecoverable P& I Advance or
Nonrecoverable Servicing Advance, respectively, and (E) any and all
Officers'Certificates delivered to the Trustee by the Master Servicer since the
Closing Date pursuant to Section 4.04(a). Copies and mailing of any and all of
the foregoing items will be available from the Trustee upon request at the
expense of the Person requesting the same.

                                      -99-

<PAGE>

                                   ARTICLE VI

                      THE DEPOSITOR AND THE MASTER SERVICER

               SECTION 6.01. Liability of the Depositor and the Master Servicer.

               The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement upon them in their respective capacities as Depositor and
Master Servicer and undertaken hereunder by the Depositor and the Master
Servicer herein.

               SECTION 6.02. Merger or Consolidation of the Depositor or the
Master Servicer.

               Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation. The Depositor and the Master Servicer each will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its respective duties under this Agreement.

               The Depositor or the Master Servicer may be merged or
consolidated with or into any Person, or transfer all or substantially all of
its assets to any Person, in which case any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer, as the case may
be, hereunder, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
Fannie Mae or Freddie Mac; and provided further that the Rating Agencies'ratings
of the Class A Certificates and the Mezzanine Certificates in effect immediately
prior to such merger or consolidation will not be qualified, reduced or
withdrawn as a result thereof (as evidenced by a letter to such effect from the
Rating Agencies).

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

               None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer
pursuant hereto, or against any liability which would otherwise be imposed by
reason of

                                      -100-

<PAGE>

willful misfeasance, bad faith or gross negligence in the performance of duties
or by reason of reckless disregard of obligations and duties hereunder. The
Depositor, the Master Servicer and any director, officer, employee or agent of
the Depositor or the Master Servicer may rely in good faith on any document of
any kind which, prima facie, is properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Master Servicer and
any director, officer, employee or agent of the Depositor or the Master Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
relating to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder. Neither the Depositor nor the Master Servicer shall be under any
obligation to appear in, prosecute or defend any legal action unless such action
is related to its respective duties under this Agreement and, in its opinion,
does not involve it in any expense or liability; provided, however, that each of
the Depositor and the Master Servicer may in its discretion undertake any such
action which it may deem necessary or desirable with respect to this Agreement
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, unless the Depositor or the Master
Servicer acts without the consent of Holders of Certificates entitled to at
least 51% of the Voting Rights, the legal expenses and costs of such action and
any liability resulting therefrom (except any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder) shall be expenses, costs and liabilities of
the Trust Fund, and the Depositor and the Master Servicer shall be entitled to
be reimbursed therefor from the Collection Account as and to the extent provided
in Section 3.11, any such right of reimbursement being prior to the rights of
the Certificateholders to receive any amount in the Collection Account.

               SECTION 6.04. Limitation on Resignation of the Master Servicer.

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

               Except as expressly provided herein, the Master Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or subcontract with, or authorize or appoint
any other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder. The foregoing prohibition on
assignment shall not prohibit the Master Servicer from designating a Subservicer
as payee of any indemnification amount payable to the Master Servicer hereunder;
provided, however, that as provided in Section 3.06 hereof, no Subservicer shall
be a third-party beneficiary hereunder and the parties hereto shall not be
required to recognize any Subservicer as an indemnitee under this Agreement. If,
pursuant to

                                      -101-

<PAGE>

any provision hereof, the duties of the Master Servicer are transferred to a
successor master servicer, the entire amount of the Servicing Fee and other
compensation payable to the Master Servicer pursuant hereto shall thereafter be
payable to such successor master servicer.

               SECTION 6.05. Rights of the Depositor in Respect of the Master
Servicer.

               The Master Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Depositor and the
Trustee, upon reasonable notice, during normal business hours, access to all
records maintained by the Master Servicer (and any such Sub-Servicer) in respect
of the Master Servicer's rights and obligations hereunder and access to officers
of the Master Servicer (and those of any such Sub-Servicer) responsible for such
obligations. Upon request, the Master Servicer shall furnish to the Depositor
and the Trustee its (and any such Sub-Servicer's) most recent financial
statements and such other information relating to the Master Servicer's capacity
to perform its obligations under this Agreement as it possesses (and that any
such Sub-Servicer possesses). To the extent such information is not otherwise
available to the public, the Depositor and the Trustee shall not disseminate any
information obtained pursuant to the preceding two sentences without the Master
Servicer's written consent, except as required pursuant to this Agreement or to
the extent that it is appropriate to do so (i) in working with legal counsel,
auditors, taxing authorities or other governmental agencies or (ii) pursuant to
any law, rule, regulation, order, judgment, writ, injunction or decree of any
court or governmental authority having jurisdiction over the Depositor and the
Trustee or the Trust Fund, and in any case, the Depositor or the Trustee as the
case may be, shall use its best efforts to assure the confidentiality of any
such disseminated non-public information. The Depositor may, but is not
obligated to, enforce the obligations of the Master Servicer under this
Agreement and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Master Servicer under this Agreement or
exercise the rights of the Master Servicer under this Agreement; provided that
the Master Servicer shall not be relieved of any of its obligations under this
Agreement by virtue of such performance by the Depositor or its designee. The
Depositor shall not have any responsibility or liability for any action or
failure to act by the Master Servicer and is not obligated to supervise the
performance of the Master Servicer under this Agreement or otherwise.

                                      -102-

<PAGE>

                                   ARTICLE VII

                                     DEFAULT

               SECTION 7.01. Master Servicer Events of Default.

        (a) "Master Servicer Event of Default," wherever used herein, means any
one of the following events:

               (i) any failure by the Master Servicer to remit to the Trustee
               for distribution to the Certificateholders any payment (other
               than a P& I Advance required to be made from its own funds on any
               Master Servicer Remittance Date pursuant to Section 4.03)
               required to be made under the terms of the Certificates and this
               Agreement which continues unremedied for a period of one Business
               Day after the date upon which written notice of such failure,
               requiring the same to be remedied, shall have been given to the
               Master Servicer by the Depositor or the Trustee (in which case
               notice shall be provided by telecopy), or to the Master Servicer,
               the Depositor and the Trustee by the Holders of Certificates
               entitled to at least 25% of the Voting Rights; or

               (ii) any failure on the part of the Master Servicer duly to
               observe or perform in any material respect any other of the
               covenants or agreements on the part of the Master Servicer
               contained in this Agreement, or the breach by the Master Servicer
               of any representation and warranty contained in Section 2.05,
               which continues unremedied for a period of 30 days (or if such
               failure or breach cannot be remedied within 30 days, then such
               remedy shall have been commenced within 30 days and diligently
               pursued thereafter; provided, however, that in no event shall
               such failure or breach be allowed to exist for a period of
               greater than 90 days) after the earlier of (i) the date on which
               written notice of such failure, requiring the same to be
               remedied, shall have been given to the Master Servicer by the
               Depositor, the Trustee or to the Master Servicer, the Depositor
               and the Trustee by the Holders of Certificates entitled to at
               least 25% of the Voting Rights and (ii) actual knowledge of such
               failure by a Servicing Officer of the Master Servicer; or

               (iii) a decree or order of a court or agency or supervisory
               authority having jurisdiction in the premises in an involuntary
               case under any present or future federal or state bankruptcy,
               insolvency or similar law or the appointment of a conservator or
               receiver or liquidator in any insolvency, readjustment of debt,
               marshalling of assets and liabilities or similar proceeding, or
               for the winding-up or liquidation of its affairs, shall have been
               entered against the Master Servicer and such decree or order
               shall have remained in force undischarged or unstayed for a
               period of 90 days; or

               (iv) the Master Servicer shall consent to the appointment of a
               conservator or receiver or liquidator in any insolvency,
               readjustment of debt, marshalling of assets and liabilities or
               similar proceedings of or relating to it or of or relating to all
               or substantially all of its property; or

                                      -103-

<PAGE>

               (v) the Master Servicer shall admit in writing its inability to
               pay its debts generally as they become due, file a petition to
               take advantage of any applicable insolvency or reorganization
               statute, make an assignment for the benefit of its creditors, or
               voluntarily suspend payment of its obligations; or

               (vi) any failure by the Master Servicer of the Master Servicer
               Termination Test; or

               (vii) any failure of the Master Servicer to make any P& I Advance
               on any Master Servicer Remittance Date required to be made from
               its own funds pursuant to Section 4.03 which continues unremedied
               until 3: 00 p. m. New York time on the second Business Day
               immediately following the Master Servicer Remittance Date.

If a Master Servicer Event of Default described in clauses (i) through (vi) of
this Section shall occur, then, and in each and every such case, so long as such
Master Servicer Event of Default shall not have been remedied, the Depositor or
the Trustee may, and at the written direction of the Holders of Certificates
entitled to at least 51% of Voting Rights, the Trustee shall, by notice in
writing to the Master Servicer (and to the Depositor if given by the Trustee or
to the Trustee if given by the Depositor), terminate all of the rights and
obligations of the Master Servicer in its capacity as Master Servicer under this
Agreement, to the extent permitted by law, and in and to the Mortgage Loans and
the proceeds thereof. If a Master Servicer Event of Default described in clause
(vii) hereof shall occur, the Trustee shall, by notice in writing to the Master
Servicer and the Depositor, terminate all of the rights and obligations of the
Master Servicer in its capacity as Master Servicer under this Agreement and in
and to the Mortgage Loans and the proceeds thereof. On or after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer under this Agreement, whether with respect to the Certificates
(other than as a Holder of any Certificate) or the Mortgage Loans or otherwise,
shall pass to and be vested in the Trustee pursuant to and under this Section,
and, without limitation, the Trustee is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of the Master Servicer, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Master Servicer agrees promptly (and in any event no later than
ten Business Days subsequent to such notice) to provide the Trustee with all
documents and records requested by it to enable it to assume the Master
Servicer's functions under this Agreement, and to cooperate with the Trustee in
effecting the termination of the Master Servicer's responsibilities and rights
under this Agreement, including, without limitation, the transfer within one
Business Day to the Trustee for administration by it of all cash amounts which
at the time shall be or should have been credited by the Master Servicer to the
Collection Account held by or on behalf of the Master Servicer, the Distribution
Account or any REO Account or Servicing Account held by or on behalf of the
Master Servicer or thereafter be received with respect to the Mortgage Loans or
any REO Property serviced by the Master Servicer (provided, however, that the
Master Servicer shall continue to be entitled to receive all amounts accrued or
owing to it under this Agreement on or prior to the date of such termination,
whether in respect of P& I Advances or otherwise, and shall continue to be
entitled to the benefits of Section 6.03, notwithstanding any such termination,
with respect to events occurring prior to such termination). For purposes of
this Section 7.01, the Trustee shall not be deemed to have knowledge

                                      -104-

<PAGE>

of a Master Servicer Event of Default unless a Responsible Officer of the
Trustee assigned to and working in the Trustee's Corporate Trust Office has
actual knowledge thereof or unless written notice of any event which is in fact
such a Master Servicer Event of Default is received by the Trustee and such
notice references the Certificates, the Trust Fund or this Agreement.

               SECTION 7.02.          Trustee to Act; Appointment of Successor.

               (a) (1) On and after the time the Master Servicer receives a
notice of termination, the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as Master Servicer under this Agreement and the
transactions set forth or provided for herein, and all the responsibilities,
duties and liabilities relating thereto and arising thereafter shall be assumed
by the Trustee (except for any representations or warranties of the Master
Servicer under this Agreement, the responsibilities, duties and liabilities
contained in Section 2.05 and the obligation to deposit amounts in respect of
losses pursuant to Section 3.12) by the terms and provisions hereof including,
without limitation, the Master Servicer's obligations to make P& I Advances
pursuant to Section 4.03; provided, however, that if the Trustee is prohibited
by law or regulation from obligating itself to make advances regarding
delinquent mortgage loans, then the Trustee shall not be obligated to make P& I
Advances pursuant to Section 4.03; and provided further, that any failure to
perform such duties or responsibilities caused by the Master Servicer's failure
to provide information required by Section 7.01 shall not be considered a
default by the Trustee as successor to the Master Servicer hereunder. As
compensation therefor, the Trustee shall be entitled to the Servicing Fee and
all funds relating to the Mortgage Loans to which the Master Servicer would have
been entitled if it had continued to act hereunder. Notwithstanding the above
and subject to Section 7.02(a)(2) below, the Trustee if it shall be unwilling to
so act, or shall, if it is unable to so act or if it is prohibited by law from
making advances regarding delinquent mortgage loans or if the Holders of
Certificates entitled to at least 51% of the Voting Rights so request in writing
to the Trustee promptly appoint or petition a court of competent jurisdiction to
appoint, an established mortgage loan servicing institution acceptable to each
Rating Agency and having a net worth of not less than $15,000,000, as the
successor to the Master Servicer under this Agreement in the assumption of all
or any part of the responsibilities, duties or liabilities of the Master
Servicer under this Agreement.

               (2) No appointment of a successor to the Master Servicer under
this Agreement shall be effective until the assumption by the successor of all
of the Master Servicer's responsibilities, duties and liabilities hereunder. In
connection with such appointment and assumption described herein, the Trustee
may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Master Servicer as such hereunder. The Depositor, the Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. Pending appointment of a successor to the Master
Servicer under this Agreement or the Trustee shall act in such capacity as
hereinabove provided.

        (b) If the Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of this Agreement (for purposes of this Section 7.02(b), a "Remittance")
because the Master Servicer is the subject of a proceeding under the federal
Bankruptcy Code and the making of such Remittance is prohibited by Section 362

                                      -105-

<PAGE>

of the federal Bankruptcy Code, the Trustee upon notice of such prohibition,
regardless of whether it has received a notice of termination under Section
7.01, advance the amount of such Remittance by depositing such amount in the
Distribution Account on the related Distribution Date. The Trustee shall be
obligated to make such advance only if (i) such advance, in the good faith
judgment of the Trustee can reasonably be expected to be ultimately recoverable
from Stayed Funds and (ii) the Trustee is not prohibited by law from making such
advance or obligating itself to do so. Upon remittance of the Stayed Funds to
the Trustee or the deposit thereof in the Distribution Account by the Master
Servicer, a trustee in bankruptcy or a federal bankruptcy court, the Trustee,
may recover the amount so advanced, without interest, by withdrawing such amount
from the Distribution Account; however, nothing in this Agreement shall be
deemed to affect the Trustee's, right to recover from the Master Servicer's own
funds interest on the amount of any such advance. If the Trustee, as the case
may be, at any time makes an advance under this Subsection which it later
determines in its good faith judgment will not be ultimately recoverable from
the Stayed Funds with respect to which such advance was made, the Trustee shall
be entitled to reimburse itself for such advance, without interest, by
withdrawing from the Distribution Account, out of amounts on deposit therein, an
amount equal to the portion of such advance attributable to the Stayed Funds.

               SECTION 7.03.          Notification to Certificateholders.

               (a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register.

               (b) Not later than the later of 60 days after the occurrence of
any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee becomes aware of the occurrence of such an
event, the Trustee shall transmit by mail to all Holders of Certificates notice
of each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.

               SECTION 7.04.       Waiver of Master Servicer Events of Default.

               The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Certificates affected by any default or Master
Servicer Event of Default hereunder may waive such default or Master Servicer
Event of Default; provided, however, that a default or Master Servicer Event of
Default under clause (i) or (vii) of Section 7.01 may be waived only by all of
the Holders of the Regular Certificates. Upon any such waiver of a default or
Master Servicer Event of Default, such default or Master Servicer Event of
Default shall cease to exist and shall be deemed to have been remedied for every
purpose hereunder. No such waiver shall extend to any subsequent or other
default or Master Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.

                                      -106-

<PAGE>

                                  ARTICLE VIII

                        CONCERNING THE TRUSTEE AND THE TRUST ADMINISTRATOR

               SECTION 8.01.          Duties of Trustee

               The Trustee prior to the occurrence of a Master Servicer Event of
Default and after the curing of all Master Servicer Events of Default which may
have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. During a Master Servicer Event of
Default, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.

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

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

                       (i) Prior to the occurrence of a Master Servicer Event of
               Default, and after the curing of all such Master Servicer Events
               of Default which may have occurred, the duties and obligations of
               the Trustee shall be determined solely by the express provisions
               of this Agreement, the Trustee shall be liable except for the
               performance of such duties and obligations as are specifically
               set forth in this Agreement, no implied covenants or obligations
               shall be read into this Agreement against the Trustee, and in the
               absence of bad faith on the part of the Trustee, the Trustee may
               conclusively rely, as to the truth of the statements and the
               correctness of the opinions expressed therein, upon any
               certificates or opinions furnished to the Trustee that conform to
               the requirements of this Agreement;

                       (ii) The Trustee shall not be personally liable for an
               error of judgment made in good faith by a Responsible Officer or
               Responsible Officers of it unless it shall be proved that it was
               negligent in ascertaining the pertinent facts; and

                       (iii) The Trustee shall not be personally liable with
               respect to any action taken, suffered or omitted to be taken by
               it in good faith in accordance with the direction of the Holders
               of Certificates entitled to at least 25% of the Voting Rights
               relating to the time, method and place of conducting any
               proceeding for any remedy

                                      -107-

<PAGE>

               available to it or exercising any trust or power conferred upon
               it under this Agreement.

               SECTION 8.02.          Certain Matters Affecting the Trustee

               (a)     Except as otherwise provided in Section 8.01:

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

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

                       (iii) The Trustee shall not be under any obligation to
               exercise any of the trusts or powers vested in it by this
               Agreement or to institute, conduct or defend any litigation
               hereunder or in relation hereto at the request, order or
               direction of any of the Certificateholders, pursuant to the
               provisions of this Agreement, unless such Certificateholders
               shall have offered to the Trustee reasonable security or
               indemnity against the costs, expenses and liabilities which may
               be incurred therein or thereby; nothing contained herein shall,
               however, relieve the Trustee of the obligation, upon the
               occurrence of a Master Servicer Event of Default (which has not
               been cured or waived), to exercise such of the rights and powers
               vested in it by this Agreement, and to use the same degree of
               care and skill in their exercise as a prudent person would
               exercise or use under the circumstances in the conduct of such
               person's own affairs;

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

                       (v) Prior to the occurrence of a Master Servicer Event of
               Default hereunder and after the curing of all Master Servicer
               Events of Default which may have occurred, the Trustee shall not
               be bound to make any investigation into the facts or matters
               stated in any resolution, certificate, statement, instrument,
               opinion, report, notice, request, consent, order, approval, bond
               or other paper or document, unless requested in writing to do so
               by the Holders of Certificates entitled to at least 25% of the
               Voting Rights; provided, however, that if the payment within a
               reasonable time to the Trustee, of the costs, expenses or
               liabilities likely to be incurred by it in the making of such
               investigation is, in the opinion of the Trustee, not reasonably
               assured to the Trustee, by such Certificateholders, the Trustee
               may require reasonable

                                      -108-

<PAGE>

               indemnity against such expense, or liability from such
               Certificateholders as a condition to taking any such action;

                       (vi) The Trustee may execute any of the trusts or powers
               hereunder or perform any duties hereunder either directly or by
               or through agents or attorneys; and

                       (vii) The Trustee shall not be personally liable for any
               loss resulting from the investment of funds held in the
               Collection Account at the direction of the Master Servicer
               pursuant to Section 3.12.

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

               SECTION 8.03. Trustee not Liable for Certificates or Mortgage
                             Loans.

               The recitals contained herein and in the Certificates (other than
the signature of the Trustee, the authentication of the Trustee on the
Certificates, the acknowledgments of the Trustee contained in Article II and the
representations and warranties of the Trustee in Section 8.12) shall be taken as
the statements of the Depositor and the Trustee shall not assume any
responsibility for their correctness. The Trustee shall not make any
representations or warranties as to the validity or sufficiency of this
Agreement (other than as specifically set forth in Section 8.12) or of the
Certificates (other than the signature of the Trustee, and authentication of the
Trustee on the Certificates) or of any Mortgage Loan or related document. The
Trustee shall not be accountable for the use or application by the Depositor of
any of the Certificates or of the proceeds of such Certificates, or for the use
or application of any funds paid to the Depositor or the Master Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from the Collection
Account by the Master Servicer, other than any funds held by or on behalf of the
Trustee in accordance with Section 3.10.

               SECTION 8.04.          Trustee May Own Certificates.

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

               SECTION 8.05.          Trustee's Fees and Expenses.

               (a) The Trustee shall withdraw from the Distribution Account on
each Distribution Date and pay to itself the Trustee Fee. The Trustee and any
director, officer, employee or agent of the Trustee, shall be indemnified by the
Trust Fund and held harmless against any loss, liability or expense (not
including expenses, disbursements and advances incurred or made by the Trustee
including the compensation and the expenses and disbursements of its agents and
counsel, in the ordinary course of the Trustee's performance in accordance with
the provisions of this Agreement) incurred by the Trustee in connection with any
claim or legal action or any pending or

                                      -109-

<PAGE>

threatened claim or legal action arising out of or in connection with the
acceptance or administration of its obligations and duties under this Agreement,
other than any loss, liability or expense (i) resulting from any breach of the
Master Servicer's obligations in connection with this Agreement, (ii) that
constitutes a specific liability of the Trustee pursuant to Section 10.01(g) or
(iii) any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder as a result of a breach
of the Trustee's obligations under Article X hereof. The Master Servicer agrees
to indemnify the Trustee, from, and hold it harmless against, any loss,
liability or expense arising in respect of any breach by the Master Servicer of
its obligations in connection with this Agreement. Such indemnity shall survive
the termination or discharge of this Agreement and the resignation or removal of
the Trustee. Any payment hereunder made by the Master Servicer to the Trustee
shall be from the Master Servicer's own funds, without reimbursement from REMIC
I therefor.

               (b) The Trustee shall pay any annual rating agency fees of the
Rating Agencies for ongoing surveillance from its own funds without right of
reimbursement.

               SECTION 8.06.          Eligibility Requirements for Trustee

               The Trustee hereunder shall at all times be a corporation or an
association (other than the Depositor, the Originator, the Seller, the Master
Servicer or any Affiliate of the foregoing) organized and doing business under
the laws of any state or the United States of America, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 (or a member of a bank holding company whose capital and
surplus is at least $50,000,000) and subject to supervision or examination by
federal or state authority. If such corporation or association publishes reports
of conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07.

               SECTION 8.07.          Resignation and Removal of the Trustee

               The Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Depositor, the
Master Servicer and to the Certificateholders. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the resigning
Trustee and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders, the Trustee and the Master Servicer by the
Depositor. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

                                      -110-

<PAGE>

               If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the and appoint a successor by written instrument, in
duplicate, which instrument shall be delivered to the Trustee so removed and to
the successor trustee. A copy of such instrument shall be delivered to the
Certificateholders, the Trustee and the Master Servicer by the Depositor.

               The Holders of Certificates entitled to at least 51% of the
Voting Rights may at any time remove the Trustee and appoint a successor trustee
by written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered to the Depositor, one complete set to the Trustee so removed
and one complete set to the successor so appointed. A copy of such instrument
shall be delivered to the Certificateholders and the Master Servicer by the
Depositor.

               Any resignation or removal of the Trustee and appointment of a
successor trustee, pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08. Notwithstanding the foregoing, in the event the
Trustee is unable to continue to perform its obligations pursuant to the terms
of this Agreement prior to the appointment of a successor, the Trustee shall be
obligated to perform such obligations until a new trustee is appointed. Such
performance shall be without prejudice to any claim by a party hereto or
beneficiary hereof resulting from the Trustee's breach of its obligations
hereunder.

               SECTION 8.08.          Successor Trustee

               Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor and its predecessor trustee an
instrument accepting such appointment hereunder, and thereupon the resignation
or removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as trustee herein. The
predecessor trustee shall deliver to the successor trustee all Mortgage Files
and related documents and statements to the extent held by it hereunder, as well
as all moneys, held by it hereunder, and the Depositor and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties and obligations.

               No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading of any Class of Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.

                                      -111-

<PAGE>

               Upon acceptance of appointment by a successor trustee, as
provided in this Section, the Depositor shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register. If the Depositor fails to mail such notice
within 10 days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Depositor.

               SECTION 8.09.          Merger or Consolidation of Trustee.

               Any corporation or association into which either the Trustee may
be merged or converted or with which it may be consolidated or any corporation
or association resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation or association succeeding to
the business of the Trustee shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

               SECTION 8.10.      Appointment of Co-Trustee or Separate Trustee.

               Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of REMIC I or property securing the same may at the time be located, the Trustee
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-trustee or co-trustees,
jointly with the Trustee, or separate trustee or separate trustees, of all or
any part of REMIC I, and to vest in such Person or Persons, in such capacity,
such title to REMIC I, or any part thereof, and, subject to the other provisions
of this Section 8.10, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 8.06 hereunder and no notice to Holders of Certificates of
the appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.08 hereof.

               In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to a defaulting Master Servicer hereunder),
the Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to REMIC I or any portion thereof in any such jurisdiction) shall be
exercised and performed by such separate trustee or co-trustee at the direction
of the Trustee.

               Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trust conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee, or separately, as may be provided therein, subject to all the
provisions

                                      -112-

<PAGE>

of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.

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

               SECTION 8.11.          Appointment of Office or Agency.

               The Trustee will appoint an office or agency in the City of St.
Paul, Minnesota where the Certificates may be surrendered for registration of
transfer or exchange, and presented for final distribution, and where notices
and demands to or upon the Trustee in respect of the Certificates and this
Agreement may be served.

               SECTION 8.12.          Representations and Warranties.

               The Trustee hereby represents and warrants to the Master Servicer
and the Depositor, as of the Closing Date, that:

               (i) it is a national banking association duly organized, validly
        existing and in good standing under the laws of the United States of
        America.

               (ii) The execution and delivery of this Agreement by it, and the
        performance and compliance with the terms of this Agreement by it, will
        not violate its articles of association or bylaws or constitute a
        default (or an event which, with notice or lapse of time, or both, would
        constitute a default) under, or result in the breach of, any material
        agreement or other instrument to which it is a party or which is
        applicable to it or any of its assets.

               (iii) It has the full power and authority to enter into and
        consummate all transactions contemplated by this Agreement, has duly
        authorized the execution, delivery and performance of this Agreement,
        and has duly executed and delivered this Agreement.

               (iv) This Agreement, assuming due authorization, execution and
        delivery by the other parties hereto, constitutes a valid, legal and
        binding obligation of it, enforceable against it in accordance with the
        terms hereof, subject to (A) applicable bankruptcy, insolvency,
        receivership, reorganization, moratorium and other laws affecting the
        enforcement of creditors'rights generally, and (B) general principles of
        equity, regardless of whether such enforcement is considered in a
        proceeding in equity or at law.

               (v) It is not in violation of, and its execution and delivery of
        this Agreement and its performance and compliance with the terms of this
        Agreement will not constitute a violation of, any law, any order or
        decree of any court or arbiter, or any order, regulation or

                                      -113-

<PAGE>

        demand of any federal, state or local governmental or regulatory
        authority, which violation, in its good faith and reasonable judgment,
        is likely to affect materially and adversely either the ability of it to
        perform its obligations under this Agreement or its financial condition.

               (vi) No litigation is pending or, to the best of its knowledge,
        threatened against it, which would prohibit it from entering into this
        Agreement or, in its good faith reasonable judgment, is likely to
        materially and adversely affect either the ability of it to perform its
        obligations under this Agreement or its financial condition.

                                      -114-

<PAGE>

                                   ARTICLE IX

                                   TERMINATION

               SECTION 9.01 Termination Upon Repurchase or Liquidation of All
                            Mortgage Loans.

               (a) Subject to Section 9.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer and
the Trustee (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 8.05 and of the Master Servicer to make remittances to the
Trustee and the Trustee to make payments in respect of the REMIC I Regular
Interests, the REMIC II Regular Interests, the Classes of Certificates as
hereinafter set forth) shall terminate upon payment to the Certificateholders
and the deposit of all amounts held by or on behalf of the Trustee and required
hereunder to be so paid or deposited on the Distribution Date coinciding with or
following the earlier to occur of (i) the purchase by the Terminator (as defined
below) of all Mortgage Loans and each REO Property remaining in REMIC I and (ii)
the final payment or other liquidation (or any advance with respect thereto) of
the last Mortgage Loan or REO Property remaining in REMIC I; provided, however,
that in no event shall the trust created hereby continue beyond the expiration
of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof. Subject to Section 3.10 hereof, the purchase by the
Terminator of all Mortgage Loans and each REO Property remaining in REMIC I
shall be at a price (the "Termination Price") equal to the greater of (A) the
aggregate Purchase Price of all the Mortgage Loans included in REMIC I, plus the
appraised value of each REO Property, if any, included in REMIC I, such
appraisal to be conducted by an appraiser mutually agreed upon by the Terminator
and the Trustee in their reasonable discretion and (B) the aggregate fair market
value of all of the assets of REMIC I (as determined by the Terminator and the
Trustee, as of the close of business on the third Business Day next preceding
the date upon which notice of any such termination is furnished to
Certificateholders pursuant to the third paragraph of this Section 9.01) plus
any additional amounts necessary to pay all interest accrued on, as well as
amounts necessary to retire the principal balance of, any net interest margin
securities to be issued by a separate trust and secured by all or a portion of
the Class CE Certificates and Class P Certificates.

               (b) The Master Servicer shall have the right (the party
exercising such right, the "Terminator"), to purchase all of the Mortgage Loans
and each REO Property remaining in REMIC I pursuant to clause (i) of the
preceding paragraph no later than the Determination Date in the month
immediately preceding the Distribution Date on which the Certificates will be
retired; provided, however, that the Terminator may elect to purchase all of the
Mortgage Loans and each REO Property remaining in REMIC I pursuant to clause (i)
above only if the aggregate Stated Principal Balance of the Mortgage Loans and
each REO Property remaining in the Trust Fund at the time of such election is
reduced to less than 10% of the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date. By acceptance of the Residual
Certificates, the Holder of the Residual Certificates agrees, in connection with
any termination hereunder, to assign and transfer any amounts in excess of par,
and to the extent received in respect of such termination, to pay any such
amounts to the Holders of the Class CE Certificates.

                                      -115-

<PAGE>

               (c) Notice of the liquidation of the Certificates shall be given
promptly by the Trustee by letter to Certificateholders mailed (a) in the event
such notice is given in connection with the purchase of the Mortgage Loans and
each REO Property by the Terminator, not earlier than the 10th day and not later
than the 20th day of the month next preceding the month of the final
distribution on the Certificates or (b) otherwise during the month of such final
distribution on or before the Determination Date in such month, in each case
specifying (i) the Distribution Date upon which the Trust Fund will terminate
and the final payment in respect of the REMIC I Regular Interests, the REMIC II
Regular Interests and the Certificates will be made upon presentation and
surrender of the related Certificates at the office of the Trustee therein
designated, (ii) the amount of any such final payment, (iii) that no interest
shall accrue in respect of the REMIC I Regular Interests, the REMIC II Regular
Interests or the Certificates from and after the Interest Accrual Period
relating to the final Distribution Date therefor and (iv) that the Record Date
otherwise applicable to such Distribution Date is not applicable, payments being
made only upon presentation and surrender of the Certificates at the office of
the Trustee. In the event such notice is given in connection with the purchase
of all of the Mortgage Loans and each REO Property remaining in REMIC I by the
Terminator, the Terminator shall deliver to the Trustee for deposit in the
Distribution Account not later than the last Business Day of the month next
preceding the month of the final distribution on the Certificates an amount in
immediately available funds equal to the above-described purchase price. The
Trustee shall remit to the Master Servicer from such funds deposited in the
Distribution Account (i) any amounts which the Master Servicer would be
permitted to withdraw and retain from the Collection Account pursuant to Section
3.11 and (ii) any other amounts otherwise payable by the Trustee to the Master
Servicer from amounts on deposit in the Distribution Account pursuant to the
terms of this Agreement, in each case prior to making any final distributions
pursuant to Section 10.01(d) below. Upon certification to the Trustee by a
Servicing Officer of the making of such final deposit, the Trustee shall
promptly release to the Terminator the Mortgage Files for the remaining Mortgage
Loans, and the Trustee shall execute all assignments, endorsements and other
instruments necessary to effectuate such transfer.

               (d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates the
amount otherwise distributable on such Distribution Date in accordance with
Section 4.01 in respect of the Certificates so presented and surrendered. Any
funds not distributed to any Holder or Holders of Certificates being retired on
such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust
and credited to the account of the appropriate non-tendering Holder or Holders.
If any Certificates as to which notice has been given pursuant to this Section
9.01 shall not have been surrendered for cancellation within six months after
the time specified in such notice, the Trustee shall mail a second notice to the
remaining non-tendering Certificateholders to surrender their Certificates for
cancellation in order to receive the final distribution with respect thereto. If
within one year after the second notice all such Certificates shall not have
been surrendered for cancellation, the Trustee shall, directly or through an
agent, mail a final notice to the remaining non-tendering Certificateholders
concerning surrender of their Certificates. The costs and expenses of
maintaining the funds in trust and of contacting such Certificateholders shall
be paid out of the assets remaining in the trust funds. If within one year after
the final notice any such Certificates shall not have been surrendered for
cancellation, the Trustee shall pay to Salomon Smith Barney Inc. all such
amounts, and all rights of non-tendering Certificateholders in or to such
amounts shall

                                      -116-

<PAGE>

thereupon cease. No interest shall accrue or be payable to any Certificateholder
on any amount held in trust by the Trustee as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 9.01. Any such amounts held in trust by
the Trustee shall be held in an Eligible Account and the Trustee may direct any
depository institution maintaining such account to invest the funds in one or
more Permitted Investments. All income and gain realized from the investment of
funds deposited in such accounts held in trust by the Trustee shall be for the
benefit of the Trustee; provided, however, that the Trustee shall deposit in
such account the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon the
realization of such loss.

               Immediately following the deposit of funds in trust hereunder in
respect of the Certificates, the Trust Fund shall terminate.

               SECTION 9.02           Additional Termination Requirements.

               (a) In the event that the Terminator purchases all the Mortgage
Loans and each REO Property or the final payment on or other liquidation of the
last Mortgage Loan or REO Property remaining in REMIC I pursuant to Section
9.01, the Trust Fund shall be terminated in accordance with the following
additional requirements:

                       (i) The Trustee shall specify the first day in the 90-day
               liquidation period in a statement attached to REMIC I's, REMIC
               II's and REMIC III's final Tax Return pursuant to Treasury
               regulation Section 1.860F-1 and shall satisfy all requirements of
               a qualified liquidation under Section 860F of the Code and any
               regulations thereunder, as evidenced by an Opinion of Counsel
               obtained at the expense of the Terminator;

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

                       (iii) At the time of the making of the final payment on
               the Certificates, the Trustee shall distribute or credit, or
               cause to be distributed or credited, to the Holders of the
               Residual Certificates all cash on hand in the Trust Fund (other
               than cash retained to meet claims), and the Trust Fund shall
               terminate at that time.

               (b) At the expense of the requesting Terminator (or, if the Trust
Fund is being terminated as a result of the occurrence of the event described in
clause (ii) of the first paragraph of Section 9.01, at the expense of the
Trustee without the right of reimbursement from the Trust Fund), the Trustee
shall prepare or cause to be prepared the documentation required in connection
with the adoption of a plan of liquidation of each of REMIC I, REMIC II and
REMIC III pursuant to this Section 9.02.

               (c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each of REMIC I, REMIC II and REMIC III, which authorization shall be
binding upon all successor Certificateholders.

                                      -117-

<PAGE>

                                    ARTICLE X

                                REMIC PROVISIONS

               SECTION 10.01.         REMIC Administration.

               (a) The Trustee shall elect to treat each of REMIC I, REMIC II
and REMIC III, as a REMIC under the Code and, if necessary, under applicable
state law. Each such election will be made by the Trustee on Form 1066 or other
appropriate federal tax or information return or any appropriate state return
for the taxable year ending on the last day of the calendar year in which the
Certificates are issued. For the purposes of the REMIC election in respect of
REMIC I, the REMIC I Regular Interests shall be designated as the Regular
Interests in REMIC I and the Class R-I Certificates shall be designated as the
Residual Interests in REMIC I. The REMIC II Regular Interests shall be
designated as the Regular Interests in REMIC II and the Class R-II Certificates
shall be designated as the Residual Interests in REMIC II. The Class A
Certificates, the Mezzanine Certificates, the Class A-IO Certificates, the Class
CE Certificates and the Class P Certificates shall be designated as the Regular
Interests in REMIC III and the Class R-III Certificates shall be designated as
the Residual Interests in REMIC III. The Trustee shall not permit the creation
of any "interests" in REMIC I, REMIC II or REMIC III (within the meaning of
Section 860G of the Code) other than the REMIC I Regular Interests, the REMIC II
Regular Interests and the interests represented by the Certificates.

               (b) The Closing Date is hereby designated as the "Startup Day" of
REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of the
Code.

               (c) The Trustee shall be reimbursed for any and all expenses
relating to any tax audit of the Trust Fund (including, but not limited to, any
professional fees or any administrative or judicial proceedings with respect to
REMIC I, REMIC II or REMIC III that involve the Internal Revenue Service or
state tax authorities), including the expense of obtaining any tax related
Opinion of Counsel except as specified herein. The Trustee, as agent for REMIC
I's, REMIC II's and REMIC III's tax matters person shall (i) act on behalf of
the Trust Fund in relation to any tax matter or controversy involving any of
REMIC I, REMIC II or REMIC III and (ii) represent the Trust Fund in any
administrative or judicial proceeding relating to an examination or audit by any
governmental taxing authority with respect thereto. The holder of the largest
Percentage Interest of each Class of Residual Certificates shall be designated,
in the manner provided under Treasury regulations section 1.860F-4(d) and
Treasury regulations section 301.6231(a)(7)-1, as the tax matters person of the
related REMIC created hereunder. By their acceptance thereof, the holder of the
largest Percentage Interest of the Residual Certificates hereby agrees to
irrevocably appoint the Trustee or an Affiliate as its agent to perform all of
the duties of the tax matters person for the Trust Fund.

               (d) The Trustee shall prepare, sign and file all of the Tax
Returns (including Form 8811, which must be filed within 30 days following the
Closing Date) in respect of each REMIC created hereunder. The expenses of
preparing and filing such returns shall be borne by the Trustee without any
right of reimbursement therefor.

                                      -118-

<PAGE>

               (e) The Trustee shall perform on behalf of each of REMIC I, REMIC
II and REMIC III all reporting and other tax compliance duties that are the
responsibility of such REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, as required by the Code, the REMIC
Provisions or other such compliance guidance, the Trustee shall provide (i) to
any Transferor of a Residual Certificate such information as is necessary for
the application of any tax relating to the transfer of a Residual Certificate to
any Person who is not a Permitted Transferee, (ii) to the Certificateholders
such information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption as required) and (iii) to
the Internal Revenue Service the name, title, address and telephone number of
the person who will serve as the representative of REMIC I, REMIC II and REMIC
III. The Depositor shall provide or cause to be provided to the Trustee, within
ten (10) days after the Closing Date, all information or data that the Trustee
reasonably determines to be relevant for tax purposes as to the valuations and
issue prices of the Certificates, including, without limitation, the price,
yield, prepayment assumption and projected cash flow of the Certificates.

               (f) The Trustee shall take such action and shall cause each REMIC
created hereunder to take such action as shall be necessary to create or
maintain the status thereof as a REMIC under the REMIC Provisions. The Trustee
shall not take any action or cause the Trust Fund to take any action or fail to
take (or fail to cause to be taken) any action that, under the REMIC Provisions,
if taken or not taken, as the case may be, could (i) endanger the status of
REMIC I, REMIC II or REMIC III as a REMIC or (ii) result in the imposition of a
tax upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee has received an Opinion of
Counsel, addressed to the Trustee (at the expense of the party seeking to take
such action but in no event at the expense of the Trustee) to the effect that
the contemplated action will not, with respect to any of REMIC I, REMIC II or
REMIC III, endanger such status or result in the imposition of such a tax, nor
shall the Master Servicer take or fail to take any action (whether or not
authorized hereunder) as to which the Trustee has advised it in writing that it
has received an Opinion of Counsel to the effect that an Adverse REMIC Event
could occur with respect to such action; provided that the Master Servicer may
conclusively rely on such Opinion of Counsel and shall incur no liability for
its action or failure to act in accordance with such Opinion of Counsel. In
addition, prior to taking any action with respect to any of REMIC I, REMIC II or
REMIC III or the respective assets of each, or causing REMIC I, REMIC II or
REMIC III to take any action, which is not contemplated under the terms of this
Agreement, the Master Servicer will consult with the Trustee or its designee, in
writing, with respect to whether such action could cause an Adverse REMIC Event
to occur with respect to REMIC I, REMIC II or REMIC III and the Master Servicer
shall not take any such action or cause REMIC I, REMIC II or REMIC III to take
any such action as to which the Trustee has advised it in writing that an
Adverse REMIC Event could occur; provided that the Master Servicer may
conclusively rely on such writing and shall incur no liability for its action or
failure to act in accordance with such writing. The Trustee may consult with
counsel to make such written advice, and the cost of same shall be borne by the
party seeking to take the action not permitted by this Agreement, but in no
event shall such cost be an expense of the Trustee. At all times as may be
required by the Code, the Trustee will ensure that substantially all of the
assets of REMIC I and

                                      -119-

<PAGE>

REMIC II will consist of "qualified mortgages" as defined in Section 860G(a)(3)
of the Code and "permitted investments" as defined in Section 860G(a)(5) of the
Code, to the extent such obligations are within the Trustee's control and not
otherwise inconsistent with the terms of this Agreement.

               (g) In the event that any tax is imposed on "prohibited
transactions" of any REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of such REMIC as defined
in Section 860G(c) of the Code, on any contributions to any such REMIC after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trustee pursuant to Section 10.03 hereof,
if such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Article X, (ii) to the Master Servicer pursuant to
Section 10.03 hereof, if such tax arises out of or results from a breach by the
Master Servicer of any of its obligations under Article III or this Article X,
or (iii) against amounts on deposit in the Distribution Account and shall be
paid by withdrawal therefrom.

               (h) On or before April 15 of each calendar year, commencing April
15, 2002, the Trustee shall deliver to each Rating Agency an Officer's
Certificate of the Trustee stating the Trustee's compliance with this Article X.

               (i) The Trustee shall, for federal income tax purposes, maintain
books and records with respect to each of REMIC I, REMIC II and REMIC III on a
calendar year and on an accrual basis.

               (j) Following the Startup Day, neither the Master Servicer nor
the Trustee shall accept any contributions of assets to any of REMIC I, REMIC II
or REMIC III other than in connection with any Qualified Substitute Mortgage
Loan delivered in accordance with Section 2.03 unless it shall have received an
Opinion of Counsel to the effect that the inclusion of such assets in the Trust
Fund will not cause the related REMIC to fail to qualify as a REMIC at any time
that any Certificates are outstanding or subject such REMIC to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.

               (k) Neither the Trustee nor the Master Servicer shall enter into
any arrangement by which REMIC I, REMIC II or REMIC III will receive a fee or
other compensation for services nor permit either REMIC to receive any income
from assets other than "qualified mortgages" as defined in Section 860G(a)(3) of
the Code or "permitted investments" as defined in Section 860G(a)(5) of the
Code.

               SECTION 10.02.         Prohibited Transactions and Activities.

               None of the Depositor, the Master Servicer or the Trustee shall
sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of REMIC I, (iii) the termination of
REMIC I pursuant to Article IX of this Agreement, (iv) a substitution pursuant
to Article II of this Agreement or (v) a purchase of Mortgage Loans pursuant to
Article II or III of this Agreement), nor acquire any assets for any of REMIC I,
REMIC II or REMIC III (other than REO Property acquired in respect of a

                                      -120-

<PAGE>

defaulted Mortgage Loan), nor sell or dispose of any investments in the
Collection Account or the Distribution Account for gain, nor accept any
contributions to any of REMIC I, REMIC II or REMIC III after the Closing Date
(other than a Qualified Substitute Mortgage Loan delivered in accordance with
Section 2.03), unless it has received an Opinion of Counsel, addressed to the
Trustee (at the expense of the party seeking to cause such sale, disposition,
substitution, acquisition or contribution but in no event at the expense of the
Trustee) that such sale, disposition, substitution, acquisition or contribution
will not (a) affect adversely the status of any of REMIC I, REMIC II or REMIC
III as a REMIC or (b) cause any of REMIC I, REMIC II or REMIC III to be subject
to a tax on "prohibited transactions" or "contributions" pursuant to the REMIC
Provisions.

               SECTION 10.03.     Master Servicer and Trustee Indemnification.

               (a) The Trustee agrees to indemnify the Trust Fund, the Depositor
and the Master Servicer for any taxes and costs including, without limitation,
any reasonable attorneys fees imposed on or incurred by the Trust Fund, the
Depositor or the Master Servicer as a result of a breach of the Trustee's
covenants set forth in this Article X.

               (b) The Master Servicer agrees to indemnify the Trust Fund, the
Depositor and the Trustee for any taxes and costs including, without limitation,
any reasonable attorneys'fees imposed on or incurred by the Trust Fund, the
Depositor or the Trustee as a result of a breach of the Master Servicer's
covenants set forth in Article III or this Article X.

                                      -121-

<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

               SECTION 11.01.         Amendment.

               This Agreement may be amended from time to time by the Depositor,
the Master Servicer and the Trustee without the consent of any of the
Certificateholders, (i) to cure any ambiguity or defect, (ii) to correct, modify
or supplement any provisions herein (including to give effect to the
expectations of Certificateholders), or (iii) to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement, provided that such action
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee
adversely affect in any material respect the interests of any Certificateholder.
No amendment shall be deemed to adversely affect in any material respect the
interests of any Certificateholder who shall have consented thereto, and no
Opinion of Counsel shall be required to address the effect of any such amendment
on any such consenting Certificateholder.

               This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the Holders
of Certificates entitled to at least 66% of the Voting Rights for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Holders of Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) adversely affect in any
material respect the interests of the Holders of any Class of Certificates in a
manner, other than as described in (i), without the consent of the Holders of
Certificates of such Class evidencing at least 66% of the Voting Rights
allocated to such Class, or (iii) modify the consents required by the
immediately preceding clauses (i) and (ii) without the consent of the Holders of
all Certificates then outstanding. Notwithstanding any other provision of this
Agreement, for purposes of the giving or withholding of consents pursuant to
this Section 11.01, Certificates registered in the name of the Depositor or the
Master Servicer or any Affiliate thereof shall be entitled to Voting Rights with
respect to matters affecting such Certificates.

               Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on any of REMIC I, REMIC II or REMIC III
pursuant to the REMIC Provisions or cause any of REMIC I, REMIC II or REMIC III
to fail to qualify as a REMIC at any time that any Certificates are outstanding.

               Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder.

               It shall not be necessary for the consent of Certificateholders
under this Section 11.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent

                                      -122-

<PAGE>

shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.

               The cost of any Opinion of Counsel to be delivered pursuant to
this Section 11.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.

               The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.

               SECTION 11.02.         Recordation of Agreement; Counterparts.

               To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.

               For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

               SECTION 11.03. Limitation on Rights of Certificateholders.

               The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
               No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.

               No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon the Trustee to

                                      -123-

<PAGE>

institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 15 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding. It is understood and intended, and expressly
covenanted by each Certificateholder with every other Certificateholder and the
Trustee, that no one or more Holders of Certificates shall have any right in any
manner whatsoever by virtue of any provision of this Agreement to affect,
disturb or prejudice the rights of the Holders of any other of such
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section, each and every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.

               SECTION 11.04.         Governing Law.

               This Agreement shall be construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.

               SECTION 11.05.         Notices.

               All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, 390 Greenwich Street, 4 th Floor, New York, New York,
Attention: Mortgage Finance (telecopy number (212) 723-8604), or such other
address or telecopy number as may hereafter be furnished to the Master Servicer
and the Trustee in writing by the Depositor, (b) in the case of the Master
Servicer, 1675 Palm Beach Lakes Blvd., Suite 10A, West Palm Beach, Florida
33401, Attention: Secretary (telecopy number: (561) 682-8177), or such other
address or telecopy number as may hereafter be furnished to the Trustee and the
Depositor in writing by the Master Servicer and (c) in the case of the Trustee,
180 East Fifth Street, St. Paul, Minnesota, 55101, Attention: Structured
Finance/SBMSVII | 2001-NC2 (telecopy number (612) 244-0089), or such other
address or telecopy number as may hereafter be furnished to the Master Servicer
and the Depositor in writing by the Trustee. Any notice required or permitted to
be given to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.

               SECTION 11.06.         Severability of Provisions.

               If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions

                                      -124-

<PAGE>

or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.

               SECTION 11.07.         Notice to Rating Agencies.

               The Trustee shall use its best efforts promptly to provide notice
to the Rating Agencies with respect to each of the following of which it has
actual knowledge:

               1. Any material change or amendment to this Agreement;

               2. The occurrence of any Master Servicer Event of Default that
has not been cured or waived;

               3. The resignation or termination of the Master Servicer or the
Trustee;

               4. The repurchase or substitution of Mortgage Loans pursuant to
or as contemplated by Section 2.03;

               5. The final payment to the Holders of any Class of Certificates;

               6. Any change in the location of the Collection Account or the
Distribution Account;

               7. Any event that would result in the inability of the Trustee to
make advances regarding delinquent Mortgage Loans; and

               8. The filing of any claim under any Master Servicer's blanket
bond and errors and omissions insurance policy required by Section 3.14 or the
cancellation or material modification of coverage under any such instrument.

               In addition, the Trustee shall promptly furnish to each Rating
Agency copies of each report to Certificateholders described in Section 4.02 and
the Master Servicer shall promptly furnish to each Rating Agency copies of the
following:

               1. Each annual statement as to compliance described in Section
3.20; and

               2. Each annual independent public accountants'servicing report
described in Section 3.21.

               Any such notice pursuant to this Section 11.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or by express delivery service
to Fitch, Inc., One State Street, 32nd Floor, New York, New York 10004 and to
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc., 55 Water Street, New York, New York 10007 or such other addresses as the
Rating Agencies may designate in writing to the parties hereto.

                                      -125-

<PAGE>

               SECTION 11.08.         Article and Section References.

               All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.

               SECTION 11.09.         Grant of Security Interest.

               It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Depositor to the Trustee, be, and be
construed as, a sale of the Mortgage Loans by the Depositor and not a pledge of
the Mortgage Loans to secure a debt or other obligation of the Depositor.
However, in the event that, notwithstanding the aforementioned intent of the
parties, the Mortgage Loans are held to be property of the Depositor, then, (a)
it is the express intent of the parties that such conveyance be deemed a pledge
of the Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.01 hereof shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and all amounts payable
to the holders of the Mortgage Loans in accordance with the terms thereof and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Collection Account and the Distribution Account, whether in the form of
cash, instruments, securities or other property; (3) the obligations secured by
such security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the
Certificateholders the benefits of this Agreement relating to the Mortgage Loans
and the Trust Fund; and (4) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a security interest in
the Mortgage Loans and all other property described in clause (2) of the
preceding sentence, for the purpose of securing to the Trustee the performance
by the Depositor of the obligations described in clause (3) of the preceding
sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 to be a true, absolute and unconditional
sale of the Mortgage Loans and assets constituting the Trust Fund by the
Depositor to the Trustee.

                                      -126-

<PAGE>

               IN WITNESS WHEREOF, the Depositor, the Master Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.

                                         SALOMON BROTHERS MORTGAGE
                                         SECURITIES VII, INC.
                                         as Depositor

                                         By: /s/ Matthew R. Bollo
                                            ---------------------------------
                                         Name:   Matthew R. Bollo
                                         Title:  Assistant Vice President

                                         OCWEN FEDERAL BANK FSB
                                         as Master Servicer

                                         By: /s/ Richard Delgado
                                            ---------------------------------
                                         Name:   Richard Delgado
                                         Title:  Vice President

                                         U.S. BANK NATIONAL
                                         ASSOCIATION
                                         as Trustee

                                         By: /s/ Eve Kaplan
                                            ---------------------------------
                                         Name:   Eve Kaplan
                                         Title:  Vice President

<PAGE>

STATE OF _____________        )
                              ) ss.:
COUNTY OF ___________         )

               On the th day of September 2001, before me, a notary public in
and for said State, personally appeared ________________, known to me to be an
Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc., one
of the corporations that executed the within instrument, and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                            ---------------------------------
                                                    Notary Public

[Notarial Seal]

<PAGE>

STATE OF _____________        )
                              ) ss.:
COUNTY OF ___________         )

               On the ____ day of September 2001, before me, a notary public in
and for said State, personally appeared _____________________, known to me to be
__________________ of Ocwen Federal Bank FSB, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                            ---------------------------------
                                                    Notary Public

[Notarial Seal]

<PAGE>

STATE OF MINNESOTA            )
                              )ss.:
COUNTY OF RAMSEY              )

               On the ____ day of September 2001, before me, a notary public in
and for said State, personally appeared Eve D. Kaplan, known to me to be a Vice
President of U. S. Bank National Association, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

               IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                            ---------------------------------
                                                    Notary Public

[Notarial Seal]

<PAGE>

                                   EXHIBIT A-1
                                   -----------

                           FORM OF CLASS A CERTIFICATE

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

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Certificate Principal Balance of
                                                            the Class A Certificates as of the Issue Date:
Pass-Through Rate: Variable                                 $____________

Cut-off Date and date of Pooling and                        Denomination: $______________
Servicing Agreement: September 1, 2001
                                                            Master Servicer: Ocwen Federal Bank FSB
First Distribution Date: October 22, 2001
                                                            Trustee: U.S. Bank National Association
No. __
                                                            Issue Date: September 27, 2001

                                                            CUSIP: ___________
</TABLE>

         DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
         OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS
         CERTIFICATE.

                                      A-1-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class A Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class A Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class A Certificates the aggregate initial Certificate
Principal Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Certificate Principal Balance of the Class A
Certificates, or otherwise by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender

                                      A-1-2

<PAGE>

of this  Certificate  at the office or agency  appointed by the Trustee for that
purpose as provided in the Agreement.

                  The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) One-Month LIBOR plus ____%, in
the case of each Distribution Date through and including the Distribution Date
on which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One- Month LIBOR plus ____% per annum, in the case of any Distribution
Date thereafter and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the

                                      A-1-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are   exchangeable  for  new  Certificates  of  the  same  Class  in  authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder  surrendering  the same. No service  charge will be made for any such
registration  of  transfer  or  exchange  of  Certificates,  but the Trustee may
require  payment  of a sum  sufficient  to cover  any tax or other  governmental
charge  that may be imposed in  connection  with any  transfer  or  exchange  of
Certificates.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-1-4

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

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

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-1-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-1-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-1-7

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                          FORM OF CLASS M-1 CERTIFICATE

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

         THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND THE
         CLASS A-IO CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND
         SERVICING AGREEMENT REFERRED TO HEREIN.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Certificate Principal Balance of
                                                            the Class M-1 Certificates as of the Issue
Pass-Through Rate: Variable                                 Date: $____________

Cut-off Date and date of Pooling and                        Denomination: $______________
Servicing Agreement: September 1, 2001
                                                            Master Servicer: Ocwen Federal Bank FSB
First Distribution Date: October 22, 2001
                                                            Trustee: U.S. Bank National Association
No. __
                                                            Issue Date: September 27, 2001

                                                            CUSIP: ___________
</TABLE>

         DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
         OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS
         CERTIFICATE.

                                      A-2-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class M-1 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-1 Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-1 Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class M-1 Certificates the aggregate initial Certificate
Principal Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Certificate Principal Balance of the Class
M-1 Certificates, or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender

                                      A-2-2

<PAGE>

of this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.

                  The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) One-Month LIBOR plus ____%, in
the case of each Distribution Date through and including the Distribution Date
on which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One- Month LIBOR plus ____% per annum, in the case of any Distribution
Date thereafter and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the

                                      A-2-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-2-4

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

         This is one of the Class M-1 Certificates referred to in the
within-mentioned Agreement.

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-2-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-2-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-2-7

<PAGE>

                                   EXHIBIT A-3
                                   -----------

                          FORM OF CLASS M-2 CERTIFICATE

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

         THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND THE
         CLASS A-IO CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND
         SERVICING AGREEMENT REFERRED TO HEREIN.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Certificate Principal Balance of
                                                            the Class M-2 Certificates as of the Issue
Pass-Through Rate: Variable                                 Date: $____________

Cut-off Date and date of Pooling and                        Denomination: $______________
Servicing Agreement: September 1, 2001
                                                            Master Servicer: Ocwen Federal Bank FSB
First Distribution Date: October 22, 2001
                                                            Trustee: U.S. Bank National Association
No. __
                                                            Issue Date: September 27, 2001

                                                            CUSIP: ___________
</TABLE>

         DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
         OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS
         CERTIFICATE.

                                      A-3-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class M-2 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-2 Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-2 Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class M-2 Certificates the aggregate initial Certificate
Principal Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Certificate Principal Balance of the Class
M-2 Certificates, or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender

                                      A-3-2

<PAGE>

of this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.

                  The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) One-Month LIBOR plus ____%, in
the case of each Distribution Date through and including the Distribution Date
on which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One- Month LIBOR plus ____% per annum, in the case of any Distribution
Date thereafter and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the

                                      A-3-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-3-4

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

         This is one of the Class M-2 Certificates referred to in the
within-mentioned Agreement.

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-3-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-3-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-3-7

<PAGE>

                                   EXHIBIT A-4
                                   -----------

                          FORM OF CLASS M-3 CERTIFICATE

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

         THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND THE
         CLASS A-IO CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND
         SERVICING AGREEMENT REFERRED TO HEREIN.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Certificate Principal Balance of
                                                            the Class M-3 Certificates as of the Issue
Pass-Through Rate: Variable                                 Date: $____________

Cut-off Date and date of Pooling and                        Denomination: $______________
Servicing Agreement: September 1, 2001
                                                            Master Servicer: Ocwen Federal Bank FSB
First Distribution Date: October 22, 2001
                                                            Trustee: U.S. Bank National Association
No. __
                                                            Issue Date: September 27, 2001

                                                            CUSIP: ___________
</TABLE>

         DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
         OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS
         CERTIFICATE.

                                      A-4-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class M-3 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-3 Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-3 Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class M-3 Certificates the aggregate initial Certificate
Principal Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Certificate Principal Balance of the Class
M-3 Certificates, or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender

                                      A-4-2

<PAGE>

of this Certificate at the office or agency appointed by the Trustee for that
purpose as provided in the Agreement.

                  The Pass-Through Rate applicable to the calculation of
interest payable with respect to this Certificate on any Distribution Date shall
equal a rate per annum equal to the lesser of (i) One-Month LIBOR plus ____%, in
the case of each Distribution Date through and including the Distribution Date
on which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One- Month LIBOR plus ____% per annum, in the case of any Distribution
Date thereafter and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the

                                     A-4-3

<PAGE>

Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations evidencing the same aggregate Percentage Interest, as requested by
the Holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-4-4

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

         This is one of the Class M-3 Certificates referred to in the
within-mentioned Agreement.

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-4-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-4-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________.
Applicable statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-4-7

<PAGE>

                                  EXHIBIT A-5
                                  -----------

                          FORM OF CLASS CE CERTIFICATE

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

         THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND THE
         CLASS A-IO CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND
         SERVICING AGREEMENT REFERRED TO HEREIN.

         THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
         AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
         TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
         EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
         AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
         THE AGREEMENT.

         NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
         RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
         SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
         IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Certificate Principal Balance of
                                                            the Class CE Certificates as of the Issue Date:
Pass-Through Rate: Variable                                 $____________

Cut-off Date and date of Pooling and                        Denomination: $______________
Servicing Agreement: September 1, 2001
                                                            Master Servicer: Ocwen Federal Bank FSB
First Distribution Date: October 22, 2001
                                                            Trustee: U.S. Bank National Association
No. __
                                                            Issue Date: September 27, 2001
Aggregate Notional Amount of the Class
CE Certificates as of the Issue Date:                       CUSIP: ___________
$-------

Notional Amount: $_________________
</TABLE>

                                      A-5-1

<PAGE>

         DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
         OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS
         CERTIFICATE.

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class CE Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class CE Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class CE Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the

                                      A-5-2

<PAGE>

registered owner of Class CE Certificates the aggregate initial Certificate
Principal Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Certificate Principal Balance of the Class
CE Certificates, or otherwise by check mailed by first class mail to the address
of the Person entitled thereto, as such name and address shall appear on the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt

                                      A-5-3

<PAGE>

of (i) if such transfer is purportedly being made in reliance upon Rule 144A
under the 1933 Act, written certifications from the Holder of the Certificate
desiring to effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor nor the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

                  No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the

                                                        A-5-4

<PAGE>

aggregate Stated Principal Balance of the Mortgage Loans at the time of purchase
being less than 10% of the aggregate principal balance of the Mortgage Loans as
of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

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

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-5-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-5-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-5-7

<PAGE>

                                   EXHIBIT A-6
                                   -----------

                           FORM OF CLASS P CERTIFICATE

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

         THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
         AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
         TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
         EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
         AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
         THE AGREEMENT.

         NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
         RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
         SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
         IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Certificate Principal Balance of
                                                            the Class P Certificates as of the Issue Date:
Pass-Through Rate: Variable                                 $____________

Cut-off Date and date of Pooling and                        Denomination: $______________
Servicing Agreement: September 1, 2001
                                                            Master Servicer: Ocwen Federal Bank FSB
First Distribution Date: October 22, 2001
                                                            Trustee: U.S. Bank National Association
No. __
                                                            Issue Date: September 27, 2001
</TABLE>

         DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF THIS
         CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN. ACCORDINGLY, THE
         OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT ANY TIME MAY BE
         LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION OF THIS
         CERTIFICATE.

                                      A-6-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class P Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class P Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class P Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class P Certificates the aggregate initial Certificate
Principal Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Certificate Principal Balance of the Class P
Certificates, or otherwise by check mailed by first class mail to the address of
the Person entitled thereto, as such name and address shall appear on the
Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

                                      A-6-2

<PAGE>

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor nor the Trustee is
obligated to register or qualify the Class of

                                      A-6-3

<PAGE>

Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor and the Master
Servicer against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.

                  No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-6-4

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

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

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-6-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-6-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-6-7

<PAGE>

                                   EXHIBIT A-7
                                   -----------

                         FORM OF CLASS A-IO CERTIFICATE

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

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Notional Amount of the Class A-
                                                            IO Certificates as of the Issue Date:
Pass-Through Rate: Variable                                 $____________

Cut-off Date and date of Pooling and                        Denomination: $______________
Servicing Agreement: September 1, 2001
                                                            Master Servicer: Ocwen Federal Bank FSB
First Distribution Date: October 22, 2001
                                                            Trustee: U.S. Bank National Association
No. __
                                                            Issue Date: September 27, 2001

                                                            CUSIP: ___________
</TABLE>

                                      A-7-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Notional Amount of the Class A-IO Certificates as of the Issue
Date) in that certain beneficial ownership interest evidenced by all the Class
A-IO Certificates in REMIC III created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Master Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class A-IO Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class A-IO Certificates the aggregate initial Notional
Amount of which is in excess of the lesser of (i) $5,000,000 or (ii) two-thirds
of the aggregate initial Notional Amount of the Class A-IO Certificates, or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this

                                      A-7-2

<PAGE>

Certificate at the office or agency appointed by the Trustee for that purpose as
provided in the Agreement.

                  With respect to the October 2001 Distribution Date through the
March 2002 Distribution Date, the Pass-Through Rate for the Class A-IO
Certificates will be the lesser of (i) ___% per annum and (ii) the weighted
average of the Expense Adjusted Mortgage Rates on the then outstanding Mortgage
Loans, weighted based on their Scheduled Principal Balances as of the first day
of the calendar month preceding the month in which the Distribution Date occurs.
With respect to the April 2002 Distribution Date through the September 2002
Distribution Date, the Pass-Through Rate for the Class A-IO Certificates will be
the lesser of (i) ___% per annum and (ii) the weighted average of the Expense
Adjusted Mortgage Rates on the then outstanding Mortgage Loans, weighted based
on their Scheduled Principal Balances as of the first day of the calendar month
preceding the month in which the Distribution Date occurs. With respect to the
October 2002 Distribution Date through the March 2003 Distribution Date, the
Pass-Through Rate for the Class A-IO Certificates will be the lesser of (i) ___%
per annum and (ii) the weighted average of the Expense Adjusted Mortgage Rates
on the then outstanding Mortgage Loans, weighted based on their Scheduled
Principal Balances as of the first day of the calendar month preceding the month
in which the Distribution Date occurs. With respect to the April 2003
Distribution Date through the September 2003 Distribution Date, the Pass-Through
Rate for the Class A-IO Certificates will be the lesser of (i) ___% per annum
and (ii) the weighted average of the Expense Adjusted Mortgage Rates on the then
outstanding Mortgage Loans, weighted based on their Scheduled Principal Balances
as of the first day of the calendar month preceding the month in which the
Distribution Date occurs. With respect to the October 2003 Distribution Date
through the March 2004 Distribution Date, the Pass-Through Rate for the Class
A-IO Certificates will be the lesser of (i) ___% per annum and (ii) the weighted
average of the Expense Adjusted Mortgage Rates on the then outstanding Mortgage
Loans, weighted based on their Scheduled Principal Balances as of the first day
of the calendar month preceding the month in which the Distribution Date occurs.
After the March 2004 Distribution Date, the Pass-Through Rate for the Class A-IO
Certificates will be 0.00% per annum.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Notional Amount of the Class of Certificates specified on the face hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least
of

                                      A-7-3

<PAGE>

66% of the Voting Rights. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation such consent is made
upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                                      A-7-4

<PAGE>

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-7-5

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

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

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-7-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-7-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-7-8

<PAGE>

                                   EXHIBIT A-8
                                   -----------

                          FORM OF CLASS R-I CERTIFICATE

         THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED
         STATES PERSON.

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

         ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
         MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
         POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

         THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
         AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
         TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
         EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
         AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
         THE AGREEMENT.

         NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
         RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
         SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
         IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

         ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
         MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE
         TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR ANY
         POSSESSION THEREOF, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
         FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
         INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY ORGANIZATION (OTHER
         THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT
         FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION
         IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
         ORGANIZATION

                                      A-8-1

<PAGE>

         DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
         DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL HEREINAFTER BE
         REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (4) AN AGENT OF A
         DISQUALIFIED ORGANIZATION AND (B) NO PURPOSE OF SUCH TRANSFER IS TO
         IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE
         SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL
         CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION
         IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION
         OF THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
         DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF
         NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED
         TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT
         LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
         HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO HAVE
         CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF
         SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
         HEREIN. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED
         FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Percentage Interest of the Class R-
                                                            I Certificates as of the Issue Date: 100.00%
Pass-Through Rate: Variable
                                                            Master Servicer: Ocwen Federal Bank FSB
Cut-off Date and date of Pooling and
Servicing Agreement: September 1, 2001                      Trustee: U.S. Bank National Association

First Distribution Date: October 22, 2001                   Issue Date: September 27, 2001

No. __
</TABLE>

                                      A-8-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-I Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-I Certificates in REMIC I created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-I Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class R-I Certificates the aggregate initial Certificate
Principal Balance of which is in excess of the lesser of (i) $5,000,000 or (ii)
two-thirds of the aggregate initial Certificate Principal Balance of the Class
R-I Certificates, or otherwise by check mailed by first class mail to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this Certificate
at the office or agency appointed by the Trustee for that purpose as provided in
the Agreement.

                                      A-8-3

<PAGE>

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel

                                      A-8-4

<PAGE>

is based. Neither the Depositor nor the Trustee is obligated to register or
qualify the Class of Certificates specified on the face hereof under the 1933
Act or any other securities law or to take any action not otherwise required
under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be required to indemnify the Trustee, the Depositor and the
Master Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such federal and state laws.

                  No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                  Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-I Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-I Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.

                  The Holder of this Certificate, by its acceptance hereof,
shall be deemed to have consented to the provisions of Section 5.02 of the
Agreement and to any amendment of the Agreement deemed necessary by counsel of
the Depositor to ensure that the transfer of this Certificate to any Person
other than a Permitted Transferee or any other Person will not cause the Trust
Fund to cease to qualify as a REMIC or cause the imposition of a tax upon the
REMIC.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                                      A-8-5

<PAGE>

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-8-6

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

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

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-8-7

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-8-8

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-8-9

<PAGE>

                                  EXHIBIT A-9
                                  -----------

                         FORM OF CLASS R-II CERTIFICATE

         THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED
         STATES PERSON.

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

         ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
         MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
         POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

         THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
         AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
         TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
         EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
         AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
         THE AGREEMENT.

         NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
         RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
         SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
         IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

         ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
         MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE
         TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR ANY
         POSSESSION THEREOF, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
         FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
         INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY ORGANIZATION (OTHER
         THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT
         FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION
         IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
         ORGANIZATION

                                      A-9-1

<PAGE>

         DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
         DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL HEREINAFTER BE
         REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (4) AN AGENT OF A
         DISQUALIFIED ORGANIZATION AND (B) NO PURPOSE OF SUCH TRANSFER IS TO
         IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE
         SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL
         CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION
         IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION
         OF THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
         DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF
         NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED
         TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT
         LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
         HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO HAVE
         CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF
         SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
         HEREIN. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED
         FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Percentage Interest of the Class R-
                                                            II Certificates as of the Issue Date: 100.00%
Pass-Through Rate: Variable
                                                            Master Servicer: Ocwen Federal Bank FSB
Cut-off Date and date of Pooling and
Servicing Agreement: September 1, 2001                      Trustee: U.S. Bank National Association

First Distribution Date: October 22, 2001                   Issue Date: September 27, 2001

No. __
</TABLE>

                                      A-9-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-II Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-II Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-II Certificates on such Distribution
Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class R-II Certificates the aggregate initial
Certificate Principal Balance of which is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the aggregate initial Certificate Principal
Balance of the Class R-II Certificates, or otherwise by check mailed by first
class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.

                                      A-9-3

<PAGE>

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor nor the Trustee is
obligated to register or qualify the Class of

                                      A-9-4

<PAGE>

Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor and the Master
Servicer against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.

                  No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                  Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-II Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-II Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose,
including, but not limited to, the receipt of distributions in respect of this
Certificate.

                  The Holder of this Certificate, by its acceptance hereof,
shall be deemed to have consented to the provisions of Section 5.02 of the
Agreement and to any amendment of the Agreement deemed necessary by counsel of
the Depositor to ensure that the transfer of this Certificate to any Person
other than a Permitted Transferee or any other Person will not cause the Trust
Fund to cease to qualify as a REMIC or cause the imposition of a tax upon the
REMIC.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                                      A-9-5

<PAGE>

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                      A-9-6

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

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

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-9-7

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-9-8

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                      A-9-9

<PAGE>

                                  EXHIBIT A-10
                                  ------------

                         FORM OF CLASS R-III CERTIFICATE

         THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.

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

         ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
         MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF THE
         POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

         THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE
         AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT
         TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE
         EXEMPT FROM REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW
         AND IS TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
         THE AGREEMENT.

         NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
         RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
         SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE REGISTERED EXCEPT
         IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

         ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
         MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT TO THE
         TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED STATES OR ANY
         POSSESSION THEREOF, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY
         FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
         INSTRUMENTALITY OF ANY OF THE FOREGOING, (2) ANY ORGANIZATION (OTHER
         THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) THAT IS EXEMPT
         FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION
         IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY
         ORGANIZATION

                                     A-10-1

<PAGE>

         DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
         DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR (3) SHALL HEREINAFTER BE
         REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (4) AN AGENT OF A
         DISQUALIFIED ORGANIZATION AND (B) NO PURPOSE OF SUCH TRANSFER IS TO
         IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (II) SUCH TRANSFEREE
         SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL
         CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION
         IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION
         OF THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
         DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF
         NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED
         TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT
         LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
         HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO HAVE
         CONSENTED TO THE PROVISIONS OF THIS PARAGRAPH AND THE PROVISIONS OF
         SECTION 5.02(D) OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
         HEREIN. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION IS PROHIBITED
         FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS CERTIFICATE.

<TABLE>
<CAPTION>
<S>                                                         <C>
Series 2001-NC2                                             Aggregate Percentage Interest of the Class R-
                                                            III Certificates as of the Issue Date: 100.00%
Pass-Through Rate: Variable
                                                            Master Servicer: Ocwen Federal Bank FSB
Cut-off Date and date of Pooling and
Servicing Agreement: September 1, 2001                      Trustee: U.S. Bank National Association

First Distribution Date: October 22, 2001                   Issue Date: September 27, 2001

No. __
</TABLE>

                                     A-10-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family,
adjustable-rate and fixed-rate, first lien mortgage loans (the "Mortgage Loans")
formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE MASTER SERVICER,
         THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
         CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
         AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

                  This certifies that ___________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-III Certificates
as of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-III Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 20th day of each month or, if such 20th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-III Certificates on such
Distribution Date pursuant to the Agreement.

                  All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date and is
the registered owner of Class R-III Certificates the aggregate initial
Certificate Principal Balance of which is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the aggregate initial Certificate Principal
Balance of the Class R-III Certificates, or otherwise by check mailed by first
class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency appointed by the Trustee
for that purpose as provided in the Agreement.

                                     A-10-3

<PAGE>

                  This Certificate is one of a duly authorized issue of
Certificates designated as Asset Backed Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

                  The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Master Servicer, the Trustee and the rights of
the Certificateholders under the Agreement at any time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies appointed by the Trustee as provided in
the Agreement, duly endorsed by, or accompanied by an assignment in the form
below or other written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor nor the Trustee is
obligated to register or qualify the Class of

                                     A-10-4

<PAGE>

Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor and the Master
Servicer against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws.

                  No transfer of this Certificate to a Plan subject to ERISA or
Section 4975 of the Code, any Person acting, directly or indirectly, on behalf
of any such Plan or any Person using "Plan Assets" to acquire this Certificate
shall be made except in accordance with Section 5.02(c) of the Agreement.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                  Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Trustee (i) an affidavit to the effect that such transferee is any Person other
than a Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-III Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-III Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose,
including, but not limited to, the receipt of distributions in respect of this
Certificate.

                  The Holder of this Certificate, by its acceptance hereof,
shall be deemed to have consented to the provisions of Section 5.02 of the
Agreement and to any amendment of the Agreement deemed necessary by counsel of
the Depositor to ensure that the transfer of this Certificate to any Person
other than a Permitted Transferee or any other Person will not cause the Trust
Fund to cease to qualify as a REMIC or cause the imposition of a tax upon the
REMIC.

                  The Depositor, the Master Servicer, the Trustee and any agent
of the Depositor, the Master Servicer or the Trustee may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Depositor, the Master Servicer, the Trustee nor any such agent
shall be affected by notice to the contrary.

                                     A-10-5

<PAGE>

                  The obligations created by the Agreement and the Trust Fund
created thereby shall terminate upon payment to the Certificateholders of all
amounts held by the Trustee and required to be paid to them pursuant to the
Agreement following the earlier of (i) the final payment or other liquidation
(or any advance with respect thereto) of the last Mortgage Loan remaining in
REMIC I and (ii) the purchase by the party designated in the Agreement at a
price determined as provided in the Agreement from REMIC I of all the Mortgage
Loans and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

                  The recitals contained herein shall be taken as statements of
the Depositor and the Trustee assumes no responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

                                     A-10-6

<PAGE>

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

Dated: September __, 2001

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                      Authorized Officer

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

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

                                              U.S. BANK NATIONAL ASSOCIATION
                                              as Trustee

                                              By:______________________________
                                                     Authorized Signatory

                                      A-10-7

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

<TABLE>
<CAPTION>
<S>                                                   <C>
TEN COM - as tenants in common                        UNIF GIFT MIN ACT - Custodian
                                                                          ---------

TEN ENT - as tenants by the entireties                                  (Cust) (Minor) under
                                                                  Uniform Gifts
JT TEN - as joint tenants with right                                    to Minors Act
         if survivorship and not as                                     _______________
          tenants in common                                                 (State)
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto ___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
 (Please print or typewrite name, address including postal zip code, and
Taxpayer Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

         I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________

Dated:

                                           -------------------------------
                                           Signature by or on behalf of assignor

                                           -------------------------------
                                           Signature Guaranteed

                                      A-10-8

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to
________________________________________________________________________________
___________________________________________________________. Applicable
statements should be mailed to
________________________________________________________________________________
___________________________.This information is provided by
___________________________________________, the assignee named above, or
________________________________________, as its agent.

                                     A-10-9

<PAGE>

                                    EXHIBIT B
                                    ---------

                                   [Reserved]

                                       B-1

<PAGE>

                                   EXHIBIT C-1
                                   -----------

                     FORM OF TRUSTEE'S INITIAL CERTIFICATION

                                                             [Date]

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

Ocwen Federal Bank FSB
1675 Palm Beach Lakes Boulevard
West Palm Beach, Florida 55402-1498

                  Re:      Pooling and Servicing Agreement, dated as of
                           September 1, 2001, among Salomon Brothers Mortgage
                           Securities VII, Inc., Ocwen Federal Bank FSB and U.S.
                           Bank National Association, Asset Backed Pass-Through
                           Certificates, Series 2001-NC2
                           -----------------------------------------------------

Ladies and Gentlemen:

                  Attached is the Trustee's preliminary exceptions in accordance
with Section 2.02 of the referenced Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Pooling and
Servicing Agreement.

                  The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the Pooling and Servicing Agreement.

                  The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
contained in the Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule, (ii) the collectability, insurability, effectiveness or
suitability of any such Mortgage Loan, or (iii) whether any Mortgage File
included any of the documents specified in clause (v) of Section 2.01 of the
Pooling and Servicing Agreement.

                                              U.S. BANK NATIONAL ASSOCIATION

                                              By:______________________________
                                              Name:
                                              Title:

                                      C-1-1

<PAGE>

                                   EXHIBIT C-2
                                   -----------

                      FORM OF TRUSTEE'S FINAL CERTIFICATION

                                                     [Date]

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

Ocwen Federal Bank FSB
1675 Palm Beach Lakes Boulevard
West Palm Beach, Florida 55402-1498

                  Re:      Pooling and Servicing Agreement, dated as of
                           September 1, 2001, among Salomon Brothers Mortgage
                           Securities VII, Inc., Ocwen Federal Bank FSB and U.S.
                           Bank National Association, Asset Backed Pass-Through
                           Certificates, Series 2001-NC2
                           -----------------------------------------------------

Ladies and Gentlemen:

                  In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies that as
to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or listed on the attachment hereto), it or a
Custodian on its behalf has received:

                  (i) the original recorded Mortgage, and the original recorded
         power of attorney, if the Mortgage was executed pursuant to a power of
         attorney, or a certified copy thereof in those instances where the
         public recording office retains the original or where the original has
         been lost; and

                  (ii) an original Assignment in recordable form or a recorded
         Assignment to the Trustee together with the original recorded
         Assignment or Assignments showing a complete chain of assignment from
         the originator, or a certified copy of such Assignments in those
         instances where the public recording retains the original or where
         original has been lost; and

                  (iii)    the original lender's title insurance policy.

                  The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The Trustee
makes no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in the Mortgage

                  File of any of the Mortgage Loans identified on the Mortgage
Loan Schedule, or (ii) the collectability, insurability, effectiveness or
suitability of any such Mortgage Loan.

                                      C-2-1

<PAGE>

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.

                                            U.S. BANK NATIONAL ASSOCIATION

                                            By:________________________________
                                            Name:
                                            Title:

                                      C-2-2

<PAGE>

                                    EXHIBIT D
                                    ---------

                    FORM OF MORTGAGE LOAN PURCHASE AGREEMENT

                                       D-1

<PAGE>

                        MORTGAGE LOAN PURCHASE AGREEMENT

         This is a Mortgage Loan Purchase Agreement (this "Agreement"), dated
September 26, 2001, among NC Capital Corporation, a California corporation (the
"Seller"), Salomon Brothers Mortgage Securities VII, Inc., a Delaware
corporation (the "Purchaser") and New Century Mortgage Corporation, a California
corporation (the "Originator").

                              PRELIMINARY STATEMENT

         The Seller intends to sell the Mortgage Loans (as hereinafter
identified) to the Purchaser on the terms and subject to the conditions set
forth in this Agreement. The Purchaser intends to deposit the Mortgage Loans
into a mortgage pool comprising the Trust Fund. The Trust Fund will be evidenced
by a single series of mortgage pass-through certificates designated as Series
2001-NC2 (the "Certificates"). The Certificates will consist of ten classes of
certificates. The Class CE Certificates, the Class P Certificates, the Class R-I
Certificates, the Class R-II Certificates and the Class R-III Certificates
(collectively, the "NC Residual Certificates") will be delivered to NC Residual
II Corporation ("NC Residual"), a wholly-owned bankruptcy remote entity of the
Seller, as partial consideration for the Mortgage Loans as further described
below. The Certificates will be issued pursuant to a Pooling and Servicing
Agreement for Series 2001-NC2, dated as of September 1, 2001 (the "Pooling and
Servicing Agreement"), among the Depositor as depositor, Ocwen Federal Bank FSB
as master servicer (the "Master Servicer") and U.S. Bank National Association as
trustee (the "Trustee"). Capitalized terms used but not defined herein shall
have the meanings set forth in the Pooling and Servicing Agreement.

         The parties hereto agree as follows:

         SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell and the
Purchaser agrees to purchase, on or before September 27, 2001 (the "Closing
Date"), certain fixed-rate and adjustable-rate conventional, one- to
four-family, adjustable-rate residential mortgage loans (the "Mortgage Loans"),
having an aggregate principal balance as of the close of business on September
1, 2001, (the "Cut-off Date") of approximately $518,002,199.85 (the "Closing
Balance"), after giving effect to all payments due on the Mortgage Loans on or
before the Cut-off Date, whether or not received including the right to any
Prepayment Charges payable by the related Mortgagors in connection with any
Principal Prepayments on the Mortgage Loans.

         SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the Seller have
agreed upon which of the mortgage loans owned by the Seller are to be purchased
by the Purchaser pursuant to this Agreement and the Seller will prepare or cause
to be prepared on or prior to the Closing Date a final schedule (the "Closing
Schedule") that shall describe such Mortgage Loans and set forth all of the
Mortgage Loans to be purchased under this Agreement, including the Prepayment
Charges. The Closing Schedule will conform to the requirements set forth in this
Agreement and to the definition of "Mortgage Loan Schedule" under the Pooling
and Servicing Agreement. The Closing Schedule shall be used as the Mortgage Loan
Schedule under the Pooling and Servicing Agreement.

         SECTION 3.        CONSIDERATION.
                           -------------

<PAGE>

         (a) In consideration for the Mortgage Loans to be purchased hereunder,
the Purchaser shall, as described in Section 8, (i) pay to or upon the order of
the Seller in immediately available funds an amount (the "Purchase Price") equal
to the net sale proceeds of the Class A Certificates, the Class A-IO
Certificates, the Class M-1 Certificates, the Class M-2 Certificates and the
Class M-3 Certificates and (ii) will have delivered to NC Residual, upon the
order of the Seller, the NC Residual Certificates.

         (b) The Purchaser or any assignee, transferee or designee of the
Purchaser shall be entitled to all scheduled payments of principal due after the
Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.

         (c) Pursuant to the Pooling and Servicing Agreement, the Purchaser will
assign all of its right, title and interest in and to the Mortgage Loans,
together with its rights under this Agreement, to the Trustee for the benefit of
the Certificateholders.

         SECTION 4.        TRANSFER OF THE MORTGAGE LOANS.
                           ------------------------------

         (a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans, including the related Prepayment Charges. The
contents of each Mortgage File not delivered to the Purchaser or to any
assignee, transferee or designee of the Purchaser on or prior to the Closing
Date are and shall be held in trust by the Seller for the benefit of the
Purchaser or any assignee, transferee or designee of the Purchaser. Upon the
sale of the Mortgage Loans, the ownership of each Mortgage Note, the related
Mortgage and the other contents of the related Mortgage File is vested in the
Purchaser and the ownership of all records and documents with respect to the
related Mortgage Loan prepared by or that come into the possession of the Seller
on or after the Closing Date shall immediately vest in the Purchaser and shall
be delivered immediately to the Purchaser or as otherwise directed by the
Purchaser.

         (b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on or prior
to the Closing Date, deliver or cause to be delivered to the Purchaser or any
assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:

                  (i) the original Mortgage Note, endorsed in blank or in the
         following form: "Pay to the order of U.S. Bank National Association, as
         Trustee under the applicable agreement, without recourse," with all
         prior and intervening endorsements showing a complete chain of
         endorsement from the originator to the Person so endorsing to the
         Trustee;

                  (ii) the original Mortgage with evidence of recording thereon,
         and the original recorded power of attorney, if the Mortgage was
         executed pursuant to a power of attorney, with evidence of recording
         thereon;

                  (iii) an original Assignment in blank;

                                       -2-

<PAGE>

                  (iv) the original recorded Assignment or Assignments showing a
         complete chain of assignment from the originator to the Person
         assigning the Mortgage to the Trustee as contemplated by the
         immediately preceding clause (iii);

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

                  (vi) the original lender's title insurance policy, together
         with all endorsements or riders that were issued with or subsequent to
         the issuance of such policy, insuring the priority of the Mortgage as a
         first lien on the Mortgaged Property represented therein as a fee
         interest vested in the Mortgagor, or in the event such original title
         policy is unavailable, a written commitment or uniform binder or
         preliminary report of title issued by the title insurance or escrow
         company.

         The Seller promptly shall (within sixty Business Days following the
later of the Closing Date and the date of the receipt by the Seller of the
recording information for a Mortgage but in no event later than ninety days
following the Closing Date) submit or cause to be submitted for recording, at no
expense to the Purchaser (or the Trust Fund or the Trustee under the Pooling and
Servicing Agreement), in the appropriate public office for real property
records, each Assignment referred to in clauses (b)(iii) and (b)(iv) of this
Section 4 and shall execute each original Assignment in the following form:
"U.S. Bank National Association, as Trustee under the applicable agreement." In
the event that any such Assignment is lost or returned unrecorded because of a
defect therein, the Seller promptly shall prepare a substitute Assignment or
cure such defect, as the case may be, and thereafter cause each such Assignment
to be duly recorded.

         With respect to a maximum of approximately 2.0% of the Mortgage Loans,
by outstanding principal balance of the Mortgage Loans as of the Cut-off Date,
if any original Mortgage Note referred to in Section 4(b)(i) above cannot be
located, the obligations of the Seller to deliver such documents shall be deemed
to be satisfied upon delivery to the Purchaser of a photocopy of such Mortgage
Note, if available, with a lost note affidavit substantially in the form of
Exhibit K to the Pooling and Servicing Agreement. If any of the original
Mortgage Notes for which a lost note affidavit was delivered to the Purchaser is
subsequently located, such original Mortgage Note shall be delivered to the
Purchaser within three Business Days. If any of the documents referred to in
Sections 4(b)(ii), (iii) or (iv) above has, as of the Closing Date, been
submitted for recording but either (x) has not been returned from the applicable
public recording office or (y) has been lost or such public recording office has
retained the original of such document, the obligations of the Seller to deliver
such documents shall be deemed to be satisfied upon (1) delivery to the
Purchaser of a copy of each such document certified by the Originator in the
case of (x) above or the applicable public recording office in the case of (y)
above to be a true and complete copy of the original that was submitted for
recording and (2) if such copy is certified by the Originator, delivery to the
Seller promptly upon receipt thereof of either the original or a copy of such
document certified by the applicable public recording office to be a true and
complete copy of the original. Notice shall be provided to the Trustee and the
Rating Agencies by the Originator if delivery pursuant to clause (2) above will
be made more than 180 days after the Closing Date. If the original lender's
title insurance policy was not delivered pursuant to Section 4(b)(vi) above, the
Seller shall deliver or cause to be delivered to the Purchaser, promptly after
receipt thereof, the original lender's title insurance policy.

                                       -3-

<PAGE>

The Seller shall deliver or cause to be delivered to the Purchaser promptly upon
receipt thereof any other original documents constituting a part of a Mortgage
File received with respect to any Mortgage Loan, including, but not limited to,
any original documents evidencing an assumption or modification of any Mortgage
Loan.

         Each original document relating to a Mortgage Loan which is not
delivered to the Purchaser or its assignee, transferee or designee, if held by
the Seller, shall be so held for the benefit of the Purchaser, its assignee,
transferee or designee.

         (c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered pursuant to
Section 4(b) hereof shall be reviewed by the Purchaser or any assignee,
transferee or designee of the Purchaser at any time before or after the Closing
Date (and with respect to each document permitted to be delivered after the
Closing Date, within seven days of its delivery) to ascertain that all required
documents have been executed and received and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule.

         (d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the right to
assign its interest under this Agreement, in whole or in part, to the Trustee,
as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller, and the assignee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
enforcing any obligations of the Seller under this Agreement will be promptly
reimbursed by the Seller.

         (e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date, the
Seller shall either (i) deliver in escrow to the Purchaser, or to any assignee,
transferee or designee of the Purchaser for examination, the Mortgage File
pertaining to each Mortgage Loan or (ii) make such Mortgage Files available to
the Purchaser or to any assignee, transferee or designee of the Purchaser for
examination. Such examination may be made by the Purchaser or the Trustee, and
their respective designees, upon reasonable notice to the Seller during normal
business hours before the Closing Date and within 60 days after the Closing
Date. If any such person makes such examination prior to the Closing Date and
identifies any Mortgage Loans that do not conform to the requirements of the
Purchaser as described in this Agreement, such Mortgage Loans shall be deleted
from the Closing Schedule. The Purchaser may, at its option and without notice
to the Seller, purchase all or part of the Mortgage Loans without conducting any
partial or complete examination. The fact that the Purchaser or any person has
conducted or has failed to conduct any partial or complete examination of the
Mortgage Files shall not affect the rights of the Purchaser or any assignee,
transferee or designee of the Purchaser to demand repurchase or other relief as
provided herein or under the Pooling and Servicing Agreement.

         SECTION 5.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
                       --------------------------------------------------------
                       AND THE ORIGINATOR.
                       -------------------

         (a) The Seller hereby represents and warrants to the Originator and the
Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:

                                       -4-

<PAGE>

                  (i) The Seller is duly organized, validly existing and in good
standing as a corporation under the laws of the State of California with full
corporate power and authority to conduct its business as presently conducted by
it to the extent material to the consummation of the transactions contemplated
herein. The Seller has the full corporate power and authority to own the
Mortgage Loans and to transfer and convey the Mortgage Loans to the Purchaser
and has the full corporate power and authority to execute and deliver, engage in
the transactions contemplated by, and perform and observe the terms and
conditions of this Agreement.

                  (ii) The Seller has duly authorized the execution, delivery
and performance of this Agreement, has duly executed and delivered this
Agreement, and this Agreement, assuming due authorization, execution and
delivery by the Originator and the Purchaser, constitutes a legal, valid and
binding obligation of the Seller, enforceable against it in accordance with its
terms except as the enforceability thereof may be limited by bankruptcy,
insolvency or reorganization or by general principles of equity.

                  (iii) The execution, delivery and performance of this
Agreement by the Seller (x) does not conflict and will not conflict with, does
not breach and will not result in a breach of and does not constitute and will
not constitute a default (or an event, which with notice or lapse of time or
both, would constitute a default) under (A) any terms or provisions of the
articles of incorporation or by-laws of the Seller, (B) any term or provision of
any material agreement, contract, instrument or indenture, to which the Seller
is a party or by which the Seller or any of its property is bound or (C) any
law, rule, regulation, order, judgment, writ, injunction or decree of any court
or governmental authority having jurisdiction over the Seller or any of its
property and (y) does not create or impose and will not result in the creation
or imposition of any lien, charge or encumbrance which would have a material
adverse effect upon the Mortgage Loans or any documents or instruments
evidencing or securing the Mortgage Loans.

                  (iv) No consent, approval, authorization or order of,
registration or filing with, or notice on behalf of the Seller to any
governmental authority or court is required, under federal laws or the laws of
the State of California, for the execution, delivery and performance by the
Seller of, or compliance by the Seller with, this Agreement or the consummation
by the Seller of any other transaction contemplated hereby and by the Pooling
and Servicing Agreement; provided, however, that the Seller makes no
representation or warranty regarding federal or state securities laws in
connection with the sale or distribution of the Certificates.

                  (v) This Agreement does not contain any untrue statement of
material fact or omit to state a material fact necessary to make the statements
contained herein not misleading. The written statements, reports and other
documents prepared and furnished or to be prepared and furnished by the Seller
pursuant to this Agreement or in connection with the transactions contemplated
hereby taken in the aggregate do not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements contained
therein not misleading.

                  (vi) The Seller is not in violation of, and the execution and
delivery of this Agreement by the Seller and its performance and compliance with
the terms of this Agreement will not constitute a violation with respect to, any
order or decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction over the Seller or its
assets,

                                       -5-

<PAGE>

which violation might have consequences that would materially and adversely
affect the condition (financial or otherwise) or the operation of the Seller or
its assets or might have consequences that would materially and adversely affect
the performance of its obligations and duties hereunder.

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

                  (viii) Immediately prior to the sale of the Mortgage Loans to
the Purchaser as herein contemplated, the Seller will be the owner of the
related Mortgage and the indebtedness evidenced by the related Mortgage Note,
and, upon the payment to the Seller of the Purchase Price, in the event that the
Seller retains or has retained record title, the Seller shall retain such record
title to each Mortgage, each related Mortgage Note and the related Mortgage
Files with respect thereto in trust for the Purchaser as the owner thereof from
and after the date hereof.

                  (ix) There are no actions or proceedings against, or
investigations known to it of, the Seller before any court, administrative or
other tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the sale of the Mortgage Loans by the Seller or the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the Seller
of its obligations under, or validity or enforceability of, this Agreement.

                  (x) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Seller, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Seller are not subject to the bulk transfer or any similar statutory
provisions.

                  (xi) [intentionally omitted]

                  (xii) The Seller has not dealt with any broker, investment
banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans (except that an entity that previously
financed the Seller's ownership of the Mortgage Loans may be entitled to a fee
to release its security interest in the Mortgage Loans, which fee shall have
been paid and which security interest shall have been released on or prior to
the Closing Date).

                  (xiii) There is no litigation currently pending or, to the
best of the Seller's knowledge without independent investigation, threatened
against the Seller that would reasonably be expected to adversely affect the
transfer of the Mortgage Loans, the issuance of the Certificates or the
execution, delivery, performance or enforceability of this Agreement, or that
would result in a material adverse change in the financial condition of the
Seller.

         (b) The Originator hereby represents and warrants to the Seller and the
Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:

                  (i) The Originator is duly organized, validly existing and in
good standing as a corporation under the laws of the State of California with
full corporate power and authority to

                                       -6-

<PAGE>

conduct its business as presently conducted by it to the extent material to the
consummation of the transactions contemplated herein. The Originator had the
full corporate power and authority to own the Mortgage Loans and to transfer and
convey the Mortgage Loans to the Seller and has the full corporate power and
authority to execute and deliver, engage in the transactions contemplated by,
and perform and observe the terms and conditions of this Agreement.

                  (ii) The Originator has duly authorized the execution,
delivery and performance of this Agreement, has duly executed and delivered this
Agreement, and this Agreement, assuming due authorization, execution and
delivery by the Seller and the Purchaser, constitutes a legal, valid and binding
obligation of the Originator, enforceable against it in accordance with its
terms except as enforceability thereof may be limited by bankruptcy, insolvency
or reorganization or by general principles of equity.

                  (iii) The execution, delivery and performance of this
Agreement by the Originator (x) does not conflict and will not conflict with,
does not breach and will not result in a breach of and does not constitute and
will not constitute a default (or an event, which with notice or lapse of time
or both, would constitute a default) under (A) any terms or provisions of the
articles of incorporation or by-laws of the Originator, (B) any term or
provision of any material agreement, contract, instrument or indenture, to which
the Originator is a party or by which the Originator or any of its property is
bound or (C) any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having jurisdiction over the
Originator or any of its property and (y) does not create or impose and will not
result in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans.

                  (iv) No consent, approval, authorization or order of,
registration or filing with, or notice on behalf of the Originator to any
governmental authority or court is required, under federal laws or the laws of
the State of California, for the execution, delivery and performance by the
Originator of, or compliance by the Originator with, this Agreement or the
consummation by the Originator of any other transaction contemplated hereby and
by the Pooling and Servicing Agreement; provided, however, that the Originator
makes no representation or warranty regarding federal or state securities laws
in connection with the sale or distribution of the Certificates.

                  (v) In this Agreement the Originator has not made any untrue
statement of material fact or omit to state a material fact necessary to make
the statements contained herein not misleading. The written statements, reports
and other documents prepared and furnished or to be prepared and furnished by
the Originator pursuant to this Agreement or in connection with the transactions
contemplated hereby taken in the aggregate do not contain any untrue statement
of material fact or omit to state a material fact necessary to make the
statements contained therein not misleading.

                  (vi) The Originator is not in violation of, and the execution
and delivery of this Agreement by the Originator and its performance and
compliance with the terms of this Agreement will not constitute a violation with
respect to, any order or decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having jurisdiction over the
Originator or its assets, which violation might have consequences that would
materially and adversely affect the condition (financial or otherwise) or the
operation of the Originator or its assets

                                       -7-

<PAGE>

or might have consequences that would materially and adversely affect the
performance of its obligations and duties hereunder.

                  (vii) The Originator is a HUD approved mortgagee pursuant to
Section 203 and Section 211 of the National Housing Act. No event has occurred,
including but not limited to a change in insurance coverage, that would make the
Originator unable to comply with HUD eligibility requirements or that would
require notification to HUD.

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

                  (ix) Immediately prior to the sale of the Mortgage Loans to
the Seller, the Originator will be the owner of the related Mortgage and the
indebtedness evidenced by the related Mortgage Note, and, upon the payment to
the Originator of the Purchase Price, in the event that the Originator retains
or has retained record title, the Originator shall retain such record title to
each Mortgage, each related Mortgage Note and the related Mortgage Files with
respect thereto in trust for the Seller as the owner thereof from and after the
date hereof.

                  (x) There are no actions or proceedings against, or
investigations known to it of, the Originator before any court, administrative
or other tribunal (A) that might prohibit its entering into this Agreement, (B)
seeking to prevent the sale of the Mortgage Loans by the Originator or the
consummation of the transactions contemplated by this Agreement or (C) that
might prohibit or materially and adversely affect the performance by the
Originator of its obligations under, or validity or enforceability of, this
Agreement.

                  (xi) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Originator, and the
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Originator are not subject to the bulk transfer or any similar statutory
provisions.

                  (xii) The information delivered by the Originator to the
Seller with respect to the Originator's loan loss, foreclosure and delinquency
experience on mortgage loans is true and correct in all material respects.

                  (xiii) The Originator has not dealt with any broker,
investment banker, agent or other person, except for the Seller or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans (except that an entity that previously
financed the Originator's ownership of the Mortgage Loans may be entitled to a
fee to release its security interest in the Mortgage Loans, which fee shall have
been paid and which security interest shall have been released on or prior to
the Closing Date).

                  (xiv) There is no litigation currently pending or, to the best
of the Originator's knowledge without independent investigation, threatened
against the Originator that would reasonably be expected to adversely affect the
transfer of the Mortgage Loans, the issuance of the Certificates or the
execution, delivery, performance or enforceability of this Agreement, or that
would result in a material adverse change in the financial condition of the
Originator.

                                       -8-

<PAGE>

         SECTION 6.   REPRESENTATIONS AND WARRANTIES OF THE
                      -------------------------------------
                      ORIGINATOR RELATING TO THE MORTGAGE LOANS.
                      ------------------------------------------

         REPRESENTATIONS AND WARRANTIES AS TO INDIVIDUAL MORTGAGE LOANS. The
Originator hereby represents and warrants to the Purchaser that as to each
Mortgage Loan as of the Closing Date:

                  (i) The information set forth in the Mortgage Loan Schedule,
including the field concerning any related Prepayment Charge, is complete, true
and correct as of the Cut-off Date;

                  (ii) The Mortgage Loan is in compliance with all requirements
set forth on Exhibit 1, and the characteristics of the Mortgage Loans as set
forth on Exhibit 1 are true and correct;

                  (iii) Except with respect to 93.66% of the Mortgage Loans, by
aggregate principal balance of the mortgage loans as of the Cut-off Date, (a)
all payments required to be made on or before the first day of the month prior
to the month of the Closing Date, with respect to such Mortgage Loan under the
terms of the Mortgage Note have been made; (b) the Originator has not advanced
funds, or induced, solicited or knowingly received any advance of funds from a
party other than the owner of the related Mortgaged Property, directly or
indirectly, for the payment of any amount required by the Mortgage Note or
Mortgage and (c) as of August 31, 2001, the payment required under any Mortgage
Loan will not and has not been 30 or more days delinquent more than once during
the last twelve months;

                  (iv) There are no delinquent taxes, ground rents, water
charges, sewer rents, assessments, insurance premiums, leasehold payments,
including assessments payable in future installments or other outstanding
charges affecting the related Mortgaged Property;

                  (v) To the best knowledge of the Originator, the terms of the
Mortgage Note and the Mortgage have not been impaired, waived, altered or
modified in any respect, except by written instruments, recorded in the
applicable public recording office if necessary to maintain the lien priority of
the Mortgage; the substance of any such waiver, alteration or modification has
been approved by the title insurer, to the extent required by the related
policy, and is reflected on the Mortgage Loan Schedule. No instrument of waiver,
alteration or modification has been executed by the Originator or the Seller or
any other person in the chain of title from the Originator to the Seller, and no
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, to the extent required by
the policy, and the terms of which are reflected in the Mortgage Loan Schedule;

                  (vi) Prior to the transfer to the Purchaser by the Seller, the
Mortgage Note and the Mortgage are not subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of the Mortgage Note and the Mortgage, or the
exercise of any right thereunder, render the Mortgage unenforceable, in whole or
in part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect thereto;

                  (vii) All buildings upon the Mortgaged Property are insured by
a generally acceptable insurer against loss by fire, hazards of extended
coverage and such other hazards as are customary

                                       -9-

<PAGE>

in the area where the Mortgaged Property is located, pursuant to insurance
policies conforming to the requirements of the Pooling and Servicing Agreement.
All such insurance policies contain a standard mortgagee clause naming the
Originator, its successors and assigns as mortgagee and all premiums thereon
have been paid. If upon origination of the Mortgage Loan, the Mortgaged Property
was in an area identified on a Flood Hazard Map or Flood Insurance Rate Map
issued by the Federal Emergency Management Agency as having special flood
hazards (and such flood insurance has been made available) a flood insurance
policy meeting the requirements of the current guidelines of the Federal
Insurance Administration is in effect which policy conforms to the requirements
of Fannie Mae and Freddie Mac. The Mortgage obligates the Mortgagor thereunder
to maintain all such insurance at the Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;

                  (viii) Any and all requirements of any federal, state or local
law including, without limitation, usury, truth in lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity or
disclosure laws applicable to the origination and servicing of the Mortgage Loan
have been complied with. Any and all statements or acknowledgments required to
be made by the Mortgagor relating to such requirements are and will remain in
the Mortgage File;

                  (ix) The Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the Mortgaged Property has
not been released from the lien of the Mortgage, in whole or in part, nor has
any instrument been executed that would effect any such satisfaction,
cancellation, subordination, rescission or release;

                  (x) The Mortgage is a valid, existing and enforceable first
lien on the Mortgaged Property, including all improvements on the Mortgaged
Property subject only to (a) the lien of current real property taxes and
assessments not yet due and payable, (b) covenants, conditions and restrictions,
rights of way, easements and other matters of the public record as of the date
of recording being acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and which do not adversely affect the appraised
value of the Mortgaged Property and (c) other matters to which like properties
are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. Any security agreement, chattel
mortgage or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, existing and enforceable first
lien and first priority security interest on the property described therein and,
as of the time it contributed the Mortgage Loan to the Seller, the Originator
had full right to contribute and assign the same to the Seller. The Mortgaged
Property was not, as of the date of origination of the Mortgage Loan, subject to
a mortgage, deed of trust, deed to secure debt or other security instrument
creating a lien subordinate to the lien of the Mortgage;

                  (xi) The Mortgage Note and the related Mortgage are genuine
and each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms;

                  (xii) All parties to the Mortgage Note and the Mortgage had
legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage, and the

                                      -10-

<PAGE>

Mortgage Note and the Mortgage have been duly and properly executed by such
parties. The Mortgagor is a natural person who is a party to the Mortgage Note
and the Mortgage is in an individual capacity or family trust that is guaranteed
by a natural person;

                  (xiii) The proceeds of the Mortgage Loan have been fully
disbursed to or for the account of the Mortgagor and there is no obligation for
the Mortgagee to advance additional funds thereunder and any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage have been paid, and the Mortgagor is not entitled to
any refund of any amounts paid or due to the Mortgagee pursuant to the Mortgage
Note or Mortgage;

                  (xiv) As of the Closing Date and prior to the sale of the
Mortgage Loan to the Purchaser, the Seller was the sole legal, beneficial and
equitable owner of the Mortgage Note and the Mortgage and has full right to
transfer and sell the Mortgage Loan to the Purchaser free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest;

                  (xv) All parties which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) in compliance
with any and all applicable "doing business" and licensing requirements of the
laws of the state wherein the Mortgaged Property is located;

                  (xvi) The Mortgage Loan is covered by an ALTA lender's title
insurance policy, and with respect to each adjustable-rate Mortgage Loan, an
adjustable rate mortgage endorsement in an amount at least equal to the balance
of the Mortgage Loan as of the Cut-off Date, such endorsement substantially in
the form of ALTA Form 6.0 or 6.1, acceptable to Fannie Mae or Freddie Mac,
issued by a title insurer acceptable to Fannie Mae and Freddie Mac and qualified
to do business in the jurisdiction where the Mortgaged Property is located,
insuring (subject to the exceptions contained in (x)(a) and (b) above) the
Originator, its successors and assigns as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan and against any
loss by reason of the invalidity or unenforceability of the lien resulting from
the provisions of the Mortgage providing for adjustment in the Mortgage Rate and
monthly payment. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress to and from the Mortgaged Property, and
against encroachments by or upon the Mortgaged Property or any interest therein.
The Originator is the sole insured of such lender's title insurance policy, and
such lender's title insurance policy is in full force and effect and will be in
full force and effect upon the consummation of the transactions contemplated by
this Agreement. No claims have been made under such lender's title insurance
policy, and no prior holder of the related Mortgage, including the Originator,
has done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy;

                  (xvii) Other than as specified in paragraph (iii) above, there
is no default, breach, violation or event of acceleration existing under the
Mortgage or the Mortgage Note and no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration, and the Originator has not
waived any default, breach, violation or event of acceleration;

                                      -11-

<PAGE>

                  (xviii) There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are outstanding
that under law could give rise to such lien) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or coordinate with, the
lien of the related Mortgage;

                  (xix) All improvements which were considered in determining
the appraised value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property. Each
appraisal has been performed in accordance with the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989;

                  (xx) The Mortgage Loan was (i) originated by the Originator or
by a savings and loan association, a savings bank, a commercial bank or similar
banking institution which is supervised and examined by a federal or state
authority, or by a mortgagee approved as such by the Secretary of HUD or (ii)
acquired by the Originator directly through loan brokers or correspondents such
that (a) the Mortgage Loan was originated in conformity with the Originator's
underwriting guidelines, (b) the Originator approved the Mortgage Loan prior to
funding and (c) the Originator provided the funds used to originate the Mortgage
Loan and acquired the Mortgage Loan on the date of origination thereof;

                  (xxi) Principal payments on the Mortgage Loan commenced no
more than two months after the proceeds of the Mortgage Loan were disbursed. The
Mortgage Loan bears interest at the Mortgage Rate. With respect to the
adjustable-rate Mortgage Loans, the Mortgage Note is payable on the first day of
each month in Monthly Payments which are changed on each Adjustment Date to an
amount which will amortize the Stated Principal Balance of the Mortgage Loan
over its remaining term at the Mortgage Rate. Interest on the Mortgage Loan is
calculated on the basis of a 360-day year consisting of twelve 30-day months.
The Mortgage Note does not permit negative amortization. The Mortgage Loan does
not permit the Mortgagor to convert the Mortgage Loan to a fixed rate Mortgage
Loan;

                  (xxii) The origination and collection practices used by the
Originator with respect to each Mortgage Note and Mortgage have been in all
respects legal, proper, prudent and customary in the mortgage origination and
servicing industry. The Mortgage Loan has been serviced by the Originator
(directly or through a subservicer) and any predecessor servicer in accordance
with the terms of the Mortgage Note. With respect to escrow deposits and Escrow
Payments, if any, all such payments are in the possession of, or under the
control of, the Originator and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have not been
made. No escrow deposits or Escrow Payments or other charges or payments due the
Originator have been capitalized under any Mortgage or the related Mortgage
Note;

                  (xxiii) The Mortgaged Property is free of damage and waste and
there is no proceeding pending for the total or partial condemnation thereof;

                  (xxiv) The Mortgage and related Mortgage Note contain
customary and enforceable provisions such as to render the rights and remedies
of the holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including, (a) in the

                                      -12-

<PAGE>

case of a Mortgage designated as a deed of trust, by trustee's sale and (b)
otherwise by judicial foreclosure. Since the date of origination of the Mortgage
Loan, the Mortgaged Property has not been subject to any bankruptcy proceeding
or foreclosure proceeding and the Mortgagor has not filed for protection under
applicable bankruptcy laws. There is no homestead or other exemption available
to the Mortgagor which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage. The
Mortgagor has not notified the Originator and the Originator has no knowledge of
any relief requested or allowed to the Mortgagor under the Soldiers and Sailors
Civil Relief Act of 1940;

                  (xxv) The related Mortgaged Property is not a leasehold estate
or, if such Mortgaged Property is a leasehold estate, the remaining term of such
lease is at least ten (10) years greater than the remaining term of the related
Mortgage Note;

                  (xxvi) The Mortgage Note is not and has not been secured by
any collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (x) above;

                  (xxvii) The Mortgage File contains an appraisal of the related
Mortgaged Property made and signed, prior to the approval of the Mortgage Loan
application, by a qualified appraiser, approved by the Originator, who had no
interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof, whose compensation is not affected by the approval or
disapproval of the Mortgage Loan and who met the minimum qualifications of
Fannie Mae and Freddie Mac;

                  (xxviii) In the event the Mortgage constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by the Purchaser to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;

                  (xxix) No Mortgage Loan contains provisions pursuant to which
Monthly Payments are (a) paid or partially paid with funds deposited in any
separate account established by the Originator, the Mortgagor, or anyone on
behalf of the Mortgagor, (b) paid by any source other than the Mortgagor or (c)
contains any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loans are not graduated payment mortgage loans and the
Mortgage Loans do not have shared appreciation or other contingent interest
features;

                  (xxx) With respect to the adjustable-rate Mortgage Loans, the
Mortgagor has executed a statement to the effect that the Mortgagor has received
all disclosure materials required by applicable law with respect to the making
of adjustable rate mortgage loans; and if the Mortgage Loan is a Refinanced
Mortgage Loan, the Mortgagor has received all disclosure and rescission
materials required by applicable law with respect to the making of a Refinanced
Mortgage Loan, and evidence of such receipt is and will remain in the Mortgage
File;

                                      -13-

<PAGE>

                  (xxxi) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade-in or exchange of a Mortgaged Property;

                  (xxxii) The Mortgage Note, the Mortgage, the Assignment of
Mortgage and any other documents required to be delivered with respect to each
Mortgage Loan pursuant to the Pooling and Servicing Agreement, have been
delivered to the Trustee all in compliance with the specific requirements of the
Pooling and Servicing Agreement;

                  (xxxiii) The Mortgaged Property is lawfully occupied under
applicable law; all inspections, licenses and certificates required to be made
or issued with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not limited to
certificates of occupancy, have been made or obtained from the appropriate
authorities;

                  (xxxiv) No error, omission, misrepresentation, negligence,
fraud or similar occurrence with respect to a Mortgage Loan has taken place on
the part of any person, including, without limitation, the Mortgagor, any
appraiser, any builder or developer, or any other party involved in the
origination of the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan;

                  (xxxv) The Assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located;

                  (xxxvi) Any principal advances made to the Mortgagor prior to
the Cut-off Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable to
Fannie Mae and Freddie Mac. The consolidated principal amount does not exceed
the original principal amount of the Mortgage Loan;

                  (xxxvii) No Mortgage Loan has a balloon payment feature;

                  (xxxviii) If the Residential Dwelling on the Mortgaged
Property is a condominium unit or a unit in a planned unit development (other
than a de minimis planned unit development) such condominium or planned unit
development project meets the Fannie Mae's eligibility requirements;

                  (xxxix) Neither the Originator nor any affiliate of the
Originator has made a mortgage on any Mortgaged Property other than the Mortgage
Loan;

                  (xl) Any Mortgage Loan subject to the provisions of the
Homeownership and Equity Protection Act of 1994, P.L. 103-325, 108 Stat 2160 was
originated in compliance therewith;

                                      -14-

<PAGE>

                  (xli) The Mortgage Loan was not intentionally selected by the
Originator in a manner intended to adversely affect the interest of the
Purchaser;

                  (xlii) The Originator has not dealt with any broker or agent
or other Person who might be entitled to a fee, commission or compensation in
connection with the transaction contemplated by this Agreement other than the
Purchaser except as set forth in the parenthetical in Section 5(xiii) hereof;

                  (xliii) The Mortgaged Property consists of a parcel of real
property of not more than ten acres with a single family residence erected
thereon, or a two to four-family dwelling, or an individual condominium unit in
a low-rise or high-rise condominium project, or an individual unit in a planned
unit development. The Mortgaged Property is improved with a Residential
Dwelling. Without limiting the foregoing, the Mortgaged Property does NOT
consist of any of the following property types: (a) co-operative units, (b) log
homes, (c) earthen homes, (d) underground homes, (e) mobile homes and (f)
manufactured homes (as defined in the Fannie Mae Originator-Servicer's Guide),
except when the appraisal indicates that the home is of comparable construction
to a stick or beam construction home, is readily marketable, has been
permanently affixed to the site and is not in a mobile home "park." The
Mortgaged Property is either a fee simple estate or a long-term residential
lease. If the Mortgage Loan is secured by a long-term residential lease, unless
otherwise specifically disclosed in the Mortgage Loan Schedule, (A) the terms of
such lease expressly permit the mortgaging of the leasehold estate, the
assignment of the lease without the lessor's consent (or the lessor's consent
has been obtained and such consent is the Mortgage File) and the acquisition by
the holder of the Mortgage of the rights of the lessee upon foreclosure or
assignment in lieu of foreclosure or provide the holder of the Mortgage with
substantially similar protection; (B) the terms of such lease do not (x) allow
the termination thereof upon the lessee's default without the holder of the
Mortgage being entitled to receive written notice of, and opportunity to cure,
such default or (y) prohibit the holder of the Mortgage from being insured under
the hazard insurance policy relating to the Mortgaged Property; (C) the original
term of such lease is not less than 15 years; (D) the term of such lease does
not terminate earlier than ten years after the maturity date of the Mortgage
Note; and (E) the Mortgaged Property is located in a jurisdiction in which the
use of leasehold estates for residential properties is an accepted practice;

                  (xliv) At the time of origination, the Loan-To-Value Ratio of
the Mortgage Loan will not be greater than 95.00%;

                  (xlv) The Mortgage, and if required by applicable law the
related Mortgage Note, contains a provision for the acceleration of the payment
of the unpaid principal balance of the Mortgage Loan in the event that the
Mortgaged Property is sold or transferred without the prior written consent of
the Mortgagee, at the option of the Mortgagee;

                  (xlvi) The Mortgage Loan either contains a customary
due-on-sale clause or may be assumed by a creditworthy purchaser of the related
Mortgaged Property; and

                  (xlvii) As of any Adjustment Date for such adjustable-rate
Mortgage Loan, the Index applicable to the determination of the Mortgage Rate on
such Mortgage Loan will be the average of the interbank offered rates for
six-month United States dollar deposits in the London market,

                                      -15-

<PAGE>

generally as published in THE WALL STREET JOURNAL and as most recently available
as of either (i) the first business day 45 days prior to such Adjustment Date or
(ii) the first business day of the month preceding the month of such Adjustment
Date, as specified in the related Mortgage Note.

                  (xlviii) Each Mortgage Loan is an obligation that is
principally secured by real property;

                  (xvlix) None of the Mortgage Loans are "high cost mortgages"
pursuant to Section 226.32 of the Truth-in-Lending Act, as amended; and

                  (l) The information set forth in the Prepayment Charge
Schedule (including the prepayment charge summary attached thereto) is complete,
true and correct in all material respects on the date or dates when such
information is furnished and each Prepayment Charge is permissible and
enforceable in accordance with its terms (except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally or
the collectability thereof may be limited due to acceleration in connection with
a foreclosure) under applicable state law.

         SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION AND FOR
                    ---------------------------------------------------------
                    BREACH OF REPRESENTATION AND WARRANTY.
                    -------------------------------------

         (a) The representations and warranties contained in Section 6 shall not
be impaired by any review and examination of loan files or other documents
evidencing or relating to the Mortgage Loans or any failure on the part of the
Seller or the Purchaser to review or examine such documents and shall inure to
the benefit of any assignee, transferee or designee of the Purchaser, including
the Trustee for the benefit of holders of the Certificates. With respect to the
representations and warranties contained herein as to which the Originator has
no knowledge, if it is discovered that the substance of any such representation
and warranty was inaccurate as of the date such representation and warranty was
made or deemed to be made, and such inaccuracy materially and adversely affects
the value of the related Mortgage Loan or the interest therein of the Purchaser
or the Purchaser's assignee, transferee or designee, then notwithstanding the
lack of knowledge by the Originator with respect to the substance of such
representation and warranty being inaccurate at the time the representation and
warranty was made, the Originator shall take such action described in the
following paragraph in respect of such Mortgage Loan.

         Upon discovery by the Seller, the Purchaser or any assignee, transferee
or designee of the Purchaser of any materially defective document in, or that
any material document was not transferred by the Seller (as listed on the
Trustee's Preliminary Exception Report) as part of any Mortgage File, or of a
breach of any of the representations and warranties contained in Section 6 that
materially and adversely affects the value of any Mortgage Loan or the interest
therein of the Purchaser or the Purchaser's assignee, transferee or designee,
the party discovering such breach shall give prompt written notice to the
Originator. Within sixty (60) days of its discovery or its receipt of notice of
any such missing documentation that was not transferred by the Seller as
described above, or of materially defective documentation, or of any such breach
of a representation and warranty, the Originator promptly shall deliver such
missing document or cure such defect or breach in all material respects or, in
the event the Originator cannot deliver such missing document or cannot cure
such

                                      -16-

<PAGE>

defect or breach, the Originator shall, within ninety (90) days of its discovery
or receipt of notice, either (i) repurchase the affected Mortgage Loan at the
Purchase Price (as such term is defined in the Pooling and Servicing Agreement)
or (ii) pursuant to the provisions of the Pooling and Servicing Agreement, cause
the removal of such Mortgage Loan from the Trust Fund and substitute one or more
Qualified Substitute Mortgage Loans. The Originator shall amend the Closing
Schedule to reflect the withdrawal of such Mortgage Loan from the terms of this
Agreement and the Pooling and Servicing Agreement. The Originator shall deliver
to the Purchaser such amended Closing Schedule and shall deliver such other
documents as are required by this Agreement or the Pooling and Servicing
Agreement within five (5) days of any such amendment. Any repurchase pursuant to
this Section 7(a) shall be accomplished by transfer to an account designated by
the Purchaser of the amount of the Purchase Price in accordance with Section
2.03 of the Pooling and Servicing Agreement. Any repurchase required by this
Section shall be made in a manner consistent with Section 2.03 of the Pooling
and Servicing Agreement.

         Notwithstanding the foregoing, within 90 days of the earlier of
discovery by the Originator or receipt of notice by the Originator of the breach
of the representation or covenant of the Originator set forth in Section 6(l)
above which materially and adversely affects the interests of the Holders of the
Class P Certificates in any Prepayment Charge, the Originator shall remedy such
breach as follows: the Originator must pay the amount of the scheduled
Prepayment Charge, for the benefit of the Holders of the Class P Certificates,
by remitting such amount to the Master Servicer for deposit into the Collection
Account, net of any amount previously collected by the Master Servicer or paid
by the Master Servicer, for the benefit of the Holders of the Class P
Certificates, in respect of such Prepayment Charge.

         (b) It is understood and agreed that the obligations of the Originator
set forth in this Section 7 to cure or repurchase a defective Mortgage Loan
constitute the sole remedies of the Purchaser against the Originator respecting
a missing document or a breach of the representations and warranties contained
in Section 6.

         SECTION 8.        CLOSING; PAYMENT FOR THE MORTGAGE LOANS.
                           ---------------------------------------
                  The closing of the purchase and sale of the Mortgage Loans
shall be held at the New York City office of Thacher Proffitt & Wood at 10:00
a.m. New York City time on the Closing Date.

                  The closing shall be subject to each of the following
conditions:

                  (a)      All of the representations and warranties of the
                           Seller under this Agreement shall be true and correct
                           in all material respects as of the date as of which
                           they are made and no event shall have occurred which,
                           with notice or the passage of time, would constitute
                           a default under this Agreement;

                  (b)      All of the representations and warranties of the
                           Originator under this Agreement shall be true and
                           correct in all material respects as of the date as of
                           which they are made and no event shall have occurred
                           which, with notice or the passage of time, would
                           constitute a default under this Agreement;

                                      -17-

<PAGE>

                  (c)      The Purchaser shall have received, or the attorneys
                           of the Purchaser shall have received in escrow (to be
                           released from escrow at the time of closing), all
                           Closing Documents as specified in Section 9 of this
                           Agreement, in such forms as are agreed upon and
                           acceptable to the Purchaser, duly executed by all
                           signatories other than the Purchaser as required
                           pursuant to the respective terms thereof;

                  (d)      The Seller shall have delivered or caused to be
                           delivered and released to the Purchaser or to its
                           designee, all documents (including without
                           limitation, the Mortgage Loans) required to be so
                           delivered by the Purchaser pursuant to Section 2.01
                           of the Pooling and Servicing Agreement; and

                  (e)      All other terms and conditions of this Agreement and
                           the Pooling and Servicing Agreement shall have been
                           complied with.

         Subject to the foregoing conditions, the Purchaser shall deliver or
cause to be delivered to the Seller on the Closing Date, against delivery and
release by the Seller to the Trustee of all documents required pursuant to the
Pooling and Servicing Agreement, the consideration for the Mortgage Loans as
specified in Section 3 of this Agreement, by delivery to the Seller of the
Purchase Price in immediately available funds and delivery of the NC Residual
Certificates to NC Residual.

         SECTION 9.  CLOSING DOCUMENTS. Without limiting the generality of
Section 8 hereof, the  closing shall be subject to delivery of each of the
following documents:

                    (a)  An Officer's Certificate of the Seller, dated the
                         Closing Date, in form satisfactory to and upon which
                         the Originator, the Purchaser and Salomon Smith Barney
                         Inc. (the "Underwriter") may rely, and attached thereto
                         copies of the certificate of incorporation, by-laws and
                         certificate of good standing of the Seller under the
                         laws of California;

                    (b)  An Officer's Certificate of the Seller, dated the
                         Closing Date, in form satisfactory to and upon which
                         the Originator, the Purchaser and the Underwriter may
                         rely, with respect to certain facts regarding the sale
                         of the Mortgage Loans by the Seller to the Purchaser;

                    (c)  An Opinion of Counsel of the Seller, dated the Closing
                         Date, in form satisfactory to and addressed to the
                         Originator, the Purchaser and the Underwriter;

                    (d)  An Officer's Certificate of the Originator, dated the
                         Closing Date, in form satisfactory to and upon which
                         the Seller, the Purchaser and the Underwriter may rely,
                         and attached thereto copies of the certificate of
                         incorporation, by- laws and certificate of good
                         standing of the Originator under the laws of its state
                         of incorporation;

                                      -18-

<PAGE>

                    (e)  An opinion of Counsel of the Originator, dated the
                         Closing Date, in form satisfactory to and addressed to
                         the Seller, the Purchaser and the Underwriter;

                    (f)  Such opinions of counsel as the Rating Agencies or the
                         Trustee may request in connection with the sale of the
                         Mortgage Loans by the Seller to the Purchaser or the
                         Seller's execution and delivery of, or performance
                         under, this Agreement;

                    (g)  (i) A letter from KPMG L.L.P., certified public
                         accountants, to the effect that they have performed
                         certain specified procedures as a result of which they
                         determined that certain information of an accounting,
                         financial or statistical nature set forth in the
                         Depositor's prospectus supplement for Series 2001-NC2,
                         dated September 26, 2001 (the "Prospectus Supplement")
                         relating to the Offered Certificates contained under
                         the captions "Summary--The Mortgage Loans," "Risk
                         Factors," (to the extent of information concerning the
                         Mortgage Loans contained therein) "The Mortgage Pool"
                         (except with respect to the information contained under
                         the caption "The Mortgage Pool--Underwriting Standards
                         of the Originator and Representations Concerning the
                         Mortgage Loans") agrees with the records of the Seller
                         and the information contained under the captions "The
                         Mortgage Pool--Underwriting Standards of the Originator
                         and Representations Concerning the Mortgage Loans" and
                         "The Originator" agrees with the records of the
                         Originator;

                    (h)  Such further information, certificates, opinions and
                         documents as the Purchaser or the Underwriter may
                         reasonably request.

        SECTION 10. COSTS. The Seller shall pay (or shall reimburse the
Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments, the fees and expenses of the Seller's
accountants and attorneys, the costs and expenses incurred in connection with
producing the Master Servicer's or any Subservicer's loan loss, foreclosure and
delinquency experience, and the costs and expenses incurred in connection with
obtaining the documents referred to in Sections 9(d), 9(e) and 9(g), the costs
and expenses of printing (or otherwise reproducing) and delivering this
Agreement, the Pooling and Servicing Agreement, the Certificates, the prospectus
and Prospectus Supplement, and any private placement memorandum relating to the
Certificates and other related documents, the initial fees, costs and expenses
of the Trustee, the fees and expenses of the Purchaser's counsel in connection
with the preparation of all documents relating to the securitization of the
Mortgage Loans, the filing fee charged by the Securities and Exchange Commission
for registration of the Certificates and the fees charged by any rating agency
to rate the Certificates. All other costs and expenses in connection with the
transactions contemplated hereunder shall be borne by the party incurring such
expense.

        SECTION 11.     [RESERVED].
                        ----------

                                      -19-

<PAGE>

        SECTION 12. INDEMNIFICATION. The Originator shall indemnify and hold
harmless each of (i) the Purchaser, (ii) the Underwriter, (iii) the Person, if
any, to which the Purchaser assigns its rights in and to a Mortgage Loan and
each of their respective successors and assigns and (iv) each person, if any,
who controls the Purchaser within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "1933 Act") ((i) through (iv) collectively, the
"Indemnified Party") against any and all losses, claims, expenses, damages or
liabilities to which the Indemnified Party may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (a)
any untrue statement or alleged untrue statement of any material fact contained
in the Prospectus Supplement or any private placement memorandum relating to the
offering by the Purchaser or an affiliate thereof, of the Class CE Certificates
or the Class P Certificates, or the omission or the alleged omission to state
therein the material fact necessary in order to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with (i) information furnished in writing to
the Purchaser or any of its affiliates by the Originator or any of its
affiliates specifically for use therein, which shall include, with respect to
the Prospectus Supplement, the information set forth under the captions "The
Mortgage Pool--Underwriting Standards of the Originator and Representations
Concerning the Mortgage Loans" and "The Originator" and, with respect to any
private placement memorandum, any information of a comparable nature, or (ii)
the data files containing information with respect to the Mortgage Loans as
transmitted by modem to the Purchaser by the Originator or any of its affiliates
(as such transmitted information may have been amended in writing by the
Originator or any of its affiliates with the written consent of the Purchaser
subsequent to such transmission), (b) any representation, warranty or covenant
made by the Originator or any affiliate of the Originator herein or in the
Pooling and Servicing Agreement, on which the Purchaser has relied, being, or
alleged to be, untrue or incorrect or (c) any updated collateral information
provided by the Underwriter to a purchaser of the Certificates derived from the
data contained in clause (ii) and the Remittance Report or a current collateral
tape obtained from the Originator or an affiliate of the Originator, including
the current loan balances of the Mortgage Loans; provided, however, that to the
extent that any such losses, claims, expenses, damages or liabilities to which
the Indemnified Party may become subject arise out of or are based upon both (1)
statements, omissions, representations, warranties or covenants of the
Originator described in clause (a), (b) or (c) above and (2) any other factual
basis, the Originator shall indemnify and hold harmless the Indemnified Party
only to the extent that the losses, claims, expenses, damages, or liabilities of
the person or persons asserting the claim are determined to rise from or be
based upon matters set forth in clause (1) above and do not result from the
gross negligence or willful misconduct of such Indemnified Party. This indemnity
shall be in addition to any liability that the Originator may otherwise have.

               The Seller shall indemnify and hold harmless each of (i) the
Purchaser, (ii) the Underwriter, (iii) the Person, if any, to which the
Purchaser assigns its rights in and to a Mortgage Loan and each of their
respective successors and assigns and (iv) each person, if any, who controls the
Purchaser within the meaning of Section 15 of the 1933 Act, as amended (the
"1933 Act") ((i) through (iv) collectively, the "Indemnified Party") against any
and all losses, claims, expenses, damages or liabilities to which the
Indemnified Party may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, expenses, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (a) any untrue statement or alleged
untrue statement of any

                                      -20-

<PAGE>

material fact contained in the Prospectus Supplement or any private placement
memorandum relating to the offering by the Purchaser or an affiliate thereof, of
the Class CE Certificates or the Class P Certificates, or the omission or the
alleged omission to state therein the material fact necessary in order to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with (i)
information furnished in writing to the Purchaser or any of its affiliates by
the Originator or any of its affiliates specifically for use therein, which
shall include, with respect to the Prospectus Supplement, the information set
forth under the captions "Summary--The Mortgage Loans," "Risk Factors" (to the
extent of information concerning the Mortgage Loans contained therein) and "The
Mortgage Pool" (other than with respect to information set forth under "The
Mortgage Pool--Underwriting Standards of the Originator and Representations
Concerning the Mortgage Loans") and, with respect to any private placement
memorandum, any information of a comparable nature, or (ii) the data files
containing information with respect to the Mortgage Loans as transmitted by
modem to the Purchaser by the Seller or any of its affiliates (as such
transmitted information may have been amended in writing by the Seller or any of
its affiliates with the written consent of the Purchaser subsequent to such
transmission), (b) any representation, warranty or covenant made by the Seller
or any affiliate of the Seller herein or in the Pooling and Servicing Agreement,
on which the Purchaser has relied, being, or alleged to be, untrue or incorrect
or (c) any updated collateral information provided by the Underwriter to a
purchaser of the Certificates derived from the data contained in clause (ii) and
the Remittance Report or a current collateral tape obtained from the Seller or
an affiliate of the Seller, including the current loan balances of the Mortgage
Loans; provided, however, that to the extent that any such losses, claims,
expenses, damages or liabilities to which the Indemnified Party may become
subject arise out of or are based upon both (1) statements, omissions,
representations, warranties or covenants of the Seller described in clause (a),
(b) or (c) above and (2) any other factual basis, the Seller shall indemnify and
hold harmless the Indemnified Party only to the extent that the losses, claims,
expenses, damages, or liabilities of the person or persons asserting the claim
are determined to rise from or be based upon matters set forth in clause (1)
above and do not result from the gross negligence or willful misconduct of such
Indemnified Party. This indemnity shall be in addition to any liability that the
Seller may otherwise have.

        SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The sale and
delivery on the Closing Date of the Mortgage Loans described on the Mortgage
Loan Schedule in accordance with the terms and conditions of this Agreement is
mandatory. It is specifically understood and agreed that each Mortgage Loan is
unique and identifiable on the date hereof and that an award of money damages
would be insufficient to compensate the Purchaser for the losses and damages
incurred by the Purchaser in the event of the Seller's failure to deliver the
Mortgage Loans on or before the Closing Date. The Seller hereby grants to the
Purchaser a lien on and a continuing security interest in the Seller's interest
in each Mortgage Loan and each document and instrument evidencing each such
Mortgage Loan to secure the performance by the Seller of its obligation
hereunder, and the Seller agrees that it holds such Mortgage Loans in custody
for the Purchaser, subject to the Purchaser's (i) right, prior to the Closing
Date, to reject any Mortgage Loan to the extent permitted by this Agreement, and
(ii) obligation to deliver or cause to be delivered the consideration for the
Mortgage Loans pursuant to Section 8 hereof. Any Mortgage Loans rejected by the
Purchaser shall concurrently therewith be released from the security interest
created hereby. All rights and remedies of the Purchaser under this Agreement
are distinct from, and cumulative with, any other rights or

                                      -21-

<PAGE>

remedies under this Agreement or afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.

        Notwithstanding the foregoing, if on the Closing Date, each of the
conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the redelivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.

        SECTION 14. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
fax and, receipt of which is confirmed by telephone, if to the Purchaser,
addressed to the Purchaser at 390 Greenwich Street, 4th Floor, New York, New
York 10013, Attention: Mortgage Finance Group, or such other address as may
hereafter be furnished to the Seller and the Originator in writing by the
Purchaser; if to the Seller, addressed to the Seller at 18400 Von Karman, Suite
1000, Irvine, California 92612, fax (949) 440-7033, or to such other address as
the Seller may designate in writing to the Purchaser and the Originator; and if
to the Originator, addressed to the Originator at 18400 Von Karman, Suite 1000,
Irvine, California 92612, fax (949) 440-7033, or such other address as may
hereafter be furnished to the Seller and the Purchaser in writing by the
Originator.

        SECTION 15. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.

        SECTION 16. AGREEMENT OF PARTIES. The Originator, the Seller and the
Purchaser each agree to execute and deliver such instruments and take such
actions as either of the others may, from time to time, reasonably request in
order to effectuate the purpose and to carry out the terms of this Agreement and
the Pooling and Servicing Agreement.

        SECTION 17. SURVIVAL. (a) The Seller agrees that the representations,
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to be relied upon by the
Purchaser, notwithstanding any investigation heretofore or hereafter made by the
Purchaser or on its behalf, and that the representations, warranties and
agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans and
shall continue in full force and effect, notwithstanding any restrictive or
qualified endorsement on the Mortgage Notes and notwithstanding subsequent
termination of this Agreement, the Pooling and Servicing Agreement or the Trust
Fund.

                                      -22-

<PAGE>

(b) The Originator agrees that the representations, warranties and agreements
made by it herein and in any certificate or other instrument delivered pursuant
hereto shall be deemed to be relied upon by the Seller and the Purchaser
notwithstanding any investigation heretofore or hereafter made by the Seller or
the Purchaser or on the behalf of either of them, and that the representations,
warranties and agreements made by the Originator herein or in any such
certificate shall continue in full force and effect, notwithstanding subsequent
termination of this Agreement, the Pooling and Servicing Agreement or the Trust
Fund.

        SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES,
OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW PROVISIONS)
AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND THAT THE
PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY
TO THIS AGREEMENT.

        SECTION 19. MISCELLANEOUS. This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute one and the same instrument. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof. Neither
this Agreement nor any term hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought. The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.

        It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Seller to the Purchaser as provided in Section 4
hereof be, and be construed as, a sale of the Mortgage Loans by the Seller to
the Purchaser and not as a pledge of the Mortgage Loans by the Seller to the
Purchaser to secure a debt or other obligation of the Seller. However, in the
event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,
instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related Mortgages and such other items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession" by the secured party for purposes of
perfecting the security interest pursuant to the New York Uniform Commercial
Code; and (4) notifications to persons holding such property and
acknowledgments, receipts or confirmations from persons holding such property
shall be deemed notifications to, or acknowledgments, receipts or

                                      -23-

<PAGE>

confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Purchaser for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Purchaser pursuant to
Section 4(d) hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement and the Pooling and Servicing
Agreement.

                                      -24-

<PAGE>

        IN WITNESS WHEREOF, the Purchaser and the Seller have caused their names
to be signed by their respective officers thereunto duly authorized as of the
date first above written.

                                             SALOMON BROTHERS MORTGAGE
                                             SECURITIES VII, INC.

                                             By:________________________________
                                             Name:
                                             Title:

                                             NC CAPITAL CORPORATION

                                             By:________________________________
                                             Name:
                                             Title:

                                             NEW CENTURY MORTGAGE CORPORATION

                                             By:________________________________
                                             Name:
                                             Title:

<PAGE>

                                    EXHIBIT 1

        References to percentage of the Mortgage Loans as set forth in this
Exhibit 1, unless otherwise noted, are calculated based on the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date.

        On the Cut-off Date, the Mortgage Loans will comply with the following
conditions:

        (i) no less than 51.15% of the Mortgage Loans have a risk grade of A+ or
A+MO; no less than 20.87% of the Mortgage Loans will have a risk category of
A-or A-MO; no less than 17.43% of the Mortgage Loans will have a risk category
of B; and no more than 8.28% of such loans have a risk grade of C, C- or C-HS;

        (ii) any Mortgage Loan with a risk grade of A+, A+MO, A-, A-MO or B has
a loan-to-value ratio between 11.69% and 95.00%;

        (iii) the weighted average loan-to-value ratio for the Mortgage Loans at
origination will not exceed 77.77%; provided, however, the weighted average
loan-to-value ratio for each of the Delayed First Adjustment Mortgage Loans at
origination will not exceed 78.52%;

        (iv) the maximum percentage concentration of Mortgage Loans secured by
mortgaged properties in any one zip code will be  0.46%;

        (v) not less than 84.86% of the Mortgage Loans provide for payment by
the mortgagor of a prepayment charge within a specified period as provided in
the related Mortgage Note not in excess of 5 years; provided, however, not less
than 87.52% of the Delayed First Adjustment Mortgage Loans provide for payment
by the mortgagor of a prepayment charge within a specified period as provided in
the related Mortgage Note not in excess of 5 years;

        (vi) the Mortgage Loans will have a weighted average Mortgage Rate equal
to 9.43% per annum and the a weighted average Gross Margin equal to 6.64% per
annum, provided, however, the Delayed First Adjustment Mortgage Loans to be
purchased will have a weighted average Mortgage Rate equal to 9.40% per annum
and a weighted average Gross Margin equal to 6.64% per annum. The Mortgage Loans
are payable on the first day of each month and with respect to the
Adjustable-Rate Mortgage Loans, interest on the Mortgage Loans and the monthly
payments are subject to adjustment on each Adjustment Date to equal the sum of
the Index and the Gross Margin, rounded to the next highest multiple of 0.125%,
subject to the Periodic Rate Cap, the Maximum Mortgage Rate and the Minimum
Mortgage Rate. The Mortgage Loans are not subject to negative amortization and
do not provide for graduated payments. None of the Adjustable Rate Mortgage
Loans are convertible to a fixed Mortgage Rate. None of the Mortgage Loans is
subject to temporary buydown agreements. Each of the Mortgage Loans is
fully-amortizing and none of the Mortgage Loans provide for the payment of a
balloon payment.

                                      -26-

<PAGE>

                                   EXHIBIT E-1
                                   -----------

                               REQUEST FOR RELEASE
                             (for Trustee/Custodian)

                                Loan Information
                                ----------------

              Name of Mortgagor: __________________________________

                                 Master Servicer
                  Loan No.: __________________________________

                                Trustee/Custodian

                    Name: __________________________________

                   Address: __________________________________

                            __________________________________

                                Trustee/Custodian
              Mortgage File No.: __________________________________

                                    Depositor

                         Name: SALOMON BROTHERS MORTGAGE
                              SECURITIES VII, INC.

  Address:__________________________________ __________________________________

                Certificates: Asset Backed Mortgage Pass-Through
                          Certificates, Series 2001-NC2

                  The undersigned Master Servicer hereby acknowledges that it
has received from _______________________, as Trustee for the Holders of Asset
Backed Pass-Through Certificates, Series 2001-NC2 the documents referred to
below (the "Documents"). All capitalized terms not otherwise defined in this
Request for Release shall have the meanings given them in the Pooling and
Servicing Agreement, dated as of September 1, 2001, among the Trustee, the
Depositor and the Master Servicer (the "Pooling and Servicing Agreement").

                  ( ) Promissory Note dated _______________, 20__, in the
original principal sum of $__________, made by _____________________, payable
to, or endorsed to the order of, the Trustee.

                  ( ) Mortgage recorded on _________________________ as
instrument no. ____________________ in the County Recorder's Office of the
County of _________________,

                                      E-1-1

<PAGE>

State of __________________ in book/reel/docket _________________ of official
records at page/image _____________.

                  ( ) Deed of Trust recorded on ___________________ as
instrument no. ________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.

                  ( ) Assignment of Mortgage or Deed of Trust to the Trustee,
recorded on ___________________ as instrument no. _________ in the County
Recorder's Office of the County of _______________, State of
_______________________ in book/reel/docket ____________ of official records at
page/image ____________.

                  ( ) Other documents, including any amendments, assignments or
other assumptions of the Mortgage Note or Mortgage.

                  ( ) ---------------------------------------------

                  ( ) ---------------------------------------------

                  ( ) ---------------------------------------------

                  ( ) ---------------------------------------------

                  The undersigned Master Servicer hereby acknowledges and agrees
as follows:

                  (1) The Master Servicer shall hold and retain possession of
the Documents in trust for the benefit of the Trustee, solely for the purposes
provided in the Agreement.

                  (2) The Master Servicer shall not cause or permit the
Documents to become subject to, or encumbered by, any claim, liens, security
interest, charges, writs of attachment or other impositions nor shall the Master
Servicer assert or seek to assert any claims or rights of setoff to or against
the Documents or any proceeds thereof.

                  (3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the Documents
has been liquidated and the proceeds thereof have been remitted to the
Collection Account and except as expressly provided in the Agreement.

                  (4) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of the Master
Servicer shall at all times be earmarked for the account of the Trustee, and the
Master Servicer shall keep the Documents and any proceeds separate and distinct
from all other property in the Master Servicer's possession, custody or control.

Dated:

                                     E-1-2

<PAGE>

<PAGE>

                             OCWEN FEDERAL BANK FSB

                          By:__________________________
                                      Name:
                                     Title:

                                     E-1-3

<PAGE>

                                   EXHIBIT E-2
                                   -----------

                               REQUEST FOR RELEASE
                          [Mortgage Loans Paid in Full]

                     OFFICER'S CERTIFICATE AND TRUST RECEIPT
                 ASSET BACKED MORTGAGE PASS-THROUGH CERTIFICATES
                                 SERIES 2001-NC2

___________________________________________________ HEREBY CERTIFIES THAT HE/SHE
IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET FORTH BENEATH
HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:

WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:

ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.

LOAN NUMBER: _________________ BORROWER'S NAME:______________________

COUNTY: ______________________

WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.

______________________________                      DATED:______________________

/ / VICE PRESIDENT

/ / ASSISTANT VICE PRESIDENT

                                      E-2-1

<PAGE>

                                   EXHIBIT F-1
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                                           [Date]

U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101

                  Re:      New Century Home Equity Loan Trust, Series 2001-NC2,
                           Asset Backed Mortgage Pass-Through Certificates,
                           Class ___, representing a ___% Class ___ Percentage
                           Interest
                           ----------------------------------------------------

Ladies and Gentlemen:

                  In connection with the transfer by ________________ (the
"Transferor") to ________________ (the "Transferee") of the captioned mortgage
pass-through certificates (the "Certificates"), the Transferor hereby certifies
as follows:

                  Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
September 1, 2001, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Ocwen Federal Bank FSB as Master Servicer and U.S. Bank National
Association as Trustee (the "Pooling and Servicing Agreement"), pursuant to
which Pooling and Servicing Agreement the Certificates were issued.

                                      F-1-1

<PAGE>

                  Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.

                                                Very truly yours,

                                                [Transferor]

                                                By:___________________________
                                                Name:
                                                Title:

                                      F-1-2

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER

                                                        [Date]

U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101

                  Re:      New Century Home Equity Loan Trust, Series 2001-NC2,
                           Asset Backed Mortgage Pass-Through Certificates,
                           Class ___, representing a ___% Percentage Interest
                           ----------------------------------------------------

Ladies and Gentlemen:

                  In connection with the purchase from ______________________
(the "Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:

                  1. The Transferee is a "qualified institutional buyer" as that
term is defined in Rule 144A ("Rule 144A") under the Securities Act of 1933 (the
"1933 Act") and has completed either of the forms of certification to that
effect attached hereto as Annex 1 or Annex 2. The Transferee is aware that the
sale to it is being made in reliance on Rule 144A. The Transferee is acquiring
the Certificates for its own account or for the account of a qualified
institutional buyer, and understands that such Certificate may be resold,
pledged or transferred only (i) to a person reasonably believed to be a
qualified institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the 1933 Act.

                  2. The Transferee has been furnished with all information
regarding (a) the Certificates and distributions thereon, (b) the nature,
performance and servicing of the Mortgage Loans, (c) the Pooling and Servicing
Agreement referred to below, and (d) any credit enhancement mechanism associated
with the Certificates, that it has requested.

                  All capitalized terms used but not otherwise defined herein
have the respective meanings assigned thereto in the Pooling and Servicing
Agreement, dated as of September 1, 2001, among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor, Ocwen Federal Bank FSB as Master Servicer and
U.S. Bank National Association as Trustee, pursuant to which the Certificates
were issued.

                                                   [TRANSFEREE]

                                                   By:__________________________
                                                   Name:
                                                   Title:

                                      F-1-3

<PAGE>

                                                          ANNEX 1 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

                  [For Transferees Other Than Registered Investment Companies]

                  The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and U.S. Bank National Association, as Trustee,
with respect to the mortgage pass-through certificates (the "Certificates")
described in the Transferee Certificate to which this certification relates and
to which this certification is an Annex:

                  1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").

                  2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) the Transferee
owned and/or invested on a discretionary basis $______________________1 in
securities (except for the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A) and (ii) the Transferee satisfies the criteria in the
category marked below.

         ___ CORPORATION, ETC. The Transferee is a corporation (other than a
bank, savings and loan association or similar institution), Massachusetts or
similar business trust, partnership, or any organization described in Section
501(c)(3) of the Internal Revenue Code of 1986.

         ___ BANK. The Transferee (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of Columbia,
the business of which is substantially confined to banking and is supervised by
the State or territorial banking commission or similar official or is a foreign
bank or equivalent institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial statements, a copy of
which is attached hereto.

         ___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan
association, building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and examined by a State
or Federal authority having supervision over any such institutions or is a
foreign savings and loan association or equivalent institution and (b) has an
audited net worth of at least

--------

         1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities. $25,000,000 as demonstrated in its latest annual financial
statements, A COPY OF WHICH IS ATTACHED HERETO.

                                      F-1-4

<PAGE>

         ___ BROKER-DEALER. The Transferee is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.

         ___ INSURANCE COMPANY. The Transferee is an insurance company whose
primary and predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is subject to
supervision by the insurance commissioner or a similar official or agency of a
State, territory or the District of Columbia.

         ___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the benefit of
its employees.

         ___ ERISA PLAN. The Transferee is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of 1974.

         ___ INVESTMENT ADVISOR. The Transferee is an investment advisor
registered under the Investment Advisers Act of 1940.

                  3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.

                  4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned by subsidiaries of the Transferee, but only if such
subsidiaries are consolidated with the Transferee in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Transferee's direction.
However, such securities were not included if the Transferee is a
majority-owned, consolidated subsidiary of another enterprise and the Transferee
is not itself a reporting company under the Securities Exchange Act of 1934.

                  5. The Transferee acknowledges that it is familiar with Rule
144A and understands that the Transferor and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be in reliance on Rule 144A.

         ___      ___      Will the Transferee be purchasing the Certificates
         Yes      No       only for the Transferee's own account?

                                      F-1-5

<PAGE>

                  6. If the answer to the foregoing question is "no", the
Transferee agrees that, in connection with any purchase of securities sold to
the Transferee for the account of a third party (including any separate account)
in reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.

                  7. The Transferee will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Transferee's purchase of the
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.

Dated:

                                            ------------------------------------
                                            Print Name of Transferee

                                            By:_________________________________
                                            Name:
                                            Title:

                                      F-1-6

<PAGE>

                                                          ANNEX 2 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That Are Registered Investment Companies]

                  The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and U.S. Bank National Association, as Trustee,
with respect to the mortgage pass- through certificates (the "Certificates")
described in the Transferee Certificate to which this certification relates and
to which this certification is an Annex:

                  1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").

                  2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as defined in Rule 144A because
(i) the Transferee is an investment company registered under the Investment
Company Act of 1940, and (ii) as marked below, the Transferee alone, or the
Transferee's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year. For purposes of determining the
amount of securities owned by the Transferee or the Transferee's Family of
Investment Companies, the cost of such securities was used.

         ____              The Transferee owned $___________________ in
                           securities (other than the excluded securities
                           referred to below) as of the end of the Transferee's
                           most recent fiscal year (such amount being calculated
                           in accordance with Rule 144A).

         ____              The Transferee is part of a Family of Investment
                           Companies which owned in the aggregate
                           $______________ in securities (other than the
                           excluded securities referred to below) as of the end
                           of the Transferee's most recent fiscal year (such
                           amount being calculated in accordance with Rule
                           144A).

                  3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).

                  4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
agreements, (vi) securities owned but subject to a repurchase agreement and
(vii) currency, interest rate and commodity swaps.

                                      F-1-7

<PAGE>

                  5. The Transferee is familiar with Rule 144A and understands
that the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.

                  6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.

Dated:

                                          -----------------------------------
                                          Print Name of Transferee or Advisor

                                          By:________________________________
                                          Name:
                                          Title:

                                          IF AN ADVISER:

                                          -----------------------------------
                                          Print Name of Transferee

                                      F-1-8

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER
                    ----------------------------------------

                  The undersigned hereby certifies on behalf of the purchaser
named below (the "Purchaser") as follows:

                  1.  I am an executive officer of the Purchaser.

                  2. The Purchaser is a "qualified institutional buyer", as
defined in Rule 144A, ("Rule 144A") under the Securities Act of 1933, as
amended.

                  3. As of the date specified below (which is not earlier than
the last day of the Purchaser's most recent fiscal year), the amount of
"securities", computed for purposes of Rule 144A, owned and invested on a
discretionary basis by the Purchaser was in excess of $100,000,000.

                                                Name of Purchaser

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

                                                By:____________________________
                                                Name:
                                                Title:

Date of this certificate:

Date of information provided in paragraph 3

                                      F-1-9

<PAGE>

                                   EXHIBIT F-2
                                   -----------

                    FORM OF TRANSFER AFFIDAVIT AND AGREEMENT

STATE OF NEW YORK          )
COUNTY OF NEW YORK         )

                  __________________________, being duly sworn, deposes,
represents and warrants as follows:

                  1. I am a ______________________ of
____________________________ (the "Owner") a corporation duly organized and
existing under the laws of ______________, the record owner of New Century Home
Equity Loan Trust, Series 2001-NC2, Asset Backed Mortgage Pass-Through
Certificates, Series 2001-NC2, [Class R-I], [Class R-II] and [Class R-III] (the
"Class R Certificates"), on behalf of whom I make this affidavit and agreement.
Capitalized terms used but not defined herein have the respective meanings
assigned thereto in the Pooling and Servicing Agreement pursuant to which the
Class R Certificates were issued.

                  2. The Owner (i) is and will be a "Permitted Transferee" as of
____________, 20__ and (ii) is acquiring the Class R Certificates for its own
account or for the account of another Owner from which it has received an
affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.

                  3. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any taxes
due with respect to the income on such residual interest, unless no significant
purpose of the transfer is to impede the assessment or collection of tax.

                                      F-2-1

<PAGE>

                  4. The Owner is aware of the tax imposed on a "pass-through
entity" holding the Class R Certificates if, at any time during the taxable year
of the pass-through entity, a non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)

                  5. The Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.

                  6. The Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.

                  7. The Owner's taxpayer identification number is
_________________.

                  8. The Owner has reviewed the restrictions set forth on the
face of the Class R Certificates and the provisions of Section 5.02(d) of the
Pooling and Servicing Agreement under which the Class R Certificates were issued
(in particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize
the Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.

                  9. The Owner is not acquiring and will not transfer the Class
R Certificates in order to impede the assessment or collection of any tax.

                  10. The Owner anticipates that it will, so long as it holds
the Class R Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class R Certificates, and hereby represents to and for the
benefit of the person from whom it acquired the Class R Certificates that the
Owner intends to pay taxes associated with holding such Class R Certificates as
they become due, fully understanding that it may incur tax liabilities in excess
of any cash flows generated by the Class R Certificates.

                  11. The Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class R Certificates.

                  12. The Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.

                  13. The Owner is not acquiring the Class R Certificates with
the intent to transfer the Class R Certificates to any person or entity that
will not have sufficient assets to pay any taxes

                                      F-2-2

<PAGE>

owed by the holder of such Class R Certificates, or that may become insolvent or
subject to a bankruptcy proceeding, for so long as the Class R Certificates
remain outstanding.

                  14. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, obtain from its transferee the
representations required by Section 5.02(d) of the Pooling and Servicing
Agreement under which the Class R Certificate were issued and will not
consummate any such transfer if it knows, or knows facts that should lead it to
believe, that any such representations are false.

                  15. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, deliver to the Trustee an affidavit, which
represents and warrants that it is not transferring the Class R Certificates to
impede the assessment or collection of any tax and that it has no actual
knowledge that the proposed transferee: (i) has insufficient assets to pay any
taxes owed by such transferee as holder of the Class R Certificates; (ii) may
become insolvent or subject to a bankruptcy proceeding for so long as the Class
R Certificates remains outstanding; and (iii) is not a "Permitted Transferee".

                  16. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.

                  17. The Owner of the Class R-III Certificate, hereby agrees
that in the event that the Trust Fund created by the Pooling and Servicing
Agreement is terminated pursuant to Section 9.01 thereof, the undersigned shall
assign and transfer to the Holders of the Class CE Certificates any amounts in
excess of par received in connection with such termination. Accordingly, in the
event of such termination, the Trustee is hereby authorized to withhold any such
amounts in excess of par and to pay such amounts directly to the Holders of the
Class CE Certificates. This agreement shall bind and be enforceable against any
successor, transferee or assigned of the undersigned in the Class R-III
Certificate. In connection with any transfer of the Class R-III Certificate, the
Owner shall obtain an agreement substantially similar to this clause from any
subsequent owner.

                                      F-2-3

<PAGE>

                  IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 20__.

                                                [OWNER]

                                                By:__________________________
                                                Name:
                                                Title:      [Vice] President

ATTEST:

By:_________________________________
Name:
Title:            [Assistant] Secretary

                  Personally appeared before me the above-named , known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.

                  Subscribed and sworn before me this ____ day of __________,
20___.

                                                ----------------------------
                                                         Notary Public

                                                County of __________________
                                                State of ___________________

                                                My Commission expires:

                                      F-2-4

<PAGE>

                          FORM OF TRANSFEROR AFFIDAVIT
'                          ----------------------------

STATE OF NEW YORK          )

COUNTY OF NEW YORK         )

                  __________________________, being duly sworn, deposes,
represents and warrants as follows:

                  1. I am a ____________________ of ____________________________
(the "Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.

                  2. The Owner is not transferring the [Class R-I][Class
R-II][Class R-III] (the "Residual Certificates") to impede the assessment or
collection of any tax.

                  3. The Owner has no actual knowledge that the Person that is
the proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.

                  4. The Owner understands that the Purchaser has delivered to
the Trustee a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit F-2. The Owner does not know or
believe that any representation contained therein is false.

                  5. At the time of transfer, the Owner has conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result
of that investigation, the Owner has determined that the Purchaser has
historically paid its debts as they became due and has found no significant
evidence to indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Owner understands that the transfer of a
Residual Certificate may not be respected for United States income tax purposes
(and the Owner may continue to be liable for United States income taxes
associated therewith) unless the Owner has conducted such an investigation.

                  6. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Pooling and Servicing Agreement.

                                      F-2-5

<PAGE>

                  IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 20__.

                                             [OWNER]

                                             By:_____________________________
                                             Name:
                                             Title:      [Vice] President

ATTEST:

By:______________________________
Name:
Title:   [Assistant] Secretary

                  Personally appeared before me the above-named , known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.

                  Subscribed and sworn before me this ____ day of __________,
20___.

                                                    ----------------------------
                                                             Notary Public

                                                    County of __________________
                                                    State of ___________________

                                                    My Commission expires:

                                      F-2-6

<PAGE>

                                    EXHIBIT G
                                    ---------

            FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE

                                                    _____________, 20__

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

U.S. Bank National Association
180 East Fifth Street
St. Paul, Minnesota 55101

Ocwen Federal Bank FSB
1675 Palm Beach Lakes Boulevard
West Palm Beach, Florida 33401

                  Re:      New Century Home Equity Loan Trust, Series 2001-NC2,
                           Asset Backed Mortgage Pass-Through Certificates,
                           Class ___
                           ----------------------------------------------------

Dear Sirs:

                  _______________________ (the "Transferee") intends to acquire
from _____________________ (the "Transferor") $____________ Initial Certificate
Principal Balance of New Century Home Equity Loan Trust, Series 2001-NC2, Asset
Backed Pass-Through Certificates, Class [CE] [P] [R] (the "Certificates"),
issued pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") dated as of September 1, 2001 among Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor"), Ocwen Federal Bank FSB as
master servicer (the "Master Servicer") and U.S. Bank National Association as
trustee (the "Trustee"). Capitalized terms used herein and not otherwise defined
shall have the meanings assigned thereto in the Pooling and Servicing Agreement.
The Transferee hereby certifies, represents and warrants to, and covenants with
the Depositor, the Trustee and the Master Servicer the following:

                  The Certificates (i) are not being acquired by, and will not
be transferred to, any employee benefit plan within the meaning of section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
other retirement arrangement, including individual retirement accounts and
annuities, Keogh plans and bank collective investment funds and insurance
company general or separate accounts in which such plans, accounts or
arrangements are invested, that is subject to Section 406 of ERISA or Section
4975 of the Internal Revenue Code of 1986 (the "Code") (any of the foregoing, a
"Plan"), (ii) are not being acquired with "plan assets" of a Plan within the
meaning of the Department of Labor ("DOL") regulation, 29 C.F.R.ss.2510.3-101,
and (iii) will not be transferred to any entity that is deemed to be investing
in plan assets within the meaning of the DOL regulation at 29 C.F.R.ss.
2510.3-101.

                                       G-1

<PAGE>

                                                 Very truly yours,

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

                                                 By:____________________________
                                                 Name:
                                                 Title:

                                       G-2

<PAGE>

                                    EXHIBIT H

                     FORM OF REPORT PURSUANT TO SECTION 4.06

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                    Form 10-K

                Annual report pursuant to Section 13 or 15(d) of
                    the Securities Exchange Act of 1934 (Fee
                   Required). For fiscal year ended __________

                        Commission file number: 333-_____

 Salomon Brothers Mortgage Securities VII, Inc. (AS DEPOSITOR UNDER THE POOLING
      AND SERVICING AGREEMENT DATED AS OF SEPTEMBER 1, 2001, PROVIDING FOR
               THE ISSUANCE OF MORTGAGE PASS-THROUGH CERTIFICATES
                                SERIES 2001-NC2)

(Exact name of registrant as specified in its charter)

                  Delaware                               13-3439681
                  --------                               ----------
                  (State or Other Jurisdiction           (I.R.S. Employer
                  of Incorporation                       Identification Number)

390 Greenwich Street, 4th Floor New York, New York 10013
(Address of Principal (Zip Code) Executive Offices)

Registrant's telephone number: (212) 816-6000

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate whether the Registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.

                                                           X  YES        No
                                                          ---        ---

Item 1.  Business:

                                       H-1

<PAGE>

Not applicable

Item 2.  Properties:

Not applicable

Item 3.  Legal Proceedings:

None

Item 4.  Submission of Matters to a Vote of Security-Holders

None

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

To the best knowledge of the registrant there is no established public trading
market for the certificates.

There are approximately _____ holders of record as of the end of the reporting
year.

Item 6.  Selected Financial Data.

Not applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Not applicable

Item 8.  Financial Statements and Supplementary Data.

Not applicable.

Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None

Item 10.

Not applicable

Item 11.  Executive Compensation

Not applicable

                                       H-2

<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Not applicable

Item 13.  Certain Relationships and Related Transactions

Not applicable

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

         a)       The company filed on Form 8-K, separately for each
                  distribution date, the distribution of funds related to the
                  trust for each of the following distribution dates:

                           Distribution Date          Form 8-K Filing Date
                           -----------------          --------------------

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

         b)       99.1     Annual Report of Independent Public Accountants' as
                           to master servicing activities or servicing
                           activities, as applicable

                           (a) Ocwen Federal Bank FSB, as master servicer

                  99.2     Annual Statement of Compliance with obligations under
                           the Pooling and Servicing Agreement or servicing
                           agreement, as applicable, of:

                           (a) Ocwen Federal Bank FSB, as master servicer

Such document (i) is not filed herewith since such document was not received by
the Reporting Person at least three business days prior to the due date of this
report; and (ii) will be included in an amendment to this report on Form 10-K/A
to be filed within 30 days of the Reporting Person's receipt of such document.

Signatures

                  Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.

Date: ___________

Salomon Brothers Mortgage Securities VII, Inc. by U.S. Bank National
Association, as Trustee for New Century Home Equity Loan Trust, Series 2001-NC2,
Asset Backed Pass-Through Certificates.

                                       H-3

<PAGE>

By:      /s/ Eve Kaplan
         --------------
Name:    Eve Kaplan
Title:   Vice President
Company: U.S. Bank National Association

                                       H-4

<PAGE>

                                    EXHIBIT I

                                   [RESERVED]

                                       I-1

<PAGE>

                                    EXHIBIT J

                                   [RESERVED]

                                       J-1

<PAGE>

                                    EXHIBIT K

                           FORM OF LOST NOTE AFFIDAVIT

Loan #: ____________
Borrower: _____________

                               LOST NOTE AFFIDAVIT

                  I, as ____________________ of ______________________, a
_______________ corporation am authorized to make this Affidavit on behalf of
_____________________ (the "Seller"). In connection with the administration of
the Mortgage Loans held by ____________________, a _________________ corporation
as Seller on behalf of Salomon Brothers Mortgage Securities VII, Inc. (the
"Purchaser"), _____________________ (the "Deponent"), being duly sworn, deposes
and says that:

         1.       The Seller's address is:   _____________________
                                             _____________________
                                             _____________________

         2.       The Seller previously delivered to the Purchaser a signed
                  Initial Certification with respect to such Mortgage and/or
                  Assignment of Mortgage;

         3.       Such Mortgage Note and/or Assignment of Mortgage was assigned
                  or sold to the Purchaser by ________________________, a
                  ____________ corporation pursuant to the terms and provisions
                  of a Mortgage Loan Purchase Agreement dated as of __________
                  __, _____;

         4.       Such Mortgage Note and/or Assignment of Mortgage is not
                  outstanding pursuant to a request for release of Documents;

         5.       Aforesaid Mortgage Note and/or Assignment of Mortgage (the
                  "Original") has been lost;

         6.       Deponent has made or caused to be made a diligent search for
                  the Original and has been unable to find or recover same;

         7.       The Seller was the Seller of the Original at the time of the
                  loss; and

         8.       Deponent agrees that, if said Original should ever come into
                  Seller's possession, custody or power, Seller will immediately
                  and without consideration surrender the Original to the
                  Purchaser.

         9.       Attached hereto is a true and correct copy of (i) the Note,
                  endorsed in blank by the Mortgagee and (ii) the Mortgage or
                  Deed of Trust (strike one) which

                                       K-1

<PAGE>

                  secures the Note, which Mortgage or Deed of Trust is recorded
                  in the county where the property is located.

         10.      Deponent hereby agrees that the Seller (a) shall indemnify and
                  hold harmless the Purchaser, its successors and assigns,
                  against any loss, liability or damage, including reasonable
                  attorney's fees, resulting from the unavailability of any
                  Notes, including but not limited to any loss, liability or
                  damage arising from (i) any false statement contained in this
                  Affidavit, (ii) any claim of any party that has already
                  purchased a mortgage loan evidenced by the Lost Note or any
                  interest in such mortgage loan, (iii) any claim of any
                  borrower with respect to the existence of terms of a mortgage
                  loan evidenced by the Lost Note on the related property to the
                  fact that the mortgage loan is not evidenced by an original
                  note and (iv) the issuance of a new instrument in lieu thereof
                  (items (i) through (iv) above hereinafter referred to as the
                  "Losses") and (b) if required by any Rating Agency in
                  connection with placing such Lost Note into a Pass-Through
                  Transfer, shall obtain a surety from an insurer acceptable to
                  the applicable Rating Agency to cover any Losses with respect
                  to such Lost Note.

         11.      This Affidavit is intended to be relied upon by the Purchaser,
                  its successors and assigns. _____________________, a
                  ______________ corporation represents and warrants that is has
                  the authority to perform its obligations under this Affidavit
                  of Lost Note.

Executed this ____ day, of ___________ ______.

                                                    SELLER

                                                    By:______________________
                                                    Name:
                                                    Title:

                  On this _____ day of ________, _____, before me appeared
_________________ to me personally known, who being duly sworn did say that he
is the _____________________ of ____________________ a ______________
corporation and that said Affidavit of Lost Note was signed and sealed on behalf
of such corporation and said acknowledged this instrument to be the free act and
deed of said corporation.

                                                    Signature:

                                                    [Seal]

                                       K-2

<PAGE>

                                   Schedule 1

                             MORTGAGE LOAN SCHEDULE

                             Available Upon Request

                                  Schedule 1-1

<PAGE>

                                   Schedule 2

                         SCHEDULE OF PREPAYMENT CHARGES

                             AVAILABLE UPON REQUEST

                                  Schedule 2-1

<PAGE>

                                   Schedule 3

                         SCHEDULE OF PMI MORTGAGE LOANS

                             Available Upon Request

                                  Schedule 3-1

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