Document:

FORBEARANCE AGREEMENT

Exhibit 10.5

AMENDED AND RESTATED FORBEARANCE AGREEMENT

(NOTICE - CONTAINS A WAIVER OF TRIAL BY JURY)

This Amended and Restated Forbearance Agreement by and between Datatec Industries, Inc. ("Customer") and IBM Credit LLC ("IBM Credit") is dated March 29, 2004 (the "Forbearance Agreement").

WITNESSETH:

WHEREAS, Customer and IBM Credit have entered into that certain Inventory and Working Capital Financing Agreement dated November 10, 2000 (as amended, supplemented or otherwise modified from time to time, the "Financing Agreement"); and all loans made by IBM Credit to the Customer, and all other liabilities and obligations at any time owing by the Customer by IBM Credit are secured by security interests granted by the Customer to IBM Credit pursuant to the terms of the Financing Agreement in all of the Customer's then existing and thereafter acquired inventory, equipment, accounts receivables, chattel paper, contract rights, documents, instruments, general intangibles and other items of personal property described in the Financing Agreement; and.

WHEREAS, HH Communications, Inc. ("HHCI") and Datatec Systems, Inc. ("DSI") (each individually a "Guarantor" and collectively the "Guarantors") have each unconditionally guaranteed payment to IBM Credit of all Obligations at any time owing by the Customer to IBM Credit under the Financing Agreement or otherwise pursuant to (i) the Guaranty (By Corporation) dated November 8, 2000 signed by HHCI and (II) the Guaranty (By Corporation) dated November 8, 2000 signed by DSI;

WHEREAS, certain Events of Default (as defined in the Financing Agreement) and noticed in the letter dated December 17, 2003 from Mr. Steven Flanagan to Mr. Raul Pupo (the "December 17, 2003 Letter" and the letter dated January 29, 2004 from Mr. Steven Flanagan to Mr. Raul Pupo (the "January 29, 2004 Letter") have occurred and are continuing; and 

WHEREAS, the Customer desires that IBM Credit forbear from exercising certain remedies available to IBM Credit under the Financing Agreement.

WHEREAS, Customer and IBM Credit previously entered into a Forbearance Agreement dated February 27, 2004 ("Original Forbearance Agreement");

WHEREAS, the Customer was unable to meet certain terms of the Original Forbearance Agreement and accordingly the parties hereto wish to amend and restate the Original Forbearance Agreement, including certain of the conditions to forbearance and the Termination Date; and

WHEREAS, IBM Credit has agreed to forbear from exercising those certain remedies available under the Financing Agreement pursuant to the terms and conditions of this Forbearance Agreement.

NOW, THEREFORE, in consideration of the foregoing and the promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Customer and IBM Credit agree as follows:

Section 1.Capitalized Terms.  All capitalized terms not herein defined shall have the meaning set forth in the Financing Agreement. 

Section 2.Customer Acknowledgement.

The customer acknowledges that it is currently in default of certain of its Obligations to IBM Credit under the Financing Agreement.  As of the date of this Forbearance Agreement, Customer acknowledges that the Events of Default as set forth in the December 17, 2003 Letter and the January 29, 2004 Letter have occurred under the Financing Agreement and are continuing (the "Existing Events of Default"):

Section 3.Collection Costs and Expenses.  Customer reaffirms the terms of Section 10.3 of the Financing Agreement and agrees to reimburse IBM Credit for all collection costs and expenses including attorney's fees, including but not limited to counsel fees, arising out of the Existing Events of Default or any other Event of Default and any bankruptcy filing by Customer or any Guarantor or against Customer or any Guarantor or other insolvency proceeding involving Customer or any Guarantor and any other defaults.

Section 4.Guarantor Acknowledgement and Reaffirmation.  Each Guarantor acknowledges that the Customer is currently in default of its obligations to IBM Credit under the Financing Agreement as indicated in Section 2 of this Forbearance Agreement.  Each Guarantor hereby acknowledges the Existing Events of Default (and the amendments set forth herein) and hereby ratifies, reaffirms and restates its agreement to unconditionally guarantee payment of any obligations owed by Customer to IBM Credit of any obligation as set forth in its Guaranty and as modified by this Forbearance Agreement.  Each of the Guarantors hereby reaffirms the validity, legality and enforceability of its guaranty and agrees that its guaranty is and shall remain in full force and effect with respect to the obligations of Customer.  Each Guarantor is not aware of any defense, which would prevent and/or delay the enforcement of the Guaranties.

Section 5.Forbearance Conditions.  IBM Credit is willing to forbear, subject to the terms of this Forbearance Agreement, from exercising its remedies as a result of the Existing Events of Default for the period from the date hereof until July 31, 2004 ("Termination Date"), provided that each and all of the following conditions (the "Forbearance Conditions") are satisfied at all times to the satisfaction of IBM Credit in its sole discretion:

	
(A)
	
Customer shall provide to IBM Credit the following; (i) 10Q's as of 10/31/03 and 1/31/04 by 5/15/04; (ii) by 6/15/04, a projection, by month, for the year ending 4/30/05; each month therein shall include a balance sheet, profit and loss statement and a statement of cash flows, in the same detail as is provided for quarterly financial statements

	
(B)
	
IBM Credit shall have received a fully executed copy (including execution by each of the Guarantors) of this Forbearance Agreement on or before March 31, 2004;

	
(C)
	
No Guarantor shall revoke or terminate, or attempt to revoke or terminate, its Guaranty;

	
(D)
	
No representation or warranty made by the Customer or any Guarantor in this Forbearance Agreement, the Financing Agreement or any Guaranty shall prove to have been in error, or untrue;

	
(E)
	
No additional Default or Event of Default shall occur, other than the Existing Events of Default set forth in Section 2 of this Forbearance Agreement;

	
(F)
	
There shall occur no further deterioration of Customer's or any Guarantors' financial position, insolvency or any other event that could reasonably by expected to have a material adverse effect, (i) on the business, operations, results of operations, assets or financial condition of the Customer or any Guarantor, (ii) on the aggregate value of the collateral granted to IBM Credit in connection with the Financing Agreement or any Other Documents ("Collateral") or the aggregate amount which IBM Credit would be likely to receive (after giving consideration to reasonably likely delays in payment and reasonable costs of enforcement) in the liquidation of such Collateral to recover the Obligations in full, or (iii) on the rights and remedies of IBM Credit under this Forbearance Agreement, the Financing Agreement or any Guaranty; and 

	
(G)
	
Customer shall not assign any of its rights, title and interest in and to the Collateral, to any other party.

Section 6.No Liens, Etc.  The Customer shall not, and will not permit any of its Subsidiaries to, create, incur, assume, grant or suffer to exist any lien, claim, mortgage, security interest, attachment or other encumbrance of any kind, (whether consensual or arising by operation of law) upon any of its property, assets or revenues, whether now owned or hereafter acquired, except upon the prior written consent of IBM Credit.

Section 7.Termination.  (A) Pursuant to Section 10.1 of Financing Agreement, upon an Event of Default, IBM Credit may declare all of Customer's Outstanding Advances and other indebtedness under the Financing Agreement to be immediately due and payable and immediately terminate the Financing Agreement.  In the spirit of good faith and cooperation and as an accommodation to Customer, IBM Credit is giving Customer until July 31, 2004 before IBM Credit asserts any remedies available to it under the Financing Agreement or otherwise.  On such date, if no further forbearance or other agreement is reached with IBM Credit in writing, Customer's Outstanding Advances and other indebtedness under the Financing Agreement will be due and payable on the Termination Date (July 31, 2004) (unless due sooner according to its terms or pursuant to the provisions hereof).

(B)  In the event that any one or more of the Forbearance Conditions is not fulfilled to IBM Credit's satisfaction in its sole discretion, IBM Credit's agreement to forbear as set forth herein shall, at IBM Credit's election but without further notice to or demand upon the Customer, terminate, and IBM Credit shall thereupon have and may exercise from time to time all of the remedies available to it under the Financing Agreement, the Guaranty, this Forbearance Agreement and applicable law as a consequence of the Existing Events of Default.  In addition and provided that the Forbearance Conditions continue to be fulfilled to the satisfaction of IBM Credit, the Financing Agreement shall terminate on the Termination Date unless terminated earlier in accordance herewith and in accordance with the Financing Agreement.  Upon the termination of the Financing Agreement, all of the Customer's Obligations shall be immediately due and payable in their entirety, even if they are not yet due under their terms, on the effective date of termination.  IBM Credit's rights under the Financing Agreement and IBM Credit's security interest in the Collateral shall continue after termination of the Financing Agreement until all of the Customer's Obligations to IBM Credit are indefeasibly paid in full. 

Section 8.Representations and Warranties of the Customer and each Guarantor.  The Customer and each Guarantor represent and warrant that:

8.1The Financial Covenants of Customer are true and correct as of the date of this Forbearance Agreement and no default exists under the Financing Agreement, except for the Existing Events of Default identified in Section 2 of this Forbearance Agreement that are in existence on the date hereof. 

8.2Subject to the existence of the Existing Events of Default specified in Section 2 of this Forbearance Agreement, the representations and warranties of Customer contained in the Financing Agreement were true and correct in all material respects when made and continue to be true and correct in all material respects on the date hereof.

8.3The execution, delivery and performance by the Customer and each Guarantor of this Forbearance Agreement and the consummation of the transactions contemplated hereby are within the corporate owner of the Customer and each Guarantor, have been duly authorized by all necessary corporate actions on the part of the Guarantor and do not result in a breach of or constitute a default under any agreement or instrument to which the Customer and each Guarantor is a party or by which it or any of its properties are bound.

8.4This Forbearance Agreement constitutes a legal, valid and binding obligation of Customer and each Guarantor, enforceable against the Customer and each Guarantor in accordance with its terms.

8.5Each party is entering into this Forbearance Agreement freely and voluntarily with the advice of legal counsel of its own choosing.

8.6Each party has freely and voluntarily agreed to the waivers and undertakings set forth in this Forbearance Agreement.

8.7Customer has not engaged in any fraudulent transfer of its assets.

8.8Except as disclosed by Customer in writing, there is no litigation, proceeding, investigation or labor dispute pending or threatened against Customer or any of the Guarantors.

8.9Except as specifically provided in this Forbearance Agreement, there exists no promises or agreements by IBM Credit to:

	
(i)
	
provide additional funding or credit to Customer,

	
(ii)
	
extend the terms for repayment of any obligation or provide additional funding or credit to the Customer under the Financing Agreement (Customer acknowledging that, upon the occurrence of an Event of Default, IBM Credit shall be entitled to enforce in full the terms of repayment for any obligation as set forth in the Forbearance Agreement), or

	
(iii)
	
make any future advances or other financial accommodations to Customer.

8.10Except as specifically amended hereby, all of the provisions of the Financing Agreement shall remain unamended and in full force and effect.  Customer represents that its obligations under the Financing Agreement shall remain in full force and effect and are enforceable obligations not subject to any claims, offsets or defects.

Section 9. Waiver of Limitations Period. The Customer and each Guarantor hereby severally waive the benefit of any statute of limitations that might otherwise bar the recovery of any of the obligations from anyone or more of them.

Section 10.Relationship of Parties; No Third Party Beneficiaries.  Nothing in this Forbearance Agreement shall be construed to alter the existing debtor-creditor relationship between the Customer and IBM Credit.  Nor is this Forbearance Agreement intended to change or affect in any way the relationship between IBM Credit and each Guarantor to one other than a debtor-creditor relationship.  This Forbearance Agreement is not intended, nor shall it be construed to create, a partnership or joint venture relationship between or among any of the parties hereto.  No party, other than a party hereto is intended to be a beneficiary hereof, and no party other than a party hereto shall be authorized to rely upon the contents of this Forbearance Agreement.

Section 11.Actions Against Guarantors Who Do Not Sign This Forbearance Agreement.  The parties hereto acknowledge that IBM Credit reserves the right to immediately commence an action against any Guarantor who does not execute this Forbearance Agreement.

Section 12.Subordination of Other Obligations.  Any indebtedness of Customer now or hereafter held by any Guarantor is hereby subordinated in right of payment to the obligations owing by the Customer to IBM Credit, and any such indebtedness collected or received by any such Guarantor shall be held in trust for IBM Credit and shall forthwith be paid over to IBM Credit to be credited and applied against any obligations, but without affecting, impairing, or limiting in any manner the liability of any Guarantor hereunder or under any other provision of any Guaranty.

Section 13.Waivers and Consents.  Neither this Forbearance Agreement nor any provisions hereof may be waived, discharged or terminated, nor may any consent to the departure from the terms hereof be given, orally (even if supported by new consideration), but only by an instrument in writing signed by the party against whom enforcement of the change, waiver discharge or termination is sought.  Any waiver or consent so given shall be effective only in the specific instance and for the specific purpose for which given.  

Section 14.Entire Forbearance Agreement; Modification of Forbearance Agreement.  This Forbearance Agreement and the Financing Agreement constitute the entire understanding of the parties with respect to the subject made hereof and thereof.  This Forbearance Agreement may not be modified, altered or amended except by agreement in writing signed by all the parties hereto.  

Section 15.Governing Law.  This Forbearance Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the laws, which govern the Financing Agreement.

Section 16.Nonwaiver of Default.  IBM Credit expects Customer to strictly adhere to the provisions of the Financing Agreement and to perform its Obligations thereunder accordingly.  Any failure by Customer to comply with the provisions of the Financing Agreement or the terms herein may result in the immediate termination of the Financing Agreement.  Neither this Forbearance Agreement nor IBM Credit's forbearance hereunder shall be deemed a waiver of or consent to the Existing Events of Default referenced in Section 2 of this Forbearance Agreement or any other default that may have occurred in addition to the Existing Events of Default or a course of dealing with respect to any default.  The Customer and each Guarantor agree that such Existing Events of Default, as referenced in Section 2 of this Forbearance Agreement, shall not be deemed t have been waived, released or cured by virtue of such loans or IBM Credit's agreement to forbear pursuant to the terms of this Forbearance Agreement or the execution of this Forbearance Agreement.  IBM Credit retains all of its rights and remedies contained in this Forbearance Agreement, the Guaranties and the Financing Agreement, including the right to make immediate demand as a result of Customer's default as provided thereunder.

Section 17.No Novation, etc.  This Forbearance Agreement is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and except as otherwise expressly stated herein, the Financing Agreement remains in full force and effect.  Notwithstanding any prior mutual temporary disregard of any of the terms of the Financing Agreement, the parties agree that the terms of the Financing Agreement shall be strictly adhered to on and after the date hereof except as expressly modified by this Forbearance Agreement. 

Section 18.Counterparts; Waivers of Notice of Acceptance.  This Forbearance Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall constitute an original, but all of which taken together shall be one and the same instrument.  In proving this Forbearance Agreement or the Financing Agreement, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.  Notice of IBM Credit's acceptance is hereby waived.

Section 19.The Parties Hereby Acknowledge and Agree as Follows:

	
(a)
	
The Customer is indebted to IBM Credit under the Financing Agreement;

	
(b)
	
The amount owing by the Customer to IBM Credit is $22,568,688.11 of principal plus accrued interest through the date of this Forbearance Agreement is due and payable by the Customer to IBM Credit pursuant to the terms of the Financing Agreement;

	
(c)
	
All Obligations of the Customer under the Financing Agreement shall be due and payable on the Termination Date unless due sooner in accordance herewith the Financing Agreement;

	
(d)
	
But for the forbearance and other considerations made by IBM Credit under this Forbearance Agreement, the Customer would have no ability to reorganize its affairs.

Section 20.JURY TRIAL WAIVER.  EACH OF IBM CREDIT, THE CUSTOMER AND THE GUARANTORS HEREBY INRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ANY COUNTERCLAIM) OF ANY THPE IN WHICH IBM CREDIT, THE CUSTOMER AND THE GUARANTORS ARE PARTIES AS TO ALL MATTERS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS FORBEARANCE AGREEMENT,THE FINANCING AGREEMENT, THE GUARANTY OR ANY DOCUMENT, INSTRUMENT OR AGREEMENT EXECUTED IN CONNECTION HEREWITH.

Section 21.SUBMISSION AND CONSENT TO JURISDICTION.  TO INDUCE IBM CREDIT TO DELIVER THIS FORBEARANCE AGREEMENT, EACH OF THE CUSTOMER AND GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

	
(A)
	
SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS FORBEARANCE AGREEMENT, THE FINANCING AGREEMENT, THE GUARANTIES AND ANY OTHER DOCUMENT, OR FOR THE RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NOON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE NEW YORK AND ANY FEDERAL DISTRICT COURT IN NEW YORK.

	
(B)
	
CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREINAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PORCEEDING IN ANY SUCH COURTOR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME.

	
(C)
	
AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREROF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO CUSTOMER AND GUARANTOR AT ITS ADDRESS SET FORTH ON THE SIFNATURE PAGE HEREOF OR AT SUCH OTHER ADDRESES OF WHICH IBM CREDIT SHALL HAVE BEEN NOTIFIED IN WRITING.

	
(D)
	
AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

Section 22.Miscellaneous.  Customer agrees not to make distributions, loans, advances, contributions or payments of money or goods to any Affiliate, Subsidiary or parent company or any officer, director or stockholder of Customer or its Affiliates, Subsidiaries, or parent company except as is allowed in Section 8.14 of the Financing Agreement.  Customer shall continue to pay when due al amounts under the Financing Agreement and to direct all payments by Customer's Account debtors to the Lockbox.  IBM Credit retains all of its rights and remedies contained in this Forbearance Agreement, the Financing Agreement and the Guaranties, the right to make immediate demand as a result of Customer's Existing Defaults or any other Event of Default as provided thereunder.  IBM Credit may exercise any and all rights and remedies of a secured party under the Uniform Commercial Code and any other rights and remedies it may have under applicable law. 

 

IN WITNESS WHEREOF, the parties hereto have read this entire Forbearance Agreement and have caused this Forbearance Agreement to be duly executed and delivered on the date first written above.

	
Datatec Industries, Inc.
	
ATTEST:

	 	 
	
By: /s/ Gerard E. Dorsey
	
/s/ Richard K. Davis

	 	
(Secretary)

	
Print Name:  Gerard E. Dorsey
	 
	 	
(Corporate Seal)

	
Title:  Chief Financial Officer
	 
	 	 
	
Address:
	 
	 	 
	
ACKNOWLEDGED AND AGREED TO BY:
	 
	 	 
	
HH Communications, Inc. (Guarantor)
	 
	 	 
	
By:  /s/ Gerard E. Dorsey
	 
	 	 
	
Print Name:  Gerard E. Dorsey
	 
	 	 
	
Address:
	 
	 	 
	
Datatec Systems, Inc. (Guarantor)
	 
	 	 
	
By:  /s/ Gerard E. Dorsey
	 
	 	 
	
Print Name:  Gerard E. Dorsey
	 
	 	 
	
Title:  Chief Financial Officer
	 
	 	 
	
IBM Credit LLC
	 
	 	 
	
By:  /s/ Steven A. Flanagan
	 
	 	 
	
Print Name:  Steven A. Flanagan
	 
	 	 
	
Title:  Manager, Global Special Handling
	 
	 	 
	
Address:PEOPLE'S CHOICE HOME LOAN SECURITIES CORP.
                                     Company

                           HOMEQ SERVICING CORPORATION
                                    Servicer

                             WELLS FARGO BANK, N.A.
                  Master Servicer and Securities Administrator

                                  HSBC BANK USA
                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT

                            Dated as of April 1, 2004

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

            People's Choice Home Loan Securities Trust Series 2004-1
                Mortgage Pass-Through Certificates, Series 2004-1

<PAGE>

<TABLE>
<CAPTION>

                                                     ARTICLE I

                                                    DEFINITIONS
<S>               <C>
SECTION 1.01      Defined Terms........................................................................-6-
                  Accepted Master Servicing Practices..................................................-6-
                  Accepted Servicing Practices.........................................................-6-
                  Account..............................................................................-6-
                  Accrual Period.......................................................................-6-
                  Accrued Certificate Interest.........................................................-6-
                  Adjustable Rate Mortgage Loan........................................................-7-
                  Adjustment Date......................................................................-7-
                  Administration Fees..................................................................-7-
                  Administration Fee Rate..............................................................-7-
                  Advance Facility.....................................................................-7-
                  Advancing Person.....................................................................-7-
                  Affiliate............................................................................-7-
                  Aggregate Loss Severity Percentage...................................................-7-
                  Agreement............................................................................-7-
                  Allocated Realized Loss Amount.......................................................-7-
                  Amounts Held for Future Distribution.................................................-7-
                  Assignment...........................................................................-8-
                  Available Distribution Amount........................................................-8-
                  Bankruptcy Code......................................................................-8-
                  Basis Risk Shortfall.................................................................-8-
                  Basis Risk Shortfall Carry-Forward Amount............................................-9-
                  Book-Entry Certificate...............................................................-9-
                  Book-Entry Custodian.................................................................-9-
                  Business Day.........................................................................-9-
                  Cash-Out Refinancing.................................................................-9-
                  Ceiling Rate.........................................................................-9-
                  Certificate..........................................................................-9-
                  Certificate Factor...................................................................-9-
                  Certificate Margin...................................................................-9-
                  Certificateholder" or "Holder.......................................................-10-
                  Certificate Owner...................................................................-11-
                  Certificate Principal Balance.......................................................-11-
                  Certificate Register................................................................-11-
                  Class...............................................................................-11-
                  Class A Certificate.................................................................-11-
                  Class 1-A Certificate...............................................................-11-
                  Class 1-A Principal Distribution Amount.............................................-12-
                  Class 2-A Certificate...............................................................-12-
                  Class 2-A Principal Distribution Amount.............................................-12-
</TABLE>

                                      -ii-

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<TABLE>
<CAPTION>

<S>               <C>
                  Class A3 Certificate................................................................-12-
                  Class A3 Principal Distribution Amount..............................................-13-
                  Class A-SIO Certificate.............................................................-13-
                  Class A-SIO Group 1 Component Notional Amount.......................................-13-
                  Class A-SIO Group 2 Component Notional Amount.......................................-14-
                  Class B Certificates................................................................-15-
                  Class B1 Certificate................................................................-15-
                  Class B1 Principal Distribution Amount..............................................-15-
                  Class B2 Certificate................................................................-15-
                  Class B2 Principal Distribution Amount..............................................-16-
                  Class C Certificate.................................................................-16-
                  Class M Certificates................................................................-16-
                  Class M1 Certificate................................................................-16-
                  Class M1 Principal Distribution Amount..............................................-16-
                  Class M2 Certificate................................................................-17-
                  Class M2 Principal Distribution Amount..............................................-17-
                  Class M3 Certificate................................................................-17-
                  Class M3 Principal Distribution Amount..............................................-17-
                  Class M4 Certificate................................................................-18-
                  Class M4 Principal Distribution Amount..............................................-18-
                  Class M5 Certificate................................................................-18-
                  Class M5 Principal Distribution Amount..............................................-18-
                  Class M6 Certificate................................................................-19-
                  Class M6 Principal Distribution Amount..............................................-19-
                  Class M7 Certificate................................................................-19-
                  Class M7 Principal Distribution Amount..............................................-19-
                  Class M8 Certificate................................................................-20-
                  Class M8 Principal Distribution Amount..............................................-20-
                  Class P Certificate.................................................................-20-
                  Class R Certificate.................................................................-20-
                  Class R-I Interest..................................................................-21-
                  Class R-II Interest.................................................................-21-
                  Class R-III Interest................................................................-21-
                  Clearstream.........................................................................-21-
                  Closing Date........................................................................-21-
                  Code................................................................................-21-
                  Collection Account..................................................................-21-
                  Commission..........................................................................-21-
                  Company.............................................................................-21-
                  Compensating Interest...............................................................-21-
                  Corporate Trust Office..............................................................-21-
                  Corresponding Certificate...........................................................-21-
                  Corridor Contract...................................................................-22-
                  Corridor Contract Allocation Amount.................................................-22-
                  Corridor Contract Available Amount..................................................-22-
                  Corridor Contract Counterparty......................................................-22-
</TABLE>

                                      -iii-

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<TABLE>
<CAPTION>

<S>               <C>
                  Custodial Agreement.................................................................-22-
                  Custodian...........................................................................-22-
                  Cut-off Date........................................................................-23-
                  Debt Service Reduction..............................................................-23-
                  Deficient Valuation.................................................................-23-
                  Definitive Certificates.............................................................-23-
                  Deleted Mortgage Loan...............................................................-23-
                  Delinquency Rate....................................................................-23-
                  Depository..........................................................................-23-
                  Depository Institution..............................................................-23-
                  Depository Participant..............................................................-24-
                  Derivative Contract.................................................................-24-
                  Derivative Counterpary..............................................................-24-
                  Determination Date..................................................................-24-
                  Directly Operate....................................................................-24-
                  Disqualified Organization...........................................................-24-
                  Distribution Account................................................................-24-
                  Distribution Date...................................................................-25-
                  Due Date............................................................................-25-
                  Due Period..........................................................................-25-
                  Eligible Account....................................................................-25-
                  ERISA...............................................................................-25-
                  Estate in Real Property.............................................................-25-
                  Excess Liquidation Proceeds.........................................................-25-
                  Extraordinary Trust Fund Expense....................................................-25-
                  Fannie Mae..........................................................................-25-
                  FDIC................................................................................-25-
                  Final Recovery Determination........................................................-25-
                  Fitch...............................................................................-26-
                  Fixed Rate..........................................................................-26-
                  Fixed Rate Mortgage Loan............................................................-26-
                  Freddie Mac.........................................................................-26-
                  Gross Margin........................................................................-26-
                  Group 1 Basic Principal Distribution Amount.........................................-26-
                  Group 1 Extra Principal Distribution Amount.........................................-26-
                  Group 1 Interest Remittance Amount..................................................-26-
                  Group 1 Mortgage Loans..............................................................-27-
                  Group 1 Optimal Interest Remittance Amount..........................................-27-
                  Group 1 Percentage..................................................................-27-
                  Group 1 Principal Distribution Amount...............................................-27-
                  Group 1 Principal Remittance Amount.................................................-27-
                  Group 1 Senior Net Funds Cap........................................................-27-
                  Group 2 Basic Principal Distribution Amount.........................................-28-
                  Group 2 Extra Principal Distribution Amount.........................................-28-
                  Group 2 Interest Remittance Amount..................................................-28-
                  Group 2 Mortgage Loans..............................................................-28-
</TABLE>

                                      -iv-

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<TABLE>
<CAPTION>

<S>               <C>
                  Group 2 Optimal Interest Remittance Amount..........................................-28-
                  Group 2 Percentage..................................................................-28-
                  Group 2 Principal Distribution Amount...............................................-28-
                  Group 2 Principal Remittance Amount.................................................-28-
                  Group 2 Senior Net Funds Cap........................................................-29-
                  Group Subordinate Amount............................................................-29-
                  Independent.........................................................................-29-
                  Independent Contractor..............................................................-29-
                  Index...............................................................................-30-
                  Insurance Proceeds..................................................................-30-
                  Interest Carry Forward Amount.......................................................-30-
                  Interest Determination Date.........................................................-30-
                  Interest Remittance Amount..........................................................-30-
                  Late Collections....................................................................-30-
                  LIBOR Certificates..................................................................-31-
                  Liquidation Event...................................................................-31-
                  Liquidation Proceeds................................................................-31-
                  Loan Group 1........................................................................-31-
                  Loan Group 2........................................................................-31-
                  Loan-to-Value Ratio.................................................................-31-
                  London Business Day.................................................................-31-
                  Loss Severity Percentage............................................................-31-
                  Marker Rate.........................................................................-31-
                  Master Servicer.....................................................................-32-
                  Master Servicer Certification.......................................................-32-
                  Master Servicer Event of Default....................................................-32-
                  Master Servicer Fee Rate............................................................-32-
                  Master Servicing Fee................................................................-32-
                  Maximum II-LTZZ Uncertificated Interest Deferral Amount.............................-32-
                  Maximum Mortgage Rate...............................................................-33-
                  Minimum Mortgage Rate...............................................................-33-
                  Monthly Payment.....................................................................-33-
                  Moody's.............................................................................-33-
                  Mortgage ...........................................................................-33-
                  Mortgage File.......................................................................-33-
                  Mortgage Loan.......................................................................-33-
                  Mortgage Loan Documents.............................................................-34-
                  Mortgage Loan Purchase Agreement....................................................-34-
                  Mortgage Loan Schedule..............................................................-34-
                  Mortgage Note.......................................................................-36-
                  Mortgage Rate.......................................................................-36-
                  Mortgaged Property..................................................................-36-
                  Mortgagor...........................................................................-36-
                  Net Funds Cap.......................................................................-36-
                  Net Monthly Excess Cashflow.........................................................-36-
                  Net Mortgage Rate...................................................................-37-
</TABLE>

                                       -v-

<PAGE>

<TABLE>
<CAPTION>

<S>               <C>
                  New Lease...........................................................................-37-
                  Nonrecoverable P&I Advance..........................................................-37-
                  Nonrecoverable Servicing Advance....................................................-37-
                  Non-United States Person............................................................-37-
                  Notional Amount.....................................................................-37-
                  Offered Certificates................................................................-37-
                  Officer's Certificate...............................................................-37-
                  One-Month LIBOR.....................................................................-37-
                  One-Month LIBOR Pass-Through Rate...................................................-38-
                  Opinion of Counsel..................................................................-39-
                  Overcollateralization Deficiency Amount.............................................-39-
                  Overcollateralization Floor.........................................................-39-
                  Overcollateralization Release Amount................................................-39-
                  Overcollateralization Target Amount.................................................-39-
                  Overcollateralized Amount...........................................................-40-
                  Ownership Interest..................................................................-40-
                  P&I Advance.........................................................................-40-
                  Pass-Through Rate...................................................................-40-
                  Percentage Interest.................................................................-42-
                  Periodic Rate Cap...................................................................-43-
                  Permitted Investments...............................................................-43-
                  Permitted Transferee................................................................-44-
                  Person..............................................................................-44-
                  Plan................................................................................-44-
                  Prepayment Assumption...............................................................-44-
                  Prepayment Charge...................................................................-45-
                  Prepayment Charge Schedule..........................................................-45-
                  Prepayment Interest Excess..........................................................-45-
                  Prepayment Interest Shortfall.......................................................-45-
                  Prepayment Period...................................................................-46-
                  Principal Prepayment................................................................-46-
                  Principal Distribution Amount.......................................................-46-
                  Principal Remittance Amount.........................................................-46-
                  Purchase Price......................................................................-46-
                  Qualified Substitute Mortgage Loan..................................................-47-
                  Rate/Term Refinancing...............................................................-47-
                  Rating Agency or Rating Agencies....................................................-47-
                  Realized Loss.......................................................................-47-
                  Record Date.........................................................................-49-
                  Reference Banks.....................................................................-49-
                  Refinanced Mortgage Loan............................................................-49-
                  Regular Certificate.................................................................-49-
                  Regular Interest....................................................................-49-
                  Regulation S Temporary Global Certificate...........................................-49-
                  Regulation S Permanent Global Certificate...........................................-49-
                  Release Date........................................................................-49-
</TABLE>

                                      -vi-

<PAGE>

<TABLE>
<CAPTION>

<S>               <C>
                  Relief Act..........................................................................-49-
                  Relief Act Interest Shortfall.......................................................-49-
                  REMIC...............................................................................-49-
                  REMIC I  ...........................................................................-49-
                  REMIC I Regular Interest............................................................-50-
                  REMIC I Remittance Rate.............................................................-50-
                  REMIC II Interest Loss Allocation Amount............................................-50-
                  REMIC II Marker Allocation Percentage...............................................-50-
                  REMIC II Overcollateralization Amount...............................................-50-
                  REMIC II Principal Loss Allocation Amount...........................................-51-
                  REMIC II Regular Interest...........................................................-51-
                  REMIC II Remittance Rate............................................................-51-
                  REMIC II Sub WAC Allocation Percentage..............................................-54-
                  REMIC II Subordinated Balance Ratio.................................................-55-
                  REMIC II Required Overcollateralization Amount......................................-55-
                  REMIC III...........................................................................-55-
                  REMIC III Certificate...............................................................-55-
                  REMIC III Certificateholder.........................................................-55-
                  REMIC Provisions....................................................................-55-
                  REMIC Regular Interest..............................................................-55-
                  REMIC Remittance Rate...............................................................-55-
                  Remittance Report...................................................................-55-
                  Rents from Real Property............................................................-55-
                  REO Account.........................................................................-55-
                  REO Disposition.....................................................................-55-
                  REO Imputed Interest................................................................-55-
                  REO Principal Amortization..........................................................-56-
                  REO Property........................................................................-56-
                  Reserve Fund........................................................................-56-
                  Reserve Interest Rate...............................................................-56-
                  Residential Dwelling................................................................-56-
                  Residual Certificate................................................................-56-
                  Residual Interest...................................................................-56-
                  Responsible Officer.................................................................-56-
                  Rolling Three-Month Delinquency Rate................................................-57-
                  S&P.................................................................................-57-
                  Scheduled Notional Balance..........................................................-57-
                  Scheduled Principal Balance.........................................................-57-
                  Securities Act......................................................................-58-
                  Securities Administrator............................................................-58-
                  Seller..............................................................................-58-
                  Senior Enhancement Percentage.......................................................-58-
                  Servicer............................................................................-58-
                  Servicer Event of Default...........................................................-58-
                  Servicer Remittance Date............................................................-59-
                  Servicer Report.....................................................................-59-
</TABLE>

                                      -vii-

<PAGE>

<TABLE>
<CAPTION>

<S>               <C>
                  Servicer Trigger Event..............................................................-59-
                  Servicing Advances..................................................................-59-
                  Servicing Fee.......................................................................-60-
                  Servicing Fee Rate..................................................................-60-
                  Servicing Officer...................................................................-60-
                  Single Certificate..................................................................-60-
                  Startup Day.........................................................................-60-
                  Stated Principal Balance............................................................-60-
                  Step-Up Date........................................................................-61-
                  Stepdown Date.......................................................................-61-
                  Strike Rate.........................................................................-61-
                  Sub-Servicer........................................................................-61-
                  Sub-Servicing Agreement.............................................................-61-
                  Subordinate Net Funds Cap...........................................................-61-
                  Subsequent Recoveries...............................................................-62-
                  Substitution Shortfall Amount.......................................................-62-
                  Superior Lien.......................................................................-62-
                  Tax Returns.........................................................................-62-
                  Telerate Page 3750..................................................................-62-
                  Termination Price...................................................................-62-
                  Terminator..........................................................................-62-
                  Transfer............................................................................-62-
                  Transferee..........................................................................-62-
                  Transferor..........................................................................-62-
                  Trigger Event.......................................................................-62-
                  Trust...............................................................................-63-
                  Trust Fund..........................................................................-63-
                  Trust REMIC.........................................................................-63-
                  Trustee.............................................................................-63-
                  Uncertificated Balance..............................................................-63-
                  Uncertificated Interest.............................................................-63-
                  Uncertificated Notional Amount......................................................-64-
                  Uninsured Cause.....................................................................-65-
                  United States Person................................................................-65-
                  Value...............................................................................-66-
                  Voting Rights.......................................................................-66-
                  Wells Fargo.........................................................................-67-

                                                    ARTICLE II

                                           CONVEYANCE OF MORTGAGE LOANS;
                                         ORIGINAL ISSUANCE OF CERTIFICATES

SECTION 2.01.     Conveyance of the Mortgage Loans....................................................-68-
SECTION 2.02.     Acceptance of REMIC I by Trustee....................................................-69-
</TABLE>

                                     -viii-

<PAGE>

<TABLE>
<CAPTION>

<S>               <C>
SECTION 2.03.     Repurchase or Substitution of Mortgage Loans.................................................-69-
SECTION 2.04.     Representations and Warranties of the Master Servicer........................................-72-
SECTION 2.05.     Representations, Warranties and Covenants of the Servicer....................................-73-
SECTION 2.06.     Issuance of the REMIC I Regular Interests and the Class R-I Interest
                   ............................................................................................-75-
SECTION 2.07.     Conveyance of the REMIC I Regular Interests and REMIC II Regular
                  Interests; Acceptance of REMIC I and REMIC II by the Trustee.................................-76-
SECTION 2.08.     Issuance of Class R Certificates.............................................................-76-
SECTION 2.09.     Establishment of the Trust...................................................................-76-

<CAPTION>

                                                    ARTICLE III

                                           ADMINISTRATION AND SERVICING
                                          OF THE MORTGAGE LOANS; ACCOUNTS
<S>               <C>
SECTION 3.01.     Servicer to Act as Servicer..................................................................-78-
SECTION 3.02.     Sub-Servicing Agreements Between Servicer and Sub-Servicers..................................-80-
SECTION 3.03.     Successor Sub-Servicers......................................................................-80-
SECTION 3.04.     No Contractual Relationship Between Sub-Servicer, Trustee or the
                  Certificateholders...........................................................................-80-
SECTION 3.05.     Assumption or Termination of Sub-Servicing Agreement by Successor
                  Servicer.....................................................................................-81-
SECTION 3.06.     Collection of Certain Mortgage Loan Payments.................................................-81-
SECTION 3.07.     Collection of Taxes, Assessments and Similar Items; Servicing Accounts
                   ............................................................................................-82-
SECTION 3.08.     Collection Account and Distribution Account..................................................-83-
SECTION 3.09.     Withdrawals from the Collection Account and Distribution Account
                   ............................................................................................-85-
SECTION 3.10.     Investment of Funds in the Investment Accounts...............................................-87-
SECTION 3.11.     Maintenance of Hazard Insurance and  Errors and Omissions and Fidelity
                  Coverage.....................................................................................-88-
SECTION 3.12.     Enforcement of Due-on-Sale Clauses; Assumption Agreements....................................-90-
SECTION 3.13.     Realization Upon Defaulted Mortgage Loans....................................................-91-
SECTION 3.14.     Trustee to Cooperate; Release of Mortgage Files..............................................-93-
SECTION 3.15.     Servicing Compensation.......................................................................-94-
SECTION 3.16.     Collection Account Statements................................................................-95-
SECTION 3.17.     Statement as to Compliance...................................................................-95-
SECTION 3.18.     Independent Public Accountants' Servicing Report.............................................-95-
SECTION 3.19      Annual Certification.........................................................................-96-
SECTION 3.20.     Access to Certain Documentation..............................................................-96-
SECTION 3.21.     Title, Management and Disposition of REO Property............................................-97-
SECTION 3.22.     Obligations of the Servicer in Respect of Prepayment Interest Shortfalls;
                  Relief Act Interest Shortfalls..............................................................-100-
SECTION 3.23.     Obligations of the Servicer in Respect of Mortgage Rates and  Monthly
                  Payments....................................................................................-100-
</TABLE>

                                      -ix-

<PAGE>

<TABLE>
<CAPTION>

<S>               <C>
SECTION 3.24.     Reserve Fund................................................................................-100-
SECTION 3.25.     Servicer and Master Servicer Indemnification................................................-102-
SECTION 3.26.     Derivative Contracts........................................................................-102-
SECTION 3.27      Assignment; Sales; Advance Facilities.......................................................-103-

                                                    ARTICLE IV

                                        ADMINISTRATION AND MASTER SERVICING
                                   OF THE MORTGAGE LOANS BY THE MASTER SERVICER
SECTION 4.01.     Master Servicer.............................................................................-106-
SECTION 4.02      REMIC-Related Covenants.....................................................................-107-
SECTION 4.03      Monitoring of Servicer......................................................................-107-
SECTION 4.04      Fidelity Bond...............................................................................-108-
SECTION 4.05      Power to Act; Procedures....................................................................-108-
SECTION 4.06      Due-on-Sale Clauses; Assumption Agreements..................................................-109-
SECTION 4.07      Reserved....................................................................................-109-
SECTION 4.08      Documents, Records and Funds in Possession of Master Servicer To Be Held
                  for Trustee.................................................................................-109-
SECTION 4.09      Standard Hazard Insurance and Flood Insurance Policies......................................-110-
SECTION 4.10      Presentment of Claims and Collection of Proceeds............................................-110-
SECTION 4.11      Reserved....................................................................................-110-
SECTION 4.12      Reserved....................................................................................-110-
SECTION 4.13      Realization Upon Defaulted Mortgage Loans...................................................-110-
SECTION 4.14      Compensation for the Master Servicer........................................................-111-
SECTION 4.15      REO Property................................................................................-111-
SECTION 4.16      Annual Officer's Certificate as to Compliance...............................................-111-
SECTION 4.17      Annual Independent Accountant's Servicing Report............................................-112-
SECTION 4.18      UCC.........................................................................................-112-
SECTION 4.19      Obligation of the Master Servicer in Respect of Prepayment Interest
                  Shortfalls..................................................................................-112-

                                                     ARTICLE V
                                          PAYMENTS TO CERTIFICATEHOLDERS
SECTION 5.01      Distributions...............................................................................-114-
SECTION 5.02      Statements to Certificateholders............................................................-122-
SECTION 5.03      Servicer Reports; P&I Advances..............................................................-125-
SECTION 5.04      Allocation of Realized Losses...............................................................-127-
SECTION 5.05      Compliance with Withholding Requirements....................................................-129-
SECTION 5.06      Reports Filed with Securities and Exchange Commission.......................................-130-
</TABLE>

                                       -x-

<PAGE>

<TABLE>
<CAPTION>

                                                    ARTICLE VI
                                                 THE CERTIFICATES
<S>               <C>
SECTION 6.01      The Certificates............................................................................-131-
SECTION 6.02      Registration of Transfer and Exchange of Certificates.......................................-133-
SECTION 6.03      Mutilated, Destroyed, Lost or Stolen Certificates...........................................-139-
SECTION 6.04      Persons Deemed Owners.......................................................................-139-
SECTION 6.05      Certain Available Information...............................................................-140-

                                                    ARTICLE VII
                                 THE COMPANY, THE SERVICER AND THE MASTER SERVICER
SECTION 7.01      Liability of the Company, the Servicer and the Master Servicer..............................-141-
SECTION 7.02      Merger or Consolidation of the Company, the Servicer or the Master
                  Servicer....................................................................................-141-
SECTION 7.03      Limitation on Liability of the Company, the Servicer, the Master Servicer and
                  Others......................................................................................-141-
SECTION 7.04      Limitation on Resignation of the Servicer...................................................-142-
SECTION 7.05      Limitation on Resignation of the Master Servicer............................................-143-
SECTION 7.06      Assignment of Master Servicing..............................................................-144-
SECTION 7.07      Rights of the Company in Respect of the Servicer and the Master Servicer
                   ...........................................................................................-144-

                                                   ARTICLE VIII
                                                      DEFAULT
SECTION 8.01      Servicer Events of Default..................................................................-146-
SECTION 8.02      Master Servicer to Act; Appointment of Successor............................................-150-
SECTION 8.03      Notification to Certificateholders..........................................................-151-
SECTION 8.04      Waiver of Servicer Events of Default........................................................-152-

                                                    ARTICLE IX
                              CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR
SECTION 9.01      Duties of Trustee and Securities Administrator..............................................-153-
SECTION 9.02      Certain Matters Affecting Trustee and Securities Administrator..............................-154-
SECTION 9.03      Trustee and Securities Administrator not Liable for Certificates or Mortgage
                  Loans.......................................................................................-156-
SECTION 9.04      Trustee and Securities Administrator May Own Certificates...................................-157-
SECTION 9.05      Fees and Expenses of Trustee and Securities Administrator...................................-157-
SECTION 9.06      Eligibility Requirements for Trustee and Securities Administrator...........................-157-
SECTION 9.07      Resignation and Removal of Trustee and Securities Administrator.............................-158-
SECTION 9.08      Successor Trustee or Securities Administrator...............................................-159-
SECTION 9.09      Merger or Consolidation of Trustee or Securities Administrator..............................-160-
</TABLE>

                                      -xi-

<PAGE>

<TABLE>
<CAPTION>

<S>               <C>
SECTION 9.10      Appointment of Co-Trustee or Separate Trustee...............................................-160-
SECTION 9.11      Appointment of Office or Agency.............................................................-161-
SECTION 9.12      Representations and Warranties..............................................................-161-

                                                     ARTICLE X
                                                    TERMINATION

SECTION 10.01     Termination Upon Repurchase or Liquidation of All Mortgage Loans.
                   ...........................................................................................-163-
SECTION 10.02     Additional Termination Requirements.........................................................-165-

                                                    ARTICLE XI
                                                 REMIC PROVISIONS
SECTION 11.01     REMIC Administration........................................................................-166-
SECTION 11.02     Prohibited Transactions and Activities......................................................-168-
SECTION 11.03     Indemnification.............................................................................-169-

                                                    ARTICLE XII
                                             MISCELLANEOUS PROVISIONS
SECTION 12.01     Amendment...................................................................................-170-
SECTION 12.02     Recordation of Agreement; Counterparts......................................................-171-
SECTION 12.03     Limitation on Rights of Certificateholders..................................................-171-
SECTION 12.04     Governing Law...............................................................................-172-
SECTION 12.05     Notices.....................................................................................-172-
SECTION 12.06     Severability of Provisions..................................................................-173-
SECTION 12.07     Notice to Rating Agencies...................................................................-173-
SECTION 12.08     Article and Section References..............................................................-174-
SECTION 12.09     Grant of Security Interest..................................................................-174-
SECTION 12.10     Survival of Indemnification.................................................................-175-
</TABLE>

                                      -xii-

<PAGE>

<TABLE>
<CAPTION>

Exhibits
--------
<S>               <C>
Exhibit A-1       Form of Class A Certificate
Exhibit A-2       Form of Class [M__][B1] Certificate
Exhibit A-3       Form of Class B2 Certificate
Exhibit A-4       Form of Class C Certificate
Exhibit A-5       Form of Class P Certificate
Exhibit A-6       Form of Class R Certificate
Exhibit B-1       Form of Transferor Representation Letter and Form of
                  Transferee Representation Letter in Connection with Transfer
                  of the Class P Certificates, Class C Certificates and Class R
                  Certificates Pursuant to Rule 144A Under the Securities Act
Exhibit B-2       Form of Transferor Representation Letter and Form of
                  Transferee Representation Letter in Connection with Transfer
                  of the Class P Certificates, Class C Certificates and Class R
                  Certificates Pursuant to Rule 501(a) Under the Securities Act
Exhibit B-3       Form of Transferor Representation Letter, Form of
                  Transferee Representation Letter in Connection with Transfer
                  of the Class B2 Certificates Pursuant to Rule 501(a) Under the
                  Securities Act, Form of Transferee Representation Letter in
                  Connection with Transfer of the Class B2 Certificates Pursuant
                  to Rule 144A Under the Securities Act and Form of Regulation S
                  Transfer Certificate
Exhibit B-4       Form of Transfer Affidavit and Agreement and Form of Transferor Affidavit in
                  Connection with Transfer of Class R Certificates
Exhibit C         Form of Servicer Certification
Exhibit D         Form of Standard File Layout
Exhibit E         Master Servicing Reporting Data Field Requirements
Exhibit F         Form 332

Schedule 1        Mortgage Loan Schedule
Schedule 2        Prepayment Charge Schedule
</TABLE>

                                     -xiii-

<PAGE>

                  This Pooling and Servicing Agreement, is dated and effective
as of April 1, 2004, among PEOPLE'S CHOICE HOME LOAN SECURITIES CORP. as
Company, HOMEQ SERVICING CORPORATION as Servicer, WELLS FARGO BANK, N.A. as
Master Servicer and Securities Administrator and HSBC BANK USA as Trustee.

                             PRELIMINARY STATEMENT:

                  The Company intends to sell pass-through certificates to be
issued hereunder in multiple classes, which in the aggregate will evidence the
entire beneficial ownership interest of the Trust Fund 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 subject to this Agreement (other than the Reserve Fund and the
Corridor Contract) as a REMIC for federal income tax purposes, and such
segregated pool of assets will be designated as "REMIC I". The Class R-I
Interest will 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.

<TABLE>
<CAPTION>

                                 REMIC I                      Initial                    Latest Possible
      Designation            Remittance Rate           Uncertificated Balance           Maturity Date (1)
      -----------            ---------------           ----------------------           -----------------
<S>                              <C>                     <C>                               <C>
       I-ILT1A                   Variable(2)             $ 1,613,060.72                    June 25, 2034
       I-ILT1B                   2.20%                   $ 1,613,060.72                    June 25, 2034
       I-ILT2A                   Variable(2)             $ 1,853,209.35                    June 25, 2034
       I-ILT2B                   2.20%                   $ 1,853,209.35                    June 25, 2034
       I-ILT3A                   Variable(2)             $ 2,168,300.08                    June 25, 2034
       I-ILT3B                   2.20%                   $ 2,168,300.08                    June 25, 2034
       I-ILT4A                   Variable(2)             $ 2,647,014.68                    June 25, 2034
       I-ILT4B                   2.20%                   $ 2,647,014.68                    June 25, 2034
       I-ILT5A                   Variable(2)             $ 2,934,998.78                    June 25, 2034
       I-ILT5B                   2.20%                   $ 2,934,998.78                    June 25, 2034
       I-ILT6A                   Variable(2)             $ 3,181,654.38                    June 25, 2034
       I-ILT6B                   2.20%                   $ 3,181,654.38                    June 25, 2034
       I-ILT7A                   Variable(2)             $ 3,608,255.60                    June 25, 2034
       I-ILT7B                   2.20%                   $ 3,608,255.60                    June 25, 2034
       I-ILT8A                   Variable(2)             $ 3,864,818.52                    June 25, 2034
       I-ILT8B                   2.20%                   $ 3,864,818.52                    June 25, 2034
       I-ILT9A                   Variable(2)             $ 4,525,856.79                    June 25, 2034
       I-ILT9B                   2.20%                   $ 4,525,856.79                    June 25, 2034
       I-ILT10A                   Variable(2)            $ 4,799,162.06                    June 25, 2034
       I-ILT10B                  2.20%                   $ 4,799,162.06                    June 25, 2034
       I-ILT11A                  Variable(2)             $ 4,815,937.57                    June 25, 2034
       I-ILT11B                  2.20%                   $ 4,815,937.57                    June 25, 2034
       I-ILT12A                  Variable(2)             $ 5,800,973.85                    June 25, 2034
</TABLE>

                                      -1-
<PAGE>

<TABLE>
<CAPTION>

<S>                              <C>                     <C>                               <C>
       I-ILT12B                  2.20%                   $ 5,800,973.85                    June 25, 2034
       I-ILT13A                  Variable(2)             $ 4,871,838.26                    June 25, 2034
       I-ILT13B                  2.20%                   $ 4,871,838.26                    June 25, 2034
       I-ILT14A                  Variable(2)             $ 4,432,389.02                    June 25, 2034
       I-ILT14B                  2.20%                   $ 4,432,389.02                    June 25, 2034
       I-ILT15A                  Variable(2)             $ 4,188,025.57                    June 25, 2034
       I-ILT15B                  2.20%                   $ 4,188,025.57                    June 25, 2034
       I-ILT16A                  Variable(2)             $ 4,407,325.27                    June 25, 2034
       I-ILT16B                  2.20%                   $ 4,407,325.27                    June 25, 2034
       I-ILT17A                  Variable(2)             $ 5,973,139.59                    June 25, 2034
       I-ILT17B                  2.20%                   $ 5,973,139.59                    June 25, 2034
       I-ILT18A                  Variable(2)             $ 6,229,638.94                    June 25, 2034
       I-ILT18B                  2.20%                   $ 6,229,638.94                    June 25, 2034
       I-ILT19A                   Variable(2)            $ 5,837,777.14                    June 25, 2034
       I-ILT19B                  2.20%                   $ 5,837,777.14                    June 25, 2034
       I-ILT20A                  Variable(2)             $ 5,211,306.81                    June 25, 2034
       I-ILT20B                  2.20%                   $ 5,211,306.81                    June 25, 2034
       I-ILT21A                  Variable(2)             $ 4,909,121.19                    June 25, 2034
       I-ILT21B                  2.20%                   $ 4,909,121.19                    June 25, 2034
       I-ILT22A                  Variable(2)             $ 4,632,281.76                    June 25, 2034
       I-ILT22B                  2.20%                   $ 4,632,281.76                    June 25, 2034
       I-ILT23A                  Variable(2)             $ 84,545,936.26                   June 25, 2034
       I-ILT23B                  2.20%                   $ 84,545,936.26                   June 25, 2034
       I-ILT                     Variable(2)             $ 4,432,507.12                    June 25, 2034
       I-LTP                     0.00%                   $ 100.00                          June 25, 2034
       I-IILT1A                  Variable(2)             $ 670,308.09                      June 25, 2034
       I-IILT1B                  2.20%                   $ 670,308.09                      June 25, 2034
       I-IILT2A                  Variable(2)             $ 766,239.99                      June 25, 2034
       I-IILT2B                  2.20%                   $ 766,239.99                      June 25, 2034
       I-IILT3A                  Variable(2)             $ 895,935.70                      June 25, 2034
       I-IILT3B                  2.20%                   $ 895,935.70                      June 25, 2034
       I-IILT4A                  Variable(2)             $ 1,093,020.29                    June 25, 2034
       I-IILT4B                  2.20%                   $ 1,093,020.29                    June 25, 2034
       I-IILT5A                  Variable(2)             $ 1,211,518.77                    June 25, 2034
       I-IILT5B                  2.20%                   $ 1,211,518.77                    June 25, 2034
       I-IILT6A                  Variable(2)             $ 1,312,982.74                    June 25, 2034
       I-IILT6B                  2.20%                   $ 1,312,982.74                    June 25, 2034
       I-IILT7A                  Variable(2)             $ 1,488,555.90                    June 25, 2034
       I-IILT7B                  2.20%                   $ 1,488,555.90                    June 25, 2034
       I-IILT8A                  Variable(2)             $ 1,594,078.32                    June 25, 2034
       I-IILT8B                  2.20%                   $ 1,594,078.32                    June 25, 2034
       I-IILT9A                  Variable(2)             $ 1,866,181.11                    June 25, 2034
       I-IILT9B                  2.20%                   $ 1,866,181.11                    June 25, 2034
       I-IILT10A                 Variable(2)             $ 1,978,572.29                    June 25, 2034
       I-IILT10B                 2.20%                   $ 1,978,572.29                    June 25, 2034
       I-IILT11A                 Variable(2)             $ 1,985,307.93                    June 25, 2034
       I-IILT11B                 2.20%                   $ 1,985,307.93                    June 25, 2034
       I-IILT12A                 Variable(2)             $ 2,390,799.11                    June 25, 2034
       I-IILT12B                 2.20%                   $ 2,390,799.11                    June 25, 2034
       I-IILT13A                 Variable(2)             $ 2,007,980.56                    June 25, 2034
       I-IILT13B                 2.20%                   $ 2,007,980.56                    June 25, 2034
       I-IILT14A                 Variable(2)             $ 1,826,853.31                    June 25, 2034
       I-IILT14B                 2.20%                   $ 1,826,853.31                    June 25, 2034
</TABLE>

                                      -2-
<PAGE>

<TABLE>
<CAPTION>

<S>                              <C>                     <C>                               <C>
       I-IILT15A                 Variable(2)             $ 1,726,079.64                    June 25, 2034
       I-IILT15B                 2.20%                   $ 1,726,079.64                    June 25, 2034
       I-IILT16A                 Variable(2)             $ 1,816,243.11                    June 25, 2034
       I-IILT16B                 2.20%                   $ 1,816,243.11                    June 25, 2034
       I-IILT17A                 Variable(2)             $ 2,460,848.23                    June 25, 2034
       I-IILT17B                 2.20%                   $ 2,460,848.23                    June 25, 2034
       I-IILT18A                 Variable(2)             $ 2,566,292.04                    June 25, 2034
       I-IILT18B                 2.20%                   $ 2,566,292.04                    June 25, 2034
       I-IILT19A                 Variable(2)             $ 2,404,775.82                    June 25, 2034
       I-IILT19B                 2.20%                   $ 2,404,775.82                    June 25, 2034
       I-IILT20A                 Variable(2)             $ 2,146,681.93                    June 25, 2034
       I-IILT20B                 2.20%                   $ 2,146,681.93                    June 25, 2034
       I-IILT21A                 Variable(2)             $ 2,022,127.37                    June 25, 2034
       I-IILT21B                 2.20%                   $ 2,022,127.37                    June 25, 2034
       I-IILT22A                 Variable(2)             $ 1,908,021.90                    June 25, 2034
       I-IILT22B                 2.20%                   $ 1,908,021.90                    June 25, 2034
       I-IILT23A                 Variable(2)             $ 34,808,573.76                   June 25, 2034
       I-IILT23B                 2.20%                   $ 34,808,573.76                   June 25, 2034
       I-IILT                    Variable(2)             $ 1,596,298.03                    June 25, 2034
</TABLE>

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

(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.

                                    REMIC II
                                    --------

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as "REMIC
II". The Class R-II Interest 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.

<TABLE>
<CAPTION>

                                   REMIC II                   Initial                   Latest Possible
      Designation               Remittance Rate        Uncertificated Balance          Maturity Date (1)
      -----------               ---------------        ----------------------          -----------------
<S>                              <C>                     <C>                               <C>
       II-LTAA                   Variable(2)             $ 247,954,114.52                  June 25, 2034
       II-LT1A                   Variable(2)             $ 1,433,280.00                    June 25, 2034
       II-LT2A                   Variable(2)             $ 590,530.00                      June 25, 2034
       II-LTA3                   Variable(2)             $ 126,485.00                      June 25, 2034
       II-LTM1                   Variable(2)             $ 37,950.00                       June 25, 2034
       II-LTM2                   Variable(2)             $ 50,595.00                       June 25, 2034
       II-LTM3                   Variable(2)             $ 75,890.00                       June 25, 2034
       II-LTM4                   Variable(2)             $ 31,625.00                       June 25, 2034
</TABLE>

                                      -3-
<PAGE>

<TABLE>
<CAPTION>

<S>                              <C>                     <C>                               <C>
       II-LTM5                   Variable(2)             $ 37,945.00                       June 25, 2034
       II-LTM6                   Variable(2)             $ 25,300.00                       June 25, 2034
       II-LTM7                   Variable(2)             $ 31,620.00                       June 25, 2034
       II-LTM8                   Variable(2)             $ 25,300.00                       June 25, 2034
       II-LTB1                   Variable(2)             $ 18,970.00                       June 25, 2034
       II-LTB2                   Variable(2)             $ 18,975.00                       June 25, 2034
       II-LTZZ                   Variable(2)             $ 2,555,823.05                    June 25, 2034
       II-LTIO1                  Variable(2)                         (3)                   June 25, 2034
       II-LTIO2                  Variable(2)                         (3)                   June 25, 2034
       II-LTP                    Variable(2)             $ 100.00                          June 25, 2034
       II-LT1SUB                 Variable(2)             $ 7,188.06                        June 25, 2034
       II-LT1GRP                 Variable(2)             $ 35,853.67                       June 25, 2034
       II-LT2SUB                 Variable(2)             $ 2,938.63                        June 25, 2034
       II-LT2GRP                 Variable(2)             $ 14,749.23                       June 25, 2034
       II-LTXX                   Variable(2)             $ 252,953,673.00                  June 25, 2034
</TABLE>

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

(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 LT-IO1 and REMIC I Regular Interest LT-IO2
         will not have Uncertificated Balances, but will accrue interest on
         their Uncertificated Notional Amounts, as defined herein.

                                    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 Interest will evidence the sole
class of "residual interests" in REMIC III for purposes of the REMIC Provisions.
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.

<TABLE>
<CAPTION>

                                                          Initial Aggregate             Latest Possible
           Designation          Pass-Through Rate   Certificate Principal Balance      Maturity Date (1)
           -----------          -----------------   -----------------------------      -----------------
<S>                              <C>                     <C>                             <C>
Class 1-A                        Variable(2)             $286,656,000.00                 June 25, 2034
Class 2-A                        Variable(2)             $118,106,000.00                 June 25, 2034
Class A-SIO                      Variable(2)                 N/A(5)                      June 25, 2034
Class A3                         Variable(2)              $25,297,000.00                 June 25, 2034
</TABLE>

                                      -4-
<PAGE>

<TABLE>
<CAPTION>

<S>                              <C>                     <C>                             <C>
Class M1                         Variable(2)             $7,590,000.00                   June 25, 2034
Class M2                         Variable(2)             $10,119,000.00                  June 25, 2034
Class M3                         Variable(2)             $15,178,000.00                  June 25, 2034
Class M4                         Variable(2)             $6,325,000.00                   June 25, 2034
Class M5                         Variable(2)             $7,589,000.00                   June 25, 2034
Class M6                         Variable(2)             $5,060,000.00                   June 25, 2034
Class M7                         Variable(2)             $6,324,000.00                   June 25, 2034
Class M8                         Variable(2)             $5,060,000.00                   June 25, 2034
Class B1                         Variable(2)             $3,794,000.00                   June 25, 2034
Class B2                         Variable(2)             $3,795,000.00                   June 25, 2034
Class P                               N/A(3)                $100.00                      June 25, 2034
Class C                               N/A(4)             $5,135,805.15                   June 25, 2034
</TABLE>
-----------------

(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 Class of
         Certificates.
(2)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.
(3)      The Class P Certificates will not accrue interest.
(4)      The Class C Certificates will accrue interest at their variable
         Pass-Through Rate on the Notional Amount of the Class C Certificates
         outstanding from time to time which shall equal the Uncertificated
         Balance of the REMIC I Regular Interests (other than REMIC II Regular
         Interest II-LTP) The Class C Certificates will not accrue interest on
         their Certificate Principal Balance.
(5)      The Class A-SIO Certificates will not have a Certificate Principal
         Balances, but will accrue interest on their Notional Amount, which will
         initially be equal to $500,000,000.00. For federal income tax purposes,
         the Class A-SIO Certificates shall not have a Notional Amount, but
         shall be entitled to 100% of amounts distributed on REMIC II Regular
         Interest II-LTIO1 and REMIC II Regular Interest II-LTIO2.

         As of the Cut-off Date, the Group 1 Mortgage Loans had an aggregate
Scheduled Principal Balance equal to approximately $358,536,651.44 and the Group
2 Mortgage Loans had an aggregate Scheduled Principal Balance equal to
approximately $147,492,253.71.

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

                                      -5-
<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 Master Servicing Practices": With respect to any
Mortgage Loan, as applicable, either (x) those customary mortgage master
servicing practices of prudent mortgage servicing institutions that master
service mortgage loans of the same type and quality as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located, to the extent
applicable to the Master Servicer (except in its capacity as successor to the
Servicer), or (y) as provided in Section 4.01 hereof, but in no event below the
standard set forth in clause (x).

                  "Accepted Servicing Practices": As defined in Section 3.01.

                  "Account": The Collection Account and the Distribution Account
as the context may require.

                  "Accrual Period": With respect to any Distribution Date and
any class of Offered Certificates, the period from and including the preceding
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date, in the case of the LIBOR Certificates and the Class
A-SIO Certificates, and from and including April 25, 2004, in the case of the
Class M8 Certificates and Class B Certificates) to and including the day prior
to the current Distribution Date. With respect to any Distribution Date and the
Class C Certificates, the REMIC I Regular Interests and the REMIC II Regular
Interests, the one-month period ending on the last day of the calendar month
immediately preceding the month in which such Distribution Date occurs.

                  "Accrued Certificate Interest": With respect to any Class A,
Class M, Class B or Class C Certificate and each Distribution Date, interest
accrued during the related 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 1-A, Class 2-A, Class A3, Class M or Class B Certificates,
or on the Notional Amount in the case of the Class C Certificates and Class
A-SIO 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 LIBOR Certificates and the Class A-SIO Certificates will be
calculated on the basis of a 360-day year and the actual number of days in the
applicable Accrual Period. All distributions of interest on the Class M8, Class
B and Class C 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 C Certificate, shall be reduced by an amount equal to the
portion allocable to such Class C Certificate of Realized Losses, if any,
pursuant to Section 5.04 hereof.

                                      -6-
<PAGE>

                  "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 an
Adjustable Rate 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.

                  "Administration Fees": The sum of (i) the Servicing Fee and
(ii) the Master Servicing Fee.

                  "Administration Fee Rate": The sum of (i) the Servicing Fee
Rate and (ii) the Master Servicing Fee Rate.

                  "Advance Facility": A financing or other facility as described
in Section 3.27.

                  "Advancing Person": The Person to whom the Servicer's rights
under this Agreement to be reimbursed for any P&I Advances or Servicing Advances
have been assigned pursuant to Section 3.27.

                  "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, including
all exhibits and schedules hereto and all amendments hereof and supplements
hereto.

                  "Allocated Realized Loss Amount": With respect to the Class A3
Certificates and any class of the Class M Certificates and Class B Certificates
and any Distribution Date, an amount equal to the sum of any Realized Loss
allocated to that Class of Certificates on that Distribution Date and any
Allocated Realized Loss Amount for that Class remaining unpaid from any previous
Distribution Date.

                  "Amounts Held for Future Distribution": As to any Distribution
Date, the aggregate amount held in the Collection Account at the close of
business on the immediately preceding Determination Date on account of (i) all
Monthly Payments or portions thereof received in respect of the Mortgage Loans
due after the related Due Period and (ii) Principal Prepayments and net

                                      -7-
<PAGE>

Liquidation Proceeds received in respect of such Mortgage Loans after the last
day of the related Prepayment Period.

                  "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage, 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 Servicer Remittance Date, (b) the aggregate of
any amounts deposited in the Distribution Account by the Servicer or the Master
Servicer in respect of Prepayment Interest Shortfalls for such Distribution Date
pursuant to Section 3.22 or Section 4.19, (c) the aggregate of any P&I Advances
for such Distribution Date made by the Servicer pursuant to Section 5.03 and (d)
the aggregate of any P&I Advances made by a successor Servicer (including the
Master Servicer) for such Distribution Date pursuant to Section 8.02, reduced
(to not less than zero) by (2) the portion of the amount described in clause
(1)(a) above that represents (i) Amounts Held for Future Distribution, (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 Company, the Servicer, the Trustee, the
Master Servicer, the Securities Administrator or the Custodian pursuant to
Section 3.09 or 9.05 or otherwise payable in respect of Extraordinary Trust Fund
Expenses, (v) amounts deposited in the Collection Account or the Distribution
Account in error, (vi) the amount of any Prepayment Charges collected by the
Servicer in connection with the Principal Prepayment of any of the Mortgage
Loans and (vii) amounts reimbursable to a successor Servicer (including the
Master Servicer) pursuant to Section 8.02.

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

                  "Basic Principal Distribution Amount": The Group 1 Basic
Principal Distribution Amount plus the Group 2 Basic Principal Distribution
Amount.

                  "Basis Risk Shortfall": With respect to any class of Offered
Certificates, other than the Class A-SIO Certificates, on each distribution date
where clause (ii) of the definition of "Pass- Through Rate" is less than clause
(i) of the definition of "Pass-Through Rate," the excess, if any, of (x) the
aggregate Accrued Certificate Interest thereon for such distribution date
calculated pursuant to clause (i) of the definition of "Pass-Through Rate" over
(y) interest accrued on the Mortgage Loans at the related Net Funds Cap.

                                      -8-
<PAGE>

                  "Basis Risk Shortfall Carry-Forward Amount": With respect to
each Class of the Offered Certificates and any Distribution Date, as determined
separately for each such Class of Offered Certificates, an amount equal to the
aggregate amount of Basis Risk Shortfall for such Certificates on such
Distribution Date, plus any unpaid Basis Risk Shortfall for such Class of
Certificates from prior Distribution Dates, plus interest thereon at the related
Pass-Through Rate for such Distribution Date, to the extent previously
unreimbursed by the Net Monthly Excess Cashflow or the Corridor Contract to the
extent of the Corridor Contract Available Amount.

                  "Book-Entry Certificates": The Class A, Class M and Class B
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 6.01.

                  "Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the States of New York,
New Jersey, Wyoming, California, Maryland, Minnesota 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 plus any subordinate mortgage on the
related Mortgaged Property and related closing costs.

                  "Ceiling Rate": With respect to the Corridor Contract
Available Amount, 4.10% per annum.

                  "Certificate": Any one of People's Choice Home Loan Securities
Trust Series 2004-1, Mortgage Pass-Through Certificates, Series 2004-1, Class
1-A, Class 2-A, Class A-SIO, Class A3, Class M1, Class M2, Class M3, Class M4,
Class M5, Class M6, Class M7, Class M8, Class B1, Class B2, Class P, Class C and
Class R issued under this Agreement.

                  "Certificate Factor":With respect to any Class of Certificates
(other than the Residual 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 Notional Amount, in the case of the
Class A-SIO Certificates and Class C Certificates) of such Class of Certificates
on such Distribution Date (after giving effect to any distributions of principal
and allocations of Realized Losses resulting in reduction of the Certificate
Principal Balance (or Notional Amount, in the case of the Class A-SIO
Certificates and Class C 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 Notional Amount, in the case of the
Class A-SIO Certificates and Class C Certificates) of such Class of Certificates
as of the Closing Date.

                  "Certificate Margin": With respect to the Class 1-A
Certificates and, for purposes of the definition of "Marker Rate", REMIC I
Regular Interest I-LTA1, 0.260% in the case of each Distribution Date prior to
the Step-Up Date and 0.520% in the case of each Distribution Date on and after
the Step-Up Date;

                                      -9-
<PAGE>

                  With respect to the Class 2-A Certificates and, for purposes
of the definition of "Marker Rate", REMIC I Regular Interest I-LTA2, 0.300% in
the case of each Distribution Date prior to the Step-Up Date and 0.600% in the
case of each Distribution Date on and after the Step-Up Date;

                  With respect to the Class A3 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTA3, 0.520% in the
case of each Distribution Date prior to the Step-Up Date and 1.040% in the case
of each Distribution Date on and after the Step-Up Date;

                  With respect to the Class M1 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTM1, 0.590% in the
case of each Distribution Date prior to the Step-Up Date and 0.885% in the case
of each Distribution Date on and after the Step-Up Date;

                  With respect to the Class M2 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTM2, 0.690% in the
case of each Distribution Date prior to the Step-Up Date and 1.035% in the case
of each Distribution Date on and after the Step-Up Date;

                  With respect to the Class M3 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTM3, 1.250% in the
case of each Distribution Date prior to the Step-Up Date and 1.875% in the case
of each Distribution Date on and after the Step-Up Date;

                  With respect to the Class M4 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTM4, 1.550% in the
case of each Distribution Date prior to the Step-Up Date and 2.325% in the case
of each Distribution Date on and after the Step-Up Date;

                  With respect to the Class M5 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTM5, 2.050% in the
case of each Distribution Date prior to the Step-Up Date and 3.075% in the case
of each Distribution Date on and after the Step-Up Date;

                  With respect to the Class M6 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTM6, 2.300% in the
case of each Distribution Date prior to the Step-Up Date and 3.450% in the case
of each Distribution Date on and after the Step-Up Date; and
                  With respect to the Class M7 Certificates and, for purposes of
the definition of "Marker Rate", REMIC I Regular Interest I-LTM7, 3.000% in the
case of each Distribution Date prior to the Step-Up Date and 4.500% in the case
of each Distribution Date on and after the Step-Up Date.

                  "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

                                      -10-
<PAGE>

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 or beneficially owned by the Company, the
Seller, the Servicer, the Master Servicer, the Securities Administrator, the
Trustee 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 12.01. The Trustee and the Securities Administrator may conclusively
rely upon a certificate of the Company, the Seller, the Master Servicer, the
Securities Administrator or the 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 and the Securities Administrator 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
1-A, Class 2-A, Class A3, Class M, Class B or Class P Certificate as of any date
of determination, the Certificate Principal Balance of such Certificate on the
Distribution Date immediately prior to such date of determination, increased by
any Subsequent Recoveries allocated thereto, minus all distributions allocable
to principal made thereon and Realized Losses allocated thereto, if any, 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 C 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 1-A, Class 2-A, Class A3, Class M,
Class B and Class P Certificates then outstanding. The aggregate initial
Certificate Principal Balance of each Class of Regular Certificates is set forth
in the Preliminary Statement hereto.

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

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

                  "Class A Certificate": Any Class 1-A, Class 2-A, Class A-SIO
or Class A3 Certificate.

                  "Class 1-A Certificate": Any one of the Class 1-A Certificates
executed and authenticated by the Securities Administrator 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.

                                      -11-
<PAGE>

                  "Class 1-A Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
lesser of (A) the Group 1 Principal Distribution Amount for such Distribution
Date, plus any Group 2 Principal Distribution Amount remaining after the
aggregate Certificate Principal Balance of the Class 2-A Certificates has been
reduced to zero and (B) the excess (if any) of (x) the aggregate Certificate
Principal Balance of the Class 1-A Certificates and Class 2-A Certificates
immediately prior to such Distribution Date over (y) the lesser of (a) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) multiplied by approximately 60.00% and (b) the amount, if
any, by which (i) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) exceeds (ii) the Overcollateralization
Floor.

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

                  "Class 2-A Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
lesser of (A) the Group 2 Principal Distribution Amount for such Distribution
Date, plus any Group 1 Principal Distribution Amount remaining after the
aggregate Certificate Principal Balance of the Class 1-A Certificates has been
reduced to zero and (B) the excess (if any) of (x) the aggregate Certificate
Principal Balance of the Class 1-A Certificates and Class 2-A Certificates
immediately prior to such Distribution Date over (y) the lesser of (a) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) multiplied by approximately 60.00% and (b) the amount, if
any, by which (i) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) exceeds (ii) the Overcollateralization
Floor.

                  "Class A3 Certificate": Any one of the Class A3 Certificates
executed and authenticated by the Securities Administrator 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.

                                      -12-
<PAGE>

                  "Class A3 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A and 2-A Certificates (after taking into account the
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date) and (ii) the Certificate Principal Balance of the Class
A3 Certificates immediately prior to such Distribution Date over (y) the lesser
of (a) the aggregate Stated Principal Balance of the Mortgage Loans as of the
last day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) multiplied by approximately 70.00% and (b) the amount, if
any, by which (i) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) exceeds (ii) the Overcollateralization
Floor.

                  "Class A-SIO Certificate": Any one of the Class A-SIO
Certificates executed and authenticated by the Securities Administrator 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-SIO Group 1 Component Notional Amount": For each
Distribution Date, the lesser of (i) the aggregate Stated Principal Balance of
the Group 1 Loans and (ii) the applicable scheduled notional amount:

                                Group 1 Notional
         Distribution Date    Component Amount ($)
         -----------------    --------------------
            May 2004             354,104,044.32
           June 2004             354,104,044.32
           July 2004             350,877,922.87
          August 2004            347,171,504.18
         September 2004          342,834,904.03
          October 2004           337,540,874.67
         November 2004           331,670,877.12
         December 2004           325,307,568.37
          January 2005           318,091,057.18
         February 2005           310,361,420.15
           March 2005            301,309,706.56
           April 2005            291,711,382.45
            May 2005             282,079,507.31

                                      -13-
<PAGE>

         June 2005                270,477,559.62
         July 2005                260,733,883.10
        August 2005               251,869,105.05
       September 2005             243,493,053.92
        October 2005              234,678,403.37
       November 2005              222,732,124.20
       December 2005              210,272,846.32
        January 2006              198,597,292.04
       February 2006              188,174,678.42
         March 2006               178,356,436.03
         April 2006               169,091,872.51
        May 2006 and                        0.00
         thereafter

                  "Class A-SIO Group 2 Component Notional Amount": For each
Distribution Date, the lesser of (i) the aggregate Stated Principal Balance of
the Group 2 Loans and (ii) the applicable scheduled notional amount:

                                   Group 2 Notional
          Distribution Date      Component Amount ($)
              May 2004               145,895,955.68
             June 2004               145,895,955.68
             July 2004               144,555,339.51
            August 2004              143,022,859.53
           September 2004            141,230,988.14
            October 2004             139,044,947.57
           November 2004             136,621,910.04
           December 2004             133,995,944.57
            January 2005             131,018,832.77
           February 2005             127,830,676.14
             March 2005              124,098,313.93
             April 2005              120,141,169.35
              May 2005               116,170,553.49
             June 2005               111,388,955.28

                                      -14-
<PAGE>

               July 2005               107,372,994.16
              August 2005              103,719,287.55
             September 2005            100,267,128.28
              October 2005              96,634,642.07
             November 2005              91,712,945.61
             December 2005              86,580,361.54
              January 2006              81,770,809.90
             February 2006              77,477,446.05
               March 2006               73,433,191.32
               April 2006               69,617,147.52
              May 2006 and                       0.00
               thereafter

                  "Class B Certificates": The Class B1 Certificates and Class B2
Certificates.

                  "Class B1 Certificate": Any one of the Class B1 Certificates
executed and authenticated by the Securities Administrator 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 B1 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3,
Class M4, Class M5, Class M6, Class M7 and Class M8 Certificates (after taking
into account the distribution of the Class 1-A, Class 2-A , Class A3, Class M1,
Class M2, Class M3, Class M4, Class M5, Class M6, Class M7 and Class M8
Principal Distribution Amounts on such Distribution Date) and (ii) the
Certificate Principal Balance of the Class B1 Certificates immediately prior to
such Distribution Date over (y) the lesser of (a) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period, and after reduction for
Realized Losses incurred during the related Prepayment Period) multiplied by
approximately 96.50% and (b) the amount, if any, by which (i) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period (after giving effect to scheduled payments of principal due during
the related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) exceeds (ii) the Overcollateralization Floor.

                  "Class B2 Certificate": Any one of the Class B2 Certificates
executed and authenticated by the Securities Administrator and delivered by the
Trustee, substantially in the form

                                      -15-
<PAGE>

annexed hereto as Exhibit A-3 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class B2 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3,
Class M4, Class M5, Class M6, Class M7, Class M8 and Class B1 Certificates
(after taking into account the distribution of the Class 1-A, Class 2-A , Class
A3, Class M1, Class M2, Class M3, Class M4, Class M5, Class M6, Class M7, Class
M8 and Class B1 Principal Distribution Amounts on such Distribution Date) and
(ii) the Certificate Principal Balance of the Class B2 Certificates immediately
prior to such Distribution Date over (y) the lesser of (a) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) multiplied by approximately 98.00% and (b) the amount, if any, by which
(i) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) exceeds (ii) the Overcollateralization Floor.

                  "Class C Certificate": Any one of the Class C Certificates
executed and authenticated by the Securities Administrator 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 Certificates": The Class M1, Class M2, Class M3,
Class M4, Class M5, Class M6, Class M7 and Class M8 Certificates.

                  "Class M1 Certificate": Any one of the Class M1 Certificates
executed and authenticated by the Securities Administrator 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 M1 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A and Class A3 Certificates (after taking into
account the distribution of the Class 1-A, Class 2-A and Class A3 Principal
Distribution Amounts on such Distribution Date) and (ii) the Certificate
Principal Balance of the Class M1 Certificates immediately prior to such
Distribution Date over (y) the lesser of (a) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period,

                                      -16-
<PAGE>

and after reduction for Realized Losses incurred during the related Prepayment
Period) multiplied by approximately 73.00% and (b) the amount, if any, by which
(i) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) exceeds (ii) the Overcollateralization Floor.

                  "Class M2 Certificate": Any one of the Class M2 Certificates
executed and authenticated by the Securities Administrator 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 M2 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3 and Class M1 Certificates (after
taking into account the distribution of the Class 1-A, Class 2-A , Class A3 and
Class M1 Principal Distribution Amounts on such Distribution Date) and (ii) the
Certificate Principal Balance of the Class M2 Certificates immediately prior to
such Distribution Date over (y) the lesser of (a) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period, and after reduction for
Realized Losses incurred during the related Prepayment Period) multiplied by
approximately 77.00% and (b) the amount, if any, by which (i) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period (after giving effect to scheduled payments of principal due during
the related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) exceeds (ii) the Overcollateralization Floor.

                  "Class M3 Certificate": Any one of the Class M3 Certificates
executed and authenticated by the Securities Administrator 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 M3 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1 and Class M2
Certificates (after taking into account the distribution of the Class 1-A, Class
2-A , Class A3, Class M1 and Class M2 Principal Distribution Amounts on such
Distribution Date) and (ii) the Certificate Principal Balance of the Class M3
Certificates immediately prior to such Distribution Date over (y) the lesser of
(a) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received

                                      -17-
<PAGE>

during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) multiplied by approximately
83.00% and (b) the amount, if any, by which (i) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled payments of principal due during the related
Due Period, to the extent received or advanced, and unscheduled collections of
principal received during the related Prepayment Period, and after reduction for
Realized Losses incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  "Class M4 Certificate": Any one of the Class M4 Certificates
executed and authenticated by the Securities Administrator 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 M4 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2 and Class M3
Certificates (after taking into account the distribution of the Class 1-A, Class
2-A , Class A3, Class M1, Class M2 and Class M3 Principal Distribution Amounts
on such Distribution Date) and (ii) the Certificate Principal Balance of the
Class M4 Certificates immediately prior to such Distribution Date over (y) the
lesser of (a) the aggregate Stated Principal Balance of the Mortgage Loans as of
the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) multiplied by approximately 85.50% and (b)
the amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  "Class M5 Certificate": Any one of the Class M5 Certificates
executed and authenticated by the Securities Administrator 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 M5 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3 and
Class M4 Certificates (after taking into account the distribution of the Class
1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3 and Class M4 Principal
Distribution Amounts on such Distribution Date) and (ii) the Certificate
Principal Balance of the Class M5 Certificates immediately prior to such
Distribution Date over (y) the lesser of (a) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period
(after giving effect to scheduled

                                      -18-
<PAGE>

payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) multiplied by approximately 88.50% and (b)
the amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  "Class M6 Certificate": Any one of the Class M6 Certificates
executed and authenticated by the Securities Administrator 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 M6 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3,
Class M4 and Class M5 Certificates (after taking into account the distribution
of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3, Class M4
and Class M5 Principal Distribution Amounts on such Distribution Date) and (ii)
the Certificate Principal Balance of the Class M6 Certificates immediately prior
to such Distribution Date over (y) the lesser of (a) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period, and
after reduction for Realized Losses incurred during the related Prepayment
Period) multiplied by approximately 90.50% and (b) the amount, if any, by which
(i) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced,
and unscheduled collections of principal received during the related Prepayment
Period, and after reduction for Realized Losses incurred during the related
Prepayment Period) exceeds (ii) the Overcollateralization Floor.

                  "Class M7 Certificate": Any one of the Class M7 Certificates
executed and authenticated by the Securities Administrator 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 M7 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3,
Class M4, Class M5 and Class M6 Certificates (after taking into account the
distribution of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class
M3, Class M4, Class M5 and Class M6 Principal Distribution Amounts on such
Distribution Date) and (ii) the Certificate Principal Balance

                                      -19-
<PAGE>

of the Class M7 Certificates immediately prior to such Distribution Date over
(y) the lesser of (a) the aggregate Stated Principal Balance of the Mortgage
Loans as of the last day of the related Due Period (after giving effect to
scheduled payments of principal due during the related Due Period, to the extent
received or advanced, and unscheduled collections of principal received during
the related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) multiplied by approximately 93.00% and (b)
the amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  "Class M8 Certificate": Any one of the Class M8 Certificates
executed and authenticated by the Securities Administrator 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 M8 Principal Distribution Amount": For any applicable
Distribution Date on or after the Stepdown Date as long as a Trigger Event has
not occurred with respect to such Distribution Date, an amount equal to the
excess (if any) of (x) the sum of (i) the aggregate Certificate Principal
Balance of the Class 1-A, Class 2-A , Class A3, Class M1, Class M2, Class M3,
Class M4, Class M5, Class M6 and Class M7 Certificates (after taking into
account the distribution of the Class 1-A, Class 2-A , Class A3, Class M1, Class
M2, Class M3, Class M4, Class M5, Class M6 and Class M7 Principal Distribution
Amounts on such Distribution Date) and (ii) the Certificate Principal Balance of
the Class M8 Certificates immediately prior to such Distribution Date over (y)
the lesser of (a) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received
or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses incurred
during the related Prepayment Period) multiplied by approximately 95.00% and (b)
the amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses
incurred during the related Prepayment Period) exceeds (ii) the
Overcollateralization Floor.

                  "Class P Certificate": Any one of the Class P Certificates
executed and authenticated by the Securities Administrator 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 R Certificate": Any one of the Class R Certificates
executed and authenticated by the Securities Administrator and delivered by the
Trustee, substantially in the form annexed hereto as Exhibit A-6, and evidencing
the Class R-I Interest, the Class R-II Interest and the Class R- III Interest.

                                      -20-
<PAGE>

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

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

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

                  "Clearstream": Clearstream Banking, societe anonyme, formerly
known as Cedelbank SA.

                  "Closing Date": April 28, 2004.

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

                  "Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Servicer pursuant to
Section 3.08(a), which shall be entitled "HomEq Servicing Corporation, as
Servicer for HSBC Bank USA, as Trustee, in trust for the registered holders of
the People's Choice Home Loan Securities Trust Series 2004-1, Mortgage Pass-
Through Certificates, Series 2004-1." The Collection Account must be an Eligible
Account.

                  "Commission": The Securities and Exchange Commission.

                  "Company": People's Choice Home Loan Securities Corp., a
Delaware corporation, or its successor in interest.

                  "Compensating Interest": With respect to any Distribution
Date, the lesser of (x) the amount, if any, by which Prepayment Interest
Shortfalls relating to Principal Prepayments in full with respect to the
Mortgage Loans exceeds any Prepayment Interest Excess with respect to the month
of that Distribution Date and (y) the Servicing Fee for the Servicer with
respect to payments received from the Mortgage Loans to be distributed on that
Distribution Date.

                  "Corporate Trust Office": The principal corporate trust office
of the Trustee which office at the date of the execution of this instrument is
located at 452 Fifth Avenue, New York, New York 10018, Attention: Corporate
Trust, or at such other address as the Trustee may designate from time to time
by notice to the Certificateholders, the Company, the Master Servicer, the
Securities Administrator and the Servicer. The office of the Securities
Administrator, which for purposes of Certificate transfers and surrender is
located at Wells Fargo Bank, N.A., Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479, Attention: Corporate Trust Services (PCHLSC
2004-1), and for all other purposes is located at Wells Fargo Bank, N.A., P.O.
Box 98, Columbia, Maryland 21045, Attention: Corporate Trust (PCHLSC 2004-1) (or
for overnight deliveries, at 9062 Old Annapolis Road, Columbia, Maryland 21046,
Attention: Corporate Trust Services (PCHLSC 2004- 1)).

                  "Corresponding Certificate": With respect to each REMIC II
Regular Interest listed below, as follows:

                                      -21-
<PAGE>

          REMIC II Regular Interest              Class
          -------------------------              -----
   REMIC II Regular Interest II-LT1A              1-A
   REMIC II Regular Interest II-LT2A              2-A
   REMIC II Regular Interest II-LTA3              A3
   REMIC II Regular Interest II-LTM1              M1
   REMIC II Regular Interest II-LTM2              M2
   REMIC II Regular Interest II-LTM3              M3
   REMIC II Regular Interest II-LTM4              M4
   REMIC II Regular Interest II-LTM5              M5
   REMIC II Regular Interest II-LTM6              M6
   REMIC II Regular Interest II-LTM7              M7
   REMIC II Regular Interest II-LTM8              M8
   REMIC II Regular Interest II-LTB1              B1
   REMIC II Regular Interest II-LTB2              B2
   REMIC II Regular Interest II-LTP                P

                  "Corridor Contract": Shall mean the Corridor Contract between
the Trustee and the Corridor Contract Counterparty named thereunder, for the
benefit of the Holders of the Offered Certificates and the Class C Certificates.

                  "Corridor Contract Allocation Amount": With respect to any
Distribution Date and each of the Class 1-A and 2-A Certificates, the amount of
the Corridor Contract Available Amount for that Distribution Date times a
fraction, the numerator of which is the Certificate Principal Balance of such
Class of Certificates immediately prior to that Distribution Date, and
denominator of which is the aggregate Certificate Principal Balance of the
Offered Certificates, other than the Class A-SIO Certificates, immediately prior
to that Distribution Date.

                  "Corridor Contract Available Amount": With respect to any
Distribution Date on or prior to the termination of the Corridor Contract, the
amount, if any, payable by the Corridor Contract Counterparty under the Corridor
Contract available for distribution to the Offered Certificates shall equal the
product of (i) the excess of (x) the lesser of (1) One-Month LIBOR (as
determined by the Corridor Contract Counterparty) and (2) the Ceiling Rate, over
(y) the Strike Rate, and (ii) a notional amount equal to the lesser of (A) the
Scheduled Notional Balance for such Distribution Date and (B) the aggregate
Certificate Principal Balance of the Offered Certificates, and (iii) the actual
number of days in the related Accrual Period, divided by 360.

                  "Corridor Contract Counterparty": Lehman Brothers Special
Financing Inc..

                  "Custodial Agreement": The Custodial Agreement dated as of
April 1, 2004, among the Trustee, the Custodian and the Servicer as such
agreement may be amended or supplemented from time to time, or any other
custodial agreement entered into after the date hereof with respect to any
Mortgage Loan subject to this Agreement.

                  "Custodian": Wells Fargo or any other custodian appointed
under any custodial agreement entered into after the date of this Agreement.

                                      -22-
<PAGE>

                  "Cut-off Date": With respect to each Mortgage Loan, April 1,
2004. 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 6.01(b).

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

                  "Delinquency Rate": For any month, the fraction, expressed as
a percentage, the numerator of which is the aggregate outstanding principal
balance of all Mortgage Loans 60 or more days delinquent (including all
foreclosures, loans subject to bankruptcy proceedings and REO properties) as of
the close of business on the last day of such month, and the denominator of
which is the aggregate Stated Principal Balance of the Mortgage Loans as of the
close of business on the last day of such month.

                  "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 at least A-1+ by S&P and
P-1 by Moody's (or, if such Rating Agencies are no longer rating the Offered
Certificates, comparable ratings by any other nationally recognized statistical
rating agency then rating the Offered Certificates).

                                      -23-
<PAGE>

                  "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.

                  "Derivative Contract": Any ISDA Master Agreement, together
with the related Schedule and Confirmation, entered into by the Trustee and a
Derivative Counterparty in accordance with Section 3.26.

                  "Derivative Counterpary": Any counterparty to a Derivative
Contract as provided in Section 3.26.

                  "Determination Date": With respect to each Distribution Date,
the 15th day of the calendar month in which such Distribution Date occurs, or if
such 15th day is not a Business Day, the Business Day immediately preceding such
15th day.

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

                  "Disqualified Organization": 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 Trust REMIC 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 Securities Administrator pursuant to Section 3.08(b) in
the name of the Securities Administrator for the benefit of the
Certificateholders and designated "Wells Fargo Bank, N.A., in trust for
registered holders of People's Choice Home Loan Securities Trust Series 2004-1,
Mortgage Pass-Through Certificates, Series 2004-1". Funds in the Distribution
Account shall be held in trust for the

                                      -24-
<PAGE>

Certificateholders for the uses and purposes set forth in this Agreement. The
Distribution Account must be an Eligible Account.

                  "Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in May 2004.

                  "Due Date": With respect to each Distribution Date, the day of
the month on which the Monthly Payment is due on a Mortgage Loan during the
related Due Period, 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 first day of the month
in which such Distribution Date occurs.

                  "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 a federal depository institution or state chartered
depository institution acting in its fiduciary capacity. Eligible Accounts may
bear interest.

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

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

                  "Excess Liquidation Proceeds": To the extent that such amount
is not required by law to be paid to the related mortgagor, the amount, if any,
by which Liquidation Proceeds with respect to a liquidated Mortgage Loan exceed
the sum of (i) the outstanding principal balance of such Mortgage Loan and
accrued but unpaid interest at the related Net Mortgage Rate through the last
day of the month in which the related Liquidation Event occurs, plus (ii)
related liquidation expenses or other amounts to which the Servicer is entitled
to be reimbursed from Liquidation Proceeds with respect to such liquidated
Mortgage Loan pursuant to Section 3.09.

                  "Extraordinary Trust Fund Expense": Any amounts payable or
reimbursable to the Trustee, the Master Servicer, the Securities Administrator,
the Custodian or any director, officer, employee or agent of any such Person
from the Trust Fund pursuant to the terms of this Agreement and any amounts
payable from the Distribution Account in respect of taxes pursuant to Section
11.01(g)(v).

                  "Fannie Mae": Fannie Mae, formerly 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 Seller or the Terminator pursuant to or as contemplated by
Section 2.03, 3.13(c) or Section 10.01), a

                                      -25-
<PAGE>

determination made by the Servicer that all Insurance Proceeds, Liquidation
Proceeds and other payments or recoveries which the Servicer, in its reasonable
good faith judgment, expects to be finally recoverable in respect thereof have
been so recovered, which determination shall be evidenced by a certificate of a
Servicing Officer delivered to the Master Servicer and maintained in its
records.

                  "Fitch": Fitch Ratings or any successor in interest.

                  "Fixed Rate": With respect to REMIC II Regular Interest
II-LTM8, REMIC II Regular Interest II-LTB1 and REMIC II Regular Interest
II-LTB2, solely for the purpose of the definition of Marker Rate and Maximum
II-LTXX Uncertificated Interest Deferral Amount, for each Distribution Date, the
lesser of (i) prior to the Step-Up Date, 5.00%, 5.00% and 5.00%, respectively,
and with respect to each Distribution Date on and after the Step-Up Date, 5.75%,
5.75% and 5.75%, respectively.

                  "Fixed Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is a
fixed rate.

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

                  "Global Certificate": A Regulation S Temporary Global
Certificate or a Regulation S Permanent Global Certificate.

                  "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.

                  "Group 1 Basic Principal Distribution Amount": With respect to
any Distribution Date, the Group 1 Principal Remittance Amount for such
Distribution Date.

                  "Group 1 Extra Principal Distribution Amount": With respect to
any Distribution Date, is the product of (i) the Group 1 Percentage and (ii) the
lesser of (x) the Overcollateralization Deficiency Amount for such Distribution
Date and (y) the Net Monthly Excess Cashflow Amount for such Distribution Date.

                  "Group 1 Interest Remittance Amount": With respect to any
Distribution Date will be the sum of (i) the interest portion of all Monthly
Payments on the Group 1 Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related Determination Date; (ii) the
interest portion of all proceeds received in respect of the repurchase of a
Group 1 Mortgage Loan during the related Prepayment Period pursuant to or as
contemplated by Section 2.03, Section 3.13(c) and Section 10.01; and (iii) the
interest portion of all other unscheduled collections, including Insurance
Proceeds, Liquidation Proceeds and all Principal Prepayments in full and in
part, received during the related Prepayment Period, to the extent applied as
recoveries of interest on the

                                      -26-
<PAGE>

Group 1 Mortgage Loans, net in each case of payments or reimbursements to the
Trustee, the Custodian, the Master Servicer, the Securities Administrator and
the Servicer.

                  "Group 1 Mortgage Loans": Those Mortgage Loans identified on
the Mortgage Loan Schedule as Group 1 Mortgage Loans.

                  "Group 1 Optimal Interest Remittance Amount": With respect to
each Distribution Date, the amount, if any, by which (1) the product of (A) (x)
the weighted average of the Net Mortgage Rates of the Group 1 Loans, as of the
first day of the related Due Period divided by (y) 12, and (B) the aggregate
Stated Principal Balance of the Group 1 Loans for the immediately preceding
Distribution Date, exceeds (2) (i) in the case of the first 24 Distribution
Dates only, an amount equal to the product of (A) the Pass-Through Rate
applicable to the Class A-SIO Certificates divided by 12 and (B) the applicable
Class A-SIO Group 1 Component Notional Amount and (ii) thereafter, zero.

                  "Group 1 Percentage": For any Distribution Date, the
percentage obtained by dividing (x) the Certificate Principal Balance of the
Class 1-A Certificates for such Distribution Date after giving effect to the
Group 1 Basic Principal Distribution Amount for such Distribution Date by (y)
the aggregate Certificate Principal Balance of the Class 1-A Certificates and
Class 2-A Certficates for such Distribution Date after giving effect to the
Basic Principal Distribution Amount for such Distribution Date.

                  "Group 1 Principal Distribution Amount": For any Distribution
Date, the Group 1 Basic Principal Distribution Amount plus the Group 1 Extra
Principal Distribution Amount.

                  "Group 1 Principal Remittance Amount": With respect to any
Distribution Date will be the sum of (i) the principal portion of all Monthly
Payments on the Group 1 Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related Determination Date; (ii) the
principal portion of all proceeds received in respect of the repurchase of a
Group 1 Mortgage Loan or, in the case of a substitution, certain amounts
representing a principal adjustment, during the related Prepayment Period
pursuant to or as contemplated by Section 2.03, Section 3.13(c) and Section
10.01; and (iii) the principal portion of all other unscheduled collections,
including Insurance Proceeds, Liquidation Proceeds and all Principal Prepayments
in full and in part, received during the related Prepayment Period, to the
extent applied as recoveries of principal on the Group 1 Mortgage Loans, net in
each case of payments or reimbursements to the Trustee, the Custodian, the
Master Servicer, the Securities Administrator and the Servicer.

                  "Group 1 Senior Net Funds Cap": For each Distribution Date,
the annual rate equal to (a) a fraction, expressed as a percentage, the
numerator of which is the product of (i) the Group 1 Optimal Interest Remittance
Amount for such Distribution Date and (ii) 12, and the denominator of which is
the aggregate Stated Principal Balance of the Group 1 Loans for the immediately
preceding Distribution Date, multiplied by (b) a fraction, the numerator of
which is 30 and the denominator of which is the actual number of days in the
Accrual Period. For federal income tax purposes, the equivalent of the foregoing
shall be expressed as the weighted average of the REMIC II Remittance Rate on
REMIC II Regular Interest II-LT1GRP, weighted on the basis of the Uncertificated
Balance of such REMIC II Regular Interest.

                                      -27-
<PAGE>

                  "Group 2 Basic Principal Distribution Amount": With respect to
any Distribution Date, the Group 2 Principal Remittance Amount for such
Distribution Date.

                  "Group 2 Extra Principal Distribution Amount": With respect to
any Distribution Date, is the product of (i) the Group 2 Percentage and (ii) the
lesser of (x) the Overcollateralization Deficiency Amount for such Distribution
Date and (y) the Net Monthly Excess Cashflow Amount for such Distribution Date.

                  "Group 2 Interest Remittance Amount": With respect to any
Distribution Date will be the sum of (i) the interest portion of all Monthly
Payments on the Group 2 Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related Determination Date; (ii) the
interest portion of all proceeds received in respect of the repurchase of a
Group 2 Mortgage Loan during the related Prepayment Period pursuant to or as
contemplated by Section 2.03, Section 3.13(c) and Section 10.01; and (iii) the
interest portion of all other unscheduled collections, including Insurance
Proceeds, Liquidation Proceeds and all Principal Prepayments in full and in
part, received during the related Prepayment Period, to the extent applied as
recoveries of interest on the Group 2 Mortgage Loans, net in each case of
payments or reimbursements to the Trustee, the Custodian, the Master Servicer,
the Securities Administrator and the Servicer.

                  "Group 2 Mortgage Loans": Those Mortgage Loans identified on
the Mortgage Loan Schedule as Group 2 Mortgage Loans.

                  "Group 2 Optimal Interest Remittance Amount": With respect to
each Distribution Date , the amount, if any, by which (1) the product of (A) (x)
the weighted average of the Net Mortgage Rates of the Group 2 Loans, as of the
first day of the related Due Period divided by (y) 12, and (B) the aggregate
Stated Principal Balance of the Group 2 Loans for the immediately preceding
Distribution Date, exceeds (2) (i) in the case of the first 24 Distribution
Dates only, an amount equal to the product of (A) the Pass-Through Rate
applicable to the Class A-SIO Certificates divided by 12 and (B) the applicable
Class A-SIO Group 2 Component Notional Amount and (ii) thereafter, zero.

                  "Group 2 Percentage": For any Distribution Date, the
percentage obtained by dividing (x) the Certificate Principal Balance of the
Class 2-A Certificates for such Distribution Date after giving effect to the
Group 2 Basic Principal Distribution Amount for such Distribution Date by (y)
the aggregate Certificate Principal Balance of the Class 1-A Certificates and
Class 2-A Certficates for such Distribution Date after giving effect to the
Basic Principal Distribution Amount for such Distribution Date.

                  "Group 2 Principal Distribution Amount": For any Distribution
Date, the Group 2 Basic Principal Distribution Amount plus the Group 2 Extra
Principal Distribution Amount.

                  "Group 2 Principal Remittance Amount": With respect to any
Distribution Date will be the sum of (i) the principal portion of all Monthly
Payments on the Group 2 Mortgage Loans due during the related Due Period,
whether or not received on or prior to the related Determination Date; (ii) the
principal portion of all proceeds received in respect of the repurchase of a
Group 2 Mortgage Loan or, in the case of a substitution, certain amounts
representing a principal adjustment, during

                                      -28-
<PAGE>

the related Prepayment Period pursuant to or as contemplated by Section 2.03,
Section 3.13(c) and Section 10.01; and (iii) the principal portion of all other
unscheduled collections, including Insurance Proceeds, Liquidation Proceeds and
all Principal Prepayments in full and in part, received during the related
Prepayment Period, to the extent applied as recoveries of principal on the Group
2 Mortgage Loans, net in each case of payments or reimbursements to the Trustee,
the Custodian, the Master Servicer, the Securities Administrator and the
Servicer.

                  "Group 2 Senior Net Funds Cap": For each Distribution Date,
the annual rate equal to (a) a fraction, expressed as a percentage, the
numerator of which is the product of (i) the Group 2 Optimal Interest Remittance
Amount for such Distribution Date and (ii) 12, and the denominator of which is
the aggregate Stated Principal Balance of the Group 2 Loans for the immediately
preceding Distribution Date, multiplied by (b) a fraction, the numerator of
which is 30 and the denominator of which is the actual number of days in the
Accrual Period. For federal income tax purposes, the equivalent of the foregoing
shall be expressed as the weighted average of the REMIC II Remittance Rate on
REMIC II Regular Interest II-LT2GRP, weighted on the basis of the Uncertificated
Balance of such REMIC II Regular Interest.

                  "Group Subordinate Amount": With respect to each of Loan Group
1 and Loan Group 2 and each Distribution Date, is the excess of the Stated
Principal Balance of the Mortgage Loans in the related loan group for the
immediately preceding Distribution Date over (i) the aggregate Certificate
Principal Balance of the Class 1-A Certificates with respect to Loan Group 1 or
(ii) the aggregate Certificate Principal Balance of the Class 2-A Certificates
with respect to Loan Group 2, immediately prior to the related Distribution
Date.

                  "Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Company, the Master
Servicer, the Securities Administrator, the Servicer, the Seller and their
respective Affiliates, (b) does not have any direct financial interest in or any
material indirect financial interest in the Company, the Master Servicer, the
Securities Administrator, the Servicer, the Seller or any Affiliate thereof, and
(c) is not connected with the Company, the Master Servicer, the Securities
Administrator, the Servicer, the Seller 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 Company, the Master Servicer, the Securities Administrator,
the Servicer, the Seller or any Affiliate thereof merely because such Person is
the beneficial owner of 1% or less of any class of securities issued by the
Company, the Master Servicer, the Securities Administrator, the Servicer, the
Seller or any Affiliate thereof, as the case may be.

                  "Independent Contractor": Either (i) any Person (other than
the Servicer) that would be an "independent contractor" with respect to 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 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

                                      -29-
<PAGE>

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": As of any Adjustment Date, the index applicable to
the determination of the Mortgage Rate on each Adjustable Rate Mortgage Loan
will generally be 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, in most cases as most recently available as 45 days prior to
such Adjustment Date.

                  "Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan or the related
Mortgaged Property, to the extent such proceeds are not to be applied to the
restoration of the related Mortgaged Property or released to the Mortgagor or a
senior lienholder in accordance with Accepted Servicing Practices, subject to
the terms and conditions of the related Mortgage Note and Mortgage.

                  "Interest Carry Forward Amount": With respect to any
Distribution Date and any Class 1-A, Class 2-A, Class A3, Class M or Class B
Certificate, the sum of (i) the amount, if any, by which (a) the Accrued
Certificate Interest for such Class as of the immediately preceding Distribution
Date exceeded (b) the actual amount distributed on such Class in respect of
interest on such immediately preceding Distribution Date and (ii) the amount of
any Interest Carry Forward Amount for such Class remaining unpaid from the
previous Distribution Date, plus accrued interest on such sum calculated at the
related Pass-Through Rate for the most recently ended Accrual Period.

                  "Interest Determination Date": With respect to the Class A
Certificates, the Class M Certificates (other than the Class M8 Certificates),
REMIC II Regular Interest II-LT1A, REMIC II Regular Interest II-LT2A, REMIC II
Regular Interest II-LTA3, REMIC II Regular Interest II- LTM1, REMIC II Regular
Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular Interest
II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular Interest II-LTM6
and REMIC II Regular Interest II-LTM7 and any Accrual Period therefor, the
second London Business Day preceding the commencement of such Accrual Period.

                  "Interest Remittance Amount": With respect to any Distribution
Date, the sum of the Group 1 Interest Remittance Amount and the Group 2 Interest
Remittance Amount.

                  "Last Scheduled Distribution Date": June 25, 2034.

                  "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 with respect to such Mortgage Loan,
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.

                                      -30-
<PAGE>

                  "LIBOR Certificates": The Class 1-A, Class 2-A, Class A3,
Class M1, Class M2, Class M3, Class M4, Class M5, Class M6 and Class M7
Certificates.

                  "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 3.13(c) or Section
10.01. With respect to any REO Property, either of the following events: (i) a
Final Recovery Determination is made as to such REO Property or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 10.01.

                  "Liquidation Proceeds": The amount (other than Insurance
Proceeds, amounts received in respect of the rental of any REO Property prior to
REO Disposition, or required to be released to a Mortgagor or a senior
lienholder in accordance with applicable law or the terms of the related
Mortgage Loan Documents) received by the Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation (other than amounts required to be released to
the Mortgagor or a senior lienholder), (ii) the liquidation of a defaulted
Mortgage Loan through a sale by the Servicer, 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
3.13(c), Section 3.21 or Section 10.01.

                  "Loan Group 1": The loan group consisting of Group 1 Mortgage
Loans.

                  "Loan Group 2": The loan group consisting of Group 2 Mortgage
Loans.

                  "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 Cities of
London and New York 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 C 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 REMIC II Regular Interest
I-LT1A, REMIC II Regular Interest I-LT2A, REMIC II Regular Interest II-LTA3,
REMIC II Regular Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II
Regular Interest II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular
Interest II- LTM5, REMIC II Regular Interest II-LTM6, REMIC II Regular Interest
II-LTM7, REMIC II Regular Interest II-LTM8, REMIC II Regular Interest II-LTB1,
REMIC II Regular Interest II-LTB2 and REMIC II Regular Interest I-LTZZ, with the
rate on each such REMIC II Regular Interest (other than REMIC II Regular
Interest II-LTZZ) subject to a cap equal to the lesser of (i) the related
One-Month

                                      -31-

<PAGE>

LIBOR Pass-Through Rate and (ii) the related Net Funds Cap (or in the case of
REMIC II Regular Interest II-LTM8, REMIC II Regular Interest II-LTB1 and REMIC
II Regular Interest II-LTB2, the lesser of (i) the related Fixed Rate and (ii)
the related Net Funds Cap) for the purpose of this calculation for such
Distribution Date and with the rate on REMIC II Regular Interest II-LTZZ subject
to a cap of zero for the purpose of this calculation; provided however, the cap
for each of REMIC II Regular Interest I-LT1A, REMIC II Regular Interest II-LT2A,
REMIC II Regular Interest II-LTA3, REMIC II Regular Interest II-LTM1, REMIC II
Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular
Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular Interest
II-LTM6 and REMIC II Regular Interest II-LTM7 shall be multiplied by a fraction
the numerator of which is the actual number of days in the related Accrual
Period and the denominator of which is 30.

                  "Master Servicer": As of the Closing Date, Wells Fargo Bank,
N.A. and thereafter, its respective successors in interest who meet the
qualifications of this Agreement. The Master Servicer and the Securities
Administrator shall at all times be the same Person.

                  "Master Servicer Certification": A written certification
covering servicing of the Mortgage Loans by the Servicer and signed by an
officer of the Master Servicer that complies with (i) the Sarbanes-Oxley Act of
2002, as amended from time to time, and (ii) the February 21, 2003 Statement by
the Staff of the Division of Corporation Finance of the Securities and Exchange
Commission Regarding Compliance by Asset-Backed Issuers with Exchange Act Rules
13a-14 and 15d-14, as in effect from time to time; provided that if, after the
Closing Date (a) the Sarbanes-Oxley Act of 2002 is amended, (b) the Statement
referred to in clause (ii) is modified or superceded by any subsequent
statement, rule or regulation of the Securities and Exchange Commission or any
statement of a division thereof, or (c) any future releases, rules and
regulations are published by the Securities and Exchange Commission from time to
time pursuant to the Sarbanes-Oxley Act of 2002, which in any such case affects
the form or substance of the required certification and results in the required
certification being, in the reasonable judgment of the Master Servicer,
materially more onerous than the form of the required certification as of the
Closing Date, the Master Servicer Certification shall be as agreed to by the
Master Servicer, the Company and the Seller following a negotiation in good
faith to determine how to comply with any such new requirements.

                  "Master Servicer Event of Default": One or more of the events
described in Section 8.01(b).

                  "Master Servicer Fee Rate": 0.005% per annum.

                  "Master Servicing Fee": With respect to each Mortgage Loan and
for any calendar month, an amount equal to one twelfth of the product of the
Master Servicer Fee Rate multiplied by the Scheduled Principal Balance of the
Mortgage Loans as of the Due Date in the preceding calendar month.

                  "Maximum II-LTZZ 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 I-LTZZ for such
Distribution Date on a balance equal to the Uncertificated Balance of REMIC II
Regular Interest I-LTZZ minus the REMIC II

                                      -32-

<PAGE>

Overcollateralization Amount, in each case for such Distribution Date, over (ii)
Uncertificated Interest on REMIC II Regular Interest I-LT1A, REMIC II Regular
Interest I-LT2A, REMIC II Regular Interest II-LTA3, REMIC II Regular Interest
II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3,
REMIC II Regular Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II
Regular Interest II-LTM6, REMIC II Regular Interest II-LTM7, REMIC II Regular
Interest II-LTM8, REMIC II Regular Interest II-LTB1 and REMIC II Regular
Interest II- LTB2, for such Distribution Date, with the rate on each such REMIC
II Regular Interest subject to a cap equal to the lesser of (i) the related
One-Month LIBOR Pass-Through Rate and (ii) the related Net Funds Cap (or in the
case of REMIC II Regular Interest II-LTM8, REMIC II Regular Interest II-LTB1 and
REMIC II Regular Interest II-LTB2, the lesser of (i) the related Fixed Rate and
(ii) the related Net Funds Cap) for the purpose of this calculation for such
Distribution Date; provided however, the caps on REMIC II Regular Interest
I-LT1A, REMIC II Regular Interest I-LT2A, REMIC II Regular Interest II-LTA3,
REMIC II Regular Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II
Regular Interest II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular
Interest II-LTM5, REMIC II Regular Interest II-LTM6 and REMIC II Regular
Interest II- LTM7 shall be multiplied by a fraction the numerator of which is
the actual number of days in the related 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.

                  "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 Servicer pursuant to Section 3.01; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.

                  "Moody's:" Moody's Investors Service, Inc. or any successor
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 Loan Documents pertaining to a
particular Mortgage Loan.

                  "Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee and the Mortgage Loan Documents for which have been delivered to
the Custodian pursuant to Section 2.01 of this Agreement and pursuant to the
Custodial 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.

                                      -33-

<PAGE>

                  "Mortgage Loan Documents": The documents evidencing or
relating to each Mortgage Loan delivered to the Custodian under the Custodial
Agreement on behalf of the Trustee.

                  "Mortgage Loan Purchase Agreement": Shall mean the Mortgage
Loan Purchase Agreement dated as of April 1, 2004, among the Company, the Seller
and Lehman Brothers Holdings, Inc.

                  "Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, separately identifying the Group 1
Mortgage Loans and the Group 2 Mortgage Loans, attached hereto as Schedule 1.
The Company shall deliver or cause the delivery of the initial Mortgage Loan
Schedule to the Servicer, the Master Servicer, the Custodian and the Trustee on
the Closing Date. 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 first and last 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 original date of the Mortgage Loan and the 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) the date on which the first Monthly Payment was due on the
Mortgage Loan;

                  (xi) the stated maturity date;

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

                  (xiii) the amount of the Monthly Payment as of the Cut-off
Date;

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

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

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<PAGE>

                  (xvi) the Stated 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
first Adjustment Date;

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

                  (xix) a code indicating the purpose of the loan (i.e.,
purchase financing, rate/term refinancing, cash-out refinancing);

                  (xx) with respect to each Adjustable Rate Mortgage Loan, the
Maximum Mortgage Rate under the terms of the Mortgage Note;

                  (xxi) with respect to each Adjustable Rate Mortgage Loan, the
Minimum Mortgage Rate under the terms of the Mortgage Note;

                  (xxii) the Mortgage Rate at origination;

                  (xxiii) with respect to each Adjustable Rate Mortgage Loan,
the Periodic Rate Cap;

                  (xxiv) with respect to each Adjustable Rate Mortgage Loan, the
first Adjustment Date immediately following the Cut-off Date;

                  (xxv) with respect to each Adjustable Rate Mortgage Loan, the
Index;

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

                  (xxvii) a code indicating whether the Mortgage Loan is an
Adjustable Rate Mortgage Loan or a Fixed Rate Mortgage Loan;

                  (xxviii) a code indicating the documentation style (i.e.,
full, stated or limited);

                  (xxix) a code indicating if the Mortgage Loan is subject to a
primary insurance policy or lender paid mortgage insurance policy and the name
of the insurer;

                  (xxx) the Appraised Value of the Mortgaged Property;

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

                  (xxxii) a code indicating whether the Mortgage Loan is subject
to a Prepayment Charge, the term of such Prepayment Charge and the amount of
such Prepayment Charge;

                  (xxxiii) the product type (e.g., 2/28, 15 year fixed, 30 year
fixed, etc.);

                                      -35-

<PAGE>

                  (xxxiv) the Mortgagor's debt to income ratio; and

                  (xxxv) the Servicer.

         The Mortgage Loan Schedule shall set forth the following information
with respect 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 Company 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 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 each Adjustable Rate Mortgage Loan (A) as of any date of
determination until the first Adjustment Date following the Cut-off Date shall
be the rate set forth in the Mortgage Loan Schedule as the Mortgage 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 Funds Cap": With respect to the Class 1-A Certificates,
the Group 1 Senior Net Funds Cap, with respect to the Class 2-A Certificates,
the Group 2 Senior Net Funds Cap and with respect to the Class A3, Class M and
Class B Certificates, the Subordinate Net Funds Cap.

                  "Net Monthly Excess Cashflow": With respect to any
Distribution Date, the sum of (i) any Overcollateralization Release Amount for
such Distribution Date and (ii) the excess of (x)

                                      -36-

<PAGE>

the Available Distribution Amount for such Distribution Date over (y) the sum
for such Distribution Date of (A) the aggregate Accrued Certificate Interest
payable to the holders of the Offered Certificates, (B) the aggregate Interest
Carry Forward Amounts payable to the holders of the Offered Certificates and (C)
the Principal Remittance Amount.

                  "Net 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 then applicable Mortgage Rate for such Mortgage Loan minus
the Administration Fee Rate.

                  "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 Servicer or a successor Servicer
(including the Trustee or 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 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 A-SIO
Certificates and any Distribution Date, the Class A-SIO Group 1 Component
Notional Amount plus the Class A-SIO Group 2 Component Notional Amount. For
federal income tax purposes, the Class A-SIO Certificates shall not have a
Notional Amount, but shall be entitled to 100% of amounts distributed on REMIC
II Regular Interest II-LTIO1 and REMIC II Regular Interest II-LTIO2. With
respect to the Class C Certificates and any Distribution Date, the
Uncertificated Balance of the REMIC I Regular Interests (other than REMIC II
Regular Interest II-LTP) immediately prior to such Distribution Date.

                  "Offered Certificates": The Class A, Class M and Class B
Certificates, collectively.

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

                  "One-Month LIBOR": With respect to the Class A Certificates,
the Class M Certificates (other than the Class M-8 Certficates), REMIC II
Regular Interest II-LT1A, REMIC II

                                      -37-

<PAGE>

Regular Interest II-LT2A, REMIC II Regular Interest II-LTA3, REMIC II Regular
Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest
II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular Interest II-LTM5,
REMIC II Regular Interest II-LTM6 and REMIC II Regular Interest II-LTM7 and any
Accrual Period therefor, the rate determined by the Securities Administrator 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 Securities Administrator 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 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 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 Securities Administrator shall
select an alternative comparable index (over which the Securities Administrator
has no control), used for determining one-month Eurodollar lending rates that is
calculated and published (or otherwise made available) by an independent party.
The establishment of One-Month LIBOR by the Securities Administrator and the
Securities Administrator's subsequent calculation of the One-Month LIBOR
Pass-Through Rates for the relevant Accrual Period, shall, in the absence of
manifest error, be final and binding.

                  "One-Month LIBOR Pass-Through Rate": With respect to the Class
1-A Certificates and, for purposes of the definition of "Marker Rate", REMIC II
Regular Interest II-LT1A, a per annum rate equal to One-Month LIBOR plus the
related Certificate Margin.

                  With respect to the Class 2-A Certificates and, for purposes
of the definition of "Marker Rate", REMIC II Regular Interest II-LT2A, a per
annum rate equal to One-Month LIBOR plus the related Certificate Margin.

                  With respect to the Class A3 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTA3, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

                  With respect to the Class M1 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTM1, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

                  With respect to the Class M2 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTM2, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

                                      -38-

<PAGE>

                  With respect to the Class M3 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTM3, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

                  With respect to the Class M4 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTM4, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

                  With respect to the Class M5 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTM5, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

                  With respect to the Class M6 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTM6, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

                  With respect to the Class M7 Certificates and, for purposes of
the definition of "Marker Rate", REMIC II Regular Interest II-LTM7, a per annum
rate equal to One-Month LIBOR plus the related Certificate Margin.

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

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

                  "Overcollateralization Floor": With respect to any
Distribution Date, 0.50% of the aggregate Stated Principal Balance of the
Mortgage Loans as of the Cut-off Date.

                  "Overcollateralization Release Amount": With respect to any
Distribution Date, will equal the lesser of (x) the Principal Remittance Amount
for such Distribution Date and (y) the amount, if any, by which the
Overcollateralized Amount exceeds the Overcollateralization Target Amount on
such Distribution Date (after giving effect to distributions in respect of the
Basic Principal Distribution Amount on such Distribution Date).

                  "Overcollateralization Target Amount": With respect to any
Distribution Date prior to the Stepdown Date, 1.00% of the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date. With respect to
any Distribution Date on or after the Stepdown Date, the greater of (x) 2.00% of
the aggregate Stated Principal Balance of the Mortgage Loans and (y) the
Overcollateralization Floor; provided, however, that if a Trigger Event is in
effect on any

                                      -39-

<PAGE>

Distribution Date, the Overcollateralization Target Amount will be equal to the
Overcollateralization Target Amount on the prior Distribution Date.

                  "Overcollateralized Amount": For any Distribution Date, the
amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, unscheduled
collections of principal received during the related Prepayment Period and any
Realized Losses on the Mortgage Loans during the related Prepayment Period)
exceeds (ii) the aggregate Certificate Principal Balance of the Offered
Certificates, other than the Class A-SIO Certificates, as of such Distribution
Date (after giving effect to distributions in respect of the Basic Principal
Distribution Amount on such Distribution Date).

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

                  "P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Servicer in respect of any Determination Date pursuant to
Section 5.03 or in respect of any Distribution Date by a successor Servicer
(including the Master Servicer) pursuant to Section 8.02 (which advances shall
not include principal or interest shortfalls due to bankruptcy proceedings or
application of the Relief Act).

                  "Pass-Through Rate": With respect to each Distribution Date
and the Class 1-A Certificates, a floating rate equal to the lesser of (i)
One-Month LIBOR plus the related Certificate Margin and (ii) the Group 1 Senior
Net Funds Cap with respect to such Distribution Date. With respect to each
Distribution Date and the Class 2-A Certificates, a floating rate equal to the
lesser of (i) One-Month LIBOR plus the related Certificate Margin and (ii) the
Group 2 Senior Net Funds Cap with respect to such Distribution Date. With
respect to each Distribution Date and the Class A3, Class M1, Class M2, Class
M3, Class M4, Class M5, Class M6 and Class M7 Certificates, a floating rate
equal to the lesser of (i) One-Month LIBOR plus the related Certificate Margin
and (ii) the Subordinate Net Funds Cap with respect to such Distribution Date.
With respect to the Class A-SIO Certificates, 0.00% for the Distribution Date in
May 2004, the greater of (i) 0.00% and (ii) 1.10% minus One-Month LIBOR for the
Distribution Date in June 2004 through the Distribution Date in April 2006 and
0.00% for the Distribution Date in May 2006 and thereafter. With respect to the
Class M8, Class B1 and Class B2 Certificates for each Distribution Date, the
lesser of (i) prior to the Step-Up Date, 5.00%, 5.00% and 5.00%, respectively,
and with respect to each Distribution Date on and after the Step-Up Date, 5.75%,
5.75% and 5.75%, respectively, and (ii) the Subordinate Net Funds Cap with
respect to such Distribution Date.

         With respect to the Class C 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 (i) through
(xvi) below, and the denominator of which is the aggregate Uncertificated
Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular Interest
II-LT1A, REMIC II Regular Interest II-LT2A, REMIC II Regular Interest II-LTA3,
REMIC II Regular Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II
Regular Interest II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular
Interest II-LTM5, REMIC II Regular Interest II-LTM6,

                                        -40-

<PAGE>

REMIC II Regular Interest II-LTM7, REMIC II Regular Interest II-LTM8, REMIC II
Regular Interest II-LTB1, REMIC II Regular Interest II-LTB2 and REMIC II Regular
Interest II-LTZZ. For purposes of calculating the Pass-Through Rate for the
Class C Certificates, the numerator is equal to the sum of the following
components:

                  (i) the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LTAA minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC III Regular Interest II-LTAA;

                  (ii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LT1A minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LT1A;

                  (iii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LT2A minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LT2A;

                  (iv) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTA3 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTA3;

                  (v) the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LTM1 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II-LTM1;

                  (vi) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM2 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM2;

                  (vii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM3 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM3;

                  (viii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM4 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM4;

                  (ix) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM5 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM5;

                  (x) the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LTM6 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II-LTM6;

                                        -41-

<PAGE>

                  (xi) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM7 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM7;

                  (xii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTM8 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTM8;

                  (xiii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTB1 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTB1;

                  (xiv) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTB2 minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTB2;

                  (xv) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LTZZ minus the Marker Rate, applied to an amount equal to
         the Uncertificated Balance of REMIC II Regular Interest II-LTZZ; and

                  (xvi) 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
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 1-A and Class 2-A Certificates are
issuable only in minimum Percentage Interests corresponding to minimum initial
Certificate Principal Balances of $25,000 and integral multiples of $1.00 in
excess thereof. The Class A3, Class M and Class B Certificates are issuable only
in minimum Percentage Interests corresponding to minimum initial Certificate
Principal Balances of $100,000 and integral multiples of $1.00 in excess
thereof. The Class A-SIO Certificates are issuable only in minimum Percentage
Interests corresponding to minimum initial Notional Amounts of $100,000 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 C
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 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 integral multiples of 5% in excess thereof.

                                        -42-

<PAGE>

                  "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 Adjustable Rate 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 Company, the Servicer, 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) (A) demand and time deposits in, certificates of
         deposit of, bankers' acceptances issued by or federal funds sold by any
         depository institution or trust company (including the Trustee or its
         agent acting in their respective commercial capacities) incorporated
         under the laws of the United States of America or any state thereof and
         subject to supervision and examination by federal and/or state
         authorities, so long as, at the time of such investment or contractual
         commitment providing for such investment, such depository institution
         or trust company (or, if the only Rating Agency is S&P, in the case of
         the principal depository institution in a depository institution
         holding company, debt obligations of the depository institution holding
         company) or its ultimate parent has a short-term uninsured debt rating
         in the highest available rating category of Moody's and S&P and
         provided that each such investment has an original maturity of no more
         than 365 days; and provided further that, if the only Rating Agency is
         S&P and if the depository or trust company is a principal subsidiary of
         a bank holding company and the debt obligations of such subsidiary are
         not separately rated, the applicable rating shall be that of the bank
         holding company; and, provided further that, if the original maturity
         of such short-term obligations of a domestic branch of a foreign
         depository institution or trust company shall exceed 30 days, the
         short- term rating of such institution shall be A-1+ in the case of S&P
         if S&P is the Rating Agency; and (B) any other demand or time deposit
         or deposit which is fully insured by the FDIC;

                      (iii) repurchase obligations with a term not to exceed 30
         days with respect to any security described in clause (i) above and
         entered into with a depository institution or trust company (acting as
         principal) rated A-1+ or higher by S&P and A2 or higher by Moody's,
         provided, however, that collateral transferred pursuant to such
         repurchase obligation must be of the type described in clause (i) above
         and must (A) be valued daily at current market prices plus accrued
         interest, (B) pursuant to such valuation, be equal, at all times, to
         105% of the cash transferred by a party in exchange for such collateral
         and (C) be delivered to such party or, if such party is supplying the
         collateral, an agent for such party, in such a manner as to accomplish
         perfection of a security interest in the collateral by possession of
         certificated securities;

                                        -43-

<PAGE>

                      (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), "AAAm" by S&P or "Aaa" by Moody's
         including any such money market fund managed or advised by the Master
         Servicer, the Trustee or any of their Affiliates; and

                      (vii) if previously confirmed in writing to the Trustee,
         any other demand, money market or time deposit, or any other
         obligation, security or investment, as may be acceptable to the Rating
         Agencies 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, limited liability company,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

                  "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 or Section 4975 of the Code.

                  "Prepayment Assumption": A prepayment rate for the Adjustable
Rate Mortgage Loans of 27% CPR and a prepayment rate of 23% CPR for the Fixed
Rate Mortgage Loans. 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.

                                        -44-

<PAGE>

                  "Prepayment Charge": With respect to any Principal Prepayment,
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.

                  "Prepayment Charge Schedule": As of any date, the list of
Mortgage Loans providing for a Prepayment Charge included in the Trust Fund on
such date, attached hereto as Schedule 2 (including the prepayment charge
summary attached thereto). The Company shall deliver or cause the delivery of
the Prepayment Charge Schedule to the Servicer, the Master Servicer and the
Trustee on the Closing Date. The Prepayment Charge Schedule shall set forth the
following information with respect to each Prepayment Charge:

                           (i) the Mortgage Loan identifying number;

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

                           (iii) the date on which the first Monthly Payment was
                  due on the related Mortgage Loan;

                           (iv) the term of the related Prepayment Charge;

                           (v) the original Stated Principal Balance of the
                  related Mortgage Loan; and

                           (vi) the Stated Principal Balance of the related
                  Mortgage Loan as of the Cut-off Date.

                  "Prepayment Interest Excess": With respect to any Distribution
Date, for each Mortgage Loan that was the subject of a Principal Prepayment in
full during the portion of the related Prepayment Period occurring between the
first day of the calendar month in which such Distribution Date occurs and the
last day of the related Prepayment Period, an amount equal to interest (to the
extent received) at the applicable Net Mortgage Rate on the amount of such
Principal Prepayment for the number of days commencing on the first day of the
calendar month in which such Distribution Date occurs and ending on the last
date through which interest is collected from the related Mortgagor. The
Servicer may withdraw such Prepayment Interest Excess from the Collection
Account in accordance with Section 3.09(a)(x).

                  "Prepayment Interest Shortfall": With respect to any
Distribution Date, for each such Mortgage Loan that was the subject of a
Principal Prepayment in full or in part during the portion of the related
Prepayment Period occurring between the first day of the related Prepayment
Period and the last day of the calendar month preceding the month in which such
Distribution Date occurs that was applied by the Servicer to reduce the
outstanding principal balance of such Mortgage 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 calendar month preceding such Distribution Date.
The obligations of the Servicer and the Master

                                        -45-

<PAGE>

Servicer in respect of any Prepayment Interest Shortfall are set forth in
Section 3.22 and Section 4.19, respectively.

                  "Prepayment Period": With respect to any Distribution Date and
(i) Principal Prepayments in full, the period commencing on the 16th day of the
month prior to the month in which the related Distribution Date occurs and
ending on the 15th day of the month in which such Distribution Date occurs, and
(ii) Principal Prepayments in part, the calendar month preceding the month in
which the related Distribution Date occurs.

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

                  "Principal Distribution Amount": With respect to any
Distribution Date is the sum of the Group 1 Principal Distribution Amount and
the Group 2 Principal Distribution Amount.

                  "Principal Remittance Amount": With respect to any
Distribution Date is the sum of the Group 1 Principal Remittance Amount and the
Group 2 Principal Remittance Amount.

                  "Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, Section
3.13(c) or Section 10.01, 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 10.01), (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 a P&I Advance by the Servicer, which payment or
P&I Advance had as of the date of purchase been distributed pursuant to Section
5.01, 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 a P&I Advance by the 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 5.01, (iii) any unreimbursed
Servicing Advances and P&I Advances (including Nonrecoverable P&I Advances and
Nonrecoverable Servicing Advances) and any unpaid Master Servicing Fees or
Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously withdrawn from the Collection Account pursuant to Section 3.09(a)(ix)
and Section 3.13(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 Servicer or the Trustee in respect of the breach or defect
giving rise to the purchase obligation and any costs and damages incurred by the
Trust Fund and the Trustee in connection with any violation by any such Mortgage
Loan of any predatory or abusive lending law.

                                        -46-

<PAGE>

                  "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 in excess of) the Mortgage
Rate of the Deleted Mortgage Loan, (iii) if the mortgage loan is an Adjustable
Rate Mortgage Loan, have a Maximum Mortgage Rate not less than the Maximum
Mortgage Rate on the Deleted Mortgage Loan, (iv) if the mortgage loan is an
Adjustable Rate Mortgage Loan, have a Minimum Mortgage Rate not less than the
Minimum Mortgage Rate of the Deleted Mortgage Loan, (v) if the mortgage loan is
an Adjustable Rate Mortgage Loan, have a Gross Margin equal to the Gross Margin
of the Deleted Mortgage Loan, (vi) if the mortgage loan is an 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) be secured by a first lien priority on the
related Mortgaged Property, (xi) have a credit grade at least equal to the
credit grading assigned on the Deleted Mortgage Loan, (xii) be a "qualified
mortgage" as defined in the REMIC Provisions and (xiii) 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 credit grades
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 (xii) 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, Moody's 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 Company, notice
of which designation shall be given to the Trustee and the 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), as reported by the Servicer to the

                                        -47-

<PAGE>

Master Servicer 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 previously withdrawn from the Collection Account in respect of
such Mortgage Loan pursuant to Section 3.09(a)(ix) and Section 3.13(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 Servicer with respect to such Mortgage
Loan pursuant to Section 3.09(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 3.09(a)(ix) and Section 3.13(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 Servicer in respect of such REO Property or the related
Mortgage Loan for which the Servicer has been or, in connection with such Final
Recovery Determination, will be reimbursed pursuant to Section 3.21 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 3.21.

                  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.

                                        -48-

<PAGE>

                  "Record Date": With respect to each Distribution Date and the
Class A, Class M and Class B Certificates, the Business Day immediately
preceding such Distribution Date for so long as such Certificates are Book-Entry
Certificates. With respect to each Distribution Date and any other Class of
Certificates, including any Definitive Certificates, the last day of the
calendar month immediately preceding the month in which such Distribution Date
occurs.

                  "Reference Banks": 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 Securities
Administrator 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 Company or any Affiliate thereof and (iii) which have been designated as
such by the Securities Administrator.

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

                  "Regular Certificate": Any Class A, Class M, Class B, Class C
or Class P Certificate.

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

                  "Regulation S Temporary Global Certificate": As defined in
Section 6.01(c).

                  "Regulation S Permanent Global Certificate": As defined in
Section 6.01(c).

                  "Release Date": The 40th day after the later of (i)
commencement of the offering of the Class B2 Certificates and (ii) the Closing
Date.

                  "Relief Act": The Servicemembers Civil Relief Act, as amended,
or similar state or local laws.

                  "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 Due Period 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 required to be
maintained pursuant to this Agreement and any proceeds thereof;

                                        -49-

<PAGE>

(iv) the Company's rights under the Mortgage Loan Purchase Agreement (including
any security interest created thereby); and (v) the Collection Account, the
Distribution Account and any REO Account, and such assets that are deposited
therein from time to time and any investments thereof, together with any and all
income, proceeds and payments with respect thereto. Notwithstanding the
foregoing, however, REMIC I specifically excludes (i) 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; (ii) the Reserve Fund and any amounts
on deposit therein from time to time and any proceeds thereof and (iii) the
Corridor Contract.

                  "REMIC I Regular Interest": As defined in the Preliminary
Statement. 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 Remittance Rate": With respect to each REMIC I
Regular Interest beginning with the designation "I-ILT" and ending with the
designation "A," the excess of (i) two (2) times the weighted average of the
Expense Adjusted Mortgage Rates of the Group 1 Mortgage Loans over (ii) 2.20%
per annum. With respect to each REMIC I Regular Interest beginning with the
designation "I-IILT" and ending with the designation "A," the excess of (i) two
(2) times the weighted average of the Expense Adjusted Mortgage Rates of the
Group 2 Mortgage Loans over (ii) 2.20% per annum. With respect to each REMIC I
Regular Interest ending with the designation "B," 2.20% per annum. With respect
to REMIC I Regular Interest I-ILT and REMIC I Regular Interest I-ILTP, the
weighted average of the Expense Adjusted Mortgage Rates of the Group 1 Mortgage
Loans. With respect to REMIC I Regular Interest I-IILT, the weighted average of
the Expense Adjusted Mortgage Rates of the Group 2 Mortgage Loans.

                  "REMIC II Interest Loss Allocation Amount": With respect to
any Distribution Date, an amount 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-LTAA minus the Marker Rate, divided by (b) 12.

                  "REMIC II Marker Allocation Percentage": 0.50% of any amount
payable or loss attributable from the Mortgage Loans, which shall be allocated
to REMIC II Regular Interest II- LTAA, REMIC II Regular Interest II-LT1A, REMIC
II Regular Interest II-LT2A, REMIC II Regular Interest II-LTA3, REMIC II Regular
Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest
II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular Interest II- LTM5,
REMIC II Regular Interest II-LTM6, REMIC II Regular Interest II-LTM7, REMIC II
Regular Interest II-LTM8, REMIC II Regular Interest II-LTB1, REMIC II Regular
Interest II-LTB2, REMIC II Regular Interest II-LTZZ and REMIC II Regular
Interest II-LTP.

                  "REMIC II Overcollateralization Amount": With respect to any
date of determination, (i) 0.50% 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-LT1A, REMIC II Regular

                                        -50-

<PAGE>

Interest II-LT2A, REMIC II Regular Interest II-LTA3, REMIC II Regular Interest
II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3,
REMIC II Regular Interest II- LTM4, REMIC II Regular Interest II-LTM5, REMIC II
Regular Interest II-LTM6, REMIC II Regular Interest II-LTM7, REMIC II Regular
Interest II-LTM8, REMIC II Regular Interest II-LTB1, REMIC II Regular Interest
II-LTB2 and REMIC II Regular Interest II-LTP, 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 (a) the product of (i) 0.50% of 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- LT1A,
REMIC II Regular Interest II-LT2A, REMIC II Regular Interest II-LTA3, REMIC II
Regular Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular
Interest II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular Interest
II-LTM5, REMIC II Regular Interest II- LTM6, REMIC II Regular Interest II-LTM7,
REMIC II Regular Interest II-LTM8, REMIC II Regular Interest II-LTB1, REMIC II
Regular Interest II-LTB2 and REMIC II Regular Interest II-LTZZ.

                  "REMIC II Regular Interest": As defined in the Preliminary
Statement. Each REMIC II Regular Interest shall accrue interest at the related
REMIC II Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal (other than REMIC II Regular Interest II- LTIO1 and
REMIC II Regular Interest II-LTIO2), 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 Remittance Rate": With respect to REMIC II Regular
Interest II-LTAA, Regular Interest II-LT1A, REMIC II Regular Interest II-LT2A,
REMIC II Regular Interest II-LTA3, REMIC II Regular Interest II-LTM1, REMIC II
Regular Interest II-LTM2, REMIC II Regular Interest II-LTM3, REMIC II Regular
Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular Interest
II-LTM6, REMIC II Regular Interest II-LTM7, REMIC II Regular Interest II-LTM8,
REMIC II Regular Interest II-LTB1, REMIC II Regular Interest II-LTB2, REMIC II
Regular Interest II-LTZZ, REMIC II Regular Interest II-LTP, REMIC II Regular
Interest II-LT1SUB, REMIC II Regular Interest II-LT2SUB and REMIC II Regular
Interest II-LTXX, a per annum rate (but not less than zero) equal to the
weighted average of: (x) with respect to REMIC I Regular Interest I-LTI, REMIC I
Regular Interest I-LTII, REMIC I Regular Interest I-LTP and each REMIC I Regular
Interest ending with the designation "B," the REMIC I Remittance Rate for such
REMIC I Regular Interest for each such Distribution Date, and (y) with respect
to each REMIC I Regular Interest ending with the designation "A," for each
Distribution Date listed below, the weighted average of the rates listed below
for each such REMIC I Regular Interest listed below, weighted on the basis of
the Uncertificated Balance of each such REMIC I Regular Interest:

Distribution      REMIC I Regular Interest       Rate
------------      ------------------------       ----
Date
----
1                  I-ILT1A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT23A     2.20% - (2 x One-Month LIBOR)

                                        -51-

<PAGE>

2                  I-ILT1A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
3                  I-ILT2A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A                        2.20%
                  I-IILT2A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A                       2.20%
4                  I-ILT3A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A and I-ILT2A            2.20%
                  I-IILT3A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A and I-IILT2A          2.20%
5                  I-ILT4A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT3A       2.20%
                  I-IILT4A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT3A      2.20%
6                  I-ILT5A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT4A       2.20%
                  I-IILT5A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT4A      2.20%
7                  I-ILT6A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT5A       2.20%
                  I-IILT6A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT6A      2.20%
8                  I-ILT7A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT6A       2.20%
                  I-IILT7A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT6A      2.20%
9                  I-ILT8A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT7A       2.20%
                  I-IILT8A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT7A      2.20%
10                 I-ILT9A through I-ILT23A      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT8A       2.20%
                  I-IILT9A through I-IILT23A     2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT9A      2.20%
11                 I-ILT10A through I-ILT23A     2.20% - (2 x One-Month LIBOR)

                                        -52-

<PAGE>

                  I-ILT1A through  I-ILT9A       2.20%
                  I-IILT10A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT9A      2.20%
12                 I-ILT11A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT10A      2.20%
                  I-IILT11A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT10A     2.20%
13                 I-ILT12A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT11A      2.20%
                  I-IILT12A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT11A     2.20%
14                 I-ILT13A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT12A      2.20%
                  I-IILT13A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT12A     2.20%
15                 I-ILT14A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT13A      2.20%
                  I-IILT14A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT13A     2.20%
16                 I-ILT15A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT14A      2.20%
                  I-IILT15A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT14A     2.20%
17                 I-ILT16A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT15A      2.20%
                  I-IILT16A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT15A     2.20%
18                 I-ILT17A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT16A      2.20%
                  I-IILT17A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT16A     2.20%
19                 I-ILT18A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT17A      2.20%
                  I-IILT18A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT17A     2.20%

                                        -53-

<PAGE>

20                 I-ILT19A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT18A      2.20%
                  I-IILT19A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT18A     2.20%
21                 I-ILT20A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT19A      2.20%
                  I-IILT20A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT19A     2.20%
22                 I-ILT21A through I-ILT23A     2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT20A      2.20%
                  I-IILT21A through I-IILT23A    2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT20A     2.20%
23                 I-ILT22A and I-ILT23A         2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT21A      2.20%
                  I-IILT22A and I-IILT23A        2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT21A     2.20%
24                 I-ILT23A                      2.20% - (2 x One-Month LIBOR)
                  I-ILT1A through  I-ILT22A      2.20%
                  I-IILT23A                      2.20% - (2 x One-Month LIBOR)
                  I-IILT1A through I-IILT22A     2.20%
                  I-ILTIA through I-ILT23A       2.20%
25 and thereafter I-IILT1A through I-IILT23A     2.20%

With respect to REMIC II Regular Interest II-LT1GRP, the weighted average of the
REMIC I Remittance Rate on REMIC I Regular Interest I-ILT, weighted on the basis
of the Uncertificated Balance of such REMIC I Regular Interest. With respect to
REMIC II Regular Interest II-LT2GRP, the weighted average of the REMIC I
Remittance Rate on REMIC I Regular Interest I-IILT, weighted on the basis of the
Uncertificated Balance of such REMIC I Regular Interest.

With respect to REMIC II Regular Interest II-LTIO1 and REMIC II Regular Interest
II-LTIO2, (i) for the first twenty-four Distribution Dates, the greater of (x)
the excess of (a) 2.200% per annum over (b) two (2) times One-Month LIBOR and
(y) zero and (ii) thereafter, 0.00%.

                  "REMIC II Sub WAC Allocation Percentage": 0.50% of any amount
payable or loss attributable from the Mortgage Loans, which shall be allocated
to REMIC II Regular Interest II- LT1SUB, REMIC II Regular Interest II-LT1GRP,
REMIC II Regular Interest II-LT2SUB, REMIC II Regular Interest II-LT2GRP and
REMIC II Regular Interest II-LTXX.

                                      -54-

<PAGE>

                  "REMIC II Subordinated Balance Ratio": The ratio among the
Uncertificated Balances of each REMIC II Regular Interest ending with the
designation "SUB,", equal to the ratio among, with respect to each such REMIC II
Regular Interest, the excess of (x) the aggregate Stated Principal Balance of
the Group 1 Mortgage Loans or Group 2 Mortgage Loans, as applicable over (y) the
current Certificate Principal Balance of related Class A Certificates and the
Class P Certificates.

                  "REMIC II Required Overcollateralization Amount": 0.50% of the
Overcollateralization Floor.

                  "REMIC III": The segregated pool of assets consisting of all
of the REMIC III Regular Interests conveyed in trust to the Trustee, for the
benefit of the REMIC 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 III Certificate": Any Regular Certificate or Class R
Certificate (with respect to the Class R-III Interest).

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

                  "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.

                  "REMIC Regular Interest": Any REMIC I Regular Interest, REMIC
II Regular Interest or Regular Certificate.

                  "REMIC Remittance Rate": The REMIC I Remittance Rate or REMIC
II Remittance Rate, as applicable.

                  "Remittance Report": A report by the Securities Administrator
pursuant to Section 5.03(f).

                  "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 Servicer in respect of an REO Property pursuant to
Section 3.21.

                  "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

                                        -55-

<PAGE>

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
10.01 that is allocable to such REO Property) or otherwise, net of any portion
of such amounts (i) payable in respect of the proper operation, management and
maintenance of such REO Property or (ii) payable or reimbursable to the related
Servicer pursuant to Section 3.21(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 Servicer
on behalf of REMIC I through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.21.

                  "Reserve Fund": A fund created pursuant to Section 3.24 which
shall be an asset of the Trust Fund but which shall not be an asset of any Trust
REMIC.

                  "Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Securities Administrator
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 Securities Administrator, after
consultation with the Company, 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 Securities Administrator
can determine no such arithmetic mean, the lowest one-month U.S. dollar lending
rate which New York City banks selected by the Securities Administrator are
quoting on such Interest Determination Date to leading European banks.

                  "Residential Dwelling": Any one of the following: (i) a
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a Fannie Mae eligible condominium project,
(iv) a manufactured home, or (v) a detached one-family dwelling in a planned
unit development, none of which is a co-operative or mobile home.

                  "Residual Certificate":  Any one of the Class R Certificates.

                  "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,
any officer of the Trustee having direct responsibility for the administration
of this Agreement 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.

                                        -56-

<PAGE>

                  "Rolling Three-Month Delinquency Rate": With respect to any
Distribution Date, the average of the Delinquency Rates for each of the three
(or one and two, in the case of the first and second Distribution Dates,
respectively) immediately preceding months.

                  "S&P": Standard and Poor's, a division of The McGraw-Hill
Companies, Inc.

                  "Scheduled Notional Balance": With respect to the Corridor
Contract Available Amount, shall be determined in accordance with the following
table:

           Month of                     Scheduled
      Distribution Date           Notional Balance ($)
      -----------------           --------------------
         June 2004                    500,000,000.00
         July 2004                    495,433,262.38
         August 2004                  490,194,363.71
         September 2004               484,065,892.17
         October 2004                 476,585,822.24
         November 2004                468,292,787.16
         December 2004                459,303,512.94
         January 2005                 449,109,889.95
         February 2005                438,192,096.29
         March 2005                   425,408,020.49
         April 2005                   411,852,551.80
         May 2005                     398,250,060.80
         June 2005                    381,866,514.90
         July 2005                    368,106,877.26
         August 2005                  355,588,392.60
         September 2005               343,760,182.20
         October 2005                 331,313,045.44
         November 2005                314,445,069.81
         December 2005                296,853,207.86
         January 2006                 280,368,101.93
         February 2006                265,652,124.47
         March 2006                   251,789,627.35
         April 2006                   238,709,020.03

                  "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

                                        -57-

<PAGE>

Due Date subsequent to the Cut-off Date up to and including the Due Date in the
calendar month in 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 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.

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

                  "Securities Administrator": As of the Closing Date, Wells
Fargo Bank, N.A. and thereafter, its respective successors in interest that meet
the qualifications of this Agreement. The Securities Administrator and the
Master Servicer shall at all times be the same Person.

                  "Seller": People's Choice Home Loan, Inc. or its successor in
interest, in its capacity as seller under the Mortgage Loan Purchase Agreement.

                  "Senior Enhancement Percentage": For any Distribution Date,
the percentage obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal Balance of the Class A3, Class M and Class B Certificates and (ii) the
related Overcollateralized Amount, in each case prior to the distribution of the
Principal Distribution Amount on such Distribution Date, by (y) the aggregate
Stated Principal Balance of the Mortgage Loans after giving effect to
distributions to be made on that Distribution Date.

                  "Servicer": HomEq Servicing Corporation or any successor
servicer appointed as herein provided, in its capacity as Servicer hereunder.

                  "Servicer Event of Default": One or more of the events
described in Section 8.01(a).

                                        -58-

<PAGE>

                  "Servicer Remittance Date": With respect to any Distribution
Date, by 12:00 p.m. New York time on the 18th calendar day of the month of such
Distribution Date, or if such day is not a Business Day, the immediately
following Business Day.

                  "Servicer Report": A report in form and substance reasonably
acceptable to the Master Servicer and Securities Administrator on an electronic
data file or tape prepared by the Servicer pursuant to Section 5.03(a) with such
additions, deletions and modifications as agreed to by the Master Servicer, the
Securities Administrator and the Servicer.

                  "Servicer Trigger Event": As of any Distribution Date, the
occurrence of any of the following scenarios:

                  (i) the aggregate Realized Losses on the Mortgage Loans since
         the Cut-off Date exceed (a) with respect to the first 12 Distribution
         Dates, 1.75% of the aggregate Cut-off Date Principal Balance of the
         Mortgage Loans, (b) with respect to the next 12 Distribution Dates,
         2.25% of the aggregate Cut-off Date Principal Balance of the Mortgage
         Loans, (c) with respect to the next 12 Distribution Dates, 3.50% of the
         aggregate Cut-off Date Principal Balance of the Mortgage Loans, (d)
         with respect to the next 12 Distribution Dates, 5.00% of the aggregate
         Cut-off Date Principal Balance of the Mortgage Loans and (e) with
         respect to all Distribution Dates thereafter, 7.00% of the aggregate
         Cut-off Date Principal Balance of the Mortgage Loans;

                  (ii) If (x) any of the Rating Agencies reduces or withdraws
         the rating of any of the Certificates due to a reason attributable to
         the Servicer or (y) the Servicer's residential primary servicer rating
         for servicing of subprime loans issued by any of the Rating Agencies is
         reduced more than one level below its rating in effect on the Closing
         Date or is withdrawn; or (z) the net worth of the Servicer shall be
         less than $25,000,000;

                  (iii) The Servicer ceases to meet the qualifications of a
         Fannie Mae or Freddie Mac seller/servicer;

                  (iv) The Servicer attempts, without the consent of the
         Company, to assign the servicing of the Mortgage Loans or its right to
         servicing compensation hereunder or the Servicer attempts, without the
         consent of the Master Servicer, to assign this Agreement or the
         servicing responsibilities hereunder or to delegate its duties
         hereunder or any portion thereof in a manner not permitted under this
         Agreement; or

                  (v) The Rolling Three-Month Delinquency Rate of the Mortgage
         Loans exceeds 12% of the unpaid principal balance of the Mortgage
         Loans.

                  "Servicing Advances": The customary and reasonable
"out-of-pocket" costs and expenses incurred by the Servicer in connection with a
default, delinquency or other unanticipated event by the Servicer in the
performance of its servicing obligations, including, but not limited to, the
cost of (i) the preservation, restoration and protection of 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)

                                        -59-

<PAGE>

and liquidation of any REO Property, (iv) the performance of its obligations
under Section 3.01, Section 3.07, Section 3.11, Section 3.13 and Section 3.21
and (v) obtaining or correcting any legal documentation required to be included
in the Mortgage Files and reasonably necessary for the Servicer to perform its
obligations under this Agreement. Servicing Advances also include any reasonable
"out-of-pocket" cost and expenses (including legal fees) incurred by the
Servicer in connection with executing and recording instruments of satisfaction,
deeds of reconveyance or Assignments to the extent not recovered from the
Mortgagor or otherwise payable under this Agreement. The 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 one twelfth of the product of the
Servicing Fee Rate multiplied by the Scheduled Principal Balance of the Mortgage
Loans as of the Due Date in the preceding calendar month. The Servicing Fee is
payable solely from collections of interest on the Mortgage Loans.

                  "Servicing Fee Rate": 0.50% per annum.

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

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

                  "Startup Day": With respect to each Trust REMIC, the day
designated as such pursuant to Section 11.01(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 Servicer or a successor Servicer (including the Master
Servicer) and distributed pursuant to Section 5.01 on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent distributed pursuant to Section 5.01 on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Servicer as recoveries of principal in accordance with the provisions of
Section 3.13, to the extent distributed pursuant to Section 5.01 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

                                      -60-

<PAGE>

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 Servicer or a successor Servicer
(including the Master Servicer) and distributed pursuant to Section 5.01 on or
before such date of determination and (ii) the aggregate amount of REO Principal
Amortization in respect of such REO Property for 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.

                  "Step-Up Date": The first Distribution Date following the
first month in which the aggregate unpaid principal balance of the Mortgage
Loans, and properties acquired in respect thereof, remaining in the trust has
been reduced to less than or equal to 10% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date.

                  "Stepdown Date": The later to occur of (x) the Distribution
Date occurring in May 2007 and (y) the first Distribution Date for which the
Senior Enhancement Percentage is greater than or equal to twice the Senior
Enhancement Percentage on the Closing Date.

                  "Strike Rate": With respect to the Corridor Contract Available
Amount, 1.10% per annum.

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

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

                  "Subordinate Net Funds Cap": For any Distribution Date, the
weighted average of the Group 1 Senior Net Funds Cap and the Group 2 Senior Net
Funds Cap, weighted on the basis of their Group Subordinate Amounts; provided,
however, that on any Distribution Date after the Certificate Principal Balance
of either the Class 1-A or Class 2-A Certificates has been reduced to zero, such
weighting will be on the basis of the Stated Principal Balance of the Mortgage
Loans in each loan group; and further provided, that in the case of the Class M8
and Class B Certificates, for the purpose of calculating the Subordinate Net
Funds Cap, the Group 1 Senior Net Funds Cap and the Group 2 Senior Net Funds Cap
will be calculated with clause (b) of the definition of each of the Group 1
Senior Net Funds Cap and the Group 2 Senior Net Funds Cap equal to 1. For
federal income tax purposes, the equivalent of the foregoing shall be expressed
as the weighted average of the REMIC II Remittance Rates on REMIC II Regular
Interest II-LT1SUB, subject to a cap and a

                                        -61-

<PAGE>

floor equal to the weighted average of Expense Adjusted Net Mortgage Rates on
the Group 1 Mortgage Loans, and REMIC II Regular Interest II-LT2SUB, subject to
a cap and a floor equal to the weighted average of Expense Adjusted Net Mortgage
Rates on the Group 2 Mortgage Loans, weighted on the basis of the Uncertificated
Balance of each such REMIC II Regular Interest.

                  "Subsequent Recoveries": Any Liquidation Proceeds (net of
amounts owed to the Servicer or Master Servicer with respect to the related
Mortgage Loan) received after the final liquidation of a Mortgage Loan.

                  "Substitution Shortfall Amount": As defined in Section 2.03.

                  "Superior Lien": With respect to any second lien Mortgage
Loan, any other mortgage loan that is not a Mortgage Loan relating to the
corresponding Mortgaged Property that creates a lien on such Mortgaged Property
that is senior to such second lien Mortgage Loan.

                  "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 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 10.01.

                  "Terminator": As defined in Section 10.01.

                  "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 is in effect with respect to
any Distribution Date if:

                  (1) the Rolling Three Month Delinquency Rate as of the close
         of business on the last day of the preceding calendar month exceeds 40%
         of the Senior Enhancement Percentage; or

                                        -62-

<PAGE>

                  (2) the cumulative amount of Realized Losses incurred on the
         Mortgage Loans from the Cut-off Date through the end of the calendar
         month immediately preceding such Distribution Date exceeds the
         applicable percentage set forth below of the aggregate Stated Principal
         Balance of the Mortgage Loans as of the Cut-off Date:

May 2007 to April 2008..................... 3.50% for the first month, plus an
                                            additional 1/12th of 1.75% for
                                            each month thereafter.
May 2008 to April 2009..................... 5.25% for the first month, plus an
                                            additional 1/12th of 1.75% for
                                            each month thereafter.
May 2009 and thereafter.................... 7.00%

                  "Trust": People's Choice Home Loan Securities Trust Series
2004-1, the trust created hereunder.

                  "Trust Fund": Collectively, all of the assets of REMIC I,
REMIC II and the Reserve Fund and any amounts on deposit therein and any
proceeds thereof, the Prepayment Charges and the Corridor Contract.

                  "Trust REMIC": REMIC I,  REMIC II or REMIC III.

                  "Trustee": HSBC Bank USA, a New York banking corporation, or
its successor in interest, or any successor trustee appointed as herein
provided.

                  "Uncertificated Balance": The amount of any REMIC Regular
Interests outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Balance of each REMIC Regular Interest 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
Regular Interest shall be reduced by all distributions of principal made on such
REMIC Regular Interest on such Distribution Date pursuant to Section 5.01 and,
if and to the extent necessary and appropriate, shall be further reduced on such
Distribution Date by Realized Losses as provided in Section 5.04 and the
Uncertificated Balance of REMIC II Regular Interest II-LTZZ shall be increased
by interest deferrals as provided in Section 5.01(a)(1)(i). The Uncertificated
Balance of each REMIC 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 Remittance
Rate applicable to such REMIC I Regular Interest for such Distribution Date,
accrued on the Uncertificated Balance or Uncertificated Notional Amount, as
applicable, thereof immediately prior to such Distribution Date. Uncertificated
Interest in respect of the REMIC Regular Interests 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 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 3.22 or Section 4.19 and (b) the aggregate amount
of any Relief Act

                                        -63-

<PAGE>

Interest Shortfall, if any allocated, in each case, to such REMIC Regular
Interest or REMIC Regular Interest pursuant to Section 1.02. In addition,
Uncertificated Interest with respect to each Distribution Date, as to any
Uncertificated REMIC Regular Interest, shall be reduced by Realized Losses, if
any, allocated to such Uncertificated REMIC Regular Interest pursuant to Section
1.02 and Section 5.04.

                  "Uncertificated Notional Amount": With respect to REMIC II
Regular Interest II- LTIO1 and each Distribution Date, the aggregate
Uncertificated Balance of the REMIC I Regular Interests ending with the
designation "B" listed below:

                     Distribution        REMIC I Regular Interests
                     ------------        -------------------------
                     Date
                     ----
                     1                   I-ILT1B through I-ILT23B
                     2                   I-ILT1B through I-ILT23B
                     3                   I-ILT2B through I-ILT23B
                     4                   I-ILT3B through I-ILT23B
                     5                   I-ILT4B through I-ILT23B
                     6                   I-ILT5B through I-ILT23B
                     7                   I-ILT6B through I-ILT23B
                     8                   I-ILT7B through I-ILT23B
                     9                   I-ILT8B through I-ILT23B
                     10                  I-ILT9B through I-ILT23B
                     11                  I-ILT10B through I-ILT23B
                     12                  I-ILT11B through I-ILT23B
                     13                  I-ILT12B through I-ILT23B
                     14                  I-ILT13B through I-ILT23B
                     15                  I-ILT14B through I-ILT23B
                     16                  I-ILT15B through I-ILT23B
                     17                  I-ILT16B through I-ILT23B
                     18                  I-ILT17B through I-ILT23B
                     19                  I-ILT18B through I-ILT23B
                     20                  I-ILT19B through I-ILT23B
                     21                  I-ILT10B through I-ILT23B
                     22                  I-ILT21B through I-ILT23B
                     23                  I-ILT22B and I-ILT23B
                     24                  I-ILT23B
                     thereafter          0

                                        -64-

<PAGE>

With respect to REMIC II Regular Interest II-LTIO2 and each Distribution Date,
the aggregate Uncertificated Balance of the REMIC I Regular Interests ending
with the designation "B" listed below:

                     Distribution        REMIC I Regular Interests
                     ------------        -------------------------
                     Date
                     ----
                     1                   I-IILT1B through I-IILT23B
                     2                   I-IILT1B through I-IILT23B
                     3                   I-IILT2B through I-IILT23B
                     4                   I-IILT3B through I-IILT23B
                     5                   I-IILT4B through I-IILT23B
                     6                   I-IILT5B through I-IILT23B
                     7                   I-IILT6B through I-IILT23B
                     8                   I-IILT7B through I-IILT23B
                     9                   I-IILT8B through I-IILT23B
                     10                  I-IILT9B through I-IILT23B
                     11                  I-IILT10B through I-IILT23B
                     12                  I-IILT11B through I-IILT23B
                     13                  I-IILT12B through I-IILT23B
                     14                  I-IILT13B through I-IILT23B
                     15                  I-IILT14B through I-IILT23B
                     16                  I-IILT15B through I-IILT23B
                     17                  I-IILT16B through I-IILT23B
                     18                  I-IILT17B through I-IILT23B
                     19                  I-IILT18B through I-IILT23B
                     20                  I-IILT19B through I-IILT23B
                     21                  I-IILT20B through I-IILT23B
                     22                  I-IILT21B through I-IILT23B
                     23                  I-IILT22B and I-IILT23B
                     24                  I-IILT23B
                     thereafter          0

                  "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
3.11.

                  "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 or any

                                        -65-

<PAGE>

political subdivision thereof (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 any Class R Certificate, 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 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, a trust which was in existence on August 20,
1996 (other than a trust treated as owned by the grantor under subpart E of part
I of subchapter J of chapter I 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 originator of the Mortgage Loan in accordance with such originator'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 the Mortgage Loan 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 originator of the Mortgage Loan in accordance with such originator'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 such Certificate. With respect to any
date of determination, 96% of all Voting Rights will be allocated among the
holders of the Class A, Class M and Class B Certificates in proportion to the
then outstanding Certificate Principal Balances of their respective
Certificates, 1% of all Voting Rights will be allocated among the holders of the
Class A-SIO Certificates, 1% of all Voting Rights will be allocated among the
holders of the Class C Certificates, 1% of all Voting Rights will be allocated
among the holders of the Class P Certificates and 1% of all Voting Rights will
be allocated among the holders of the Class R 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.

                                        -66-

<PAGE>

                  "Wells Fargo": Wells Fargo Bank, N.A. or any successor
thereto.

                                      -67-

<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

                  SECTION 2.01. Conveyance of the Mortgage Loans.

                  The Company, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, on behalf of the Trust, without recourse, for the benefit of the
Certificateholders, all the right, title and interest of the Company, including
any security interest therein for the benefit of the Company, in and to the
Mortgage Loans identified on the Mortgage Loan Schedule, the rights of the
Company under the Mortgage Loan Purchase Agreement (including, without
limitation the right to enforce the obligations of the other parties thereto
thereunder), and all other assets included or to be included in REMIC I. Such
assignment includes all interest and principal received by the Company or the
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 Company herewith delivers to the Trustee and the Servicer an executed
copy of the Mortgage Loan Purchase Agreement.

                  In connection with such transfer and assignment, the Company
does hereby deliver to, and deposit with the Custodian pursuant to the Custodial
Agreement the documents with respect to each Mortgage Loan as described under
Section 2 of the Custodial Agreement (the "Mortgage Loan Documents"). In
connection with such delivery and as further described in the Custodial
Agreement, the Custodian will be required to review such Mortgage Loan Documents
and deliver to the Trustee, the Company, the Servicer and the Seller
certifications (in the forms attached to the Custodial Agreement) with respect
to such review with exceptions noted thereon. In addition, under the Custodial
Agreement the Company will be required to cure certain defects with respect to
the Mortgage Loan Documents for the related Mortgage Loans after the delivery
thereof by the Company to the Custodian as more particularly set forth therein.

         The Master Servicer hereby acknowledges the receipt by it of cash in an
amount equal to $75,762.99 (the "Special Deposit"), representing interest at the
Mortgage Rate, for the calendar month of April 2004, for those Mortgage Loans
which do not have Monthly Payments due on May 1, 2004. The Master Servicer shall
hold such amount in the Custodial Account and shall include such amount in the
Available Distribution Amount for the Distribution Date in May 2004.

                  Notwithstanding anything to the contrary contained herein, the
parties hereto acknowledge that the functions of the Trustee with respect to the
custody, acceptance, inspection and release of the Mortgage Files, including,
but not limited to certain insurance policies and documents contemplated by
Section 4.12, and preparation and delivery of the certifications shall be
performed by the Custodian pursuant to the terms and conditions of the Custodial
Agreement.

                  The Company shall deliver or cause the Seller to deliver to
the Servicer copies of all trailing documents required to be included in the
Mortgage File at the same time the originals or certified copies thereof are
delivered to the Trustee or Custodian, such documents including the mortgagee
policy of title insurance and any Mortgage Loan Documents upon return from the

                                        -68-

<PAGE>

recording office. The Servicer shall not be responsible for any custodian fees
or other costs incurred in obtaining such documents and the Company shall cause
the Servicer to be reimbursed for any such costs the Servicer may incur in
connection with performing its obligations under this Agreement.

                  The Mortgage Loans permitted by the terms of this Agreement to
be included in the Trust are limited to (i) Mortgage Loans (which the Company
acquired pursuant to the Mortgage Loan Purchase Agreement, which contains, among
other representations and warranties, a representation and warranty of the
Mortgage Loan Seller that no Mortgage Loan is a "High-Cost Home Loan" as defined
in the New Jersey Home Ownership Act effective November 27, 2003 or as defined
in the New Mexico Home Loan Protection Act effective January 1, 2004) and (ii)
Qualified Substitute Mortgage Loans (which, by definition as set forth herein
and referred to in the Mortgage Loan Purchase Agreement, are required to conform
to, among other representations and warranties, the representation and warranty
of the Mortgage Loan Seller that no Qualified Substitute Mortgage Loan is a
"High-Cost Home Loan" as defined in the New Jersey Home Ownership Act effective
November 27, 2003 or as defined in the New Mexico Home Loan Protection Act
effective January 1, 2004). The Company and the Trustee on behalf of the Trust
understand and agree that it is not intended that any mortgage loan be included
in the Trust that is a "High-Cost Home Loan" as defined in the New Jersey Home
Ownership Act effective November 27, 2003 or as defined in the New Mexico Home
Loan Protection Act effective January 1, 2004.

                  SECTION 2.02. Acceptance of REMIC I by Trustee.

                  The Trustee acknowledges receipt, subject to the provisions of
Section 2.01 hereof and Section 2 of the Custodial Agreement, of the Mortgage
Loan Documents 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 (or the Custodian on its
behalf holds) and will hold such documents and the other documents delivered to
it constituting a Mortgage Loan Document, and that it holds (or the Custodian on
its behalf 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.

                  SECTION 2.03. Repurchase or Substitution of Mortgage Loans.

                  (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
a breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement in respect of any Mortgage Loan that materially
and adversely affects the value of such Mortgage Loan or the interest therein of
the Certificateholders, the Trustee shall promptly notify the Seller and the
Servicer of such defect, missing document or breach and request that the Seller
deliver such missing document, cure such defect or breach within 60 days from
the date the Seller was notified of such missing document, defect or breach, and
if the Seller does not deliver such missing document or cure such defect or
breach in all material respects during such period, the Trustee shall enforce
the obligations of the Seller 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 Seller was notified of such missing document, defect
or breach, if and to the extent that the Seller is obligated to do so under the
Mortgage Loan Purchase Agreement. The Purchase Price for the repurchased
Mortgage Loan

                                        -69-

<PAGE>

shall be remitted to the Servicer for deposit in the Collection Account and the
Trustee, upon receipt of written certification from the Servicer of such
deposit, shall release or cause the Custodian (upon receipt of a request for
release in the form attached to the Custodial Agreement) to release to the
Seller the related Mortgage File and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse,
representation or warranty, as the Seller shall furnish to it and as shall be
necessary to vest in the Seller any Mortgage Loan released pursuant hereto, and
the Trustee shall 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 Seller 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 Seller to cure or to
repurchase (or to substitute for) any Mortgage Loan as to which a document is
missing, a material defect in a constituent document exists or as to which such
a breach has occurred and is continuing shall constitute the sole remedy
respecting such omission, defect or breach available to the Trustee and the
Certificateholders.

                  In addition, promptly upon the earlier of discovery by the
Servicer or receipt of notice by the Servicer of the breach of the
representation or covenant of the Seller set forth in Section 3.1(c)(xxxviii) of
the Mortgage Loan Purchase Agreement which materially and adversely affects the
interests of the Holders of the Class P Certificates in any Prepayment Charge,
the Servicer shall promptly notify the Seller and the Trustee of such breach.
The Trustee shall enforce the obligations of the Seller under the Mortgage Loan
Purchase Agreement to remedy such breach to the extent and in the manner set
forth in the Mortgage Loan Purchase Agreement.

                  (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 Seller
substitutes a Qualified Substitute Mortgage Loan or Loans, such substitution
shall be effected by the Seller delivering to the Trustee or the Custodian on
behalf of 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 of the Custodial Agreement, as applicable, 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
Custodian on behalf of the Trustee shall acknowledge receipt of such Qualified
Substitute Mortgage Loan or Loans and, within ten Business Days thereafter,
review such documents and deliver to the Company, the Trustee and the Servicer,
with respect to such Qualified Substitute Mortgage Loan or Loans, an initial
certification pursuant to the Custodial Agreement, with any applicable
exceptions noted thereon. Within one year of the date of substitution, the
Custodian on behalf of the Trustee shall deliver to the Company, the Trustee and
the Servicer a final certification pursuant to the Custodial Agreement 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

                                        -70-

<PAGE>

Seller. 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 Seller shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Company 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 and the Servicer. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall constitute part of the Trust Fund 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 herein or in the Mortgage Loan Purchase Agreement.

                  For any month in which the Seller substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
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 Seller will deliver or
cause to be delivered to the Servicer for deposit in the Collection Account an
amount equal to the Substitution Shortfall Amount, if any, and the Trustee or
the Custodian on behalf of the Trustee, upon receipt of the related Qualified
Substitute Mortgage Loan or Loans, upon receipt of a request for release in the
form attached to the Custodial Agreement and certification by the Servicer of
such deposit, shall release to the Seller the related Mortgage File or Files and
the Trustee shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, representation or warranty, as the
Seller shall deliver to it and as shall be necessary to vest therein any Deleted
Mortgage Loan released pursuant hereto.

                  In addition, the Seller shall obtain at its own expense and
deliver to the Trustee an Opinion of Counsel to the effect that such
substitution will not cause (a) any federal tax to be imposed on any Trust
REMIC, 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 Trust REMIC
to fail to qualify as a REMIC at any time that any Certificate is outstanding.

                  (c) Upon discovery by the Company, the Seller, the Servicer or
the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party discovering such
fact shall within two Business Days give written notice thereof to the other
parties. In connection therewith, the Seller shall repurchase or 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 Seller 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 Seller under the Mortgage Loan Purchase Agreement or (ii) the
Company, if the affected

                                        -71-

<PAGE>

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 Seller the Mortgage Loan to be released pursuant hereto in the same manner,
and on the same terms and conditions, as it would a Mortgage Loan repurchased
for breach of a representation or warranty.

                  (d) With respect to a breach of the representations made
pursuant to Section 3.1(c)(xxxviii) of the Mortgage Loan Purchase Agreement that
materially and adversely affects the value of such Mortgage Loan or the interest
therein of the Certificateholders, the Seller shall be required to take the
actions set forth in this Section 2.03.

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

                  SECTION 2.04. Representations and Warranties of the Master
                                Servicer.

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

                  (i) The Master Servicer is a national banking association duly
formed, validly existing and in good standing under the laws of the United
States of America and is duly authorized and qualified to transact any and all
business contemplated by this Agreement to be conducted by the Master Servicer;

                  (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
other parties hereto, 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 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 charter and by-laws
of the Master Servicer or (B) conflict with, result in a material 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

                                      -72-

<PAGE>

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
of the 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 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;

                  (v) 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 perform any of its
other obligations hereunder in accordance with the terms hereof,

                  (vi) 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; and

                  (vii) 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.

                  It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.04 shall survive the
resignation or termination of the parties hereto and the termination of this
Agreement and shall inure to the benefit of the Trustee, the Company and the
Certificateholders.

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

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

                  (i) The Servicer is a corporation duly organized, validly
         existing and in good standing under the laws of the state of New Jersey
         and is duly authorized and qualified to transact any and all business
         contemplated by this Agreement to be conducted by the 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

                                      -73-

<PAGE>

         Mortgage Loan and to service the Mortgage Loans in accordance with the
         terms of this Agreement;

                  (ii) The 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 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 other parties hereto,
         constitutes a legal, valid and binding obligation of the 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
         Servicer, the servicing of the Mortgage Loans by the Servicer
         hereunder, the consummation by the 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
         Servicer and will not (A) result in a breach of any term or provision
         of the charter or by-laws of the 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 Servicer is a party or by which it may be bound, or any statute,
         order or regulation applicable to the Servicer of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over the Servicer; and the 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 Servicer's knowledge, would in the future materially and
         adversely affect, (x) the ability of the Servicer to perform its
         obligations under this Agreement, (y) the business, operations,
         financial condition, properties or assets of the Servicer taken as a
         whole or (z) the legality, validity or enforceability of this
         Agreement;

                  (iv) The 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;

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

                  (vi) There are no actions or proceedings against, or
         investigations known to it of, the 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 Servicer of
         its obligations under, or the validity or enforceability of, this
         Agreement;

                                      -74-

<PAGE>

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

                  (viii) The Servicer has fully furnished and will continue to
         fully furnish, in accordance with the Fair Credit Reporting Act and its
         implementing regulations, accurate and complete information (e.g.,
         favorable and unfavorable) on its borrower credit files to Equifax,
         Experian and Trans Union Credit Information Company or their successors
         on a monthly basis; and

                  (ix) The Servicer will not waive any Prepayment Charge other
         than in accordance with the standard set forth in Section 3.01.

Notwithstanding anything to the contrary contained in this Agreement, if the
covenant of the Servicer set forth in Section 2.05(ix) above is breached, the
Servicer will pay the amount of such waived Prepayment Charge, from its own
funds without any right of reimbursement, for the benefit of the Holders of the
Class P Certificates, by depositing such amount into the Collection Account
within 90 days of the earlier of discovery by the Servicer or receipt of notice
by the Servicer of such breach. Furthermore, notwithstanding any other
provisions of this Agreement, any payments made by the Servicer in respect of
any waived Prepayment Charges pursuant to this paragraph shall be deemed to be
paid outside of the Trust Fund.

                  It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive the
resignation or termination of the parties hereto, the termination of this
Agreement and the delivery of the Mortgage Files to the Custodian and shall
inure to the benefit of the Trustee, the Master Servicer, the Securities
Administrator, the Company and the Certificateholders. Upon discovery by any
such Person or the Servicer of a breach of any of the foregoing representations,
warranties and covenants which materially and adversely affects the value of any
Mortgage Loan, Prepayment Charge 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 8.01, unless such breach shall not be
susceptible of cure within 90 days, the obligation of the Servicer set forth in
Section 2.03(e) to cure breaches shall constitute the sole remedy against the
Servicer available to the Certificateholders, the Company or the Trustee on
behalf of the Certificateholders respecting a breach of the representations,
warranties and covenants contained in this Section 2.05.

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

                  The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to the Custodian on its behalf of the Mortgage Loan
Documents, subject to the provisions of Section 2.01 and Section 2.02 hereof and
Section 2 of the Custodial Agreement, together with the assignment to it of all
other assets included in REMIC I, the receipt of which is hereby acknowledged.
The interests evidenced by the Class R-I Interest, together with the REMIC I
Regular

                                        -75-

<PAGE>

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

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

                  The Company, 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 Company in
and to the REMIC I Regular Interests for the benefit of the Class R-II Interest
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 Holders of the Class R-II Interest and REMIC II (as holder of the
REMIC I Regular Interests). The rights of the Holder of the Class R-II Interest
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
Interest and REMIC II Regular Interests, respectively, and all ownership
interests evidenced or constituted by the Class R-II Interest and the REMIC II
Regular Interests, shall be as set forth in this Agreement. The Class R-II
Interest and the REMIC II Regular Interests shall constitute the entire
beneficial ownership interest in REMIC II.

                  The Company, 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 Company in
and to the REMIC II Regular Interests for the benefit of the Class R-III
Interest and the holders of the Regular Certificates. 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 Holders of the Class R-III Interest and the holders of the Regular
Certificates. The rights of the Holder of the Class R-III Interest and holders
of the Regular Certificates to receive distributions from the proceeds of REMIC
III in respect of the Class R-III Interest and Regular Certificates,
respectively, and all ownership interests evidenced or constituted by the Class
R-III Interest and the Regular Certificates, shall be as set forth in this
Agreement. The Class R-III Interest and the Regular Certificates shall
constitute the entire beneficial ownership interest in REMIC III.

                  SECTION 2.08. Issuance of Class R Certificates.

                  The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and REMIC II Regular Interests and, concurrently therewith and
in exchange therefor, pursuant to the written request of the Company executed by
an officer of the Company, the Securities Administrator has executed and
authenticated and the Trustee has delivered to or upon the order of the Company,
the Class R Certificates in authorized denominations. The Class R Certificates
evidence ownership in the Class R-I Interest, the Class R-II Interest and the
Class R-III Interest.

                  SECTION 2.09. Establishment of the Trust.

                                        -76-

<PAGE>

                  The Company does hereby establish, pursuant to the further
provisions of this Agreement and the laws of the State of New York, an express
trust to be known, for convenience, as "People's Choice Home Loan Securities
Trust Series 2004-1" and does hereby appoint HSBC Bank USA, as Trustee in
accordance with the provisions of this Agreement.

                                        -77-

<PAGE>

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                         OF THE MORTGAGE LOANS; ACCOUNTS

                  SECTION 3.01. Servicer to Act as Servicer.

                  The Servicer shall service and administer the Mortgage Loans
on behalf of the Trust Fund and in the best interests of and for the benefit of
the Certificateholders (as determined by the Servicer in its reasonable
judgment) in accordance with the terms of this Agreement and the respective
Mortgage Loans and all applicable law and regulations 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 prudent mortgage
lenders and loan servicers administering similar mortgage loans but without
regard to:

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

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

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

                  (iv) the Servicer's right to receive compensation for its
         services hereunder.

                  To the extent consistent with the foregoing, the Servicer
shall also seek to maximize the timely and complete recovery of principal and
interest on the Mortgage Notes and shall waive (or permit a Sub-Servicer to
waive) a Prepayment Charge only under the following circumstances: (i) such
waiver is standard and customary in servicing similar Mortgage Loans and such
waiver is related to a default or reasonably foreseeable default and would, in
the reasonable judgement of the 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, (ii) such Prepayment Charge is unenforceable in accordance
with applicable law or the collection of such related Prepayment Charge would
otherwise violate applicable law or (iii) the mortgage debt has been accelerated
as a result of the related Mortgagor's default in making the related Monthly
Payments. Notwithstanding any provision in this Agreement to the contrary, in
the event the Prepayment Charge payable under the terms of the Mortgage Note is
less than the amount of the Prepayment Charge set forth in the Prepayment Charge
Schedule or other information provided to the Servicer, the Servicer shall not
have any liability or obligation with respect to such difference, and in
addition shall not have any liability or obligation to pay the amount of any
uncollected Prepayment Charge if the failure to collect such amount is the
direct result of inaccurate or incomplete information on the Prepayment Charge
Schedule.

                  Subject only to the above-described servicing standards (the
"Accepted Servicing Practices") and the terms of this Agreement and of the
respective Mortgage Loans, the Servicer shall

                                        -78-

<PAGE>

have full power and authority, 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 Servicer in its
own name or in the name of the Trustee is hereby authorized and empowered by the
Trustee when the Servicer believes it appropriate in its best judgment, to
execute and deliver, on behalf of the Trust Fund, the Certificateholders and the
Trustee or any of them, and upon written notice to the Trustee, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge or subordination, 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, in the name of and on behalf of the Trustee, for the benefit of the
Trust Fund and the Certificateholders. The 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 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 3.14, the Trustee shall execute, at the
written request of the Servicer, and furnish to the Servicer any special or
limited powers of attorney and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties
hereunder and furnished to the Trustee by the Servicer, and the Trustee shall
not be liable for the actions of the Servicer under such powers of attorney and
shall be indemnified by the Servicer for any cost, liability or expense incurred
by the Trustee in connection with the Servicer's use or misuse of any such power
of attorney.

                  In accordance with Accepted Servicing Practices, the Servicer
shall make or cause to be made Servicing Advances as necessary for the purpose
of effecting the payment of taxes and assessments on the Mortgaged Properties,
which Servicing Advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.07, and further as
provided in Section 3.09; provided, however, the Servicer shall only make such
Servicing Advance if the Mortgagor has not made such payment, if the failure to
make such Servicing Advance would result in the loss of the Mortgaged Property
due to a tax sale or foreclosure as result of a tax lien and if such Servicing
Advance would not constitute a Nonrecoverable Servicing Advance. Any cost
incurred by the Servicer in effecting the payment of taxes and assessments on a
Mortgaged Property shall not, for the purpose of calculating the Stated
Principal Balance of a Mortgage Loan or 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 Servicer may not make any future advances with respect to a Mortgage Loan
and the Servicer shall not 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 3.06, the Mortgagor is in default with respect to the Mortgage Loan or
such default is, in the judgment of the Servicer, reasonably foreseeable) or 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 final, temporary or proposed Treasury regulations
promulgated thereunder) and (B) cause any Trust REMIC created hereunder to fail
to qualify as a REMIC under

                                        -79-

<PAGE>

the Code or the imposition of any tax on "prohibited transactions" or
"contributions after the startup date" under the REMIC Provisions.

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

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

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

                  SECTION 3.03. Successor Sub-Servicers.

                  Any Sub-Servicing Agreement shall provide that Servicer shall
be entitled to terminate any Sub-Servicing Agreement and to either itself
directly service the related Mortgage Loans or 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 successor Servicer (which may be the Trustee or
the Master Servicer) without fee, in accordance with the terms of this
Agreement, in the event that the Servicer (or any successor Servicer) shall, for
any reason, no longer be the Servicer (including termination due to a Servicer
Event of Default).

                  SECTION 3.04. No Contractual Relationship Between
                                Sub-Servicer, Trustee or the Certificateholders.

                                        -80-

<PAGE>

                  Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer alone and the Master Servicer,
the Trustee and the Certificateholders shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
any Sub-Servicer except as set forth in Section 3.05.

                  SECTION 3.05. Assumption or Termination of Sub-Servicing
                                Agreement by Successor Servicer.

                  In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by a successor Servicer (which may be the Trustee or the Master
Servicer) pursuant to Section 8.02, it is understood and agreed that the
Servicer's rights and obligations under any Sub-Servicing Agreement then in
force between the Servicer and a Sub-Servicer shall be assumed simultaneously by
such successor Servicer without act or deed on the part of such successor
Servicer; provided, however, that any successor Servicer may terminate the
Sub-Servicer.

                  The Servicer shall, upon the reasonable request of the Master
Servicer, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub- Servicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.

                  The Servicing Fee payable to any such successor Servicer shall
be payable from payments received on the Mortgage Loans in the amount and in the
manner set forth in this Agreement.

                  SECTION 3.06. Collection of Certain Mortgage Loan Payments.

                  The 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
Accepted Servicing Practices, 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 Servicer may in its
discretion (i) waive any late payment charge or, if applicable, 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 that any extension pursuant to
this clause shall not affect the amortization schedule of any Mortgage Loan for
purposes of any computation hereunder. Notwithstanding the foregoing, in the
event that any Mortgage Loan is in default or, in the judgment of the Servicer,
such default is reasonably foreseeable, the Servicer, consistent with Accepted
Servicing Practices may waive, modify or vary any term of such Mortgage Loan
(including modifications that change the Mortgage Rate, forgive the payment of
principal or interest or extend the final maturity date of such Mortgage Loan),
accept payment from the related Mortgagor of an amount less than the Stated
Principal Balance in final satisfaction of such Mortgage Loan, or consent to the
postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor if in the Servicer's determination such waiver,
modification, postponement or indulgence is not materially adverse to the
interests of the

                                        -81-

<PAGE>

Certificateholders (taking into account any estimated Realized Loss that might
result absent such action).

                  SECTION 3.07. Collection of Taxes, Assessments and Similar
                                Items; Servicing Accounts.

                  To the extent the terms of a Mortgage provide for Escrow
Payments, the Servicer shall establish and maintain 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,
fire, flood, and 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 Servicer shall deposit in the Servicing
Accounts on a daily basis and in no event later than the second Business Day
after receipt, and retain therein, 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, fire, flood, and hazard insurance premiums, and comparable items;
(ii) reimburse the Servicer out of related collections for any Servicing
Advances made pursuant to Section 3.01 (with respect to taxes and assessments)
and Section 3.11 (with respect to fire, flood and hazard insurance); (iii)
refund to Mortgagors any sums as may be determined to be overages; (iv) pay
interest to the Servicer or, if required and as described below, to Mortgagors
on balances in the Servicing Account; (v) withdraw funds deposited in error or
for which amounts previously deposited are returned due to a "not sufficient
funds" or other denial from the related Mortgagor's banking institution; or (vi)
clear and terminate the Servicing Account at the termination of the Servicer's
obligations and responsibilities in respect of the Mortgage Loans under this
Agreement in accordance with Article X. As part of its servicing duties, the
Servicer shall pay to the Mortgagors interest on funds in 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. Notwithstanding the foregoing,
the Servicer shall not be obligated to collect Escrow Payments if the related
Mortgage Loan does not require such payments but the Servicer shall nevertheless
be obligated to make Servicing Advances as provided in Section 3.01 and Section
3.11. In the event the Servicer shall deposit in the Servicing Accounts any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Servicing Accounts, any provision to the contrary
notwithstanding.

                  To the extent that a Mortgage does not provide for Escrow
Payments, the Servicer (i) shall determine whether any such payments are made by
the Mortgagor in a manner and at a time that is necessary to avoid the loss of
the Mortgaged Property due to a tax sale or the foreclosure as a result of a tax
lien and (ii) shall ensure that all insurance required to be maintained on the
Mortgaged Property pursuant to this Agreement is maintained. If any such payment
has not been made and the Servicer receives notice of a tax lien with respect to
the Mortgage Loan being imposed, the Servicer shall, promptly and to the extent
required to avoid loss of the Mortgaged Property, advance or cause to be
advanced funds necessary to discharge such lien on the Mortgaged Property unless
the Servicer determines the advance to be nonrecoverable. The Servicer assumes
full responsibility for the payment of all such bills and shall effect payments
of all such bills irrespective of the Mortgagor's faithful performance in the
payment of same or the making of the Escrow

                                        -82-

<PAGE>

Payments and shall make Servicing Advances to effect such payments subject to
its determination of recoverability.

                  SECTION 3.08. Collection Account and Distribution Account.

                  (a) On behalf of the Trust Fund, the Servicer shall establish
and maintain one or more Collection Accounts, held in trust for the benefit of
the Trustee and the Certificateholders. On behalf of the Trust Fund, the
Servicer shall deposit or cause to be deposited in the Collection Account on a
daily basis and in no event later than two Business Days after receipt, as and
when received or as otherwise required hereunder, the following payments and
collections received or made by it on or subsequent to the Cut-off Date other
than amounts attributable to a Due Date on or prior to the Cut-off Date:

                           (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 and any Prepayment Interest Excess) on
                  each Mortgage Loan;

                           (iii) all Insurance Proceeds and Liquidation Proceeds
                  (other than proceeds collected in respect of any particular
                  REO Property);

                           (iv) any amounts required to be deposited pursuant to
                  Section 3.10 in connection 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
                  Servicer pursuant to the second paragraph of Section 3.11(a)
                  in respect of any blanket policy deductibles;

                           (vi) any Purchase Price or Substitution Shortfall
                  Amount delivered to the Servicer and all proceeds (net of
                  amounts payable or reimbursable to the Servicer, the Master
                  Servicer, the Trustee, the Custodian or the Securities
                  Administrator) of Mortgage Loans purchased in accordance with
                  Section 2.03, Section 3.13 or Section 10.01; and

                           (vii) any Prepayment Charges collected by the
                  Servicer in connection with the Principal Prepayment of any of
                  the Mortgage Loans or amounts required to be deposited by the
                  Servicer in connection with a breach of its obligations under
                  Section 2.05.

                  The foregoing requirements for deposit in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late payment
charges, assumption fees or other similar fees need not be deposited by the
Servicer in the Collection Account and may be retained by the Servicer as
additional compensation. In the event the Servicer shall deposit in the
Collection Account any amount not required to be

                                        -83-

<PAGE>

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 Securities Administrator
shall establish and maintain one or more accounts (such account or accounts, the
"Distribution Account"), held in trust for the benefit of the Trustee, the Trust
Fund and the Certificateholders. On behalf of the Trust Fund, the Servicer shall
deliver to the Securities Administrator in immediately available funds for
deposit in the Distribution Account on or before 12:00 noon New York time on the
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 Servicer in connection with
the Principal Prepayment of any of the Mortgage Loans then on deposit in the
Collection Account. If the balance on deposit in the Collection Account exceeds
$100,000 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 Servicer shall, on or before
5:00 p.m. New York time on such Business Day, withdraw from the Collection
Account any and all amounts payable or reimbursable to the Company, the
Servicer, the Trustee, the Master Servicer, the Securities Administrator or the
Seller pursuant to Section 3.09(a) and shall pay such amounts to the Persons
entitled thereto.

                  With respect to any remittance received by the Securities
Administrator on or after the first Business Day following the Business Day on
which such payment was due, the Securities Administrator shall send written
notice thereof to the Servicer. The Servicer shall pay to the Securities
Administrator interest on any such late payment at an annual rate equal to Prime
Rate (as defined in The Wall Street Journal) plus one percentage point, but in
no event greater than the maximum amount permitted by applicable law. Such
interest shall be paid by the Servicer to the Securities Administrator on the
date such late payment is made and shall cover the period commencing with the
day following such first Business Day and ending with the Business Day on which
such payment is made, both inclusive. The payment by the Servicer of any such
interest, or the failure of the Securities Administrator to notify the Servicer
of such interest, shall not be deemed an extension of time for payment or a
waiver of any Event of Default by the Servicer.

                  (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 3.10. The Servicer shall give notice to the
Trustee, the Securities Administrator and the Master Servicer of the location of
the Collection Account maintained by it when established and prior to any change
thereof. Upon receipt, the Master Servicer shall provide to the Rating Agencies
such notice of any change in the location of the Collection Account. The
Securities Administrator shall give notice to the Servicer and the Company 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 Servicer in immediately available funds to the Securities
Administrator for deposit in the Distribution Account. In the event the Servicer
shall deliver to the Securities Administrator for deposit in the Distribution
Account any amount not required to be deposited therein, it may at any time
request that the Securities Administrator withdraw such amount from the
Distribution Account

                                      -84-

<PAGE>

and remit to the Servicer any such amount, any provision herein to the contrary
notwithstanding. In no event shall the Securities Administrator incur liability
as a result of withdrawals from the Distribution Account at the direction of the
Servicer in accordance with the immediately preceding sentence. In addition, the
Servicer shall deliver to the Securities Administrator no later than the
Servicer Remittance Date the amounts set forth in clauses (i) through (iv)
below:

                           (i) any P&I Advances, as required pursuant to Section
                  5.03;

                           (ii) any amounts required to be deposited pursuant to
                  Section 3.21(d) or 3.21(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 10.01; and

                           (iv) any Compensating Interest payments required to
                  be deposited pursuant to Section 3.22.

                  SECTION 3.09. Withdrawals from the Collection Account and
                                Distribution Account.

                           (a) The Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 5.03:

                           (i) to remit to the Securities Administrator for
                  deposit in the Distribution Account the amounts required to be
                  so remitted pursuant to Section 3.08(b) or permitted to be so
                  remitted pursuant to the first sentence of Section 3.08(d);

                           (ii) subject to Section 3.13(d), to reimburse the
                  Servicer (including any successor Servicer) for P&I Advances
                  made by it, but only to the extent of amounts received which
                  represent Late Collections (net of the related Servicing Fees)
                  on Mortgage Loans with respect to which such P&I Advances were
                  made in accordance with the provisions of Section 5.03;

                           (iii) subject to Section 3.13(d), to pay the Servicer
                  (A) any unpaid Servicing Fees and reimburse the Servicer any
                  unreimbursed Servicing Advances with respect to each Mortgage
                  Loan, but only to the extent of any Liquidation Proceeds and
                  Insurance Proceeds received with respect to such Mortgage Loan
                  and (B) any unpaid Servicing Fees with respect to second lien
                  Mortgage Loans to the extent the Liquidation Proceeds or
                  Insurance Proceeds are insufficient to pay such Servicing
                  Fees;

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

                                        -85-

<PAGE>

                           (v) to pay to the Servicer 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
                  3.13(c) all amounts received thereon not included in the
                  Purchase Price or the Substitution Shortfall Amount;

                           (vi) to reimburse the Servicer (including any
                  successor Servicer) for any P&I Advance or Servicing Advance
                  previously made by it which the Servicer has determined to be
                  a Nonrecoverable P&I Advance or a Nonrecoverable Servicing
                  Advance in accordance with the provisions of Section 5.03;

                           (vii) to reimburse the Servicer or the Company for
                  expenses incurred by or reimbursable to the Servicer or the
                  Company, as the case may be, pursuant to Section 3.01 or
                  Section 7.03;

                           (viii) to reimburse the Servicer or the Trustee, as
                  the case may be, for expenses reasonably incurred in respect
                  of the breach or defect giving rise to the purchase obligation
                  under Section 2.03 of this Agreement that were included in the
                  Purchase Price of the Mortgage Loan, including any expenses
                  arising out of the enforcement of the purchase obligation;

                           (ix) to pay, or to reimburse the Servicer for
                  advances in respect of, expenses incurred in connection with
                  any Mortgage Loan pursuant to Section 3.13(b);

                           (x) to pay to the Servicer any Prepayment Interest
                  Excess on the Mortgage Loans (to the extent not retained
                  pursuant to Section 3.08(a)(ii));

                           (xi) to withdraw funds deposited in error or for
                  which amounts previously deposited are returned due to a "not
                  sufficient funds" or other denial from the related Mortgagor's
                  banking institution; and

                           (xii) to clear and terminate the Collection Account
                  pursuant to Section 10.01.

                  The 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), (v), (vi), (vii), (viii), (ix) and (x)
above.

                           (b) The Securities Administrator 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 5.01;

                                        -86-

<PAGE>

                           (ii) to pay to itself, the Custodian, the Master
                  Servicer and the Trustee amounts to which it is entitled
                  pursuant to Section 9.05 or any other provision of this
                  Agreement and any Extraordinary Trust Fund Expenses; provided
                  however, that the maximum amount that the Trustee can be paid
                  pursuant to this clause shall not exceed $200,000 in any
                  calendar year;

                           (iii) to reimburse itself or the Master Servicer
                  pursuant to Section 8.02;

                           (iv) to pay any amounts in respect of taxes pursuant
                  to Section 11.01(g)(v);

                           (v) to pay the Master Servicing Fee to the Master
                  Servicer; and

                           (vi) to clear and terminate the Distribution Account
                  pursuant to Section 10.01.

                  SECTION 3.10. Investment of Funds in the Investment Accounts.

                           (a) The Servicer may direct, by means of written
directions (which may be standing directions), any depository institution
maintaining the Collection Account to invest the funds in the Collection Account
(for purposes of this Section 3.10, an "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 Securities
Administrator 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 Securities Administrator is the obligor on such Permitted
Investment. Amounts in the Distribution Account may be invested in Permitted
Investments as directed in writing by the Master Servicer 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 Securities Administrator 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
Securities Administrator is the obligor thereon. All such Permitted Investments
shall be held to maturity, unless payable on demand. Any investment of funds
shall be made in the name of the Trustee (in its capacity as such) or in the
name of a nominee of the Trustee. The Securities Administrator shall be entitled
to sole possession over each such investment in the Distribution Account and,
subject to subsection (b) below, the income thereon, and any certificate or
other instrument evidencing any such investment shall be delivered directly to
the Securities Administrator 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 the Collection Account are at any
time invested in a Permitted Investment payable on demand, the party with
investment discretion over such Investment Account 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

                                        -87-

<PAGE>

                  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 receipt by such party of written notice from the
                  Servicer 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 held by or on behalf of the
Servicer, shall be for the benefit of the Servicer and shall be subject to its
withdrawal in accordance with Section 3.09. The Servicer shall deposit in the
Collection Account the amount of any loss incurred in respect of any such
Permitted Investment made with funds in such account immediately upon
realization of such loss. All earnings and gain realized from the investment of
funds deposited in the Distribution Account shall be for the benefit of the
Master Servicer. The Master Servicer shall remit from its own funds for deposit
into the Distribution Account the amount of any loss incurred on Permitted
Investments in the Distribution Account.

                           (c) Except as otherwise expressly provided in this
Agreement, if any default occurs in the making of a payment due under any
Permitted Investment, or if a default occurs in any other performance required
under any Permitted Investment, the Trustee may and, subject to Section 9.01 and
Section 9.02(a)(v), shall, at the written direction of the Servicer, take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate proceedings.

                           (d) The Trustee, the Master Servicer or their
respective Affiliates are permitted to receive additional compensation that
could be deemed to be in the Trustee's or the Master Servicer's economic
self-interest for (i) serving as investment adviser, administrator, shareholder
servicing agent, custodian or sub-custodian with respect to certain of the
Permitted Investments, (ii) using Affiliates to effect transactions in certain
Permitted Investments and (iii) effecting transactions in certain Permitted
Investments. Such compensation shall not be considered an amount that is
reimbursable or payable to the Trustee or the Master Servicer pursuant to
Section 3.09 or 3.10 or otherwise payable in respect of Extraordinary Trust Fund
Expenses. Such additional compensation shall not be an expense of the Trust
Fund.

                  SECTION 3.11. Maintenance of Hazard Insurance and Errors and
                                Omissions and Fidelity Coverage.

                  (a) The terms of each Mortgage Note require the related
Mortgagor to maintain fire, flood and hazard insurance policies. To the extent
such policies are not maintained, the Servicer shall cause to be maintained for
each Mortgaged Property fire and hazard insurance with extended coverage as is
customary in the area where the Mortgaged Property is located in an amount which
is at least equal to the least of (i) the current principal balance of such
Mortgage Loan, (ii) the maximum insurable value of the improvements which are a
part of such property and (iii) the amount necessary to compensate fully for any
damage or loss to the improvements which are a part of such property on a
replacement cost basis, in each case in an amount not less than such amount as
is

                                        -88-

<PAGE>

necessary to avoid the application of any coinsurance clause contained in the
related hazard insurance policy. The Servicer shall also cause to be maintained
fire and hazard insurance on each REO Property with extended coverage as is
customary in the area where the Mortgaged Property is located in an amount which
is at least equal to the lesser of (i) the maximum insurable value of the
improvements which are a part of such property, (ii) the outstanding principal
balance of the related Mortgage Loan at the time it became an REO Property or
(iii) the amount necessary to compensate fully for any damage or loss to the
improvements which 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 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 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 Accepted Servicing Practices, 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 3.09, if received
in respect of a Mortgage Loan, or in the REO Account, subject to withdrawal
pursuant to Section 3.21, if received in respect of an REO Property. Any cost
incurred by the 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, the 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 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 otherwise acceptable to Fannie Mae or Freddie Mac
insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations to cause fire and
hazard insurance to be maintained on the Mortgaged Properties, it being
understood and agreed that such policy may contain a deductible clause, in which
case the Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property or REO Property a policy complying with the
first two sentences of this Section 3.11, 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 Servicer agrees to prepare
and present, on behalf of itself, the Trustee, the Trust Fund and the
Certificateholders, claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.

                                        -89-

<PAGE>

                  (b) The 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 its respective 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 Servicer has obtained a waiver of such requirements
from Fannie Mae or Freddie Mac. The Servicer shall each also maintain a fidelity
bond in the form and amount that would meet the requirements of Fannie Mae or
Freddie Mac, unless the Servicer has obtained a waiver of such requirements from
Fannie Mae or Freddie Mac. The Servicer shall be deemed to have complied with
this provision if an Affiliate of the 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 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.

                  SECTION 3.12. Enforcement of Due-on-Sale Clauses; Assumption
                                Agreements.

                  The Servicer shall, to the extent it has knowledge of any
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 Servicer shall
not exercise any such rights if prohibited by law from doing so. If the 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 Servicer shall 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 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 then current underwriting criteria of the Servicer for mortgage
loans similar to the Mortgage Loans. In connection with any assumption or
substitution, the Servicer shall apply such underwriting standards and follow
such practices and procedures as shall be normal and usual in its general
mortgage servicing activities. The 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 Servicer in respect of an assumption or
substitution of liability agreement will be retained by the 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 Servicer shall
notify the Trustee (or the Custodian) that any such substitution or assumption
agreement has been completed by forwarding to the Trustee the executed original
of such substitution or assumption agreement, which document shall be added to
the related Mortgage File and shall, for all purposes, be considered

                                        -90-

<PAGE>

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 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 Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.12, 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 3.13. Realization Upon Defaulted Mortgage Loans.

                  (a) The 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 3.06. The Servicer, on
behalf of the Trust Fund, may also, in its discretion, as an alternative to
foreclosure, sell defaulted Mortgage Loans at fair market value to
third-parties, if the Servicer reasonably believes that such sale would maximize
proceeds to the Certificateholders in the aggregate (on a present value basis)
with respect to that Mortgage Loan. The Servicer shall be responsible for all
costs and expenses incurred by it in any such proceedings or sale; provided,
however, that such costs and expenses will be recoverable as Servicing Advances
by the Servicer as contemplated in Sections 3.09 and 3.21. The foregoing is
subject to the provision that, in any case in which a Mortgaged Property shall
have suffered damage from an Uninsured Cause, the 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
3.13 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trust Fund, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trust Fund, the Trustee 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 Servicer has also previously
determined, based on its reasonable judgment and a prudent report prepared by an
Independent 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

                                        -91-

<PAGE>

                  (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 3.13 shall be advanced by the Servicer, subject to the Servicer's
right to be reimbursed therefor from the Collection Account as provided in
Section 3.09(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 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 Servicer shall take such action as it deems to be in the best economic
interest of the Trust Fund. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Sections 3.09(a)(iii) or 3.09(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 Seller shall have the right to purchase from REMIC I
any defaulted Mortgage Loan that is 90 days or more delinquent, which the Seller
determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee, in form and substance satisfactory to the Seller and the Trustee, prior
to purchase), at a price equal to the Purchase Price. The Purchase Price for any
Mortgage Loan purchased hereunder shall be deposited in the Collection Account,
and the Trustee, upon receipt of written certification from the Seller of such
deposit, shall release or cause to be released to the Seller the related
Mortgage File and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, representation or
warranty, as the Seller shall furnish and as shall be necessary to vest in the
Seller title to any Mortgage Loan 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
Servicer for any related unreimbursed Servicing Advances and P&I Advances,
pursuant to Section 3.09(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

                                        -92-

<PAGE>

such Mortgage Loan, the amount of such recovery will be allocated by the
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 Servicer pursuant to Section
3.09(a)(iii). The portion of the recovery allocated to interest (net of unpaid
Servicing Fees) and the portion of the recovery allocated to principal of the
Mortgage Loan shall be applied as follows: first, to reimburse the Servicer for
any related unreimbursed Servicing Advances or P&I Advances in accordance with
Section 3.09(a)(ii) and any other amounts reimbursable to the Servicer pursuant
to Section 3.09, and second, as part of the amounts to be transferred to the
Distribution Account in accordance with Section 3.08(b).

                  (e) The Servicer, in its sole discretion, may, with respect to
any second lien Mortgage Loan which is greater than 180 days delinquent and for
which the related Superior Lien is not a Mortgage Loan, charge off such second
lien Mortgage Loan if it has made a Final Recovery Determination with respect
thereto (each such Mortgage Loan, a "Charged-off Mortgage Loan"). Any such
Charged-off Mortgage Loan shall be treated as a liquidated Mortgage Loan giving
rise to a Realized Loss. The Servicer shall have no obligation to make any P&I
Advances or Servicing Advances with respect to such Charged-off Mortgage Loan
for the period following the date on which such second lien Mortgage Loan was
charged off. Any net Liquidation Proceeds received in connection with any
recoveries received with respect to such Charged-off Mortgage Loan shall be
deposited in the Collection Account pursuant to Section 3.08.

                  (f) In the event that the Mortgage Loan Documents relating to
any Mortgage Loan contain provisions requiring the related Mortgagor to submit
to binding arbitration of any disputes arising in connection with such Mortgage
Loan, the Servicer shall be entitled to waive any such provisions on behalf of
the Trust Fund and to send written notice of such waiver to the related
Mortgagor, although such Mortgagor may still require arbitration of such
disputes at its option.

                  SECTION 3.14. Trustee to Cooperate; Release of Mortgage Files.

                  (a) Upon becoming aware of the payment in full of any Mortgage
Loan, or the receipt by the Servicer of a notification that payment in full has
been escrowed in a manner customary for such purposes for payment to
Certificateholders on the next Distribution Date, the Servicer will promptly
furnish to the Custodian, on behalf of the Trustee, a copy of a request for
release substantially in the form attached to the Custodial Agreement signed by
a Servicing Officer or in a mutually agreeable electronic format which will, in
lieu of a signature on its face, originate from a Servicing Officer (which
certification shall include a statement to the effect that all amounts received
in connection with such payment that are required to be deposited in the
Collection Account have been or will be so deposited) and shall request that the
Custodian, on behalf of the Trustee, deliver to the Servicer the related
Mortgage File. Upon receipt of such certification and request, the Custodian, on
behalf of the Trustee, shall within five (5) Business Days release the related
Mortgage File to the Servicer and the Trustee and Custodian shall have no
further responsibility with regard to such Mortgage File. Upon any such payment
in full, the Servicer is authorized, to give, as agent for the Trustee, as the
mortgagee under the Mortgage that secured the Mortgage Loan, an instrument of
satisfaction (or assignment of mortgage without recourse) regarding the
Mortgaged Property subject to the Mortgage, which instrument of satisfaction or
assignment, as the case may be, shall be delivered to the Person or Persons
entitled thereto against receipt therefor of such payment, it

                                        -93-

<PAGE>

being understood and agreed that, except as otherwise provided in the definition
of Servicing Advance, no expenses incurred in connection with such instrument of
satisfaction or assignment, as the case may be, shall be chargeable to the
Collection Account.

                  (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Trustee shall execute such documents as
shall be prepared and furnished to the Trustee by the Servicer (in form
reasonably acceptable to the Trustee) and as are necessary to the prosecution of
any such proceedings. The Custodian, on behalf of the Trustee, shall, upon the
request of the Servicer, and delivery to the Custodian, on behalf of the
Trustee, of two copies of a request for release signed by a Servicing Officer
substantially in the form attached to the Custodial Agreement (or in a mutually
agreeable electronic format which will, in lieu of a signature on its face,
originate from a Servicing Officer), release within five (5) Business Days the
related Mortgage File held in its possession or control to the Servicer. Such
trust receipt shall obligate the Servicer to return the Mortgage File to the
Custodian on behalf of the Trustee, when the need therefor by the Servicer no
longer exists unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a certificate of a Servicing Officer similar to that hereinabove
specified, the Mortgage File shall be released by the Custodian, on behalf of
the Trustee, to the Servicer.

                  Notwithstanding the foregoing, in connection with a Principal
Prepayment in full of any Mortgage Loan, the Master Servicer may request release
of the related Mortgage File from the Custodian, in accordance with the
provisions of the Custodial Agreement, in the event the Servicer fails to do so.

                  Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer, any court pleadings, requests for
trustee's sale or other documents prepared and delivered to the Trustee and
reasonably acceptable to it and 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. The Servicer shall have the right to execute any and all such
court pleadings, requests and other documents as attorney-in-fact for, and on
behalf of the Trustee.

                  SECTION 3.15. Servicing Compensation.

                  As compensation for the activities of the Servicer, hereunder,
the 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 3.22. In addition, the Servicer shall be
entitled to recover unpaid Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds and as otherwise permitted by Section 3.09(a)(iii) and out
of amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.21. The right to the Servicing Fee may not be transferred
in whole or in part except pursuant to Section 3.27 or in connection with the
transfer of all of the Servicer's responsibilities under this Agreement to the
extent permitted herein.

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<PAGE>

                  Additional servicing compensation in the form of assumption
fees, late payment charges and other miscellaneous fees (other than Prepayment
Charges) shall be retained by the Servicer only to the extent such fees or
charges are received by the Servicer. The Servicer shall also be entitled
pursuant to Section 3.09(a)(iv) to withdraw from the Collection Account and
pursuant to Section 3.21(b) to withdraw from any REO Account, as additional
servicing compensation, interest or other income earned on deposits therein,
subject to Section 3.10. In addition, the Servicer shall be entitled to retain
or withdraw from the Collection Account, pursuant to Section 3.09(a)(x), any
Prepayment Interest Excess with respect to the Mortgage Loans as additional
servicing compensation. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided
herein.

                  SECTION 3.16. Collection Account Statements.

                  Upon request of the Master Servicer or the Securities
Administrator, the Servicer shall forward to the Master Servicer or Securities
Administrator a statement prepared by the institution at which the Collection
Account is maintained setting forth the status of the Collection Account as of
the close of business on such Distribution Date and showing, for the period
covered by such statement, the aggregate amount of deposits into and withdrawals
from the Collection Account. Copies of such statement shall be provided by the
Securities Administrator to the Company, to any Certificateholder and to any
Person identified to the Securities Administrator as a prospective transferee of
a Certificate, upon request at the expense of the requesting party, provided
such statement is delivered by the Servicer to the Securities Administrator.

                  In addition, the Servicer shall deliver to the Company, on a
weekly basis, reports in the form of Alltel(R) report numbers P-194, P-196,
S-29F, T-30L and T-30M. Commencing after the fifteenth day of each month, and on
a weekly basis until the last day of each month, the Servicer shall deliver to
the Owner reports in the form of Alltel(R) report numbers P-195 and 4-DL.

                  SECTION 3.17. Statement as to Compliance.

                  Not later than March 15th of each calendar year commencing in
2005, the Servicer shall deliver to the Master Servicer an Officer's Certificate
(upon which the Master Servicer can conclusively rely in connection with its
obligations under Section 5.06) acceptable for filing with the Securities and
Exchange Commission as an exhibit to a Form 10-K stating, as to each signatory
thereof, that (i) a review of the activities of the Servicer during the
preceding year and of performance under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the 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 Master Servicer to the Trustee and the Company upon receipt, and
by the Trustee to any Certificateholder, upon request at the expense of the
requesting party.

                  SECTION 3.18. Independent Public Accountants' Servicing
                                Report.

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<PAGE>

                  Not later than March 15th of each calendar year commencing in
2005, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Servicer a report
acceptable for filing with the Securities and Exchange Commission as an exhibit
to a Form 10-K stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Servicer which includes an
assertion that the Servicer has complied with certain minimum residential
mortgage loan servicing standards, identified in 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
and such firm has determined that the Servicer has complied in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. Immediately upon receipt of such report, the Servicer shall furnish
a copy of such report to the Master Servicer, the Trustee and each Rating
Agency. Copies of any such statement shall be provided by the Master Servicer to
the Rating Agencies, the Trustee and the Company upon receipt, and by the
Trustee to any Certificateholder, upon request at the expense of the requesting
party.

                  SECTION 3.19 Annual Certification.

                  (a) The Servicer shall deliver to the Master Servicer, on or
before March 15th of each calendar year beginning in 2005 (or, if any such day
is not a Business Day, the immediately preceding Business Day) or such
alternative date reasonably specified by the Master Servicer which shall occur
only if, and not earlier than 15 days prior to the date, any Form 10-K is
required to be filed with the Commission in connection with the transactions
contemplated by this Agreement, a certification in the form attached hereto as
Exhibit C. Such certification shall be signed by the senior officer in charge of
servicing of the Servicer. In addition, the Servicer shall provide such other
information with respect to the Mortgage Loans and the servicing and
administration thereof within the control of the Servicer which shall be
required to enable the Master Servicer to comply with the reporting requirements
of the Securities and Exchange Act of 1934, as amended pursuant to Section 5.06
hereof.

                  (b) The Servicer shall indemnify and hold harmless the Master
Servicer and the Trustee and their respective officers, directors, agents and
affiliates from and against any losses, damages, penalties, fines, forfeitures,
reasonable legal fees and related costs, judgments and other costs and expenses
arising out of or based upon a breach by the Servicer or any of its officers,
directors, agents or affiliates of its obligations under this Section 3.19 or
the Servicer's negligence, bad faith or willful misconduct in connection
therewith. Such indemnity shall survive the termination or resignation of the
parties hereto or the termination of this Agreement. If the indemnification
provided for herein is unavailable or insufficient to hold harmless the Master
Servicer and the Trustee, then the Servicer agrees that it shall contribute to
the amount paid or payable by the Master Servicer and the Trustee as a result of
the losses, claims, damages or liabilities of the Master Servicer and the
Trustee in such proportion as is appropriate to reflect the relative fault of
the Master Servicer and the Trustee on the one hand and the Servicer on the
other in connection with a breach of the Servicer's obligations under this
Section 3.19.

                  SECTION 3.20. Access to Certain Documentation.

                                        -96-

<PAGE>

                  The 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 Certificate Owner,
access to the documentation 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
Servicer designated by it. Nothing in this Section 3.20 shall limit the
obligation of the Servicer to comply with any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the
Servicer to provide access as provided in this Section as a result of such
obligation shall not constitute a breach of this Section. Nothing in this
Section 3.20 shall require the Servicer to collect, create, collate or otherwise
generate any information that it does not generate in its usual course of
business. The Servicer shall not be required to make copies of or ship documents
to any Person unless provisions have been made for the reimbursement of the
costs thereof.

                  SECTION 3.21. 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, on behalf of the Trust Fund
and for the benefit of the Certificateholders. The Servicer, on behalf of REMIC
I, shall either sell any REO Property by the close of the third calendar year
following the calendar year in which 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 Servicer had delivered to the Trustee an Opinion of
Counsel, addressed to the Trustee and the Company, 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 any Trust REMIC created
hereunder of taxes on "prohibited transactions" thereof, as defined in Section
860F of the Code, or cause any Trust REMIC hereunder to fail to qualify as a
REMIC under Federal law at any time that any Certificates are outstanding. The
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 any Trust REMIC created hereunder 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 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
with respect to REO Properties an account held in trust for the Trustee, on
behalf of the Trust Fund and for the benefit of the Certificateholders (the "REO
Account"), which shall be an Eligible Account. The Servicer shall be permitted
to allow the Collection Account to serve as the REO Account, subject to separate
ledgers for each REO Property. The Servicer shall be entitled to retain or
withdraw any interest income paid on funds deposited in the REO Account.

                  (c) The 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 Servicer manages and operates similar

                                        -97-

<PAGE>

property owned by the Servicer or any of its Affiliates, all on such terms and
for such period as the Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Servicer shall deposit, or
cause to be deposited, on a daily basis in the REO Account 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 Servicer
shall advance from its own funds such amount as is necessary for such purposes
if, but only if, the Servicer would make such advances if the Servicer owned the
REO Property and if in the Servicer's judgment, the payment of such amounts will
be recoverable from the rental or sale of the REO Property.

                  Subject to compliance with applicable laws and regulations as
shall at any time be in force, and notwithstanding the foregoing, the Servicer,
on behalf of the Trust Fund, shall not:

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

                  (iii) authorize or permit 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

                  (iv) allow 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 Servicer has obtained an Opinion of Counsel,
provided to the Servicer and 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 Servicer may take such actions as are specified in
such Opinion of Counsel.

                                        -98-

<PAGE>

                  The 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 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 3.21(c) relating
         to any such contract or to actions taken through any such Independent
         Contractor shall be deemed to relieve the Servicer of any of its duties
         and obligations to the Trustee on behalf of the Trust Fund and for the
         benefit of the Certificateholders with respect to the operation and
         management of any such REO Property; and

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

                  The 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 Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Servicer shall be solely liable for all fees
owed by it to any such Independent Contractor, irrespective of whether the
Servicer's compensation pursuant to Section 3.15 is sufficient to pay such fees.
Any such agreement shall include a provision that such agreement may be
immediately terminated by the Trustee (as successor Servicer) or any other
successor Servicer (including the Master Servicer) without fee, in the event the
Servicer shall for any reason, no longer be the Servicer (including termination
due to a Servicer Event of Default).

                  (d) In addition to the withdrawals permitted under Section
3.21(c), the Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself 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 Advances made in respect of such REO
Property or the related Mortgage Loan. On the Servicer Remittance Date, the
Servicer shall withdraw from each REO Account maintained by it and deposit into
the Distribution Account in accordance with Section 3.08(d)(ii), for
distribution on the related Distribution Date in accordance with Section 5.01,
the income from the related REO Property received during the prior calendar
month, net of any withdrawals made pursuant to Section 3.21(c) or this Section
3.21(d).

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

                                        -99-

<PAGE>

                  (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 Servicer as provided above, shall
be deposited in the Distribution Account in accordance with Section 3.08(d)(ii)
on the Servicer Remittance Date in the month following the receipt thereof for
distribution on the related Distribution Date in accordance with Section 5.01.
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 Servicer shall file information returns (and shall
provide a certification of a Servicing Officer to the Master Servicer that such
filings have been made) 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 3.22. Obligations of the Servicer in Respect of
                                Prepayment Interest Shortfalls; Relief Act
                                Interest Shortfalls.

                  The Servicer shall deliver to the Securities Administrator for
deposit into the Distribution Account on or before 12:00 noon New York time on
the Servicer Remittance Date from its own funds an amount equal to the
Compensating Interest for such Distribution Date. The Servicer shall not have
the right to reimbursement for any amounts remitted to the Securities
Administrator in respect of this Section 3.22. The Servicer shall not be
obligated to pay the amounts set forth in this Section 3.22 with respect to
shortfalls resulting from the application of the Relief Act.

                  SECTION 3.23. Obligations of the 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 Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Securities
Administrator for deposit in the Distribution Account from its own funds the
amount of any such shortfall and shall indemnify and hold harmless the Trust
Fund, the Trustee, the Securities Administrator and the Master Servicer, the
Company and any successor Servicer in respect of any such liability. Such
indemnities shall survive the termination or discharge of this Agreement.
Notwithstanding the foregoing, this Section 3.23 shall not limit the ability of
the Servicer to seek recovery of any such amounts from the related Mortgagor
under the terms of the related Mortgage Note and Mortgage, to the extent
permitted by applicable law.

                  SECTION 3.24. Reserve Fund.

                                        -100-

<PAGE>

                  (a) No later than the Closing Date, the Securities
Administrator shall establish and maintain a separate, segregated trust account
entitled, "Reserve Fund, Wells Fargo Bank, N.A., in trust for the registered
holders of People's Choice Home Loan Securities Trust Series 2004-1, Mortgage
Pass-Through Certificates, Series 2004-1." On the Closing Date, the Company will
deposit, or cause to be deposited, into the Reserve Fund $1,000. In addition,
the amount deposited in the Reserve Fund shall be increased by any payments
received by the Securities Administrator under the Corridor Contract and
deposited in the Reserve Fund for the benefit of the Offered Certificates and
the Class C Certificates.

                  (b) On each Distribution Date as to which there is a Basis
Risk Shortfall Carry- Forward Amount payable to the Offered Certificates, the
Securities Administrator shall deposit into the Reserve Fund the amounts
described in Section 5.01(a)(7)(ii) and (iii), rather than distributing such
amounts to the Class C Certificateholders. On each such Distribution Date, the
Securities Administrator shall hold all such amounts for the benefit of the
Holders of the Offered Certificates, and will distribute such amounts to the
Holders of the Offered Certificates in the amounts and priorities set forth in
Section 5.01(a). If no Basis Risk Shortfall Carry-Forward Amounts are payable on
a Distribution Date, the Securities Administrator shall deposit, into the
Reserve Fund on behalf of the Class C Certificateholders, from amounts otherwise
distributable to the Class C 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 C
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 II to the Holders of
the Class C Certificates. Upon the termination of the Trust Fund, or the payment
in full of the Offered Certificates, all amounts remaining on deposit in the
Reserve Fund will be released by the Trust Fund and distributed to the Class C
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
Offered Certificates of Basis Risk Shortfall Carry-Forward 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 C Certificate, each Class C
Certificateholder hereby agrees that the Securities Administrator will deposit
into the Reserve Fund the amounts described above on each Distribution Date
rather than distributing such amounts to the Class C Certificateholders. By
accepting a Class C Certificate, each Class C Certificateholder further agrees
that its agreement to such action by the Securities Administrator 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 C Certificates, the Securities Administrator
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 Securities Administrator or an Affiliate manages or advises such
investment, and (ii) no later than the date on which such funds are

                                        -101-

<PAGE>

required to be withdrawn from such account pursuant to this Agreement, if the
Securities Administrator or an Affiliate manages or advises such investment. All
income and gain earned upon such investment shall be deposited into the Reserve
Fund. In no event shall the Securities Administrator be liable for any
investments made pursuant to this clause (e). If the Holders of a majority in
Percentage Interest in the Class C Certificates fail to provide investment
instructions, funds on deposit in the Reserve Fund shall be held uninvested by
the Securities Administrator without liability for interest or compensation.

                  (f) For federal tax return and information reporting, the
value of the right of the Class A Certificateholders, the Class M
Certificateholders and the Class B Certificateholders to receive payments from
the Reserve Fund in respect of any Basis Risk Shortfall Carry-Forward Amount may
be obtained from the Master Servicer upon request to the extent such information
is provided to the Master Servicer by the Company or the Underwriters.  The
initial value of such right is equal to $25,301.45.

                  SECTION 3.25. Servicer and Master Servicer Indemnification.

         (a) The Servicer agrees to indemnify the Trustee, Master Servicer and
the Securities Administrator, from, and hold the Trustee, Master Servicer and
the Securities Administrator harmless against, any loss, liability or expense
(including reasonable attorney's fees and expenses) incurred by any such Person
by reason of the Servicer's willful misfeasance, bad faith or gross negligence
in the performance of its duties under this Agreement or by reason of the
Servicer's reckless disregard of its obligations and duties under this
Agreement. Such indemnity shall survive the termination or discharge of this
Agreement and the resignation or removal of the Servicer, the Trustee, the
Master Servicer and the Securities Administrator. Any payment hereunder made by
the Servicer to any such Person shall be from the Servicer's own funds, without
reimbursement from REMIC I therefor.

         (b) The Master Servicer agrees to indemnify the Trustee, Servicer and
the Securities Administrator, from, and hold the Trustee, Servicer and the
Securities Administrator harmless against, any loss, liability or expense
(including reasonable attorney's fees and expenses) incurred by any such Person
by reason of the Master Servicer's willful misfeasance, bad faith or gross
negligence in the performance of its duties under this Agreement or by reason of
the Master Servicer's reckless disregard of its obligations and duties under
this Agreement. Such indemnity shall survive the termination or discharge of
this Agreement and the resignation or removal of the Servicer, the Trustee, the
Master Servicer and the Securities Administrator. Any payment hereunder made by
the Master Servicer to any such Person shall be from the Master Servicer's own
funds, without reimbursement from REMIC I therefor.

                  SECTION 3.26. Derivative Contracts.

         (a) At the direction of the Seller, the Trustee shall, on behalf of the
Trust Fund, enter into Derivative Contracts for the benefit of the Class C
Certificates. Any acquisition of a Derivative Contract shall be accompanied by
(i) an appropriate amendment to this Agreement, (ii) any Opinion of Counsel
required by Section 12.01, and (iii) either (A) an Opinion of Counsel to the
effect that the existence of the Derivative Contract will not adversely affect
the availability of the exemptive relief afforded under ERISA by U.S. Department
of Labor Prohibited Transaction Exemption 94-84

                                        -102-

<PAGE>

or FAN 97-03E, as most recently amended, to the Holders of the Class A, Class M
and Class B1 Certificates, as of the date the Derivative Contract is entered
into by the Trustee or (B) the consent of each Holder of a Class A, Class M or
Class B1 Certificate to the acquisition of such Derivative Contract. In
addition, in the event any such instrument is deposited, the Trust Fund shall be
deemed to be divided into two separate and discrete sub-Trusts. The assets of
one such sub-Trust shall consist of all the assets of the Trust other than such
instrument and the assets of the other sub-Trust shall consist solely of such
instrument.

         (b) All collections, proceeds and other amounts in respect of the
Derivative Contracts payable by the Derivative Counterparty shall be distributed
to the Class C Certificates on the Distribution Date following receipt thereof
by the Securities Administrator on behalf of the Trustee.

         (c) Any Derivative Contract that provides for any payment obligation on
the part of the Trust Fund must (i) be without recourse to the assets of the
Trust Fund, (ii) contain a non-petition covenant provision from the Derivative
Counterparty, (iii) limit payment dates thereunder to Distribution Dates and
(iv) contain a provision limiting any cash payments due to the Derivative
Counterparty on any day under such Derivative Contract solely to funds available
therefor in the Distribution Account available to make payments to the Holders
of the Class C Certificates on such Distribution Date.

         (d) Each Derivative Contract must (i) provide for the direct payment of
any amounts by the Derivative Counterparty thereunder to the Distribution
Account at least one Business Day prior to the related Distribution Date, (ii)
contain an assignment of all of the Trust Fund's rights (but none of its
obligations) under such Derivative Contract to the Trustee on behalf the Class C
Certificateholders and shall include an express consent to the Derivative
Counterparty to such assignment, (iii) provide that in the event of the
occurrence of a Servicer Event of Default or Master Servicer Event of Default,
such Derivative Contract shall terminate upon the direction of a 50.01% or
greater Percentage Interest of the Class C Certificates, and (iv) prohibit the
Derivative Counterparty from "setting-off' or "netting" other obligations of the
Trust Fund and its Affiliates against such Derivative Counterparty's payment
obligations thereunder.

         (e) The Seller shall determine, in its sole discretion, whether any
Derivative Contract conforms to the requirements of this Section 3.26(c) and
(d). In no event shall such an instrument constitute a part of any REMIC created
hereunder.

                  SECTION 3.27 Assignment; Sales; Advance Facilities.

         (a) For so long as the Servicer is acting as the Servicer hereunder (i)
the Servicer is hereby authorized to enter into an advance facility ("Advance
Facility") under which (A) the Servicer sells, assigns or pledges to an
Advancing Person the Servicer's rights under this Agreement to be reimbursed for
any P&I Advances or Servicing Advances and/or (B) an Advancing Person agrees to
fund some or all P&I Advances or Servicing Advances required to be made by the
Servicer pursuant to this Agreement and (ii) the Servicer is hereby authorized
to assign its rights to the Servicing Fee; it being understood neither the Trust
Fund nor any party hereto shall have a right or claim (including without
limitation any right of offset) to the portion of the Servicing Fee so assigned;
it being further understood that upon the resignation or termination of the
Servicer, such

                                        -103-

<PAGE>

Advance Facility (in the case of clause (i)) and such assignment (in the case of
clause (ii)) shall be terminated. No consent of the Trustee, Certificateholders
or any other party is required before the Servicer may enter into an Advance
Facility. Notwithstanding the existence of any Advance Facility under which an
Advancing Person agrees to fund P&I Advances and/or Servicing Advances on the
Servicer's behalf, the Servicer shall remain obligated pursuant to this
Agreement to make P&I Advances and Servicing Advances pursuant to and as
required by this Agreement, and shall not be relieved of such obligations by
virtue of such Advance Facility.

         (b) Reimbursement amounts shall consist solely of amounts in respect of
P&I Advances and/or Servicing Advances made with respect to the Mortgage Loans
for which the Servicer would be permitted to reimburse itself in accordance with
this Agreement, assuming the Servicer had made the related P&I Advance(s) and/or
Servicing Advance(s).

         (c) The Servicer shall maintain and provide to any successor Servicer a
detailed accounting on a loan-by-loan basis as to amounts advanced by, pledged
or assigned to, and reimbursed to any Advancing Person. The successor Servicer
shall be entitled to rely on any such information provided by the predecessor
Servicer, and the successor Servicer shall not be liable for any errors in such
information.

         (d) An Advancing Person who purchases or receives an assignment or
pledge of the rights to be reimbursed for P&I Advances and/or Servicing
Advances, and/or whose obligations hereunder are limited to the funding of P&I
Advances and/or Servicing Advances shall not be required to meet the criteria
for qualification of a Subservicer set forth in this Agreement.

         (e) The documentation establishing any Advance Facility shall require
that such reimbursement amounts distributed with respect to each Mortgage Loan
be allocated to outstanding unreimbursed P&I Advances or Servicing Advances (as
the case may be) made with respect to that Mortgage Loan on a "first-in, first
out" (FIFO) basis. Such documentation shall also require the Servicer to provide
to the related Advancing Person or its designee loan-by-loan information with
respect to each such reimbursement amount distributed to such Advancing Person
or Advance Facility trustee on each Distribution Date, to enable the Advancing
Person or Advance Facility trustee to make the FIFO allocation of each such
reimbursement amount with respect to each Mortgage Loan. The Servicer shall
remain entitled to be reimbursed by the Advancing Person or Advance Facility
trustee for all P&I Advances and Servicing Advances funded by the Servicer to
the extent the related rights to be reimbursed therefor have not been sold,
assigned or pledged to an Advancing Person.

         (f) Any amendment to this Section 3.27 or to any other provision of
this Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 3.27, including
amendments to add provisions relating to a successor Servicer, may be entered
into by the Trustee, the Master Servicer, the Securities Administrator, the
Company and the Servicer without the consent of any Certificateholder,
notwithstanding anything to the contrary in this Agreement, provided, that the
Trustee has been provided an Opinion of Counsel that such amendment has no
material adverse effect on the Certificateholders which opinion shall be an
expense of the party requesting such opinion but in any case shall not be an
expense of the Trustee or the Trust Fund; provided, further, that the amendment
shall not be deemed to adversely affect in

                                        -104-

<PAGE>

any material respect the interests of the Certificateholders if the Person
requesting the amendment obtains a letter from each Rating Agency (instead of
obtaining an Opinion of Counsel) stating that the amendment would not result in
the downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such rating letter in and
of itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. Prior to entering into an Advance Facility, the
Servicer shall notify the lender under such facility in writing that: (a) the
P&I Advances and/or Servicing Advances financed by and/or pledged to the lender
are obligations owed to the Servicer on a non-recourse basis payable only from
the cash flows and proceeds received under this Agreement for reimbursement of
P&I Advances and/or Servicing Advances only to the extent provided herein, and
the Trustee and the Trust are not otherwise obligated or liable to repay any P&I
Advances and/or Servicing Advances financed by the lender; (b) the Servicer will
be responsible for remitting to the lender the applicable amounts collected by
it as reimbursement for P&I Advances and/or Servicing Advances funded by the
lender, subject to the restrictions and priorities created in this Agreement;
and (c) the Trustee shall not have any responsibility to track or monitor the
administration of the financing arrangement between the Servicer and the lender.

                                        -105-

<PAGE>

                                   ARTICLE IV

                       ADMINISTRATION AND MASTER SERVICING
                  OF THE MORTGAGE LOANS BY THE MASTER SERVICER

                  SECTION 4.01. Master Servicer.

                  The Master Servicer shall supervise, monitor and oversee the
obligation of the Servicer to service and administer the Mortgage Loans in
accordance with the terms of this Agreement and shall have full power and
authority to do any and all things which it may deem necessary or desirable in
connection with such master servicing and administration. In performing its
obligations hereunder, the Master Servicer shall act in a manner consistent with
Accepted Master Servicing Practices. Furthermore, the Master Servicer shall
oversee and consult with the Servicer as necessary from time-to-time to carry
out the Master Servicer's obligations hereunder, shall receive, review and
evaluate all reports, information and other data provided to the Master Servicer
by the Servicer and shall cause the Servicer to perform and observe the
covenants, obligations and conditions to be performed or observed by the
Servicer under this Agreement. The Master Servicer shall independently and
separately monitor the Servicer's servicing activities with respect to each
related Mortgage Loan, reconcile the results of such monitoring with such
information provided in the previous sentence on a monthly basis and coordinate
corrective adjustments to the Servicer's and Master Servicer's records, and
based on such reconciled and corrected information, prepare the statements
specified in Section 5.03 and any other information and statements required to
be provided by the Master Servicer hereunder. The Master Servicer shall
reconcile the results of its Mortgage Loan monitoring with the actual
remittances of the Servicer to the Distribution Account pursuant to the terms
hereof based on information provided to the Master Servicer by the Servicer.

                  The Trustee shall furnish the Servicer and the Master Servicer
with any limited powers of attorney and other documents in form as provided to
it necessary or appropriate to enable the Servicer and the Master Servicer to
service and administer the related Mortgage Loans and REO Property. The Trustee
shall have no responsibility for any action of the Master Servicer or the
Servicer pursuant to any such limited power of attorney and shall be indemnified
by the Master Servicer or the Servicer, as applicable, for any cost, liability
or expense incurred by the Trustee in connection with such Person's misuse of
any such power of attorney.

                  The Trustee, the Custodian and the Securities Administrator
shall provide access to the records and documentation in possession of the
Trustee, the Custodian or the Securities Administrator regarding the related
Mortgage Loans and REO Property and the servicing thereof to the
Certificateholders, the FDIC, and the supervisory agents and examiners of the
FDIC, such access being afforded only upon reasonable prior written request and
during normal business hours at the office of the Trustee, the Custodian or the
Securities Administrator; provided, however, that, unless otherwise required by
law, none of the Trustee, the Custodian or the Securities Administrator shall be
required to provide access to such records and documentation if the provision
thereof would violate the legal right to privacy of any Mortgagor. The Trustee,
the Custodian and the Securities Administrator shall allow representatives of
the above entities to photocopy any of the records and documentation and shall
provide equipment for that purpose at a charge that covers the Trustee's, the
Custodian's or the Securities Administrator's actual costs.

                                        -106-

<PAGE>

                  The Trustee shall execute and deliver to the Servicer or the
Master Servicer upon request any court pleadings, requests for trustee's sale or
other documents necessary or desirable to (i) the foreclosure or trustee's sale
with respect to a Mortgaged Property; (ii) any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or any other Mortgage Loan
Document; (iii) obtain a deficiency judgment against the Mortgagor; or (iv)
enforce any other rights or remedies provided by the Mortgage Note or any other
Mortgage Loan Document or otherwise available at law or equity.

                  SECTION 4.02 REMIC-Related Covenants.

                  For as long as each REMIC shall exist, the Trustee and the
Securities Administrator shall act in accordance herewith to treat such REMIC as
a REMIC, and the Trustee and the Securities Administrator shall comply with any
directions of the Seller, the Servicer or the Master Servicer to assure such
continuing treatment. In particular, the Trustee shall not (a) sell or permit
the sale of all or any portion of the Mortgage Loans or of any investment of
deposits in an Account unless such sale is as a result of a repurchase of the
Mortgage Loans pursuant to this Agreement or the Trustee has received a REMIC
Opinion prepared at the expense of the Trust Fund; and (b) other than with
respect to a substitution pursuant to the Mortgage Loan Purchase Agreements or
Section 2.03 of this Agreement, as applicable, accept any contribution to any
REMIC after the Startup Day without receipt of a Opinion of Counsel stating that
such contribution will not result in an Adverse REMIC Event as defined in
Section 11.01(f).

                  SECTION 4.03 Monitoring of Servicer.

                  (a) The Master Servicer shall be responsible for monitoring
the compliance by the Servicer with its duties under this Agreement. In the
review of the Servicer's activities, the Master Servicer may rely upon an
Officer's Certificate of the Servicer with regard to the Servicer's compliance
with the terms of this Agreement. In the event that the Master Servicer, in its
judgment, determines that the Servicer should be terminated in accordance with
the terms hereof, or that a notice should be sent pursuant to the terms hereof
with respect to the occurrence of an event that, unless cured, would constitute
an Event of Default, the Master Servicer shall notify the Servicer, the Seller
and the Trustee thereof and the Master Servicer shall issue such notice or take
such other action as it deems appropriate.

                  (b) The Master Servicer, for the benefit of the Trustee and
the Certificateholders, shall enforce the obligations of the Servicer under this
Agreement, and shall, in the event that the Servicer fails to perform its
obligations in accordance with this Agreement, subject to the preceding
paragraph and Article VIII, cause the Trustee to terminate the rights and
obligations of the Servicer hereunder in accordance with the provisions of
Article VIII. Such enforcement, including, without limitation, the legal
prosecution of claims and the pursuit of other appropriate remedies, shall be in
such form and carried out to such an extent and at such time as the Master
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The Master Servicer shall pay the costs of such
enforcement at its own expense, provided that the Master Servicer shall not be
required to prosecute or defend any legal action except to the extent that the
Master Servicer shall have received reasonable indemnity for its costs and
expenses in pursuing such action.

                                        -107-

<PAGE>

                  (c) The Master Servicer shall be entitled to be reimbursed by
the Servicer (or from amounts on deposit in the Distribution Account if the
Servicer is unable to fulfill its obligations hereunder) for all reasonable
out-of-pocket or third party costs associated with the transfer of servicing
from the predecessor Servicer (or if the predecessor Servicer is the Master
Servicer, from the Trust Fund), including without limitation, any reasonable
out-of-pocket or third party costs or expenses associated with the complete
transfer of all servicing data and the completion, correction or manipulation of
such servicing data as may be required by the Master Servicer to correct any
errors or insufficiencies in the servicing data or otherwise to enable the
Master Servicer to service the Mortgage Loans properly and effectively, upon
presentation of reasonable documentation of such costs and expenses.

                  (d) The Master Servicer shall require the Servicer to comply
with the remittance requirements and other obligations set forth in this
Agreement.

                  (e) If the Master Servicer acts as successor to the Servicer,
it will not assume liability for the representations and warranties of the
terminated Servicer.

                  SECTION 4.04 Fidelity Bond.

                  The Master Servicer, at its expense, shall maintain in effect
a blanket fidelity bond and an errors and omissions insurance policy, affording
coverage with respect to all directors, officers, employees and other Persons
acting on such Master Servicer's behalf, and covering errors and omissions in
the performance of the Master Servicer's obligations hereunder. The errors and
omissions insurance policy and the fidelity bond shall be in such form and
amount generally acceptable for entities serving as master servicers or
trustees.

                  SECTION 4.05 Power to Act; Procedures.

                  The Master Servicer shall master service the Mortgage Loans
and shall have full power and authority, subject to the REMIC Provisions and the
provisions of Article XI, to do any and all things that it may deem necessary or
desirable in connection with the master servicing and administration of the
Mortgage Loans, including but not limited to the power and authority (i) to
execute and deliver, on behalf of the Certificateholders and the Trustee,
customary consents or waivers and other instruments and documents, (ii) to
consent to transfers of any Mortgaged Property and assumptions of the Mortgage
Notes and related Mortgages, (iii) to collect any Insurance Proceeds and
Liquidation Proceeds, and (iv) to effectuate foreclosure or other conversion of
the ownership of the Mortgaged Property securing any Mortgage Loan, in each
case, in accordance with the provisions of this Agreement; provided, however,
that the Master Servicer shall not (and, consistent with its responsibilities
under Section 4.03, shall not permit the Servicer to) knowingly or intentionally
take any action, or fail to take (or fail to cause to be taken) any action
reasonably within its control and the scope of duties more specifically set
forth herein, that, under the REMIC Provisions, if taken or not taken, as the
case may be, would cause REMIC I or REMIC II to fail to qualify as a REMIC or
result in the imposition of a tax upon the Trust Fund (including but not limited
to the tax on prohibited transactions as defined in Section 860F(a)(2) of the
Code and the tax on contributions to a REMIC set forth in Section 860G(d) of the
Code) unless the Master Servicer has received an Opinion of Counsel (but not at
the expense of the Master Servicer) to the effect that

                                        -108-

<PAGE>

the contemplated action will not would cause REMIC I or REMIC II to fail to
qualify as a REMIC or result in the imposition of a tax upon REMIC I or REMIC
II, as the case may be. The Trustee shall furnish the Master Servicer, upon
written request from a Servicing Officer, with any powers of attorney prepared
and delivered to it and reasonably acceptable to it by empowering the Master
Servicer or the Servicer to execute and deliver instruments of satisfaction or
cancellation, or of partial or full release or discharge, and to foreclose upon
or otherwise liquidate Mortgaged Property, and to appeal, prosecute or defend in
any court action relating to the Mortgage Loans or the Mortgaged Property, in
accordance with this Agreement, and the Trustee shall execute and deliver such
other documents prepared and delivered to it and reasonably acceptable to it, as
the Master Servicer or the Servicer may request, to enable the Master Servicer
to master service and administer the Mortgage Loans and carry out its duties
hereunder, in each case in accordance with Accepted Master Servicing Practices
(and the Trustee shall have no liability for misuse of any such powers of
attorney by the Master Servicer or the Servicer and shall be indemnified by the
Master Servicer or the Servicer, as applicable, for any cost, liability or
expense incurred by the Trustee in connection with such Person's use or misuse
of any such power of attorney). If the Master Servicer or the Trustee has been
advised that it is likely that the laws of the state in which action is to be
taken prohibit such action if taken in the name of the Trustee or that the
Trustee would be adversely affected under the "doing business" or tax laws of
such state if such action is taken in its name, the Master Servicer shall join
with the Trustee in the appointment of a co-trustee pursuant to Section 9.10. In
the performance of its duties hereunder, the Master Servicer shall be an
independent contractor and shall not, except in those instances where it is
taking action in the name of the Trustee, be deemed to be the agent of the
Trustee.

                  SECTION 4.06 Due-on-Sale Clauses; Assumption Agreements.

                  To the extent Mortgage Loans contain enforceable due-on-sale
clauses, the Master Servicer shall cause the Servicer to enforce such clauses in
accordance with this Agreement. If applicable law prohibits the enforcement of a
due-on-sale clause or such clause is otherwise not enforced in accordance with
this Agreement, and, as a consequence, a Mortgage Loan is assumed, the original
Mortgagor may be released from liability in accordance with this Agreement.

                  SECTION 4.07 Reserved.

                  SECTION 4.08 Documents, Records and Funds in Possession of
                               Master Servicer To Be Held for Trustee.

                  (a) The Master Servicer shall transmit to the Trustee or
Custodian such documents and instruments coming into the possession of the
Master Servicer from time to time as are required by the terms hereof to be
delivered to the Trustee or Custodian. Any funds received by the Master Servicer
in respect of any Mortgage Loan or which otherwise are collected by the Master
Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any
Mortgage Loan shall be remitted to the Securities Administrator for deposit in
the Distribution Account. The Master Servicer shall, and, subject to Section
3.20, shall cause the Servicer to, provide access to information and
documentation regarding the Mortgage Loans to the Trustee, its agents and
accountants at any time upon reasonable request and during normal business
hours, and with respect to Certificateholders that are savings and loan
associations, banks or insurance companies, the Office of Thrift

                                        -109-

<PAGE>

Supervision, the FDIC and the supervisory agents and examiners of such Office
and Corporation or examiners of any other federal or state banking or insurance
regulatory authority if so required by applicable regulations of the Office of
Thrift Supervision or other regulatory authority, such access to be afforded
without charge but only upon reasonable request in writing and during normal
business hours at the offices of the Master Servicer designated by it. In
fulfilling such a request, the Master Servicer shall not be responsible for
determining the sufficiency of such information.

                  (b) All Mortgage Files and funds collected or held by, or
under the control of, the Master Servicer, in respect of any Mortgage Loans,
whether from the collection of principal and interest payments or from
Liquidation Proceeds or Insurance Proceeds, shall be remitted to the Trustee for
deposit in the Distribution Account.

                  SECTION 4.09 Standard Hazard Insurance and Flood Insurance
                               Policies.

                  For each Mortgage Loan, the Master Servicer shall enforce the
obligation of the Servicer under this Agreement to maintain or cause to be
maintained standard fire and casualty insurance and, where applicable, flood
insurance, all in accordance with the provisions of this Agreement. It is
understood and agreed that such insurance shall be with insurers meeting the
eligibility requirements set forth in Section 3.11 and that no earthquake or
other additional insurance is to be required of any Mortgagor or to be
maintained on property acquired in respect of a defaulted loan, other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance.

                  SECTION 4.10 Presentment of Claims and Collection of Proceeds.

                  The Master Servicer shall enforce the Servicer's obligations
under this Agreement to, prepare and present on behalf of the Trustee and the
Certificateholders all claims under the Insurance Policies and take such actions
(including the negotiation, settlement, compromise or enforcement of the
insured's claim) as shall be necessary to realize recovery under such policies.
Any proceeds disbursed to the Master Servicer in respect of such policies, bonds
or contracts shall be promptly remitted to the Trustee for deposit in the
Distribution Account upon receipt, except that any amounts realized that are to
be applied to the repair or restoration of the related Mortgaged Property as a
condition precedent to the presentation of claims on the related Mortgage Loan
to the insurer under any applicable insurance policy need not be so or remitted.

                  SECTION 4.11 Reserved.

                  SECTION 4.12 Reserved.

                  SECTION 4.13 Realization Upon Defaulted Mortgage Loans.

                  The Master Servicer shall cause the Servicer to foreclose
upon, repossess or otherwise comparably convert the ownership of Mortgaged
Properties securing such of the Mortgage Loans as come into and continue in
default and as to which no satisfactory arrangements can be made for collection
of delinquent payments, all in accordance with this Agreement.

                                        -110-

<PAGE>

                  SECTION 4.14 Compensation for the Master Servicer.

                  As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Master Servicing Fee
payable solely from payments in respect of each Mortgage Loan, and
the income from investment of or earnings on the funds from time to time in the
Distribution Account, as provided in Section 3.10. The Master Servicing Fee
payable to the Master Servicer in respect of any Distribution Date shall be
reduced in accordance with Section 4.19. The Master Servicer shall be required
to pay all expenses incurred by it in connection with its activities hereunder
and shall not be entitled to reimbursement therefor except as provided in this
Agreement.

                  SECTION 4.15 REO Property.

                  (a) In the event the Trust Fund acquires ownership of any REO
Property in respect of any related Mortgage Loan, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of the related
Certificateholders. The Master Servicer shall cause the Servicer to sell, any
REO Property as expeditiously as possible and in accordance with the provisions
of this Agreement. Further, the Master Servicer shall cause the Servicer to sell
any REO Property prior to three years after the end of the calendar year of its
acquisition by REMIC I unless (i) the Trustee shall have been supplied by the
Servicer with an Opinion of Counsel to the effect that the holding by the Trust
Fund of such REO Property subsequent to such three-year period will not result
in the imposition of taxes on "prohibited transactions" of any REMIC hereunder
as defined in section 860F of the Code or cause any REMIC hereunder to fail to
qualify as a REMIC at any time that any Certificates are outstanding, in which
case the Trust Fund may continue to hold such Mortgaged Property (subject to any
conditions contained in such Opinion of Counsel) or (ii) the Servicer shall have
applied for, prior to the expiration of such three-year period, an extension of
such three-year period in the manner contemplated by Section 856(e)(3) of the
Code, in which case the three-year period shall be extended by the applicable
extension period. The Master Servicer shall cause the Servicer to protect and
conserve, such REO Property in the manner and to the extent required by this
Agreement, in accordance with the REMIC Provisions and in a manner that does not
result in a tax on "net income from foreclosure property" or cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code.

                  (b) The Master Servicer shall cause the Servicer to deposit
all funds collected and received in connection with the operation of any REO
Property in the REO Account.

                  SECTION 4.16 Annual Officer's Certificate as to Compliance.

                  (a) The Master Servicer shall deliver to the Trustee and the
Rating Agencies on or before March 15 of each year, commencing on March 15,
2005, an Officer's Certificate, certifying that with respect to the period
ending December 31 of the prior year: (i) such Servicing Officer has reviewed
the activities of such Master Servicer during the preceding calendar year or
portion thereof and its performance under this Agreement, (ii) to the best of
such Servicing Officer's knowledge, based on such review, such Master Servicer
has performed and fulfilled its duties, responsibilities and obligations under
this Agreement in all material respects throughout such year, or, if there has
been a default in the fulfillment of any such duties, responsibilities or
obligations, specifying each

                                        -111-

<PAGE>

such default known to such Servicing Officer and the nature and status thereof,
(iii) nothing has come to the attention of such Servicing Officer to lead such
Servicing Officer to believe that the Master Servicer has failed to perform any
of its duties, responsibilities and obligations under this Agreement in all
material respects throughout such year, or, if there has been a material default
in the performance or fulfillment of any such duties, responsibilities or
obligations, specifying each such default known to such Servicing Officer and
the nature and status thereof.

                  (b) Copies of such statements shall be provided to any
Certificateholder upon request, by the Master Servicer or by the Trustee at the
Master Servicer's expense if the Master Servicer failed to provide such copies
(unless (i) the Master Servicer shall have failed to provide the Trustee with
such statement or (ii) the Trustee shall be unaware of the Master Servicer's
failure to provide such statement).

                  SECTION 4.17 Annual Independent Accountant's Servicing Report.

                  If the Master Servicer has, during the course of any calendar
year, directly serviced any of the Mortgage Loans, then the Master Servicer at
its expense shall cause a nationally recognized firm of independent certified
public accountants to furnish a statement to the Trustee, the Rating Agencies
and the Seller on or before March 15 of each year, commencing on March 15, 2005
to the effect that, with respect to the most recently ended fiscal year, such
firm has examined certain records and documents relating to the Master
Servicer's performance of its servicing obligations under this Agreement and
pooling and servicing and trust agreements in material respects similar to this
Agreement and to each other and that, on the basis of such examination conducted
substantially in compliance with the audit program for mortgages serviced for
Freddie Mac or the Uniform Single Attestation Program for Mortgage Bankers, such
firm is of the opinion that the Master Servicer's activities have been conducted
in compliance with this Agreement, or that such examination has disclosed no
material items of noncompliance except for (i) such exceptions as such firm
believes to be immaterial, (ii) such other exceptions as are set forth in such
statement and (iii) such exceptions that the Uniform Single Attestation Program
for Mortgage Bankers or the Audit Program for Mortgages Serviced by Freddie Mac
requires it to report. Copies of such statements shall be provided to any
Certificateholder upon request by the Master Servicer, or by the Trustee at the
expense of the Master Servicer if the Master Servicer shall fail to provide such
copies (unless (i) the Master Servicer shall have failed to provide the Trustee
with such statement or (ii) the Trustee shall be unaware of the Master
Servicer's failure to provide such statement). If such report discloses
exceptions that are material, the Master Servicer shall advise the Trustee
whether such exceptions have been or are susceptible of cure, and will take
prompt action to do so.

                  SECTION 4.18 UCC.

                  The Company agrees to file continuation statements for any
Uniform Commercial Code financing statements which the Seller has informed the
Company were filed on the Closing Date in connection with the Trust. The Company
shall file any financing statements or amendments thereto required by any change
in the Uniform Commercial Code.

                  SECTION 4.19 Obligation of the Master Servicer in Respect of
                               Prepayment Interest Shortfalls.

                                        -112-

<PAGE>

                  In the event of any Prepayment Interest Shortfalls, the Master
Servicer shall deposit into the Distribution Account not later than the related
Distribution Date an amount equal to the lesser of (i) the aggregate amounts
required to be paid by the Servicer with respect to Prepayment Interest
Shortfalls attributable to Principal Prepayments in full on the related Mortgage
Loans for the related Distribution Date, and not so paid by the Servicer and
(ii) the aggregate amount of the related Master Servicing Fees for such
Distribution Date, without reimbursement therefor.

                                        -113-

<PAGE>

                                    ARTICLE V
                         PAYMENTS TO CERTIFICATEHOLDERS

                  SECTION 5.01 Distributions.

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

                  (i) first, to the Holders of the REMIC I Regular Interests
         ending with the designation "B," 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 the REMIC I Regular Interests
         ending with the designation "A," REMIC I Regular Interest I-ILT, REMIC
         I Regular Interest I-IILT and REMIC I Regular Interest 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 Funds 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-ILT and REMIC I Regular Interest I-IILT
         until the Uncertificated Balance of each such REMIC I Regular Interest
         is reduced to zero, and second, to the Holders of the remaining REMIC I
         Regular Interests with the lowest numerical designation, until the
         Uncertificated Balance of each such REMIC I Regular Interest is reduced
         to zero, provided that each pair of such REMIC I Regular Interests with
         the same numerical designation shall be paid pro rata, until the
         Uncertificated Principal Balance of each such REMIC I Regular Interest
         is reduced to zero; and

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

                  (b)(1) 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 Certificates, in respect
of the Class R-II Interest, as the case may be:

                  (i) to Holders of REMIC II Regular Interest II-LTAA, Regular
Interest II-LT1A, REMIC II Regular Interest II-LT2A, REMIC II Regular Interest
II-LTA3, REMIC II Regular Interest II-LTM1, REMIC II Regular Interest II-LTM2,
REMIC II Regular Interest II-LTM3, REMIC II

                                        -114-

<PAGE>

Regular Interest II-LTM4, REMIC II Regular Interest II-LTM5, REMIC II Regular
Interest II-LTM6, REMIC II Regular Interest II-LTM7, REMIC II Regular Interest
II-LTM8, REMIC II Regular Interest II-LTB1, REMIC II Regular Interest II-LTB2,
REMIC II Regular Interest II-LTZZ and REMIC II Regular Interest II-LTP, pro
rata, 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. Amounts payable as Uncertificated Interest in
respect of REMIC II Regular Interest II-LTZZ shall be reduced when the REMIC II
Overcollateralization Amount is less than the REMIC II Required
Overcollateralization Amount, by the lesser of (x) the amount of such difference
and (y) the Maximum II-LTZZ Uncertificated Interest Deferral Amount and such
amount will be payable to the Holders of REMIC II Regular Interest II-LT1A,
REMIC II Regular Interest II-LT2A, REMIC II Regular Interest II-LTA3, REMIC II
Regular Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular
Interest II-LTM3, REMIC II Regular Interest II-LTM4, REMIC II Regular Interest
II-LTM5, REMIC II Regular Interest II-LTM6, REMIC II Regular Interest II-LTM7,
REMIC II Regular Interest II-LTM8, REMIC II Regular Interest II-LTB1 and REMIC
II Regular Interest II-LTB2, in the same proportion as the Overcollateralization
Increase Amount is allocated to the Corresponding Certificates and the
Uncertificated Balance of REMIC II Regular Interest II- LTZZ shall be increased
by such amount;

                  (ii) to Holders of REMIC II Regular Interest II-LT1SUB, REMIC
         II Regular Interest II-LT1GRP, REMIC II Regular Interest II-LT2SUB,
         REMIC II Regular Interest II- LT2GRP and REMIC II Regular Interest
         II-LTXX, pro rata, 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;

                  (iii) to the Holders of REMIC II Regular Interests, in an
         amount equal to the remainder of the REMIC II Marker Allocation
         Percentage 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-LTAA,
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-LT1A, REMIC
II Regular Interest II-LT2A, REMIC II Regular Interest II-LTA3, REMIC II Regular
Interest II-LTM1, REMIC II Regular Interest II-LTM2, REMIC II Regular Interest
II-LTM3, REMIC II Regular Interest II- LTM4, REMIC II Regular Interest II-LTM5,
REMIC II Regular Interest II-LTM6, REMIC II Regular Interest II-LTM7, REMIC II
Regular Interest II-LTM8, REMIC II Regular Interest II-LTB1 and REMIC II Regular
Interest II-LTB2, 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-LTZZ, 1.00%
of such remainder, until the Uncertificated Balance of such REMIC II Regular
Interest is reduced to zero;

                                        -115-

<PAGE>

                  (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
Certificates, in respect of the Class R-II Interest;

provided, however, that 98.00% and 2.00% of any principal payments that are
attributable to an Overcollateralization Deficiency Amount shall be allocated to
Holders of REMIC II Regular Interest II-LTAA and REMIC II Regular Interest
II-LTZZ, respectively.

                  (2) On each Distribution Date, the Securities Administrator
shall withdraw from the Distribution Account to the extent on deposit therein an
amount equal to the Group 1 Interest Remittance Amount and Group 2 Interest
Remittance Amount and make the following disbursements and transfers in the
order of priority described below, in each case to the extent of the Group 1
Interest Remittance Amount or Group 2 Interest Amount, as applicable, remaining
for such Distribution Date:

         first, concurrently, (i) from the Group 1 Interest Remittance Amount,
         to the Holders of the Class 1-A Certificates and the Group 1 Component
         of the Class A-SIO Certificates, the related Accrued Certificate
         Interest allocable to each such Class, on a pro rata basis, based on
         the entitlement of each such Class and (ii) from the Group 2 Interest
         Remittance Amount, to the Holders of the Class 2-A Certificates and the
         Group 2 Component of the Class A-SIO Certificates, the related Accrued
         Certificate Interest allocable to each such Class, on a pro rata basis,
         based on the entitlement of each such Class; and

         second, concurrently, (i) from the Group 1 Interest Remittance Amount,
         to the Holders of the Class 2-A Certificates and the Group 2 Component
         of the Class A-SIO Certificates, the related Accrued Certificate
         Interest allocable to each such Class, on a pro rata basis, based on
         the entitlement of each such class to the extent remaining unpaid after
         the distribution of the Group 2 Interest Remittance Amount as set forth
         in clause first above and (ii) from the Group 2 Interest Remittance
         Amount, to the Holders of the Class 1-A Certificates and the Group 1
         Component of the Class A-SIO Certificates, the related Accrued
         Certificate Interest allocable to each such Class, on a pro rata basis,
         based on the entitlement of each such class to the extent remaining
         unpaid after the distribution of the Group 1 Interest Remittance Amount
         as set forth in clause first above.

                  (3) On each Distribution Date, the Securities Administrator
shall withdraw from the Distribution Account to the extent on deposit therein an
amount equal to the Group 1 Interest Remittance Amount and the Group 2 Interest
Remittance Amount remaining after the distributions required by clause (2) above
and make the following disbursements and transfers in the order of priority
described below, in each case to the extent of the Group 1 Interest Remittance
Amount and Group 2 Interest Remittance Amount remaining for such Distribution
Date:

                                        -116-

<PAGE>

         first, sequentially to the Holders of the Class A3, Class M1, Class M2,
         Class M3, Class M4, Class M5, Class M6, Class M7, Class M8, Class B1
         and Class B2 Certificates, in that order, the related Accrued
         Certificate Interest and any Interest Carry Forward Amount for such
         Classes for such Distribution Date; and

         second, to pay the Trustee any amounts in excess of the limitation set
         forth in Section 3.09(b)(ii).

                  (4) On each Distribution Date (a) prior to the Stepdown Date
or (b) on which a Trigger Event is in effect, the Securities Administrator shall
withdraw from the Distribution Account to the extent on deposit therein an
amount equal to the Group 1 Principal Distribution Amount and the Group 2
Principal Distribution Amount and distribute to the Certificateholders the
following amounts, in the following order of priority:

                           (i) The Group 1 Principal Distribution Amount shall
         be distributed in the following order of priority:

                           first, to the Holders of the Class 1-A Certificates,
                           until the Certificate Principal Balance thereof has
                           been reduced to zero;

                           second, to the Holders of the Class 2-A Certificates,
                           after taking into account the distribution of the
                           Group 2 Principal Distribution Amount pursuant to
                           clause first of Section 5.01(a)(4)(ii) below, until
                           the Certificate Principal Balance of the Class 2-A
                           Certificates has been reduced to zero.

                           (ii) The Group 2 Principal Distribution Amount shall
         be distributed in the following order of priority:

                           first, to the Holders of the Class 2-A Certificates,
                           until the Certificate Principal Balance of the Class
                           2-A Certificates has been reduced to zero; and

                           second, to the Holders of the Class 1-A Certificates
                           after taking into account the distribution of the
                           Group 1 Principal Distribution Amount pursuant to
                           clause first of Section 5.01(a)(4)(i) above;

                           (iii) The Group 1 Principal Distribution Amount and
         Group 2 Principal Distribution Amount remaining after distributions
         pursuant to Section 5.01(a)(4)(i) and (ii) above shall be distributed
         sequentially to the Class A3, Class M1, Class M2, Class M3, Class M4,
         Class M5, Class M6, Class M7, Class M8, Class B1 and Class B2
         Certificates, in that order, until the Certificate Principal Balance of
         each such Class is reduced to zero.

                  (5) On each Distribution Date (a) on or after the Stepdown
Date and (b) on which a Trigger Event is not in effect, the Securities
Administrator shall withdraw from the Distribution Account to the extent on
deposit therein an amount equal to the Group 1 Principal Distribution Amount and
the Group 2 Principal Distribution Amount and distribute to the
Certificateholders the following amounts, in the following order of priority:

                                        -117-

<PAGE>

                           first, the Class 1-A Principal Distribution Amount
                           shall be distributed to the Holders of the Class 1-A
                           Certificates, until the Certificate Principal Balance
                           of such Class has been reduced to zero; and

                           second, to the extent of the portion, if any, of the
                           Group 1-A Principal Distribution Amount remaining
                           undistributed pursuant to clause first of this
                           Section 5.01(a)(5)(i), to the Holders of the Class
                           2-A Certificates and after taking into account the
                           distribution of the Group 2 Principal Distribution
                           Amount pursuant to clause first of Section
                           5.01(a)(5)(ii) below, until the Certificate Principal
                           Balance of the Class 2-A Certificates has been
                           reduced to zero.

                  (ii) The Group 2 Principal Distribution Amount shall be
         distributed in the following order of priority:

                           first, to the Holders of the Class 2-A Certificates,
                           the Class 2-A Principal Distribution Amount, until
                           the Certificate Principal Balance of the Class 2-A
                           Certificates has been reduced to zero;

                           second, to the extent of the portion, if any, of the
                           Class 2-A Principal Distribution Amount remaining
                           undistributed pursuant to clause first of this
                           Section 5.01(a)(5)(ii) and after taking into account
                           the distribution of the Group 1 Principal
                           Distribution Amount pursuant to clause first of
                           Section 5.01(a)(5)(i) above, to the Holders of the
                           Class 1-A Certificates, until the Certificate
                           Principal Balance of each such Class has been reduced
                           to zero; and

                  (iii) The Principal Distribution Amount remaining after
distributions pursuant to Section 5.01(a)(5)(i) and (ii) above shall be
distributed in the following order of priority, in each case to the extent of
the remaining Principal Distribution Amount:

                           first, to the Class M1 Certificates, the Class M1
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                           second, to the Class M2 Certificates, the Class M2
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                           third, to the Class M3 Certificates, the Class M3
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                           fourth, to the Class M4 Certificates, the Class M4
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                                        -118-

<PAGE>

                           fifth, to the Class M5 Certificates, the Class M5
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                           sixth, to the Class M6 Certificates, the Class M6
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                           seventh,, to the Class M7 Certificates, the Class M7
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;
                           eighth, to the Class M8 Certificates, the Class M8
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;

                           ninth, to the Class B1 Certificates, the Class B1
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero;
                           and

                           tenth, to the Class B2 Certificates, the Class B2
                           Principal Distribution Amount until the Certificate
                           Principal Balance thereof has been reduced to zero.

                  (7) 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 Deficiency 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 any
                           Extra Principal Distribution Amount, payable to such
                           Holders as part of the Principal Distribution Amount
                           as provided above;

                           (ii) to the Reserve Fund, concurrently to the Class
                           1-A Certificates and Class 2-A Certificates, in an
                           amount equal to any Basis Risk Shortfall Carry-
                           Forward Amount for such Class or Classes, to the
                           extent not covered by amounts received under the
                           Corridor Contract to the extent of the Corridor
                           Contract Available Amount;

                           (iii) to the Reserve Fund, sequentially to the Class
                           A3, Class M1, Class M2, Class M3, Class M4, Class M5,
                           Class M6, Class M7, Class M8, Class B1 and Class B2
                           Certificates, in that order, in an amount equal to
                           any Basis Risk Shortfall Carry-Forward Amount for
                           such Class or Classes, to the extent not covered by
                           amounts received under the Corridor Contract to the
                           extent of the Corridor Contract Available Amount;

                                        -119-

<PAGE>

                           (iv) sequentially to the Class A3, Class M1, Class
                           M2, Class M3, Class M4, Class M5, Class M6, Class M7,
                           Class M8, Class B1 and Class B2 Certificates, in that
                           order, in an amount equal to any Allocated Realized
                           Loss Amount for such Class or Classes;

                           (v) to the Holders of the Class C Certificates, the
                           Accrued Certificate Interest for such Class and any
                           Overcollateralization Deficiency Amount for such
                           Distribution Date; and

                           (vi) to the Holders of the Class R Certificates, in
                           respect of the Class R-II Interest, 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
                           Certificates.

         On each Distribution Date, after making the distributions of the
Available Distribution Amount as set forth above, the Securities Administrator
will first, withdraw from the Reserve Fund all income from the investment of
funds in the Reserve Fund and amounts received with respect to the Corridor
Contract in excess of the Corridor Contract Available Amount and distribute such
amounts to the Holders of the Class C Certificates, and second, withdraw from
the Reserve Fund, to the extent of amounts remaining on deposit therein, the
amount of any Basis Risk Shortfall Carry- Forward Amount for such Distribution
Date and distribute such amount first, concurrently to the Class 1-A and 2-A
Certificates, in proportion to any related Basis Risk Shortfall Carry-Forward
Amount for such Classes, second, to the Class A3 Certificates, third, to the
Class M1 Certificates, fourth, to the Class M2 Certificates, fifth, to the Class
M3 Certificates, sixth, to the Class M4 Certificates, seventh, to the Class M5
Certificates, eighth, to the Class M6 Certificates, ninth, to the Class M7
Certificates, tenth, to the Class M8 Certificates, eleventh, to the Class B1
Certificates and twelfth, to the Class B2 Certificates, in each case to the
extent to the extent any Basis Risk Shortfall Carry-Forward Amount is allocable
to each such Class.

                  (c) On each Distribution Date, the Securities Administrator
shall withdraw any amounts then on deposit in the Distribution Account that
represent Prepayment Charges and shall distribute such amounts to the Class P
Certificateholders as described above.

                  (d) 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 5.01(e) or
Section 10.01 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 Securities Administrator in
writing at least five Business Days prior

                                        -120-

<PAGE>

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, as applicable, that is in excess of the
lesser of (i) $1,000,000 or (ii) two-thirds of the initial Certificate Principal
Balance or Notional Amount, as applicable, 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 Securities
Administrator 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 Company,
the Servicer, the Securities Administrator or the Master Servicer shall have any
responsibility therefor except as otherwise provided by this Agreement or
applicable law.

                  (e) 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, the
Servicer, the Securities Administrator 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.

                  (f) Except as otherwise provided in Section 10.01, whenever
the Securities Administrator expects that the final distribution with respect to
any Class of Certificates will be made on the next Distribution Date, the
Securities Administrator 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:

                  (i) the Securities Administrator 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 Securities Administrator therein
         specified, and

                  (ii) no interest shall accrue on such Certificates from and
         after the end of the related 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 Securities Administrator 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 5.01(f) shall not
have been surrendered for cancellation within six months after the time
specified in such notice, the Securities Administrator shall mail a

                                        -121-

<PAGE>

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 Securities
Administrator 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 Securities Administrator shall pay to the Company 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 Securities Administrator as a result of such
Certificateholder's failure to surrender its Certificate(s) on the final
Distribution Date for final payment thereof in accordance with this Section
5.01(f). Any such amounts held in trust by the Securities Administrator shall be
held uninvested in an Eligible Account.

                  (g) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A, Class M or Class B
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 5.04 and (b) distributed to the Holder of such Certificate in reduction
of the Certificate Principal Balance thereof pursuant to this Section 5.01 from
Net Monthly Excess Cashflow and (ii) in no event shall the Uncertificated
Balance of a REMIC Regular Interest be reduced more than once in respect of any
particular amount both (a) allocated to such REMIC Regular Interest in respect
of Realized Losses pursuant to Section 5.04 and (b) distributed on such REMIC
Regular Interest in reduction of the Uncertificated Balance thereof pursuant to
this Section 5.01.

                  SECTION 5.02 Statements to Certificateholders.

                  On each Distribution Date, the Securities Administrator (based
on the information set forth in the Servicer Report for such Distribution Date
and information provided by the Trustee or the counterparty to the Corridor
Contract with respect to payments made pursuant to the Corridor Contract) shall
make available to the Trustee, the Servicer, the Company, and each Holder of the
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 Servicer and
         Master Servicing Fee received by the Master Servicer during the related
         Due Period;

                                        -122-

<PAGE>

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

                  (v) Reserved;

                  (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 Scheduled Principal
         Balance of such Mortgage Loan;

                  (ix) if available, 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 and the aggregate amount of any
         Prepayment Charges received in respect thereof;

                  (xi) the aggregate amount of Realized Losses incurred during
         the related Prepayment Period and the aggregate amount of Realized
         Losses incurred since the Closing Date;

                  (xii) the aggregate amount of Extraordinary Trust Fund
         Expenses withdrawn from the Distribution Account for such Distribution
         Date;

                  (xiii) the aggregate Certificate Principal Balance 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 Accrued Certificate Interest in respect of the Class
         A, Class M, Class B and Class C Certificates for such Distribution Date
         and the Interest Carry Forward Amount, if any, with respect to the
         Class A, Class M and Class B Certificates on such Distribution Date,
         and in the case of the Class A3, Class M and Class B Certificates,
         separately

                                        -123-

<PAGE>

         identifying any reduction thereof due to allocations of Realized
         Losses, Prepayment Interest Shortfalls, Relief Act Interest Shortfalls
         and Basis Risk Shortfall Carry-Forward Amounts;

                  (xvi) the aggregate amount of any Prepayment Interest
         Shortfalls for such Distribution Date, to the extent not covered by
         payments by the Servicer pursuant to Section 3.22 or the Master
         Servicer pursuant to Section 4.19;

                  (xvii) the aggregate amount of Relief Act Interest Shortfalls
         for such Distribution Date;

                  (xviii) the Overcollateralized Amount, Overcollateralization
         Target Amount and the Senior Enhancement Percentage for such
         Distribution Date;

                  (xix) the Overcollateralization Increase Amount, if any, for
         such Distribution Date;

                  (xx) the Overcollateralization Deficiency Amount, if any, for
         such Distribution Date;

                  (xxi) the Basis Risk Shortfall Carry-Forward Amount, if any,
         for such Distribution Date;

                  (xxii) the Basis Risk Shortfall Carry-Forward Amount, if any,
         outstanding after reimbursements therefor on such Distribution Date and
         any amounts received under the Corridor Contract to the extent of the
         Corridor Certificates Available Amount;

                  (xxiii) the respective Pass-Through Rates applicable to the
         Class A, Class M, Class B and Class C Certificates for such
         Distribution Date;

                  (xxiv) the amount of any deposit to the Reserve Fund
         contemplated by Section 3.24(b);

                  (xxv) the balance of the Reserve Fund prior to the deposit or
         withdrawal of any amounts on such Distribution Date;

                  (xxvi) the amount of any deposit to the Reserve Fund pursuant
         to Sections 5.01(a)(7)(ii) and (iii);

                  (xxvii) the balance of the Reserve Fund after all deposits and
         withdrawals on such Distribution Date;

                  (xxviii) the Loss Severity Percentage with respect to each
         Mortgage Loan; and

                  (xxix) the Aggregate Loss Severity Percentage.

                  The Securities Administrator will make such statement (and, at
its option, any additional files containing the same information in an
alternative format) available each month to

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the Servicer, the Trustee, the Certificateholders and the Rating Agencies via
the Securities Administrator's internet website. The Securities Administrator's
internet website shall initially be located at http:\\www.ctslink.com and
assistance in using the website can be obtained by calling the Securities
Administrator's customer service desk at 1-301-815-6600. Parties that are unable
to use the above distribution options are entitled to have a paper copy mailed
to them via first class mail by calling the customer service desk and indicating
such. The Securities Administrator shall have the right to change the way such
statements are distributed in order to make such distribution more convenient
and/or more accessible to the above parties and the Securities Administrator
shall provide timely and adequate notification to all above parties regarding
any such changes.

                  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 Securities Administrator shall furnish upon request 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
Securities Administrator shall be deemed to have been satisfied to the extent
that substantially comparable information shall be provided by the Securities
Administrator pursuant to any requirements of the Code as from time to time are
in force.

                  Within a reasonable period of time after the end of each
calendar year, the Securities Administrator shall furnish upon request 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 Securities Administrator 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 herein, as
shall be reasonable with respect to the Certificateholder, as applicable, 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.

                  On each Distribution Date the Securities Administrator 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 Securities Administrator and Bloomberg.

                  SECTION 5.03 Servicer Reports; P&I Advances.

                  (a) On or before 12:00 noon New York time on the later of (i)
the 18th calendar day of each month or (ii) two Business Days following the
Determination Date in each month, the Servicer shall deliver to the Master
Servicer and the Securities Administrator by telecopy or electronic mail (or by
such other means as the Servicer, the Master Servicer and the Securities
Administrator may agree from time to

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<PAGE>

time) (i) a remittance report containing such information with respect to the
Mortgage Loans and the related Distribution Date as is reasonably available to
the Servicer as the Master Servicer or the Securities Administrator may
reasonably require so as to enable the Master Servicer to master service the
Mortgage Loans and oversee the servicing by the Servicer and the Securities
Administrator to fulfill its obligations hereunder with respect to securities
and tax reporting and (ii) the reports in substantially the form set forth in
Exhibits D, E and F hereto.

                  (b) The amount of P&I Advances to be made by the Servicer on
any Distribution Date shall equal, subject to Section 5.03(d), (i) the aggregate
amount of Monthly Payments (net of the related Servicing Fees), due during the
related Due Period 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 such 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 deposited in the Collection Account pursuant to Section 3.21 for
distribution on such Distribution Date; provided, however, the Servicer shall
not be required to make P&I Advances with respect to Relief Act Interest
Shortfalls, or with respect to Prepayment Interest Shortfalls in excess of its
obligations under Section 3.22.

                  By 12:00 noon New York time on the Servicer Remittance Date,
the Servicer shall remit in immediately available funds to the Securities
Administrator 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 for the related Distribution Date either (i) from its own funds or (ii)
from the Collection Account, to the extent of any Amounts Held For Future
Distribution on deposit therein (in which case it will cause to be made an
appropriate entry in the records of the Collection Account that Amounts Held For
Future Distribution have been, as permitted by this Section 5.03, used by the
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 Servicer with respect to the Mortgage Loans. In addition, the
Servicer shall have the right to reimburse itself for any outstanding P&I
Advance made from its own funds from Amounts Held for Future Distribution. Any
Amounts Held For Future Distribution used by the Servicer to make P&I Advances
or to reimburse itself for outstanding P&I Advances shall be appropriately
reflected in the Servicer's records and replaced by the Servicer by deposit in
the Collection Account no later than the close of business on the Servicer
Remittance Date immediately following the Due Period or Prepayment Period for
which such amounts relate. The Securities Administrator will notify the Servicer
and the Master Servicer by the close of business on the Business Day prior to
the Distribution Date in the event that the amount remitted by the Servicer to
the Securities Administrator on such date is less than the P&I Advances required
to be made by the Servicer for the related Distribution Date.

                  (c) The obligation of the 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.

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<PAGE>

                  (d) Notwithstanding anything herein to the contrary, no P&I
Advance or Servicing Advance shall be required to be made hereunder by the
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 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 a
certification of a Servicing Officer delivered to the Master Servicer.

                  (e) Subject to and in accordance with the provisions of
Article VIII, in the event the Servicer fails to make any such P&I Advance not
determined by the Servicer to be a Nonrecoverable P&I Advance, then the Master
Servicer (in its capacity as successor servicer) or any other successor Servicer
shall be required to make such P&I Advance on the Distribution Date on which the
Servicer was required to make such Advance, subject to its determination of
recoverability.

                  SECTION 5.04 Allocation of Realized Losses.

                  (a) Prior to the Determination Date, the Servicer shall
determine as to each Mortgage Loan and REO Property and include in the monthly
remittance report provided to the Master Servicer and the Securities
Administrator such information as is reasonably available to the Servicer as the
Master Servicer or the Securities Administrator may reasonably require so as to
enable the Master Servicer to master service the Mortgage Loans and oversee the
servicing by the Servicer and the Securities Administrator to fulfill its
obligations hereunder with respect to securities and tax reporting, which shall
include, but not be limited to: (i) the total amount of Realized Losses, if any,
incurred in connection with any Final Recovery Determinations made during the
related Prepayment Period and (ii) the respective portions of such Realized
Losses allocable to interest and allocable to principal. Prior to each
Determination Date, the Servicer shall also determine as to each Mortgage Loan:
(i) the 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.

                  (b) All Realized Losses on the Mortgage Loans allocated to any
REMIC I Regular Interest pursuant to Section 5.04(c) shall be allocated by the
Securities Administrator on each Distribution Date as follows: first, to Net
Monthly Excess Cashflow; second, to the Class C Certificates; third, to the
Class B2 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; fourth, to the Class B1 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; fifth, to the Class M8
Certificates, until the Certificate Principal Balance thereof has been reduced
to zero; sixth, to the Class M7 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; seventh, to the Class M6 Certificates,
until the Certificate Principal Balance thereof has been reduced to zero;
eighth, to the Class M5 Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; ninth, to the Class M4 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero; tenth, to the
Class M3 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; eleventh, to the Class M2 Certificates, until the Certificate
Principal Balance thereof has been

                                        -127-

<PAGE>

reduced to zero; twelfth, to the Class M1 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and thirteenth, to the Class
A3 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 such 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 Class A3 Certificate,
Class M Certificate or Class B 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 C Certificate shall be
made by reducing the amount otherwise payable in respect thereof pursuant to
Section 5.01(a)(7)(v). No allocations of any Realized Losses shall be made to
the Certificate Principal Balances of the Class 1-A Certificates, Class 2-A
Certificates or Class P Certificates.

                  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, first to each of the REMIC I
Regular Interests ending with the designation "A," REMIC I Regular Interest
I-ILT, REMIC I Regular Interest I-IILT, until the Uncertificated Balance of each
such REMIC II Regular Interest has been reduced to zero and then to each of the
REMIC I Regular Interests ending with the designation "B," until the
Uncertificated Balances have been reduced to zero.

                  (d)(i) The REMIC II Marker Percentage of all Realized Losses
on the Mortgage Loans shall be allocated by the Trustee, based solely on the
instructions of the Securities Administrator, 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-LTAA and REMIC II Regular Interest II-LTZZ up to an aggregate amount equal to
the REMIC II Interest Loss Allocation Amount, 98.00% and 2.00%, respectively;
second, to the Uncertificated Balances of the REMIC II Regular Interest II-LTAA
and REMIC II Regular Interest II-LTZZ up to an aggregate amount equal to the
REMIC II Principal Loss Allocation Amount, 98.00% and 2.00%, respectively;
third, to the Uncertificated Balances of REMIC II Regular Interest II-LTAA,
REMIC II Regular Interest II-LTB2 and REMIC II Regular Interest II-LTZZ, 98.00%,
1.00% and 1.00%, respectively, until the Uncertificated Balance of REMIC II
Regular Interest II- LTB2 has been reduced to zero; fourth, to the
Uncertificated Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular
Interest II-LTB1 and REMIC II Regular Interest II-LTZZ, 98.00%, 1.00% and 1.00%,
respectively, until the Uncertificated Balance of REMIC II Regular Interest II-
LTB1 has been reduced to zero; fifth, to the Uncertificated Balances of REMIC II
Regular Interest II-LTAA, REMIC II Regular Interest II-LTM8 and REMIC II Regular
Interest II-LTZZ, 98.00%, 1.00%, and 1.00%, respectively, until the
Uncertificated Balance of REMIC II Regular Interest II- LTM8 has been reduced to
zero; sixth, to the Uncertificated Balances of REMIC II Regular Interest
II-LTAA, REMIC II Regular Interest II-LTM7 and REMIC II Regular Interest
II-LTZZ, 98.00%,

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<PAGE>

1.00% and 1.00%, respectively, until the Uncertificated Balance of REMIC II
Regular Interest II- LTM7 has been reduced to zero; seventh, to the
Uncertificated Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular
Interest II-LTM6 and REMIC II Regular Interest II-LTZZ, 98.00%, 1.00% and 1.00%,
respectively, until the Uncertificated Balance of REMIC II Regular Interest
II-LTM6 has been reduced to zero; eighth, to the Uncertificated Balances of
REMIC II Regular Interest II-LTAA, REMIC II Regular Interest II-LTM5 and REMIC
II Regular Interest II- LTZZ, 98.00%, 1.00% and 1.00%, respectively, until the
Uncertificated Balance of REMIC II Regular Interest II-LTM5 has been reduced to
zero; ninth, to the Uncertificated Balances of REMIC II Regular Interest
II-LTAA, REMIC II Regular Interest II-LTM4 and REMIC II Regular Interest II-
LTZZ, 98.00%, 1.00% and 1.00%, respectively, until the Uncertificated Balance of
REMIC II Regular Interest II-LTM4 has been reduced to zero; tenth, to the
Uncertificated Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular
Interest II-LTM3 and REMIC II Regular Interest II- LTZZ, 98.00%, 1.00% and
1.00%, respectively, until the Uncertificated Balance of REMIC II Regular
Interest II-LTM3 has been reduced to zero; eleventh, to the Uncertificated
Balances of REMIC II Regular Interest II-LTAA, REMIC II Regular Interest II-LTM2
and REMIC II Regular Interest II-LTZZ, 98.00%, 1.00% and 1.00%, respectively,
until the Uncertificated Balance of REMIC II Regular Interest II-LTM2 has been
reduced to zero; and twelfth, to the Uncertificated Balances of REMIC II Regular
Interest II-LTAA, REMIC II Regular Interest II-LTM1 and REMIC II Regular
Interest II-LTZZ, 98.00%, 1.00% and 1.00%, respectively, until the
Uncertificated Balance of REMIC II Regular Interest II-LTM1 has been reduced to
zero.

                  (ii) The REMIC II Sub WAC Allocation Percentage of all
Realized Losses shall be applied after all distributions have been made on each
Distribution Date first, so as to keep the Uncertificated Balance of each REMIC
II Regular Interest ending with the designation "B" equal to 0.01% of the
aggregate Stated Principal Balance of the Mortgage Loans in the related Loan
Group; second, to each REMIC II Regular Interest ending with the designation
"A," so that the Uncertificated Balance of each such REMIC II Regular Interest
is equal to 0.01% of the excess of (x) the aggregate Stated Principal Balance of
the Mortgage Loans in the related Loan Group over (y) the current Certificate
Principal Balance of the Class A Certificate in the related Loan Group (except
that if any such excess is a larger number than in the preceding distribution
period, the least amount of Realized Losses shall be applied to such REMIC II
Regular Interests such that the REMIC II Subordinated Balance Ratio is
maintained); and third, any remaining Realized Losses shall be allocated to
REMIC II Regular Interest II-LTXX.

                  SECTION 5.05 Compliance with Withholding Requirements.

                  Notwithstanding any other provision of this Agreement, the
Trustee and the Securities Administrator shall comply with all federal
withholding requirements respecting payments to Certificateholders of interest
or original issue discount 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 Securities Administrator does withhold any amount
from interest or original issue discount payments or advances thereof to any
Certificateholder pursuant to federal withholding requirements, the Securities
Administrator shall indicate the amount withheld to such Certificateholders.

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<PAGE>

                  SECTION 5.06 Reports Filed with Securities and Exchange
                               Commission.

                  The Company shall prepare or cause to be prepared the initial
current report on Form 8-K. Within 15 days after each Distribution Date, the
Securities Administrator shall, in accordance with industry standards, file with
the Commission via the Electronic Data Gathering and Retrieval System ("EDGAR"),
a Form 8-K with a copy of the statement to be furnished to the
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30, 2005, the Securities Administrator shall, in accordance with
industry standards, file a Form 15 Suspension Notice with respect to the Trust
Fund, if applicable. Prior to (i) March 20, 2005 and (ii) unless and until a
Form 15 Suspension Notice shall have been filed, prior to March 20th of each
year thereafter, the Master Servicer shall provide the Securities Administrator
with a Master Servicer Certification, together with a copy of the annual
independent accountant's servicing report and annual statement of compliance of
the Servicer to be delivered pursuant to this Agreement, and, if applicable, the
annual independent accountant's servicing report and annual statement of
compliance to be delivered by the Master Servicer pursuant to Sections 4.16 and
4.17. On or prior to (i) March 31, 2005 and (ii) unless and until a Form 15
Suspension Notice shall have been filed, within 90 days after the end of each
fiscal year thereafter, the Securities Administrator shall prepare and file a
Form 10-K, in substance conforming to industry standards, with respect to the
Trust. Such Form 10-K shall include the Master Servicer Certification and other
documentation provided by the Master Servicer pursuant to the second preceding
sentence. The Company hereby grants to the Securities Administrator a limited
power of attorney to execute and file each such document on behalf of the
Company. Such power of attorney shall continue until either the earlier of (i)
receipt by the Securities Administrator from the Company of written termination
of such power of attorney and (ii) the termination of the Trust Fund. The
Company agrees to promptly furnish to the Securities Administrator, from time to
time upon request, such further information, reports and financial statements
within its control related to this Agreement, the Mortgage Loans as the
Securities Administrator reasonably deems appropriate to prepare and file all
necessary reports with the Commission. The Securities Administrator shall have
no responsibility to file any items other than those specified in this Section
5.06; provided, however, the Securities Administrator will cooperate with the
Company in connection with any additional filings with respect to the Trust Fund
as the Company deems necessary under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Fees and expenses incurred by the Securities
Administrator in connection with the preparation and filing of periodic reports
under this Section 5.06 shall not be reimbursable from the Trust Fund, other
than any indemnity amounts otherwise payable under Section 9.05.

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<PAGE>

                                   ARTICLE VI
                                THE CERTIFICATES

                  SECTION 6.01 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-6. 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 and
authenticated by the Securities Administrator and delivered by the Trustee to
and upon the written order of the Company. The Certificates shall be executed by
manual or facsimile signature on behalf of the Trust by the Securities
Administrator by an authorized signatory. Certificates bearing the manual or
facsimile signatures of individuals who were at any time the proper officers of
the Securities Administrator shall bind the Trust, 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 Securities Administrator 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, Class M and Class B 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
Securities Administrator 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 Securities Administrator
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 Company,

                                        -131-

<PAGE>

the Servicer and, if the Trustee is not the Book-Entry Custodian, the Trustee,
any other transfer agent (including the Depository or any successor 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 Securities Administrator
resigns or is removed in accordance with the terms hereof, the successor
Securities Administrator or, if it so elects, the Depository shall immediately
succeed to its predecessor's duties as Book-Entry Custodian. The Company shall
have the right to inspect, and to obtain copies of, any Certificates held as
Book-Entry Certificates by the Book-Entry Custodian.

                  (c) The Class B2 Certificates initially offered and sold in
offshore transactions in reliance on Regulation S under the Securities Act
("Regulation S") shall be issued in the form of a temporary global certificate
in definitive, fully registered form (each, a "Regulation S Temporary Global
Certificate"), which shall be deposited with the Securities Administrator or an
agent of the Securities Administrator as custodian for the Depository and
registered in the name of Cede & Co. as nominee of the Depository for the
account of designated agents holding on behalf of Euroclear or Clearstream.
Beneficial interests in each Regulation S Temporary Global Certificate may be
held only through Euroclear or Clearstream; provided, however, that such
interests may be exchanged for interests in a Definitive Certificate in
accordance with the requirements described in Section 6.02. After the expiration
of the Release Date, a beneficial interest in a Regulation S Temporary Global
Certificate may be exchanged for a beneficial interest in the related permanent
global certificate of the same Class (each, a "Regulation S Permanent Global
Certificate"), in accordance with the procedures set forth in Section 6.02. Each
Regulation S Permanent Global Certificate shall be deposited with the Securities
Administrator or an agent of the Securities Administrator as custodian for the
Depository and registered in the name of Cede & Co. as nominee of the
Depository.

                  (d) The Trustee, the Servicer, the Securities Administrator,
the Master Servicer and the Company 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
Securities Administrator 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 Company advises the Securities Administrator in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (B) the Company is unable to locate a
qualified successor or (ii) the Company at its option advises the Securities
Administrator in writing that it elects to terminate the book-entry system
through the Depository, the Securities Administrator 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. With respect to a Global Certificate, the related
Certificate Owner

                                        -132-

<PAGE>

(other than a Holder of a Regulation S Temporary Global Certificate) may request
that its interest in a Global Certificate be exchanged for a Definitive
Certificate. Upon surrender to the Securities Administrator of the Book-Entry
Certificates by the Book-Entry Custodian or the Depository, as applicable, the
Securities Administrator 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 Company, the
Servicer, the Master Servicer, the Securities Administrator or 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 Securities Administrator, to the extent
applicable with respect to such Definitive Certificates, and the Securities
Administrator shall recognize the Holders of the Definitive Certificates as
Certificateholders hereunder.

                  In addition, after the occurrence of a Servicer Event of
Default or Master Servicer Event of Default, each Certificate Owner materially
adversely affected thereby may at its option request a Definitive Certificate
evidencing such Certificate Owner's Percentage Interest in the related Class of
Certificates. In order to make such request, such Certificate Owner shall,
subject to the rules and procedures of the Depository, provide the Depository or
the related Depository Participant with directions for the Securities
Administrator to exchange or cause the exchange of the Certificate Owner's
interest in such Class of Certificates for an equivalent Percentage Interest in
fully registered definitive form. Upon receipt by the Securities Administrator
of instruction from the Depository directing the Securities Administrator to
effect such exchange (such instructions to contain information regarding the
Class of Certificates and the Certificate Principal Balance or Notional Amount,
as applicable, being exchanged, the Depository Participant account to be debited
with the decrease, the registered holder of and delivery instructions for the
Definitive Certificates and any other information reasonably required by the
Securities Administrator), (i) the Securities Administrator shall instruct the
Depository to reduce the related Depository Participant's account by the
aggregate Certificate Principal Balance or Notional Amount, as applicable, of
the Definitive Certificates, (ii) the Securities Administrator shall execute,
authenticate and deliver, in accordance with the registration and delivery
instructions provided by the Depository, a Definitive Certificate evidencing
such Certificate Owner's Percentage Interest in such Class of Certificates and
(iii) the Securities Administrator shall execute and authenticate a new
Book-Entry Certificate reflecting the reduction in the aggregate Certificate
Principal Balance or Notional Amount, as applicable, of such Class of
Certificates by the amount of the Definitive Certificates.

                  SECTION 6.02 Registration of Transfer and Exchange of
                               Certificates.

                  (a) The Securities Administrator shall cause to be kept at one
of the offices or agencies to be appointed by the Securities Administrator in
accordance with the provisions of Section 9.11, a Certificate Register for the
Certificates in which, subject to such reasonable regulations as it may
prescribe, the Securities Administrator shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein provided.

                                        -133-

<PAGE>

                  (b) No transfer of any Class B2 Certificate shall be made
unless that transfer is made pursuant to an effective registration statement
under the Securities 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 B2 Certificate is to be made without registration or qualification
(other than in connection with the initial transfer of any such Certificate by
the Company), the Securities Administrator shall require receipt of: (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the
Securities Act, written certifications from the Certificateholder desiring to
effect the transfer and from such Certificateholder's prospective transferee,
substantially in the form attached hereto as Exhibit B-3; (ii) if such transfer
is purportedly being made in reliance upon Rule 501(a) under the Securities Act,
written certifications from the Certificateholder desiring to effect the
transfer and from such Certificateholder's prospective transferee, substantially
in the form attached hereto as Exhibit B-3; (iii) if such transfer is
purportedly being made in reliance on Regulation S, a written certification from
the prospective transferee, substantially in the form attached hereto as Exhibit
B-3 and (iv) in all other cases, an Opinion of Counsel satisfactory to the
Securities Administrator 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 Company, the Trustee, the Master Servicer, the
Securities Administrator or the 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. Neither of the Company nor the Securities
Administrator is obligated to register or qualify any such Certificates under
the Securities 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 Company, the Master Servicer, the
Securities Administrator and the Servicer against any liability that may result
if the transfer is not so exempt or is not made in accordance with such federal
and state laws.

                  A holder of a beneficial interest in a Regulation S Temporary
Global Certificate must provide Euroclear or Clearstream, as the case may be,
with a certificate in the form of Exhibit B-3 hereto certifying that the
beneficial owner of the interest in such Global Certificate is not a U.S. Person
(as defined in Regulation S), and Euroclear or Clearstream, as the case may be,
must provide to the Trustee and Securities Administrator a certificate in the
form of Exhibit B-3 hereto prior to (i) the payment of interest or principal
with respect to such holder's beneficial interest in the Regulation S Temporary
Global Certificate and (ii) any exchange of such beneficial interest for a
beneficial interest in a Regulation S Permanent Global Certificate.

                  No transfer of any Class C 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, 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 C 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
Company), the Securities Administrator shall require receipt of: (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the
Securities Act, written certifications from the Certificateholder desiring to
effect the transfer and from such Certificateholder's

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<PAGE>

prospective transferee, substantially in the form attached hereto as Exhibit
B-1; (ii) if such transfer is purportedly being made in reliance upon Rule
501(a) under the Securities Act, written certifications from the
Certificateholder desiring to effect the transfer and from such
Certificateholder's prospective transferee, substantially in the form attached
hereto as Exhibit B-2 and (iii) in all other cases, an Opinion of Counsel
satisfactory to the Securities Administrator 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 Company, the Trustee, the Master
Servicer, the Securities Administrator or the 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. Neither of the Company nor the Securities
Administrator is obligated to register or qualify any such Certificates under
the Securities 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 Company, the Master Servicer, the
Securities Administrator and the Servicer against any liability that may result
if the transfer is not so exempt or is not made in accordance with such federal
and state laws.

                  (c) No transfer of a Class C Certificate, Class P Certificate
or a 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
Securities Administrator is provided with an Opinion of Counsel on which the
Company, the Master Servicer, the Securities Administrator, the Trustee and the
Servicer may rely, which establishes to the satisfaction of the Securities
Administrator 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 Company, the
Servicer, the Trustee, the Master Servicer, the Securities Administrator 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 Company, the
Servicer, the Trustee, the Master Servicer, the Securities Administrator, the
Trust Fund. An Opinion of Counsel will not be required in connection with the
initial transfer of any such Certificate by the Company to an affiliate of the
Company (in which case, the Company 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 Securities Administrator shall be entitled to conclusively rely
upon a representation (which, upon the request of the Securities Administrator,
shall be a written representation) from the Company of the status of such
transferee as an affiliate of the Company.

                  Each Transferee of a Class M Certificate or Class B1
Certificate will be deemed to have represented by virtue of its purchase or
holding of such Certificate (or interest therein) that either (a) such
Transferee is not a Plan or purchasing such Certificate with Plan Assets, (b) it
has acquired and is holding such Certificate in reliance on Prohibited
Transaction Exemption ("PTE") 94-84 or FAN 97-03E, as amended by PTE 97-34, 62
Fed. Reg. 39021 (July 21, 1997), PTE 2000- 58, 65 Fed. Reg. 67765 (November 13,
2000) and PTE 2002-41, 67 Fed. Reg. 54487 (August 22, 2002) (the "Exemption"),
and that it understands that there are certain conditions to the availability

                                        -135-

<PAGE>

of the Exemption including that such Certificate must be rated, at the time of
purchase, not lower than "BBB-" (or its equivalent) by a Rating Agency or (c)
the following conditions are satisfied: (i) such Transferee is an insurance
company, (ii) the source of funds used to purchase or hold such Certificate (or
interest therein) is an "insurance company general account" (as defined in PTCE
95- 60, and (iii) the conditions set forth in Sections I and III of PTCE 95-60
have been satisfied. Each purchaser or transferee of a Class B-2 Certificate
will be deemed to have represented by virtue of its purchase and holding of such
Certificate that either (ii) it is not a Plan or purchasing such Certificate
with Plan Assets or (ii) (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
Certificate or any interest therein is acquired or held in violation of the
conditions described in this Section 6.02(c), 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 certificate or
interest therein was effected in violation of the conditions described in this
Section 6.02(c) shall indemnify and hold harmless the Company, the Trustee, the
Servicer, the Master Servicer, the Securities Administrator 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 Securities
Administrator 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
                           Securities Administrator 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 B-4) from the proposed
                           Transferee, in form and substance satisfactory to the
                           Securities Administrator, representing and
                           warranting, among other things, that such Transferee
                           is a Permitted 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 6.02(d) and agrees to be bound by
                           them.

                                        -136-

<PAGE>

                                    (C) Notwithstanding the delivery of a
                           Transfer Affidavit and Agreement by a proposed
                           Transferee under clause (B) above, if an authorized
                           officer of the Securities Administrator 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 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
                           B-2) to the Securities Administrator 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 Securities Administrator 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 Securities Administrator 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
                  Securities Administrator as a condition to such registration.
                  In addition, no Transfer of a Residual Certificate shall be
                  made unless the Securities Administrator 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 6.02(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 Securities Administrator 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 6.02(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.

                                    (B) If any purported Transferee shall become
                           a holder of a Residual Certificate in violation of
                           the restrictions in this Section 6.02(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,

                                        -137-

<PAGE>

                           illegal or unenforceable, then the Securities
                           Administrator 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 Securities Administrator on
                           such terms as the Securities Administrator may
                           choose. Such purported Transferee shall promptly
                           endorse and deliver each Residual Certificate in
                           accordance with the instructions of the Securities
                           Administrator. Such purchaser may be the Securities
                           Administrator itself or any Affiliate of the
                           Securities Administrator. The proceeds of such sale,
                           net of the commissions (which may include commissions
                           payable to the Securities Administrator or its
                           Affiliates), expenses and taxes due, if any, will be
                           remitted by the Securities Administrator 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 Securities
                           Administrator, and the Securities Administrator 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 Securities Administrator 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
                  charged or collected by the Securities Administrator.

                           (v) The provisions of this Section 6.02(d) set forth
                  prior to this subsection (v) may be modified, added to or
                  eliminated, provided that there shall have been delivered to
                  the Securities Administrator 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 Securities
                           Administrator, to the effect that such modification
                           of, addition to or elimination of such provisions
                           will not cause any Trust REMIC to cease to qualify as
                           a REMIC and will not cause any Trust REMIC, 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

                                        -138-

<PAGE>

                           Transfer of a Residual Certificate to a Person that
                           is not a Permitted Transferee.

                  (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Securities Administrator maintained for such purpose pursuant to Section 9.11,
the Securities Administrator 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 Securities
Administrator maintained for such purpose pursuant to Section 9.11. Whenever any
Certificates are so surrendered for exchange, the Securities Administrator 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 Securities
Administrator) be duly endorsed by, or be accompanied by a written instrument of
transfer in the form satisfactory to the Securities Administrator 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 Securities Administrator
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 Securities Administrator in accordance
with its customary procedures.

                  SECTION 6.03 Mutilated, Destroyed, Lost or Stolen
                               Certificates.

                  If (i) any mutilated Certificate is surrendered to the
Securities Administrator, or the Securities Administrator receives evidence to
its satisfaction of the destruction, loss or theft of any Certificate and of the
ownership thereof, and (ii) there is delivered to Securities Administrator such
security or indemnity as may be required by it to save it harmless, then, in the
absence of actual knowledge by the Securities Administrator that such
Certificate has been acquired by a protected purchaser, the Securities
Administrator, shall execute, authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of the same Class and of like denomination and Percentage Interest.
Upon the issuance of any new Certificate under this Section, the Securities
Administrator may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Securities Administrator)
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 6.04 Persons Deemed Owners.

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<PAGE>

                  The Company, the Servicer, the Trustee, the Master Servicer,
the Securities Administrator 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, and none of the Company, the Servicer, the Trustee,
the Master Servicer, the Securities Administrator or any agent of any of them
shall be affected by notice to the contrary.

                  SECTION 6.05 Certain Available Information.

                  On or prior to the date of the first sale of any Class B2,
Class C, Class P or Residual Certificate to an Independent third party, the
Company shall provide to the Securities Administrator ten copies of any private
placement memorandum or other disclosure document used by the Company in
connection with the offer and sale of such Certificate. 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 Securities
Administrator, the Company promptly shall inform the Securities Administrator of
such event and shall deliver to the Securities Administrator ten copies of the
private placement memorandum or disclosure document, as revised, amended or
supplemented. The Securities Administrator shall maintain at its office as set
forth in Section 12.05 hereof 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 Securities Administrator 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 B2, Class C, Class P 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 Securities Administrator; 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 and (C) any copies of all Officers' Certificates of the Servicer
since the Closing Date delivered to the Master Servicer to evidence such
Person'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.
Copies and mailing of any and all of the foregoing items will be available from
the Securities Administrator upon request at the expense of the Person
requesting the same.

                                        -140-

<PAGE>

                                   ARTICLE VII
                THE COMPANY, THE SERVICER AND THE MASTER SERVICER

                  SECTION 7.01 Liability of the Company, the Servicer and the
                               Master Servicer.

                  The Company, the Servicer 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 Company, Servicer and Master Servicer and undertaken hereunder by the
Company, the Servicer and the Master Servicer herein.

                  SECTION 7.02 Merger or Consolidation of the Company, the
                               Servicer or the Master Servicer.

                  Subject to the following paragraph, the Company 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 Servicer 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 formation. The Company, the Servicer 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 Company, the Servicer 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 Company, the Servicer or the Master Servicer shall be
a party, or any Person succeeding to the business of the Company, the Servicer
or the Master Servicer, shall be the successor of the Company, the Servicer 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 any
successor of the Servicer or the Master Servicer shall meet the eligibility
requirements set forth in clauses (i) and (iii) of the last paragraph of Section
8.02(a) or Section 7.06, as applicable.

                  SECTION 7.03 Limitation on Liability of the Company, the
                               Servicer, the Master Servicer and Others.

                  None of the Company, the Servicer, the Securities
Administrator, the Master Servicer or any of the directors, officers, employees
or agents of the Company, the Servicer 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 Company, the Servicer, the Securities Administrator, the
Master Servicer or any such person against any breach of warranties,

                                        -141-

<PAGE>

representations or covenants made herein or against any specific liability
imposed on any such Person pursuant hereto or against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Company, the Servicer, the Securities
Administrator, the Master Servicer and any director, officer, employee or agent
of the Company, the Servicer, the Securities Administrator and 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 Company, the Servicer, the Securities Administrator, the Master
Servicer and any director, officer, employee or agent of the Company, the
Servicer, the Securities Administrator 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,
the Certificates or any loss, liability or expense incurred other than by reason
of willful misfeasance, bad faith or gross negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. None of the Company, the Servicer, the Securities Administrator or
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 Company, the Servicer, the
Securities Administrator 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, 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 Company, the Servicer, the Securities Administrator and
the Master Servicer shall be entitled to be reimbursed therefor from the
Collection Account or the Distribution Account as and to the extent provided in
Article III and Article IV, any such right of reimbursement being prior to the
rights of the Certificateholders to receive any amount in the Collection Account
and the Distribution Account.

                  Notwithstanding anything to the contrary contained herein, the
Servicer shall not be liable for any actions or inactions prior to the Cut-off
Date of any prior servicer of the Mortgage Loans and the Master Servicer shall
not be liable for any action or inaction of the Servicer, except to the extent
expressly provided herein.

                  SECTION 7.04 Limitation on Resignation of the Servicer.

                  (a) Except as otherwise provided in this Agreement, the
Servicer shall neither assign all or substantially all of its rights under this
Agreement or the servicing hereunder nor delegate all or substantially all of
its duties hereunder without, in each case, the prior written consent of the
Master Servicer, which consent shall not be unreasonably withheld; provided,
that in each case, there must be delivered to the Trustee and the Master
Servicer a letter from each Rating Agency to the effect that such transfer of
servicing will not result in a qualification, withdrawal or downgrade of the
then-current rating of any of the Certificates. Notwithstanding the foregoing,
the Servicer, without the consent of the Trustee or the Master Servicer, may
retain third-party contractors to perform certain servicing and loan
administration functions, including without limitation hazard insurance
administration, tax payment and administration, flood certification and
administration,

                                        -142-

<PAGE>

collection services and similar functions, provided, however, that the retention
of such contractors by the Servicer shall not limit the obligation of the
Servicer to service the Mortgage Loans pursuant to the terms and conditions of
this Agreement. The Servicer shall not resign from the obligations and duties
hereby imposed on it except by consent of the Master Servicer or upon
determination that its duties hereunder are no longer permissible under
applicable law or as provided in Section 7.04(c). Any such determination
pursuant to the preceding sentence permitting the resignation (other than
pursuant to Section 7.04(c)) of the Servicer shall be evidenced by an Opinion of
Counsel to such effect obtained at the expense of the Servicer and delivered to
the Trustee. No resignation of the Servicer shall become effective until the
Master Servicer or a successor Servicer shall have assumed the Servicer's
responsibilities, duties, liabilities (other than those liabilities arising
prior to the appointment of such successor) and obligations under this
Agreement.

                  (b) Except as expressly provided herein, the 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 Servicer hereunder. The foregoing prohibition on assignment
shall not prohibit the Servicer from designating a Sub-Servicer as payee of any
indemnification amount payable to the Servicer hereunder; provided, however,
that as provided in Section 3.02, no Sub- Servicer 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.

                  (c) Notwithstanding anything to the contrary herein, the
Servicer may pledge or assign as collateral all its rights, title and interest
under this Agreement to a lender (the "Lender"), provided, that:

                  (1) upon an Event of Default and receipt of a notice of
         termination by the Servicer, the Lender may direct the Servicer or its
         designee to appoint a successor Servicer pursuant to the provisions,
         and subject to the conditions, set forth in Section 8.02 regarding the
         Servicer's appointment of a successor Servicer;

                  (2) the Lender's rights are subject to this Agreement; and

                  (3) the Servicer shall remain subject to termination as
         servicer under this Agreement pursuant to the terms hereof.

                  SECTION 7.05 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 and the Rating
Agencies. No resignation of the Master Servicer shall become effective until the
Trustee or a successor Master 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.

                                        -143-

<PAGE>

                  SECTION 7.06 Assignment of Master Servicing.

                  The Master Servicer may sell and assign its rights and
delegate its duties and obligations in its entirety as Master Servicer under
this Agreement; provided, however, that: (i) the purchaser or transferee accept
in writing such assignment and delegation and assume the obligations of the
Master Servicer hereunder (a) shall have a net worth of not less than
$15,000,000 (unless otherwise approved by each Rating Agency pursuant to clause
(ii) below); (b) shall be reasonably satisfactory to the Trustee (as evidenced
in a writing signed by the Trustee); and (c) shall execute and deliver to the
Trustee an agreement, in form and substance reasonably satisfactory to the
Trustee, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by it as master servicer under this Agreement, any custodial agreement
from and after the effective date of such agreement; (ii) each Rating Agency
shall be given prior written notice of the identity of the proposed successor to
the Master Servicer and each Rating Agency's rating of the Certificates in
effect immediately prior to such assignment, sale and delegation will not be
downgraded, qualified or withdrawn as a result of such assignment, sale and
delegation, as evidenced by a letter to such effect delivered to the Master
Servicer and the Trustee; and (iii) the Master Servicer assigning and selling
the master servicing shall deliver to the Trustee an Officer's Certificate and
an Opinion of Independent counsel, each stating that all conditions precedent to
such action under this Agreement have been completed and such action is
permitted by and complies with the terms of this Agreement. No such assignment
or delegation shall affect any liability of the Master Servicer arising out of
acts or omissions prior to the effective date thereof.

                  SECTION 7.07 Rights of the Company in Respect of the Servicer
                               and the Master Servicer.

                  Each of the Master Servicer and the Servicer shall afford (and
any Sub-Servicing Agreement shall provide that each Sub-Servicer shall afford)
the Company and the Trustee, upon reasonable notice, during normal business
hours, reasonable access to all records maintained by the Master Servicer or the
Servicer (and any such Sub-Servicer) in respect of the Servicer's rights and
obligations related to the Mortgage Loans hereunder and access to officers of
the Master Servicer or the Servicer (and those of any such Sub-Servicer)
responsible for such obligations, and the Master Servicer shall have reasonable
access to all records related to the Mortgage Loans and the servicing thereof
maintained by the Servicer and any Sub-Servicers. Upon request, unless publicly
filed with the Securities and Exchange Commission, each of the Master Servicer
and the Servicer shall furnish to the Company and the Trustee its (and any such
Sub-Servicer's) most recent financial statements, and upon reasonable request
from the Company or the Trustee, such other information relating to the Master
Servicer's or Servicer's capacity to perform its obligations under this
Agreement as it possesses. To the extent such information is not otherwise
available to the public, the Company and the Trustee shall not disseminate any
information obtained pursuant to the preceding two sentences without the Master
Servicer's or the Servicer's, as applicable, written consent, except as required
pursuant to this Agreement or to the extent that it is appropriate to do so (i)
to its legal counsel, auditors, taxing authorities or other governmental
agencies and the Certificateholders, (ii) pursuant to any law, rule, regulation,
order, judgment, writ, injunction or decree of any court or governmental
authority having jurisdiction over the Company and the Trustee or the Trust
Fund, and in any case, the Company or the Trustee, (iii) disclosure of any and
all information that is or becomes publicly

                                      -144-

<PAGE>

known, or information obtained by the Trustee from sources other than the
Company, the Servicer or the Master Servicer, (iv) disclosure as required
pursuant to this Agreement or (v) disclosure of any and all information (A) in
any preliminary or final offering circular, registration statement or contract
or other document pertaining to the transactions contemplated by the Agreement
approved in advance by the Company, the Servicer or the Master Servicer or (B)
to any affiliate, independent or internal auditor, agent, employee or attorney
of the Trustee having a need to know the same, provided that the Trustee advises
such recipient of the confidential nature of the information being disclosed,
shall use its best efforts to assure the confidentiality of any such
disseminated non-public information. Nothing in this Section 7.07 shall limit
the obligation of the Servicer to comply with any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the
Servicer to provide access as provided in this Section 7.07 as a result of such
obligation shall not constitute a breach of this Section. The Servicer shall not
be required to make copies of or ship documents to any party unless provisions
have been made for the reimbursement of the costs thereof. The Company may, but
is not obligated to, enforce the obligations of the Master Servicer and the
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 or
the Servicer under this Agreement or exercise the rights of the Master Servicer
or the Servicer under this Agreement; provided that neither the Master Servicer
nor the Servicer shall be relieved of any of its obligations under this
Agreement by virtue of such performance by the Company or its designee. The
Company shall not have any responsibility or liability for any action or failure
to act by the Master Servicer or the Servicer and is not obligated to supervise
the performance of the Master Servicer or the Servicer under this Agreement or
otherwise.

                                        -145-

<PAGE>

                                  ARTICLE VIII
                                     DEFAULT

                  SECTION 8.01 Servicer Events of Default.

                  (a) "Servicer Event of Default," wherever used herein, means
         any one of the following events:

                  (i) any failure by the Servicer to remit to the Securities
         Administrator for distribution to the Certificateholders any payment
         (other than a P&I Advance required to be made from its own funds on any
         Servicer Remittance Date pursuant to Section 5.03) 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 Servicer by the Company or the Trustee (in
         which case notice shall be provided by telecopy), or to the Servicer,
         the Company, the Trustee and by the Holders of Certificates entitled to
         at least 25% of the Voting Rights; or

                  (ii) any failure on the part of the Servicer duly to observe
         or perform in any material respect any other of the covenants or
         agreements on the part of the Servicer contained in this Agreement, or
         the material breach by the Servicer of any representation and warranty
         contained in Section 2.05, which continues unremedied for a period of
         30 days after the date on which written notice of such failure,
         requiring the same to be remedied, shall have been given to the
         Servicer by the Company or the Trustee or to the Servicer, the Company
         and the Trustee by the Holders of Certificates entitled to at least 25%
         of the Voting Rights; provided, however, that in the case of a failure
         that cannot be cured within thirty (30) days, the cure period may be
         extended for an additional thirty (30) days if the Servicer can
         demonstrate to the reasonable satisfaction of the Trustee that the
         Servicer is diligently pursuing remedial action; 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
         Servicer and such decree or order shall have remained in force
         undischarged or unstayed for a period of 90 days; or

                  (iv) the 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

                  (v) the Servicer shall admit in writing its inability to pay
         its debts generally as they become due, file a petition to take
         advantage of any applicable insolvency or

                                        -146-

<PAGE>

         reorganization statute, make an assignment for the benefit of its
         creditors, or voluntarily suspend payment of its obligations;

                  (vi) failure by the Servicer to duly perform, within the
         required time period, its obligations under Section 3.17, 3.18 or 3.19
         which failure continues unremedied for a period of thirty (30) days
         after the date on which written notice of such failure, requiring the
         same to be remedied, shall have been given to the Servicer by any party
         to this Agreement; or

                  (vii) any failure of the Servicer to make any P&I Advance on
         any Servicer Remittance Date required to be made from its own funds
         pursuant to Section 5.03 which continues unremedied until 3:00 p.m. New
         York time on the Business Day immediately following the Servicer
         Remittance Date; or

                  (viii) a Servicer Trigger Event shall be in effect on any
         Distribution Date.

If a Servicer Event of Default described in clauses (i) through (vi) or (viii)
of this Section shall occur, then, and in each and every such case, so long as
such Servicer Event of Default shall not have been remedied, the Company 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 Servicer (and to the Company if given by the Trustee or to the
Trustee if given by the Company) with a copy to the Master Servicer and each
Rating Agency, terminate all of the rights and obligations of the Servicer in
its capacity as Servicer under this Agreement, to the extent permitted by law,
and in and to the Mortgage Loans and the proceeds thereof. If a Servicer Event
of Default described in clause (vii) hereof shall occur, the Trustee shall, by
notice in writing to the Servicer, the Company and the Master Servicer,
terminate all of the rights and obligations of the Servicer in its capacity as
Servicer under this Agreement and in and to the Mortgage Loans and the proceeds
thereof. Subject to Section 8.02, on or after the receipt by the Servicer of
such written notice, all authority and power of the 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 Master Servicer pursuant to and under this Section, and, without
limitation, the Master Servicer is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver, on behalf of and at the
expense of the 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 Servicer agrees promptly (and in any event no later than ten
Business Days subsequent to such notice) to provide the Master Servicer with all
documents and records requested by it to enable it to assume the Servicer's
functions under this Agreement, and to cooperate with the Master Servicer in
effecting the termination of the Servicer's responsibilities and rights under
this Agreement, including, without limitation, the transfer within one Business
Day to the Master Servicer for administration by it of all cash amounts which at
the time shall be or should have been credited by the Servicer to the Collection
Account held by or on behalf of the Servicer or thereafter be received with
respect to the Mortgage Loans or any REO Property (provided, however, that the
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, Servicing Advances, accrued and unpaid Servicing
Fees or otherwise, and shall continue to be entitled to the benefits of Section
7.03 and Section 11.03, notwithstanding any such termination, with

                                        -147-

<PAGE>

respect to events occurring prior to such termination). For purposes of this
Section 8.01(a), the Trustee shall not be deemed to have knowledge of a 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 Servicer Event of
Default is received by the Trustee at its Corporate Trust Office and such notice
references the Certificates, the Trust or this Agreement. The Trustee shall
promptly notify the Master Servicer and the Rating Agencies of the occurrence of
a Servicer Event of Default of which it has knowledge as provided above.

                  The Master Servicer shall be entitled to be reimbursed by the
Servicer (or from amounts on deposit in the Distribution Account if the Servicer
is unable to fulfill its obligations hereunder) for all reasonable out-of-pocket
or third party costs associated with the transfer of servicing from the
predecessor Servicer (or if the predecessor Servicer is the Master Servicer,
from the Trust Fund), including without limitation, any reasonable out-of-pocket
or third party costs or expenses associated with the complete transfer of all
servicing data and the completion, correction or manipulation of such servicing
data as may be required by the Master Servicer to correct any errors or
insufficiencies in the servicing data or otherwise to enable the Master Servicer
to service the Mortgage Loans properly and effectively, upon presentation of
reasonable documentation of such costs and expenses.

                  (b) "Master Servicer Event of Default," wherever used herein,
means any one of the following events:

                           (i) 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 2.04, which continues
         unremedied for a period of 30 days after 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 Company or the Trustee or to
         the Master Servicer, the Company and the Trustee by the Holders of
         Certificates entitled to at least 25% of the Voting Rights; or

                           (ii) 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

                           (iii) 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

                                        -148-

<PAGE>

                           (iv) 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.

If a Master Servicer Event of Default 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 Company 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 Company if given
by the Trustee or to the Trustee if given by the Company) with a copy to each
Rating Agency, 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. 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 including, without limitation, the compensation
payable to the Master Servicer under this Agreement, 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 (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 and shall continue to be entitled to the benefits of Section 7.03,
notwithstanding any such termination, with respect to events occurring prior to
such termination). For purposes of this Section 8.01(b), the Trustee shall not
be deemed to have knowledge 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 or this
Agreement. The Trustee shall promptly notify the Rating Agencies of the
occurrence of a Master Servicer Event of Default of which it has knowledge as
provided above.

                  To the extent that the costs and expenses of the Trustee
related to the termination of the Master Servicer, appointment of a successor
Master Servicer or the transfer and assumption of the master servicing by the
Trustee (including, without limitation, (i) all legal costs and expenses and all
due diligence costs and expenses associated with an evaluation of the potential
termination of the Master Servicer as a result of a Master Servicer Event of
Default and (ii) all costs and expenses associated with the complete transfer of
the master servicing, including all servicing files and all servicing data and
the completion, correction or manipulation of such servicing data as may be
required by the successor Master Servicer to correct any errors or
insufficiencies in the servicing data or otherwise to enable the successor
Master Servicer to master service the Mortgage Loans in

                                        -149-

<PAGE>

accordance with this Agreement) are not fully and timely reimbursed by the
terminated Master Servicer, the Trustee shall be entitled to reimbursement of
such costs and expenses from the Distribution Account.

                  SECTION 8.02 Master Servicer to Act; Appointment of Successor.

                  (a) On and after the time the Servicer receives a notice of
termination, the Master Servicer shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement and the transactions
set forth or provided for herein, and all the responsibilities, duties and
liabilities relating thereto and arising thereafter shall be assumed by the
Master Servicer (except for any representations or warranties of the Servicer
under this Agreement, the responsibilities, duties and liabilities contained in
Section 2.03 and the obligation to deposit amounts in respect of losses pursuant
to Section 3.10(b)) by the terms and provisions hereof including, without
limitation, the Servicer's obligations to make P&I Advances pursuant to Section
5.03; provided, however, that if the Master Servicer is prohibited by law or
regulation from obligating itself to make advances regarding delinquent mortgage
loans, then the Master Servicer shall not be obligated to make P&I Advances
pursuant to Section 5.03; and provided further, that any failure to perform such
duties or responsibilities caused by the Servicer's failure to provide
information required by Section 8.01 shall not be considered a default by the
Master Servicer as successor to the Servicer hereunder; provided, however, that
(1) it is understood and acknowledged by the parties hereto that there will be a
period of transition (not to exceed 120 days) before the actual servicing
functions can be fully transferred to the Master Servicer or any successor
Servicer appointed in accordance with the following provisions and (2) any
failure to perform such duties or responsibilities caused by the Servicer's
failure to provide information required by Section 8.01 shall not be considered
a default by the Master Servicer as successor to the Servicer hereunder. As
compensation therefor, the Master Servicer shall be entitled to the Servicing
Fee and all funds relating to the Mortgage Loans to which the Servicer would
have been entitled if it had continued to act hereunder. Notwithstanding the
above and subject to the immediately following paragraph, the Master Servicer
may, if it shall be unwilling to so act, or shall, if it is unable to so act
promptly appoint or petition a court of competent jurisdiction to appoint, a
Person that satisfies the eligibility criteria set forth below as the successor
to the Servicer under this Agreement in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer under this Agreement.

                  Notwithstanding any provision in this Agreement to the
contrary, for a period of 30 days following the date on which the Servicer shall
have received a notice of termination pursuant to Section 8.01, the Servicer or
its designee may appoint a successor Servicer that satisfies the eligibility
criteria of a successor Servicer set forth below, which appointment shall be
subject to the consent of the Company, the Seller, the Master Servicer, and the
Trustee, which consent shall not be unreasonably withheld or delayed; provided
that such successor Servicer agrees to fully effect the servicing transfer
within 120 days following the termination of the Servicer and to make all P&I
Advances that would otherwise be made by the Master Servicer under Section 8.01
as of the date of such appointment, and to reimburse the Servicer and/or the
Master Servicer for any unreimbursed P&I Advances they have made and any
reimburseable expenses that they may have incurred in connection with this
Section 8.02. Any proceeds received in connection with the appointment of such
successor Servicer shall be the property of the Servicer or its designee. This
30-day period shall terminate immediately (i) at the close of business on the
second Business Day of such 30-day period

                                        -150-

<PAGE>

if (A) the Servicer was terminated because of an Event of Default described in
Section 8.01 (a)(vii) for failing to make a required P&I Advance, and (B) the
Servicer shall have failed to make (or cause to be made) such P&I Advance, or
shall fail to reimburse (or cause to be reimbursed) the Master Servicer for a
P&I Advance made by the Master Servicer, by the close of business on such second
Business Day, or (ii) at the close of business on the second Business Day
following the date (if any) during such 30-day period on which a P&I Advance is
due to be made, if the Servicer shall have failed to make (or caused to be made)
such P&I Advance, or the Servicer shall have failed to reimburse (or cause to be
reimbursed) the Master Servicer for such P&I Advance, by the close of business
on such second Business Day.

                  Notwithstanding anything herein to the contrary, in no event
shall the Trustee or the Master Servicer be liable for any Servicing Fee or for
any differential in the amount of the Servicing Fee paid hereunder and the
amount necessary to induce any successor Servicer to act as successor Servicer
under this Agreement and the transactions set forth or provided for herein.

                  Any successor Servicer appointed under this Agreement must (i)
be an established mortgage loan servicing institution that is a Fannie Mae and
Freddie Mac approved seller/servicer, (ii) be approved by each Rating Agency by
a written confirmation from each Rating Agency that the appointment of such
successor Servicer would not result in the reduction or withdrawal of the then
current ratings of any outstanding Class of Certificates, (iii) have a net worth
of not less than $15,000,000 and (iv) assume all the responsibilities, duties or
liabilities of the Servicer (other than liabilities of the Servicer hereunder
incurred prior to termination of the Servicer under Section 8.01 herein) under
this Agreement as if originally named as a party to this Agreement.

                  (b)(1) All reasonable out-of-pocket or third-party servicing
transfer costs (including, without limitation, servicing transfer costs of the
type described in Section 8.02(a) and incurred by the Trustee, the Master
Servicer and any successor Servicer under paragraph (b)(2) below) shall be paid
by the terminated Servicer upon presentation of reasonable documentation of such
costs, and if such predecessor or initial Servicer, as applicable, defaults in
its obligation to pay such costs, the successor Servicer, the Master Servicer
and the Trustee shall be entitled to reimbursement therefor from the assets of
the Trust Fund.

                  (2) No appointment of a successor to the Servicer under this
Agreement shall be effective until the assumption by the successor of all of the
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 Servicer as such
hereunder. The Company, 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 Servicer under this
Agreement, the Master Servicer shall act in such capacity as hereinabove
provided.

                  SECTION 8.03 Notification to Certificateholders.

                  (a) Upon any termination of the Servicer or the Master
Servicer pursuant to Section 8.01(a) or (b) or any appointment of a successor to
the Servicer or the Master Servicer

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<PAGE>

pursuant to Section 8.02, the Trustee shall give prompt written notice thereof
to the 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 Servicer Event of Default or 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
Servicer Event of Default or Master Servicer Event of Default shall have been
cured or waived.

                  SECTION 8.04 Waiver of Servicer Events of Default.

                  The Holders representing at least 66 2/3% of the Voting Rights
evidenced by all Classes of Certificates affected by any default, Servicer Event
of Default or Master Servicer Event of Default hereunder may waive such default,
Servicer Event of Default or Master Servicer Event of Default; provided,
however, that a Servicer Event of Default under clause (i) or (vii) of Section
8.01(a) may be waived only by all of the Holders of the Regular Certificates.
Upon any such waiver of a default, Servicer Event of Default or Master Servicer
Event of Default, such default, Servicer Event of 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, Servicer Event of Default or Master Servicer Event of Default or
impair any right consequent thereon except to the extent expressly so waived.

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<PAGE>

                                   ARTICLE IX
             CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR

                  SECTION 9.01 Duties of Trustee and Securities Administrator.

                  The Trustee, prior to the occurrence of a Master Servicer
Event of Default and after the curing or waiver of all Master Servicer Events of
Default which may have occurred, and the Securities Administrator each undertake
to perform such duties and only such duties as are specifically set forth in
this Agreement as duties of the Trustee and the Securities Administrator,
respectively. During the continuance of 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 its exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.

                  Each of the Trustee and the Securities Administrator, upon
receipt of all resolutions, certificates, statements, opinions, reports,
documents, orders or other instruments furnished to it, which are specifically
required to be furnished pursuant to any provision of this Agreement, shall
examine them to determine whether they conform to the requirements of this
Agreement. If any such instrument is found not to conform to the requirements of
this Agreement in a material manner, the Trustee or the Securities
Administrator, as the case may be, shall take such action as it deems
appropriate to have the instrument corrected, and if the instrument is not
corrected to its satisfaction, the Securities Administrator will provide notice
to the Trustee thereof and the Trustee will provide notice to the
Certificateholders.

                  The Trustee shall promptly remit to the Servicer any
complaint, claim, demand, notice or other document (collectively, the "Notices")
delivered to the Trustee as a consequence of the assignment of any Mortgage Loan
hereunder and relating to the servicing of the Mortgage Loans; provided than any
such notice (i) is delivered to the Trustee at its Corporate Trust Office, (ii)
contains information sufficient to permit the Trustee to make a determination
that the real property to which such document relates is a Mortgaged Property.
The Trustee shall have no duty hereunder with respect to any Notice it may
receive or which may be alleged to have been delivered to or served upon it
unless such Notice is delivered to it or served upon it at its Corporate Trust
Office and such Notice contains the information required pursuant to clause (ii)
of the preceding sentence.

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

                           (i) Prior to the occurrence of a Master Servicer
                  Event of Default, and after the curing or waiver of all such
                  Master Servicer Events of Default which may have occurred with
                  respect to the Trustee and at all times with respect to the
                  Securities Administrator, the duties and obligations of the
                  Trustee shall be determined solely by the express provisions
                  of this Agreement, neither the Trustee nor the Securities
                  Administrator shall be liable except for the performance of
                  such

                                        -153-

<PAGE>

                  duties and obligations as are specifically set forth in this
                  Agreement, no implied covenants or obligations shall be read
                  into this Agreement against the Trustee or the Securities
                  Administrator and, in the absence of bad faith on the part of
                  the Trustee or the Securities Administrator, respectively, the
                  Trustee or the Securities Administrator, respectively, may
                  conclusively rely, as to the truth of the statements and the
                  correctness of the opinions expressed therein, upon any
                  certificates or opinions furnished to the Trustee or the
                  Securities Administrator, respectively, that conform to the
                  requirements of this Agreement;

                           (ii) Neither the Trustee nor the Securities
                  Administrator shall be liable for an error of judgment made in
                  good faith by a Responsible Officer or Responsible Officers of
                  the Trustee or an officer or officers of the Securities
                  Administrator, respectively, unless it shall be proved that
                  the Trustee or the Securities Administrator, respectively, was
                  negligent in ascertaining the pertinent facts; and

                           (iii) Neither the Trustee nor the Securities
                  Administrator shall be liable with respect to any action
                  taken, suffered or omitted to be taken by it in good faith in
                  accordance with the 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 available to the Trustee or the Securities
                  Administrator or exercising any trust or power conferred upon
                  the Trustee or the Securities Administrator under this
                  Agreement.

                  SECTION 9.02 Certain Matters Affecting Trustee and Securities
                               Administrator.

                  (a) Except as otherwise provided in Section 9.01:

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

                           (iii) Neither the Trustee nor the Securities
                  Administrator shall be under any obligation to exercise any of
                  the trusts or powers vested in it by this Agreement 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

                                        -154-

<PAGE>

                  or the Securities Administrator, as the case may be,
                  reasonable security or indemnity satisfactory to it 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) Neither the Trustee nor the Securities
                  Administrator shall be 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 or waiver of
                  all Master Servicer Events of Default which may have occurred
                  with respect to the Trustee and at all times with respect to
                  the Securities Administrator, neither the Trustee nor the
                  Securities Administrator shall be bound to make any
                  investigation into the facts or matters stated in any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, consent, order, approval, bond or
                  other paper or 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 or the Securities Administrator
                  of the costs, expenses or liabilities likely to be incurred by
                  it in the making of such investigation is, in the opinion of
                  the Trustee or the Securities Administrator, as applicable,
                  not reasonably assured to the Trustee or the Securities
                  Administrator by such Certificateholders, the Trustee or the
                  Securities Administrator, as applicable, may require
                  reasonable indemnity satisfactory to it against such expense,
                  or liability from such Certificateholders as a condition to
                  taking any such action;

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

                           (vii) The Trustee shall not be liable for any loss
                  resulting from the investment of funds held in the Collection
                  Account, for any loss resulting from the investment of funds
                  held in the Reserve Fund or for any loss resulting from the
                  redemption or sale of any such investment as therein
                  authorized;

                           (viii) the Trustee shall not be deemed to have notice
                  of any default, Master Servicer Event of Default or Servicer
                  Event of Default unless a Responsible Officer of the Trustee
                  has actual knowledge thereof or unless written notice of any
                  event which is in fact such a default is received by a
                  Responsible Officer of the Trustee at

                                        -155-

<PAGE>

                  the Corporate Trust Office of the Trustee, and such notice
                  references the Certificates and this Agreement; and

                           (ix) the rights, privileges, protections, immunities
                  and benefits given to the Trustee, including, without
                  limitation, its right to be indemnified, are extended to, and
                  shall be enforceable by, each agent, custodian and other
                  Person employed to act hereunder.

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

                  (c) The Trustee is hereby directed by the Company to execute
the Corridor Contract on behalf of the Trust Fund in the form presented to it by
the Company and shall have no responsibility for the contents of the Corridor
Contract, including, without limitation, the representations and warranties
contained therein. Any funds payable by the Trustee under the Corridor Contract
at closing shall be paid by the Company. Notwithstanding anything to the
contrary contained herein or in the Corridor Contract, the Trustee shall not be
required to make any payments to the counterparty under the Corridor Contract.

                  (d) None of the Securities Administrator, the Master Servicer,
any Servicer, the Seller, the Company, the Custodian or the Trustee shall be
responsible for the acts or omissions of the others, it being understood that
this Agreement shall not be construed to render those partners joint venturers
or agents of one another.

                  SECTION 9.03 Trustee and Securities Administrator not Liable
                               for Certificates or Mortgage Loans.

                  The recitals contained herein and in the Certificates (other
than the signature of the Securities Administrator, the authentication of the
Securities Administrator on the Certificates, the acknowledgments of the Trustee
contained in Article II and the representations and warranties of the Trustee in
Section 9.12) shall be taken as the statements of the Company and neither the
Trustee nor the Securities Administrator assumes any responsibility for their
correctness. Neither the Trustee nor the Securities Administrator makes any
representations or warranties as to the validity or sufficiency of this
Agreement (other than as specifically set forth in Section 9.12) or of the
Certificates (other than the signature of the Securities Administrator and
authentication of the Securities Administrator on the Certificates) or of any
Mortgage Loan or related document. The Trustee and the Securities Administrator
shall not be accountable for the use or application by the Company of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Company or the Master Servicer in respect
of the Mortgage Loans or deposited in or withdrawn from the Collection Account
by the Servicer, other than with respect to the Securities Administrator any
funds held by or on behalf of the Trustee in accordance with Section 3.23 and
3.24.

                                        -156-

<PAGE>

                  SECTION 9.04 Trustee and Securities Administrator May Own
                               Certificates.

                  Each of the Trustee and the Securities Administrator in its
individual capacity or any other capacity may become the owner or pledgee of
Certificates and may transact business with other interested parties and their
Affiliates with the same rights it would have if it were not Trustee or the
Securities Administrator.

                  SECTION 9.05 Fees and Expenses of Trustee and Securities
                               Administrator.

                  The fees of the Trustee and the Securities Administrator
hereunder and of Wells Fargo under the Custodial Agreement shall be paid in
accordance with a side letter agreement with the Master Servicer and at the sole
expense of the Master Servicer. In addition, the Trustee, the Securities
Administrator, the Custodian and any director, officer, employee or agent of the
Trustee, the Securities Administrator and the Custodian shall be indemnified by
the Trust and held harmless against any loss, liability or expense (including
reasonable attorney's fees and expenses) incurred by the Trustee, the Custodian
or the Securities Administrator in connection with any claim or legal action or
any pending or threatened claim or legal action arising out of or in connection
with the acceptance or administration of its respective obligations and duties
under this Agreement, including the Corridor Contract and any and all other
agreements related hereto, other than any loss, liability or expense (i) for
which the Trustee is indemnified by the Master Servicer or the Servicer, (ii)
that constitutes a specific liability of the Trustee or the Securities
Administrator pursuant to Section 11.01(g) or (iii) any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder by the Trustee or the Securities
Administrator or by reason of reckless disregard of obligations and duties
hereunder. In no event shall the Trustee or the Securities Administrator be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if it has been
advised of the likelihood of such loss or damage and regardless of the form of
action. The Master Servicer agrees to indemnify the Trustee, from, and hold the
Trustee harmless against, any loss, liability or expense (including reasonable
attorney's fees and expenses) incurred by the Trustee by reason of the Master
Servicer's willful misfeasance, bad faith or gross negligence in the performance
of its duties under this Agreement or by reason of the Master Servicer's
reckless disregard of its obligations and duties under this Agreement. In
addition, the Seller agrees to indemnify the Trustee for, and to hold the
Trustee harmless against, any loss, liability or expense arising out of, or in
connection with, the provisions set forth in the last paragraph of Section 2.01,
including, without limitation, all costs, liabilities and expenses (including
reasonable legal fees and expenses) of investigating and defending itself
against any claim, action or proceeding, pending or threatened, relating to the
provisions of such paragraph. The indemnities in this Section 9.05 shall survive
the termination or discharge of this Agreement and the resignation or removal of
the Master Servicer, the Trustee, the Securities Administrator or the Custodian.
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.

                  SECTION 9.06 Eligibility Requirements for Trustee and
                               Securities Administrator.

                  The Trustee and the Securities Administrator shall at all
times be a corporation or an association (other than the Company, the Seller,
the Master Servicer or any Affiliate of the

                                        -157-

<PAGE>

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 or the Securities
Administrator, as applicable, shall cease to be eligible in accordance with the
provisions of this Section, the Trustee or the Securities Administrator, as
applicable, shall resign immediately in the manner and with the effect specified
in Section 9.07.

                  SECTION 9.07 Resignation and Removal of Trustee and Securities
                               Administrator.

                  The Trustee and the Securities Administrator may at any time
resign and be discharged from the trust hereby created by giving written notice
thereof to the Company, to the Master Servicer, to the Securities Administrator
(or the Trustee, if the Securities Administrator resigns) and to the
Certificateholders. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee or successor securities administrator by
written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee or Securities Administrator, as applicable, and to the
successor trustee or successor securities administrator, as applicable. A copy
of such instrument shall be delivered to the Certificateholders, the Trustee,
the Securities Administrator, the Servicer and the Master Servicer by the
Company. If no successor trustee or successor securities administrator shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee or Securities
Administrator, as the case may be, may, at the expense of the Trust Fund,
petition any court of competent jurisdiction for the appointment of a successor
trustee, successor securities administrator, Trustee or Securities
Administrator, as applicable.

                  If at any time the Trustee or the Securities Administrator
shall cease to be eligible in accordance with the provisions of Section 9.06 and
shall fail to resign after written request therefor by the Company, or if at any
time the Trustee or the Securities Administrator shall become incapable of
acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee
or the Securities Administrator or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or the Securities
Administrator or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Company may remove the Trustee or the
Securities Administrator, as applicable and appoint a successor trustee or
successor securities administrator, as applicable, by written instrument, in
duplicate, which instrument shall be delivered to the Trustee or the Securities
Administrator so removed and to the successor trustee or successor securities
administrator. A copy of such instrument shall be delivered to the
Certificateholders, the Trustee, the Securities Administrator, the Servicer and
the Master Servicer by the Company.

                  The Holders of Certificates entitled to at least 51% of the
Voting Rights may at any time remove the Trustee or the Securities Administrator
and appoint a successor trustee or successor securities administrator by written
instrument or instruments, in triplicate, signed by such Holders

                                        -158-

<PAGE>

or their attorneys-in-fact duly authorized, one complete set of which
instruments shall be delivered to the Company, one complete set to the Trustee
or the Securities Administrator so removed and one complete set to the successor
so appointed. A copy of such instrument shall be delivered to the
Certificateholders, the Trustee (in the case of the removal of the Securities
Administrator), the Securities Administrator (in the case of the removal of the
Trustee), the Servicer and the Master Servicer by the Company.

                  Any resignation or removal of the Trustee or the Securities
Administrator and appointment of a successor trustee or successor securities
administrator pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor trustee or successor
securities administrator, as applicable, as provided in Section 8.08.

                  Notwithstanding anything to the contrary contained herein, the
Master Servicer and the Securities Administrator shall at all times be the same
Person.

                  SECTION 9.08 Successor Trustee or Securities Administrator.

                  Any successor trustee or successor securities administrator
appointed as provided in Section 9.07 shall execute, acknowledge and deliver to
the Company and its predecessor trustee or predecessor securities administrator
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee or predecessor securities
administrator shall become effective and such successor trustee or successor
securities administrator without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee or
securities administrator herein. The predecessor trustee or predecessor
securities administrator shall deliver to the successor trustee or successor
securities administrator all Mortgage Loan Documents and related documents and
statements to the extent held by it hereunder, as well as all moneys, held by it
hereunder, and the Company and the predecessor trustee or predecessor securities
administrator shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in the successor trustee or successor securities administrator all
such rights, powers, duties and obligations.

                  No successor trustee or successor securities administrator
shall accept appointment as provided in this Section unless at the time of such
acceptance such successor trustee or successor securities administrator shall be
eligible under the provisions of Section 8.06 and the appointment of such
successor trustee or successor securities administrator shall not result in a
downgrading of any Class of Certificates by any Rating Agency, as evidenced by a
letter from each Rating Agency.

                  Upon acceptance of appointment by a successor trustee or
successor securities administrator as provided in this Section, the Company
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
Company fails to mail such notice within 10 days after acceptance of appointment
by the successor trustee or successor securities administrator, the successor
trustee or successor securities administrator shall cause such notice to be
mailed at the expense of the Company.

                                      -159-

<PAGE>

                  SECTION 9.09 Merger or Consolidation of Trustee or Securities
                               Administrator.

                  Any corporation or association into which the Trustee or the
Securities Administrator may be merged or converted or with which it may be
consolidated or any corporation or association resulting from any merger,
conversion or consolidation to which the Trustee or the Securities Administrator
shall be a party, or any corporation or association succeeding to the business
of the Trustee or the Securities Administrator shall be the successor of the
Trustee or the Securities Administrator 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 9.10 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 the 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, and for the benefit of the Holders of the Certificates, such
title to REMIC I, or any part thereof, and, subject to the other provisions of
this Section 9.10, 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 9.06 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 9.10 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 IX. 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 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.

                                        -160-

<PAGE>

                  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 9.11 Appointment of Office or Agency.

                  The Certificates may be surrendered for registration of
transfer or exchange at the Securities Administrator's office located at Sixth
and Marquette, Minneapolis, Minnesota 55479, and presented for final
distribution at the Corporate Trust Office of the Securities Administrator where
notices and demands to or upon the Securities Administrator in respect of the
Certificates and this Agreement may be served.

                  SECTION 9.12 Representations and Warranties.

                  The Trustee hereby represents and warrants to the Master
Servicer, the Securities Administrator, the Servicer and the Company as
applicable, as of the Closing Date, that:

                  (i) It is a banking corporation duly organized, validly
         existing and in good standing under the laws of the State of New York.

                  (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 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.

                                        -161-

<PAGE>

                  (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.

                                        -162-

<PAGE>

                                    ARTICLE X
                                   TERMINATION

                  SECTION 10.01 Termination Upon Repurchase or Liquidation of
                                All Mortgage Loans.

                  (a) Subject to Section 10.02, the respective obligations and
responsibilities under this Agreement of the Company, the Servicer, the Master
Servicer and the Trustee (other than the obligations of the Master Servicer to
the Trustee pursuant to Section 9.05 and of the Servicer to make remittances to
the Securities Administrator and the Securities Administrator to make payments
in respect of the REMIC I Regular Interests, REMIC I Regular Interests or 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. 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 sum of (i)
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 plus (ii) any amounts due the
Servicer and the Master Servicer in respect of unpaid Servicing Fees, Master
Servicing Fees, outstanding P&I Advances and Servicing Advances and any other
amounts due to the Trustee, the Securities Administrator, the Servicer and the
Master Servicer under this Agreement.

                  (b) The majority Certificateholder of the Class C Certificates
and the Servier 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 (a) in the case of the
majority Certificateholder of the Class C Certificates, 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 and (b) in the case of the Servicer, only if the majority Certificateholder
of the Class C Certificates has not exercised its option to purchase within 180
days after the first Distribution Date on which 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 portion

                                        -163-

<PAGE>

of the Termination Price 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 C
Certificates.

                  (c) Notice of the liquidation of the Certificates shall be
given promptly by the Securities Administrator by letter to the
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 15th day and not later than the 25th 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, REMIC II Regular Interests or the Certificates
will be made upon presentation and surrender of the related Certificates at the
office of the Securities Administrator therein designated, (ii) the amount of
any such final payment, (iii) that no interest shall accrue in respect of the
REMIC I Regular Interests, REMIC II Regular Interests or Certificates from and
after the 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 Securities Administrator. 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 Securities Administrator for deposit in the Distribution Account
not later than the Business Day prior to the Distribution Date on which the
final distribution on the Certificates an amount in immediately available funds
equal to the above-described Termination Price. The Securities Administrator
shall remit to the Servicer, the Master Servicer, the Trustee and the Custodian
from such funds deposited in the Distribution Account (i) any amounts which the
Servicer would be permitted to withdraw and retain from the Collection Account
pursuant to Section 3.09 as if such funds had been deposited therein (including
all unpaid Servicing Fees and all outstanding P&I Advances and Servicing
Advances) and (ii) any other amounts otherwise payable by the Securities
Administrator to the Master Servicer, the Trustee, the Custodian and the
Servicer from amounts on deposit in the Distribution Account pursuant to the
terms of this Agreement prior to making any final distributions pursuant to
Section 10.01(d) below. Upon certification to the Trustee by the Securities
Administrator of the making of such final deposit, the Trustee shall promptly
release or cause to be released to the Terminator the Mortgage Files for the
remaining Mortgage Loans, and Trustee shall execute all assignments,
endorsements and other instruments delivered to it and necessary to effectuate
such transfer.

                  (d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Securities Administrator
shall distribute to each Certificateholder so presenting and surrendering its
Certificates the amount otherwise distributable on such Distribution Date in
accordance with Section 5.01 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 10.01 shall not have been surrendered for cancellation within six months
after the time specified in such notice, the Securities Administrator shall mail
a second notice to the remaining non-tendering Certificateholders to surrender
their Certificates for cancellation in order to receive the final

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distribution with respect thereto. If within one year after the second notice
all such Certificates shall not have been surrendered for cancellation, the
Securities Administrator 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 Securities
Administrator shall pay to the Company 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 Securities Administrator as a result of such Certificateholder's
failure to surrender its Certificate(s) on the final Distribution Date for final
payment thereof in accordance with this Section 10.01. Any such amounts held in
trust by the Securities Administrator shall be held uninvested in an Eligible
Account.

                  SECTION 10.02 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 10.01, 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 each
                  Trust REMIC'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 by and 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 Securities Administrator 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 10.01, at the expense
of the Trust Fund), the Terminator shall prepare or cause to be prepared the
documentation required in connection with the adoption of a plan of liquidation
of each Trust REMIC pursuant to this Section 10.02.

                  (c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each Trust REMIC, which authorization shall be binding upon all successor
Certificateholders.

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<PAGE>

                                   ARTICLE XI
                                REMIC PROVISIONS

                  SECTION 11.01 REMIC Administration.

                  (a) The Trustee shall elect to treat each Trust REMIC as a
REMIC under the Code and, if necessary, under applicable state law. Each such
election will be made by the Securities Administrator 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 Interest shall be designated as the
Residual Interests in REMIC I. For the purposes of the REMIC election in respect
of REMIC II, the REMIC II Regular Interests shall be designated as the Regular
Interests in REMIC II and the Class R-II Interest shall be designated as the
Residual Interests in REMIC II. The Class A, Class M, Class B, Class C and Class
P Certificates (exclusive of any right to receive payments from the Reserve
Fund) shall be designated as the Regular Interests in REMIC III and the Class
R-III Interest shall be designated as the Residual Interests in REMIC III. The
Trustee shall not permit the creation of any "interests" in each Trust REMIC
(within the meaning of Section 860G of the Code) other than the REMIC I Regular
Interests and the interests represented by the Certificates.

                  (b) The Closing Date is hereby designated as the "Startup Day"
of each Trust REMIC within the meaning of Section 860G(a)(9) of the Code.

                  (c) The Securities Administrator 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 each Trust REMIC 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 Securities Administrator, as
agent for each Trust REMIC's tax matters person shall (i) act on behalf of the
Trust Fund in relation to any tax matter or controversy involving any Trust
REMIC 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
Securities Administrator or an Affiliate as its agent to perform all of the
duties of the tax matters person for the Trust Fund.

                  (d) The Securities Administrator shall prepare and file and
the Trustee shall sign all of the Tax Returns in respect of each REMIC created
hereunder. The expenses of preparing and filing such returns shall be borne by
the Securities Administrator without any right of reimbursement therefor.

                  (e) The Securities Administrator shall perform on behalf of
each Trust REMIC all reporting and other tax compliance duties that are the
responsibility of such REMIC under the

                                        -166-

<PAGE>

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 Securities Administrator 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 upon receipt of additional reasonable compensation, (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 each
Trust REMIC. The Company shall provide or cause to be provided to the Securities
Administrator, within ten (10) days after the Closing Date, all information or
data that the Securities Administrator 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) To the extent in the control of the Trustee or the
Securities Administrator, each such Person (i) 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,
(ii) shall not take any action, 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 (A) endanger the
status of each Trust REMIC as a REMIC or (B) 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 such action or inaction is permitted
under this Agreement or the Trustee and the Securities Administrator have
received an Opinion of Counsel, addressed to the them (at the expense of the
party seeking to take such action but in no event at the expense of the Trustee
or the Securities Administrator) to the effect that the contemplated action will
not, with respect to any Trust REMIC, endanger such status or result in the
imposition of such a tax, nor (iii) shall the Securities Administrator 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 Securities Administrator 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 Trust REMIC or the respective assets of each, or causing any
Trust REMIC to take any action, which is not contemplated under the terms of
this Agreement, the Securities Administrator 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 any Trust REMIC, and the Securities
Administrator shall not take any such action or cause any Trust REMIC to take
any such action as to which the Trustee has advised it in writing that an
Adverse REMIC Event could occur. The Trustee may consult with counsel to make
such written advice, and the cost of same shall be home 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.

                  (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

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<PAGE>

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 11.03, if such tax arises out of or results
from a breach by the Trustee of any of its obligations under this Article XI,
(ii) to the Securities Administrator pursuant to Section 11.03, if such tax
arises out of or results from a breach by the Securities Administrator of any of
its obligations under this Article XI, (iii) to the Master Servicer pursuant to
Section 11.03, if such tax arises out of or results from a breach by the Master
Servicer of any of its obligations under Article IV or under this Article XI,
(iv) to the Servicer pursuant to Section 11.03, if such tax arises out of or
results from a breach by the Servicer of any of its obligations under Article
III or under this Article XI, or (v) in all other cases, against amounts on
deposit in the Distribution Account and shall be paid by withdrawal therefrom.

                  (h) The Securities Administrator shall, for federal income tax
purposes, maintain books and records with respect to each Trust REMIC on a
calendar year and on an accrual basis.

                  (i) Following the Startup Day, neither the Securities
Administrator nor the Trustee shall accept any contributions of assets to any
Trust REMIC 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.

                  (j) Neither the Trustee nor the Securities Administrator shall
knowingly enter into any arrangement by which any Trust REMIC 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.

                  (k) The Securities Administrator shall apply for an employer
identification number with the Internal Revenue Service via a Form SS-4 or other
comparable method for each REMIC. In connection with the foregoing, the
Securities Administrator shall provide the name and address of the person who
can be contacted to obtain information required to be reported to the holders of
Regular Interests in each REMIC as required by IRS Form 8811.

                  SECTION 11.02 Prohibited Transactions and Activities.

                  None of the Company, the Servicer, the Securities
Administrator, 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 X of
this Agreement, (iv) a substitution pursuant to Article II of this Agreement or
(v) a purchase of Mortgage Loans pursuant to Article II of this Agreement), nor
acquire any assets for any Trust REMIC (other than REO Property acquired in
respect of a defaulted Mortgage Loan), nor sell or dispose of any investments in
the Collection

                                        -168-

<PAGE>

Account or the Distribution Account for gain, nor accept any contributions to
any Trust REMIC 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 and the Securities Administrator
(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 Trust REMIC as a REMIC or (b)
cause any Trust REMIC to be subject to a tax on "prohibited transactions" or
"contributions" pursuant to the REMIC Provisions.

                  SECTION 11.03 Indemnification.

                  (a) The Trustee agrees to be liable for any taxes and costs
incurred by the Trust Fund, the Company, the Master Servicer, the Securities
Administrator or the Servicer including, without limitation, any reasonable
attorneys fees imposed on or incurred by the Trust Fund, the Company, the Master
Servicer, the Securities Administrator or the Servicer as a result of the
Trustee's failure to perform its covenants set forth in this Article XI in
accordance with the standard of care of the Trustee set forth in this Agreement.

                  (b) The Servicer agrees to indemnify the Trust Fund, the
Company, the Master Servicer, the Securities Administrator and the Trustee for
any taxes and costs including any reasonable attorneys' fees imposed on or
incurred by the Trust Fund, the Company, the Master Servicer, the Securities
Administrator or the Trustee, as a result of the Servicer's failure to perform
its covenants set forth in Article III in accordance with the standard of care
of the Servicer set forth in this Agreement.

                  (c) The Master Servicer agrees to indemnify the Trust Fund,
the Company, the Servicer and the Trustee for any taxes and costs including any
reasonable attorneys' fees imposed on or incurred by the Trust Fund, the
Company, the Servicer or the Trustee, as a result of the Master Servicer's
failure to perform its covenants set forth in Article IV in accordance with the
standard of care of the Master Servicer set forth in this Agreement.

                  (d) The Securities Administrator agrees to be liable for any
taxes and costs incurred by the Trust Fund, the Company, the Servicer or the
Trustee including any reasonable attorneys fees imposed on or incurred by the
Trust Fund, the Company, the Servicer or the Trustee as a result of the
Securities Administrator's failure to perform its covenants set forth in this
Article XI in accordance with the standard of care of the Securities
Administrator set forth in this Agreement.

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<PAGE>

                                   ARTICLE XII
                            MISCELLANEOUS PROVISIONS

                  SECTION 12.01 Amendment.

                  This Agreement may be amended from time to time by the
Company, the Servicer, the Master Servicer, the Securities Administrator and the
Trustee, but 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; provided that any such amendment shall be
deemed not to adversely affect in any material respect the interests of the
Certificateholders and no such Opinion of Counsel shall be required if the
Person requesting such amendment obtains a letter from each Rating Agency
stating that such amendment would not result in the downgrading or withdrawal of
the respective ratings then assigned to the Certificates. 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
Company, the Servicer, the Master Servicer, the Securities Administrator and the
Trustee with the consent of the Holders of Certificates entitled to at least 66
2/3% of the Voting Rights for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, payments 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 2/3% 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 12.01, Certificates registered in the name
of the Company or the Servicer or any Affiliate thereof shall be entitled to
Voting Rights with respect to matters affecting such Certificates. Without
limiting the generality of the foregoing, any amendment to this Agreement
required in connection with the compliance with or the clarification of any
reporting obligations described in Section 5.06 hereof shall not require the
consent of any Certificateholder and without the need for any Opinion of Counsel
or Rating Agency confirmation.

                  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 is
permitted hereunder and will not result in the imposition of any tax on any
Trust REMIC pursuant to the REMIC Provisions or cause any Trust

                                        -170-

<PAGE>

REMIC to fail to qualify as a REMIC at any time that any Certificates are
outstanding and that such amendment is authorized or permitted by this
Agreement.

                  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 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.

                  The cost of any Opinion of Counsel to be delivered pursuant to
this Section 12.01 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 12.02 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 Company 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 12.03 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

                                      -171-

<PAGE>

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 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 12.04 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 without regard to
conflicts of laws principles thereof.

                  SECTION 12.05 Notices.

                  All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if sent by
facsimile, receipt confirmed, 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 Company, People's
Choice Home Loan Securities Corp., 7515 Irvine Center Drive, Irvine, California
92618, Attention: General Counsel, or such other address or telecopy number as
may hereafter be furnished to the Servicer, the Master Servicer, the Securities
Administrator and the Trustee in writing by the Company, (b) in the case of the
Servicer, HomEq Servicing Corporation, 4837 Watt Avenue, North Highlands,
California 95660, Attention: Portfolio Management, with a copy to HomEq
Servicing Corporation, 1620 E. Roseville Parkway, Roseville, California 95661,
Attention: Legal Department, or such other address or telecopy number as may
hereafter be furnished to the Trustee, the Master Servicer, the Securities
Administrator and the Company in writing by the Servicer, (c) in the case of the
Master Servicer and the Securities Administrator, Wells Fargo Bank, N.A., P.O.
Box 98, Columbia, Maryland 21046 and for overnight delivery to 9062 Old
Annapolis Road, Columbia, Maryland 21045, Attention: People's Choice Home Loan
Securities Corp., 2004-1 (telecopy number: (410) 715-2380), or such other

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<PAGE>

address or telecopy number as may hereafter be furnished to the Trustee, the
Company and the Servicer in writing by the Master Servicer or the Securities
Administrator and (d) in the case of the Trustee, at the Corporate Trust Office
or such other address or telecopy number as the Trustee may hereafter be furnish
to the Servicer, the Master Servicer, the Securities Administrator and the
Company 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 12.06 Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.

                  SECTION 12.07 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 a
Responsible Officer has actual knowledge:

                  1.       Any material change or amendment to this Agreement;

                  2.       The occurrence of any Servicer Event of Default or
                           Master Servicer Event of Default that has not been
                           cured or waived;

                  3.       The resignation or termination of the Servicer, 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 Distribution
                           Account; and

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<PAGE>

                  7.       Any event that would result in the inability of the
                           Trustee as successor Servicer to make advances
                           regarding delinquent Mortgage Loans.

                  In addition, the Securities Administrator shall promptly make
available to each Rating Agency copies of each report to Certificateholders
described in Section 5.02.

                  Any such notice pursuant to this Section 12.07 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 Standard & Poor's, a division of The McGraw-Hill Companies, Inc., 55 Water
Street, New York, New York 10041, to Fitch Ratings, 1 State Street Plaza, New
York, New York 10004 and to Moody's Investors Service, Inc., 99 Church Street,
New York, New York 10007 or such other addresses as the Rating Agencies may
designate in writing to the parties hereto.

                  SECTION 12.08 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 12.09 Grant of Security Interest.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Company to the Trustee, on behalf of the
Trust and for the benefit of the Certificateholders, be, and be construed as, a
sale of the Mortgage Loans by the Company and not a pledge of the Mortgage Loans
to secure a debt or other obligation of the Company. However, in the event that,
notwithstanding the aforementioned intent of the parties, the Mortgage Loans are
held to be property of the Company, then, (a) it is the express intent of the
parties that such conveyance be deemed a pledge of the Mortgage Loans by the
Company to the Trustee, on behalf of the Trust and for the benefit of the
Certificateholders, to secure a debt or other obligation of the Company 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 shall be deemed to be a grant by the Company to the Trustee, on
behalf of the Trust and for the benefit of the Certificateholders, of a security
interest in all of the Company'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 Company'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

                                      -174-

<PAGE>

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
Company hereby grants to the Trustee, on behalf of the Trust and for the benefit
of the Certificateholders, 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 Company 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 Company to the Trustee, on behalf of the
Trust and for the benefit of the Certificateholders.

                  SECTION 12.10 Survival of Indemnification.

                  Any and all indemnities to be provided by any party to this
Agreement shall survive the termination and resignation of any party hereto and
the termination of this Agreement.

                                        -175-

<PAGE>

                  IN WITNESS WHEREOF, the Company, the Servicer, the Master
Servicer, the Securities Administrator 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.

                 PEOPLE'S CHOICE HOME LOAN SECURITIES
                 CORP.,

                 as Company

                 By:     /s/ Brad Plantiko
                    -----------------------------------------------------
                 Name:   Brad Plantiko
                 Title:  CFO

                 HOMEQ SERVICING CORPORATION,

                 as Servicer

                 By:     /s/ Arthur Lyon
                    -----------------------------------------------------
                 Name:   Arthur Lyon
                 Title:  President

                 HSBC BANK USA,

                 not in its individual capacity but solely as Trustee

                 By:     /s/ Wendy Zhang
                    -----------------------------------------------------
                 Name:   Wendy Zhang
                 Title:  Assistant VP

                 WELLS FARGO BANK, N.A.

                 as Master Servicer and Securities Administrator

                 By:     /s/ Peter J. Masterman
                    --------------------------------------------------
                 Name:   Peter J. Masterman
                 Title:  Vice President

<PAGE>

                            Acknowledged and Agreed for purposes of Section
                            9.05:

                            PEOPLE'S CHOICE HOME LOAN, INC.

                            By:     /s/ Brad Plantiko
                                ----------------------------------------------
                            Name:   Brad Plantiko
                            Title:  CFO

<PAGE>

STATE OF          )
                  ) ss.:
COUNTY OF         )

                  On the ___ day of April 2004, before me, a notary public in
and for said State, personally appeared _____________________ known to me to be
a _____________________ of People's Choice Home Loan Securities Corp., 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]                           My commission expires

<PAGE>

STATE OF          )
                  ) ss.:
COUNTY OF         )

                  On the ___ day of April 2004, before me, a notary public in
and for said State, personally appeared _______________ known to me to be a
_______________ of ________________, HomEq Servicing Corporation, 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]                           My commission expires

<PAGE>

STATE OF          )
                  ) ss.:
COUNTY OF         )

                  On the ___ day of April 2004, before me, a notary public in
and for said State, personally appeared ____________________, known to me to be
a __________________ of Wells Fargo Bank, N.A., 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 April 2004, before me, a notary public in
and for said State, personally appeared ____________________, known to me to be
a __________________ of HSBC Bank USA, 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 April 2004, before me, a notary public in
and for said State, personally appeared _____________________ known to me to be
a _____________________ of People's Choice Home Loan, 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]                           My commission expires

<PAGE>

                                   EXHIBIT A-1

                 FORM OF CLASS [1-][2-] A [3] [-SIO] 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 SHALL INITIALLY BE ISSUED AS ONE OR MORE CERTIFICATES
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
SECURITIES ADMINISTRATOR 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 EACH OF SUCH BOOK-ENTRY CERTIFICATES THROUGH THE BOOK-ENTRY FACILITIES
OF THE DEPOSITORY AND, EXCEPT AS PROVIDED BELOW, SHALL NOT BE ENTITLED TO
DEFINITIVE CERTIFICATES IN RESPECT OF SUCH OWNERSHIP INTERESTS. ALL TRANSFERS BY
CERTIFICATE OWNERS OF THEIR RESPECTIVE OWNERSHIP 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 TRANSFER THE OWNERSHIP INTERESTS ONLY 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 SECURITIES ADMINISTRATOR SHALL NOT BE REQUIRED TO MONITOR,
DETERMINE OR INQUIRE AS TO COMPLIANCE WITH THE TRANSFER RESTRICTIONS WITH
RESPECT TO THE BOOK-ENTRY CERTIFICATES, AND THE SECURITIES ADMINISTRATOR SHALL
HAVE NO LIABILITY FOR TRANSFERS OF OWNERSHIP INTERESTS IN THE BOOK-ENTRY
CERTIFICATES MADE THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY OR BETWEEN
OR AMONG DEPOSITORY PARTICIPANTS OR CERTIFICATE OWNERS, MADE IN VIOLATION OF THE
APPLICABLE RESTRICTIONS.

[THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DECREASED BY THE
PRINCIPAL PAYMENTS HEREON [AND REALIZED LOSSES ALLOCABLE HERETO] AS DESCRIBED IN
THE AGREEMENT REFERRED TO HEREIN. ACCORDINGLY, FOLLOWING

                                      A-1-1

<PAGE>

THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE PRINCIPAL BALANCE OF
THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE PRINCIPAL BALANCE BY
INQUIRY OF THE SECURITIES ADMINISTRATOR NAMED HEREIN.]

[THE NOTIONAL AMOUNT OF THIS CERTIFICATE WILL BE DECREASED AS DESCRIBED IN THE
AGREEMENT REFERRED TO HEREIN. ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE
CERTIFICATES, THE CERTIFICATE NOTIONAL AMOUNT OF THIS CERTIFICATE WILL BE
DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE
MAY ASCERTAIN ITS NOTIONAL AMOUNT BY INQUIRY OF THE SECURITIES ADMINISTRATOR
NAMED HEREIN.]

[THIS CERTIFICATE IS SUBORDINATE TO THE CLASS 1-A CERTIFICATES, CLASS 2-A
CERTIFICATES AND CLASS A-SIO CERTIFICATES TO THE EXTENT DESCRIBED IN THE
AGREEMENT REFERRED TO HEREIN.]

                                      A-1-2

<PAGE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Series 2004-1, Class [1-][2-] A [3] [-SIO]                Aggregate [Certificate Principal
                                                          Balance] [Notional Amount] of the Class
                                                          [1-][2-] A [3]
Pass-Through Rate: Variable                               [-SIO] Certificates as of the Issue Date:
                                                          $

Date of Pooling and Servicing Agreement and
Cut-off Date: April 1, 2004                               Denomination: $______________

                                                          Master Servicer: Wells Fargo Bank, N.A.
First Distribution Date:
May 25, 2004                                              Trustee: HSBC Bank USA

No.___                                                    Issue Date: April 28, 2004

                                                          CUSIP:_________________
</TABLE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2004-1
                        MORTGAGE 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 and second lien subprime residential
mortgage loans (the "Mortgage Loans") formed and sold by

                   PEOPLE'S CHOICE HOME LOAN SECURITIES CORP.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN PEOPLE'S
CHOICE HOME LOAN SECURITIES CORP., THE MASTER SERVICER, THE SECURITIES
ADMINISTRATOR, THE 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] [Notional Amount]
of the Class [1-][2-] A [3] [-SIO] Certificates as of the Issue Date) in that
certain beneficial ownership interest evidenced by all the Class [1-][2-] A [3]
[-SIO] Certificates in REMIC III created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among People's Choice
Home Loan Securities Corp., as company (hereinafter called the "Company", which
term includes any successor entity under the Agreement), Wells Fargo Bank, N.A.
as master servicer (the "Master Servicer") and securities administrator (the
"Securities Administrator"), HomEq Servicing Corporation, as servicer (the
"Servicer") and HSBC Bank USA, as trustee (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

                                      A-1-3

<PAGE>

assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the Business Day immediately
preceding such Distribution Date (the "Record Date"), 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 [1-] [2-] A [3]
[-SIO]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 Securities Administrator by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Securities
Administrator 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
[1-][2-] A [3] [-SIO] Certificates the aggregate initial [Certificate Principal
Balance] [Notional Amount] of which is in excess of the lesser of (i) $1,000,000
or (ii) two-thirds of the aggregate initial [Certificate Principal Balance]
[Notional Amount] of the Class [1-][2-] A [3] [-SIO] 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 Securities Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Securities Administrator 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
be 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 in the month in 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 [_____]%, in the case of
any Distribution Date thereafter and (ii) the applicable Net Funds Cap for such
Distribution Date.] [ 0.00% for the Distribution Date in May 2004, the greater
of (i) 0.00% and (ii) 1.10% minus One-Month LIBOR for the Distribution Date in
June 2004 through the Distribution Date in April 2006 and 0.00% for the
Distribution Date in May 2006 and thereafter.]

                  This Certificate is one of a duly authorized issue of
Certificates designated as Mortgage 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] [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

                                      A-1-4

<PAGE>

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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Company, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the consent of the Holders of
Certificates entitled to at least 66 2/3% 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 Securities Administrator
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 Securities Administrator 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 Securities Administrator 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and any agent of the Company, the Master Servicer,
the Trustee, the Securities Administrator or the Servicer may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Company, the Master Servicer, the Trustee, the
Securities Administrator, the Servicer 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 Securities Administrator 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

                                      A-1-5

<PAGE>

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 Company and neither the Trustee nor the Securities Administrator assumes any
responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Securities Administrator, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.

                                      A-1-6

<PAGE>

                  IN WITNESS WHEREOF, the Securities Administrator has caused
this Certificate to be duly executed.

                                      Dated:

                                      WELLS FARGO BANK, N.A.
                                      as Securities Administrator

                                      By:______________________________________
                                               Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Class [1-][2-] A [3] [-SIO] Certificates
referred to in the within-mentioned Agreement.

                                      WELLS FARGO BANK, N.A.
                                      as Securities Administrator

                                      By:______________________________________
                                               Authorized Signatory

                            A-1-7

<PAGE>

                                  ABBREVIATIONS
                                  -------------

                  The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:

<TABLE>
<CAPTION>

<S>                                                       <C>                                <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       CUSTODIAN
                                                                                                   ----------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                        --------------
                     survivorship and not as tenants in                     (State)
                     common

                        Additional abbreviations may also be used though not in
the above list.
</TABLE>

                                   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 Mortgage
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Securities
Administrator 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

<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.

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                       FORM OF CLASS [M__][B1] 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 SHALL INITIALLY BE ISSUED AS ONE OR MORE CERTIFICATES
         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 SECURITIES ADMINISTRATOR 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 EACH
         OF SUCH BOOK-ENTRY CERTIFICATES THROUGH THE BOOK-ENTRY FACILITIES OF
         THE DEPOSITORY AND, EXCEPT AS PROVIDED BELOW, SHALL NOT BE ENTITLED TO
         DEFINITIVE CERTIFICATES IN RESPECT OF SUCH OWNERSHIP INTERESTS. ALL
         TRANSFERS BY CERTIFICATE OWNERS OF THEIR RESPECTIVE OWNERSHIP 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
         TRANSFER THE OWNERSHIP INTERESTS ONLY 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 SECURITIES ADMINISTRATOR SHALL NOT BE REQUIRED TO MONITOR,
         DETERMINE OR INQUIRE AS TO COMPLIANCE WITH THE TRANSFER RESTRICTIONS
         WITH RESPECT TO THE BOOK-ENTRY CERTIFICATES, AND THE SECURITIES
         ADMINISTRATOR SHALL HAVE NO LIABILITY FOR TRANSFERS OF OWNERSHIP
         INTERESTS IN THE BOOK-ENTRY CERTIFICATES MADE THROUGH THE BOOK-ENTRY
         FACILITIES OF THE DEPOSITORY OR BETWEEN OR AMONG DEPOSITORY
         PARTICIPANTS OR CERTIFICATE OWNERS, MADE IN VIOLATION OF THE APPLICABLE
         RESTRICTIONS.

         THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A
         CERTIFICATES [,] [AND] [CLASS M1 CERTIFICATES] [,] [AND] CLASS
         M2 CERTIFICATES [,] [AND] [CLASS M3 CERTIFICATES] [,] [AND]
         [CLASS M4 CERTIFICATES] [,] [AND] [CLASS M5 CERTIFICATES] [,]

<PAGE>

         [AND] [CLASS M6 CERTIFICATES] [,] [AND] [CLASS M7 CERTIFICATES]
         TO THE EXTENT DESCRIBED IN THE AGREEMENT REFERRED TO
         HEREIN.

         ANY TRANSFEREE OF THIS CERTIFICATE SHALL BE DEEMED TO
         MAKE THE REPRESENTATIONS SET FORTH IN SECTION 6.02(C) OF
         THE AGREEMENT REFERRED TO HEREIN.

         THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DECREASED
         BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES ALLOCABLE HERETO
         AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN. ACCORDINGLY,
         FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE
         PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE
         DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY
         ASCERTAIN ITS CERTIFICATE PRINCIPAL BALANCE BY INQUIRY OF THE
         SECURITIES ADMINISTRATOR NAMED HEREIN.

                                      A-2-2

<PAGE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Series 2004-1, Class [M__][B1]                            Aggregate Certificate Principal Balance of the
                                                          Class [M__][B1] Certificates as of the Issue
Pass-Through Rate: [Variable] [5.00%]                     Date: $______________

Date of Pooling and Servicing Agreement and               Denomination: $______________
Cut-off Date: April 1, 2004
                                                          Master Servicer: Wells Fargo Bank, N.A.
First Distribution Date:
May 25, 2004                                              Trustee: HSBC Bank USA

No.___                                                    Issue Date: April 28, 2004

                                                          CUSIP:_________________
</TABLE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2004-1
                        MORTGAGE 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 and second lien subprime residential
mortgage loans (the "Mortgage Loans") formed and sold by

                   PEOPLE'S CHOICE HOME LOAN SECURITIES CORP.

         THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
         PEOPLE'S CHOICE HOME LOAN SECURITIES CORP., THE MASTER SERVICER, THE
         SECURITIES ADMINISTRATOR, THE 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__][B1] Certificates as of the Issue Date) in that certain beneficial
ownership interest evidenced by all the Class [M__][B1] Certificates in REMIC
III created pursuant to a Pooling and Servicing Agreement, dated as specified
above (the "Agreement"), among People's Choice Home Loan Securities Corp., as
company (hereinafter called the "Company", which term includes any successor
entity under the Agreement), Wells Fargo Bank, N.A. as master servicer (the
"Master Servicer") and securities administrator (the "Securities
Administrator"), HomEq Servicing Corporation, as servicer (the "Servicer") and
HSBC Bank USA, as trustee (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.

                                      A-2-3

<PAGE>

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the Business Day immediately
preceding such Distribution Date (the "Record Date"), 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__][B1] 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 Securities Administrator by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Securities
Administrator 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__][B1] Certificates the aggregate initial Certificate Principal Balance of
which is in excess of the lesser of (i) $1,000,000 or (ii) two-thirds of the
aggregate initial Certificate Principal Balance of the Class [M__][B1]
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 Securities Administrator of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Securities Administrator
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 in the month in 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] [____]%, in the case of
any Distribution Date thereafter and (ii) the applicable Net Funds Cap for such
Distribution Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Mortgage 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 Company, the Master Servicer, the

                                      A-2-4

<PAGE>

Trustee, the Securities Administrator, the Servicer and the rights of the
Certificateholders under the Agreement at any time by the Company, the Master
Servicer, the Trustee, the Securities Administrator and the Servicer with the
consent of the Holders of Certificates entitled to at least 66 2/3% 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 Securities Administrator
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 Securities Administrator 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.

                  Any transferee of this Certificate shall be deemed to make the
representations set forth in Section 6.02(c) of the Agreement.

                  No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Securities Administrator 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and any agent of the Company, the Master Servicer,
the Trustee, the Securities Administrator or the Servicer may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Company, the Master Servicer, the Trustee, the
Securities Administrator, the Servicer 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 Securities Administrator 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

                                      A-2-5

<PAGE>

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 Company and neither the Trustee nor the Securities Administrator assume any
responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Securities Administrator by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.

                                      A-2-6

<PAGE>

                  IN WITNESS WHEREOF, the Securities Administrator has caused
this Certificate to be duly executed.

Dated:

                                   WELLS FARGO BANK, N.A.
                                   as Securities Administrator

                                   By:_______________________________________
                                              Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class [M__][B1] Certificates referred to in
the within-mentioned Agreement.

                                   WELLS FARGO BANK, N.A.
                                   as Securities Administrator

                                   By:_______________________________________
                                              Authorized Signatory

<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>                                <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       CUSTODIAN
                                                                                                   ----------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                        --------------
                     survivorship and not as tenants in                     (State)
                     common

                        Additional abbreviations may also be used though not in
the above list.
</TABLE>

                                   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 Mortgage
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Securities
Administrator 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

<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.

<PAGE>

                                   EXHIBIT A-3
                                   -----------

                          FORM OF CLASS B2 CERTIFICATE

             [THIS REGULATION S TEMPORARY GLOBAL CERTIFICATE IS A "TEMPORARY
             GLOBAL CERTIFICATE" FOR PURPOSES OF REGULATION S UNDER THE UNITED
             STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
             WHICH IS EXCHANGEABLE FOR A PERMANENT GLOBAL CERTIFICATE SUBJECT TO
             THE TERMS AND CONDITIONS SET FORTH HEREIN.]

             [THIS REGULATION S PERMANENT GLOBAL CERTIFICATE IS A GLOBAL
             CERTIFICATE WHICH IS EXCHANGEABLE FOR INTERESTS IN OTHER GLOBAL
             CERTIFICATES AND DEFINITIVE CERTIFICATES SUBJECT TO THE TERMS AND
             CONDITIONS SET FORTH HEREIN AND IN THE POOLING AGREEMENT (AS
             DEFINED HEREIN).]

             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 SHALL INITIALLY BE ISSUED AS ONE OR MORE
             CERTIFICATES 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 SECURITIES ADMINISTRATOR
             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 EACH OF SUCH BOOK-ENTRY CERTIFICATES
             THROUGH THE BOOK-ENTRY FACILITIES OF THE DEPOSITORY AND, EXCEPT AS
             PROVIDED BELOW, SHALL NOT BE ENTITLED TO DEFINITIVE CERTIFICATES IN
             RESPECT OF SUCH OWNERSHIP INTERESTS. ALL TRANSFERS BY CERTIFICATE
             OWNERS OF THEIR RESPECTIVE OWNERSHIP 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 TRANSFER THE
             OWNERSHIP INTERESTS ONLY IN THE BOOK-ENTRY

                                      A-3-1

<PAGE>

             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 SECURITIES ADMINISTRATOR SHALL
             NOT BE REQUIRED TO MONITOR, DETERMINE OR INQUIRE AS TO COMPLIANCE
             WITH THE TRANSFER RESTRICTIONS WITH RESPECT TO THE BOOK-ENTRY
             CERTIFICATES, AND THE SECURITIES ADMINISTRATOR SHALL HAVE NO
             LIABILITY FOR TRANSFERS OF OWNERSHIP INTERESTS IN THE BOOK-ENTRY
             CERTIFICATES MADE THROUGH THE BOOK-ENTRY FACILITIES OF THE
             DEPOSITORY OR BETWEEN OR AMONG DEPOSITORY PARTICIPANTS OR
             CERTIFICATE OWNERS, MADE IN VIOLATION OF THE APPLICABLE
             RESTRICTIONS.

             THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES [,]
             [AND] [CLASS M CERTIFICATES] [,] [AND] [CLASS M1 CERTIFICATES] [,]
             [AND] CLASS M2 CERTIFICATES [,] [AND] [CLASS M3 CERTIFICATES] [,]
             [AND] [CLASS M4 CERTIFICATES] [,] [AND] [CLASS M5 CERTIFICATES] [,]
             [AND] [CLASS M6 CERTIFICATES] [,] [AND] [CLASS M7 CERTIFICATES] TO
             THE EXTENT DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.

             ANY TRANSFEREE OF THIS CERTIFICATE SHALL BE DEEMED
             TO MAKE THE REPRESENTATIONS SET FORTH IN SECTION
             6.02(C) OF THE AGREEMENT REFERRED TO HEREIN.

             THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
             DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES
             ALLOCABLE HERETO AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
             ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES,
             THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
             DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE ACQUIRING THIS
             CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE PRINCIPAL BALANCE BY
             INQUIRY OF THE SECURITIES ADMINISTRATOR NAMED 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

                                      A-3-2

<PAGE>

             FROM REGISTRATION UNDER SUCH ACT AND UNDER
             APPLICABLE STATE LAW AND IS TRANSFERRED IN
             ACCORDANCE WITH THE PROVISIONS OF SECTION 6.02 OF
             THE AGREEMENT.

                                      A-3-3

<PAGE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Series 2004-1, Class B2                                   Aggregate Certificate Principal Balance of the
                                                          Class B2 Certificates as of the Issue Date:
Pass-Through Rate: 5.00%                                  $______________

Date of Pooling and Servicing Agreement and               Denomination: $______________
Cut-off Date: April 1, 2004
                                                          Master Servicer: Wells Fargo Bank, N.A.
First Distribution Date:
May 25, 2004                                              Trustee: HSBC Bank USA

No.___                                                    Issue Date: April 28, 2004

                                                          CUSIP:_________________

                                                          [ISIN:___________________]
</TABLE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2004-1
                        MORTGAGE 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 and second lien subprime residential
mortgage loans (the "Mortgage Loans") formed and sold by

                   PEOPLE'S CHOICE HOME LOAN SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             PEOPLE'S CHOICE HOME LOAN SECURITIES CORP., THE MASTER SERVICER,
             THE SECURITIES ADMINISTRATOR, THE 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 B2
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class B2 Certificates in REMIC III created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among People's Choice Home Loan Securities Corp., as company (hereinafter called
the "Company", which term includes any successor entity under the Agreement),
Wells Fargo Bank, N.A. as master servicer (the "Master Servicer") and securities
administrator (the "Securities Administrator"), HomEq Servicing Corporation, as
servicer (the "Servicer") and HSBC Bank USA, as trustee (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

                                      A-3-4

<PAGE>

Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the Business Day immediately
preceding such Distribution Date (the "Record Date"), 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 B2 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 Securities Administrator by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Securities
Administrator 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
B2 Certificates the aggregate initial Certificate Principal Balance of which is
in excess of the lesser of (i) $1,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class B2 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 Securities Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Securities Administrator 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) 5.00%, in the case of each
Distribution Date through and including the Distribution Date in the month in
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 5.75%, in the case of any Distribution Date thereafter and (ii) the
applicable Net Funds Cap for such Distribution Date.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Mortgage Pass-Through Certificate 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.

                                      A-3-5

<PAGE>

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Company, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the consent of the Holders of
Certificates entitled to at least 66 2/3% 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 Securities Administrator
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 Securities Administrator 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.

                  Any transferee of this Certificate shall be deemed to make the
representations set forth in Section 6.02(c) of the Agreement.

                  No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Securities Administrator 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and any agent of the Company, the Master Servicer,
the Trustee, the Securities Administrator or the Servicer may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Company, the Master Servicer, the Trustee, the
Securities Administrator, the Servicer 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 Securities Administrator 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

                                      A-3-6

<PAGE>

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 Company and neither the Trustee nor the Securities Administrator assume any
responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Securities Administrator by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.

                                      A-3-7

<PAGE>

                  IN WITNESS WHEREOF, the Securities Administrator has caused
this Certificate to be duly executed.

Dated:

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                             Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class B2 Certificates referred to in the
within-mentioned Agreement.

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                             Authorized Signatory

<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>                                <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       CUSTODIAN
                                                                                                   ----------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                        --------------
                     survivorship and not as tenants in                     (State)
                     common

                        Additional abbreviations may also be used though not in
the above list.
</TABLE>

                                   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 Mortgage
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Securities
Administrator 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

<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.

<PAGE>

                                   EXHIBIT A-4
                                   -----------

                           FORM OF CLASS C 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, THE CLASS M CERTIFICATES AND THE CLASS
             B CERTIFICATES TO THE EXTENT DESCRIBED IN THE
             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 6.02 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.

                                      A-4-1

<PAGE>

<TABLE>
<CAPTION>

<S>                                                        <C>
Series 2004-1, Class C                                     Aggregate Certificate Principal Balance of the
                                                           Class C Certificates as of the Issue Date:
Pass-Through Rate:                                         $_____________

Cut-off Date and date of Pooling and                       Denomination: $_________________
Servicing Agreement: April 1, 2004
                                                           Master Servicer: Wells Fargo Bank, N.A.
First Distribution Date: May 25, 2004
                                                           Trustee: HSBC Bank USA
No. __
                                                           Issue Date: April 28, 2004
Aggregate Notional Amount of the Class
C Certificates as of the Issue Date:
$-------------

Notional Amount: $_______________
</TABLE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2004-1
                        MORTGAGE 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 and second lien subprime residential
mortgage loans (the "Mortgage Loans") formed and sold by

                   PEOPLE'S CHOICE HOME LOAN SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             PEOPLE'S CHOICE HOME LOAN SECURITIES CORP. THE MASTER SERVICER, THE
             SECURITIES ADMINISTRATOR, THE 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 C
Certificates as of the Issue Date) in that certain beneficial ownership interest
evidenced by all the Class C Certificates in REMIC III created pursuant to a
Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among People's Choice Home Loan Securities Corp., as company (hereinafter called
the "Company," which term includes any successor entity under the Agreement),
Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and
securities administrator (the "Securities Administrator"), HomEq Servicing
Corporation, as servicer

                                      A-4-2

<PAGE>

(the "Servicer") and HSBC Bank USA, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the last Business Day of the
calendar month immediately preceding the month in which the related Distribution
Date occurs (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 C 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 Securities Administrator by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Securities
Administrator 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
C Certificates the aggregate initial Certificate Principal Balance of which is
in excess of the lesser of (i) $1,000,000 or (ii) two-thirds of the aggregate
initial Certificate Principal Balance of the Class C 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 Securities Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Securities Administrator for that purpose as
provided in the Agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Mortgage Pass-Through Certificate 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Company, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the consent of the Holders of
Certificates entitled to at least 66

                                      A-4-3

<PAGE>

2/3% 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 Securities Administrator
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 Securities Administrator 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 Securities Administrator 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 B-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 Company, the
Trustee, the Master Servicer or the Securities Administrator 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. None of the
Company, the Trustee or the Securities Administrator 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 Company, the Master
Servicer and the Securities Administrator 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 6.02(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

                                      A-4-4

<PAGE>

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 Securities Administrator 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and any agent of the Company, the Master Servicer,
the Trustee, the Securities Administrator or the Servicer may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Company, the Master Servicer, the Trustee, the
Securities Administrator, the Servicer 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 Securities Administrator 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 Company and neither the Trustee nor the Securities Administrator assume any
responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Securities Administrator, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.

                                      A-4-5

<PAGE>

                  IN WITNESS WHEREOF, the Securities Administrator has caused
this Certificate to be duly executed.

Dated:

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                               Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

             This is one of the Class C Certificates referred to in the
within-mentioned Agreement.

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                              Authorized Officer

<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>                                <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       CUSTODIAN
                                                                                                   ----------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                        --------------
                     survivorship and not as tenants in                     (State)
                     common

                        Additional abbreviations may also be used though not in
the above list.
</TABLE>

                                   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 Mortgage
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Securities
Administrator 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

<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.

<PAGE>

                                   EXHIBIT A-4
                                   -----------

                               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 6.02 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.

             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 BELOW AS THE
             DENOMINATION OF THIS CERTIFICATE.

<PAGE>

<TABLE>
<CAPTION>

<S>                                                        <C>
Series 2004-1, Class P                                     Aggregate Certificate Principal Balance of the
                                                           Class P Certificates as of the Issue Date:
                                                           $100.00
Cut-off Date and date of Pooling and
Servicing Agreement: April 1, 2004                         Denomination: $100.00

First Distribution Date: May 25, 2004                      Master Servicer: Wells Fargo Bank, N.A.

No. __ Trustee: HSBC Bank USA

                                                           Issue Date: April 28, 2004
</TABLE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2004-1
                        MORTGAGE 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 and second lien subprime residential
mortgage loans (the "Mortgage Loans") formed and sold by

                   PEOPLE'S CHOICE HOME LOAN SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             PEOPLE'S CHOICE HOME LOAN SECURITIES CORP., THE MASTER SERVICER,
             THE SECURITIES ADMINISTRATOR, THE 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 People's Choice Home Loan Securities Corp., as company (hereinafter called
the "Company", which term includes any successor entity under the Agreement),
Wells Fargo Bank, N.A., as master servicer (the "Master Servicer"), and
securities administrator (the "Securities Administrator"), HomEq Servicing
Corporation, as servicer (the "Servicer") and HSBC Bank USA, as trustee (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,

                                      A-4-2

<PAGE>

to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following such 25th day (a "Distribution Date"),
commencing on the First Distribution Date specified above, to the Person in
whose name this Certificate is registered on the last Business Day of the
calendar month immediately preceding the month in which the related Distribution
Date occurs (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 Securities Administrator by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Securities
Administrator 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) $1,000,000 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 Securities Administrator of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Securities Administrator for that purpose as
provided in the Agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Mortgage Pass-Through Certificate 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Company, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the consent of the Holders of
Certificates entitled to at least 66 2/3% 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

                                      A-4-3

<PAGE>

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 Securities Administrator
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 Securities Administrator 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 Securities Administrator 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 B-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 Company, the
Trustee, the Master Servicer or the Securities Administrator 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. None of the
Company, the Trustee or the Securities Administrator 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 Company, the Master
Servicer and the Securities Administrator 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 6.02(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 Securities

                                      A-4-4

<PAGE>

Administrator 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and any agent of the Company, the Master Servicer,
the Trustee, the Securities Administrator or the Servicer may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Company, the Master Servicer, the Trustee, the
Securities Administrator, the Servicer 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 Securities Administrator 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 Company and neither the Trustee nor the Securities Administrator assume any
responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Securities Administrator, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.

<PAGE>

                  IN WITNESS WHEREOF, the Securities Administrator has caused
this Certificate to be duly executed.

Dated:

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                               Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

             This is one of the Class P Certificates referred to in the
within-mentioned Agreement.

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                               Authorized Officer

<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>                                <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       CUSTODIAN
                                                                                                   ----------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                        --------------
                     survivorship and not as tenants in                     (State)
                     common

                        Additional abbreviations may also be used though not in
the above list.
</TABLE>

                                   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 Mortgage
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Securities
Administrator 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

<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.

<PAGE>

                                   EXHIBIT A-5
                                   -----------

                           FORM OF CLASS R CERTIFICATE

             THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-
             UNITED STATES PERSON.

             SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
             REPRESENTS THE SOLE "RESIDUAL INTEREST" IN EACH "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 6.02 OF THE 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 6.02 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 SECURITIES ADMINISTRATOR 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

<PAGE>

             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 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 6.02(D) OF THE AGREEMENT
             REFERRED TO HEREIN. ANY PERSON THAT IS A DISQUALIFIED ORGANIZATION
             IS PROHIBITED FROM ACQUIRING BENEFICIAL OWNERSHIP OF THIS
             CERTIFICATE.

                                      A-5-2

<PAGE>

<TABLE>
<CAPTION>

<S>                                                    <C>
Series 2004-1, Class R                                 Aggregate Percentage Interest of the Class R
                                                       Certificates as of the Issue Date: 100.00%
Date of Pooling and Servicing Agreement
and Cut-off Date: April 1, 2004                        Master Servicer: Wells Fargo Bank, N.A.

First Distribution Date:                               Trustee: HSBC Bank USA
May 25, 2004
No __                                                  Issue Date: April 28, 2004
</TABLE>

            PEOPLE'S CHOICE HOME LOAN SECURITIES TRUST SERIES 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a conventional one- to four-family, adjustable-rate and
fixed-rate, first and second lien subprime residential mortgage loans (the
"Mortgage Loans") formed and sold by

                   PEOPLE'S CHOICE HOME LOAN SECURITIES CORP.

             THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
             PEOPLE'S CHOICE HOME LOAN SECURITIES CORP., THE MASTER SERVICER,
             THE SECURITIES ADMINISTRATOR, THE 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 Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class R Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among People's
Choice Home Loan Securities Corp., as company (hereinafter called the "Company",
which term includes any successor entity under the Agreement), Wells Fargo Bank,
N.A., as master servicer (the "Master Servicer") and securities administrator
(the "Securities Administrator"), HomEq Servicing Corporation, as the servicer
(the "Servicer") and HSBC Bank USA, as trustee (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.

                                      A-5-3

<PAGE>

                  Pursuant to the terms of the Agreement, distributions will be
made on the 25th day of each month or, if such 25th day is not a Business Day,
the Business Day immediately following (a "Distribution Date"), commencing on
the First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the 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 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 Securities Administrator by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Securities
Administrator in writing at least five Business Days prior to the Record Date
immediately prior to such Distribution Date and is the registered owner of Class
R Certificates, 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 Securities Administrator of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Securities Administrator
for that purpose as provided in the Agreement.

                  This Certificate is one of a duly authorized issue of
Certificates designated as Mortgage Pass-Through Certificate 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and the rights of the Certificateholders under the
Agreement at any time by the Company, the Master Servicer, the Trustee, the
Securities Administrator and the Servicer with the consent of the Holders of
Certificates entitled to at least 66 2/3% 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 Securities Administrator
as provided in the Agreement, duly endorsed by, or accompanied by an assignment
in the form below

                                      A-5-4

<PAGE>

or other written instrument of transfer in form satisfactory to the Securities
Administrator duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of the same
Class in authorized denominations evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.

                  The Certificates are issuable in fully registered form only
without coupons in Classes and denominations representing Percentage Interests
specified in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

                  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 Securities Administrator 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 B-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 Company, the
Trustee, the Master Servicer or the Securities Administrator 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. None of the
Company, the Trustee or the Securities Administrator 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 Company, the Master
Servicer and the Securities Administrator 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 6.02 of the Agreement.

                  Prior to registration of any transfer, sale or other
disposition of this Certificate, the proposed transferee shall provide to the
Securities Administrator (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 Certificates have been
designated as representing the beneficial ownership of the residual interests in
each of REMIC I, REMIC II and REMIC III (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

                                      A-5-5

<PAGE>

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 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 6.02 of the
Agreement and to any amendment of the Agreement deemed necessary by counsel of
the Company to ensure that the transfer of this Certificate to any Person other
than a Permitted Transferee or any other Person will not cause any portion of
the Trust Fund to cease to qualify as a REMIC or cause the imposition of a tax
upon any REMIC.

                  No service charge will be made for any such registration of
transfer or exchange of Certificates, but the Securities Administrator 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 Company, the Master Servicer, the Trustee, the Securities
Administrator, the Servicer and any agent of the Company, the Master Servicer,
the Trustee, the Securities Administrator or the Servicer may treat the Person
in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Company, the Master Servicer, the Trustee, the
Securities Administrator, the Servicer 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 Securities Administrator 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 Company and neither the Trustee nor the Securities Administrator assume any
responsibility for their correctness.

                  Unless the certificate of authentication hereon has been
executed by the Securities Administrator, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.

                                      A-5-6

<PAGE>

                  IN WITNESS WHEREOF, the Securities Administrator has caused
this Certificate to be duly executed.

Dated:

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                              Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class R Certificates referred to in the
within-mentioned Agreement.

                                  WELLS FARGO BANK, N.A.
                                  as Securities Administrator

                                  By:_______________________________________
                                              Authorized Signatory

<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>                                <C>
TEN COM        -     as tenants in common                 UNIF GIFT MIN ACT -                       CUSTODIAN
                                                                                                   ----------
                                                                                                 (Cust) (Minor)
                                                                                             under Uniform Gifts to
                                                                                                   Minors Act
TEN ENT        -     as tenants by the entireties
JT TEN         -     as joint tenants with right if                        --------------
                     survivorship and not as tenants in                     (State)
                     common

                        Additional abbreviations may also be used though not in
the above list.
</TABLE>

                                   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 Mortgage
Pass-Through Certificate and hereby authorize(s) the registration of transfer of
such interest to assignee on the Certificate Register of the Trust Fund.

                  I (we) further direct the Trustee or the Securities
Administrator 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

<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.

<PAGE>

                                   EXHIBIT B-1
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                     [Date]

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

                Re:  People's Choice Home Loan Securities Corp., Series 2004-1
                     Mortgage Pass-Through Certificates
                     Class C, Class P and Class R Certificates
                     ----------------------------------------------------------

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
April 1, 2004, among People's Choice Home Loan Securities Corp. as Company,
Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and
securities administrator (the "Securities Administrator"), HomEq Servicing
Corporation, as the servicer (the "Servicer") and HSBC Bank USA, as trustee (the
"Trustee") (the "Pooling and Servicing Agreement"), pursuant to which Pooling
and Servicing Agreement the Certificates were issued.

<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:

                                      B-1-2

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER

                                                      [Date]

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

               Re:  People's Choice Home Loan Securities Corp., Series 2004-1
                    Mortgage Pass-Through Certificates
                    Class C, Class P and Class R Certificates
                    ----------------------------------------------------------

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.

                  3. The Transferee: (a) is not an employee benefit or other
             plan subject to the prohibited transaction provisions of the
             Employee Retirement Income Security Act of 1974, as amended
             ("ERISA), or Section 4975 of the Internal Revenue Code of 1986, as
             amended ("Plan"), or any other person (including an investment
             manager, a named fiduciary or a trustee of any Plan) acting,
             directly or indirectly, on behalf of or purchasing any Certificate
             with "plan assets" of any Plan within the meaning of the Department
             of Labor ("DOL") regulation at 29 C.F.R. ss.2510.3-101 or (b) has
             provided the Securities

                                      B-1-3

<PAGE>

             Administrator with an opinion of counsel on which the Trustee, the
             Company, the Master Servicer, the Securities Administrator and the
             Servicer may rely, acceptable to and in form and substance
             satisfactory to the Trustee to the effect that the purchase of
             Certificates is permissible under applicable law, will not
             constitute or result in any non-exempt prohibited transaction under
             ERISA or Section 4975 of the Code and will not subject the Trust
             Fund, the Trustee, the Company, the Master Servicer, the Securities
             Administrator or the Servicer to any obligation or liability
             (including obligations or liabilities under ERISA or Section 4975
             of the Code) in addition to those undertaken in the Pooling and
             Servicing Agreement.

             In addition, the Transferee hereby certifies, represents and
warrants to, and covenants with, the Company, the Trustee, the Securities
Administrator, the Master Servicer and the Servicer that the Transferee will not
transfer such Certificates to any Plan or person unless such Plan or person
meets the requirements set forth in either 3(a) or (b) above.

             All capitalized terms used but not otherwise defined herein have
the respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of April 1, 2004, among People's Choice Home Loan Securities Corp. as
Company, Wells Fargo Bank, N.A. as Master Servicer and Securities Administrator,
HomEq Servicing Corporation as Servicer and HSBC Bank USA as Trustee, pursuant
to which the Certificates were issued.

                                  [TRANSFEREE]

                                  By:
                                      --------------------------------------
                                  Name:
                                  Title:

                                      B-1-4

<PAGE>

                                                          ANNEX 1 TO EXHIBIT B-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 Wells Fargo Bank, N.A., as Securities
Administrator, 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 $25,000,000 as demonstrated in
                  its latest annual financial statements, A COPY OF WHICH IS
                  ATTACHED HERETO.
--------
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.

                                      B-1-5

<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?

                                      B-1-6

<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:

                                      B-1-7

<PAGE>

                                                          ANNEX 2 TO EXHIBIT B-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 Wells Fargo Bank, N.A., as Securities
Administrator, 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.

                                      B-1-8

<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

                                      B-1-9

<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: (Signature)
                ---------------------------------------------------------------

Name of Signatory
                  -------------------------------------------------------------

Title
      -------------------------------------------------------------------------

Date of this certificate
                         ------------------------------------------------------

Date of information provided in paragraph 3
                                            -----------------------------------

                                     B-1-10

<PAGE>

                                                          ANNEX A TO EXHIBIT B-1

                    FORM OF REGULATION S TRANSFER CERTIFICATE

[Date]

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

                  Re:  People's Choice Home Loan Securities Corp., Series 2004-1
                       Mortgage Pass-Through Certificates
                       Class B2 Certificates
                       ---------------------

Ladies and Gentlemen:

                  Reference is hereby made to the Pooling and Servicing
Agreement (the "Agreement"), dated as of April 1, 2004, among People's Choice
Home Loan Securities Corp. (the "Company"), Wells Fargo Bank, N.A., as master
servicer and securities administrator (the "Master Servicer"), HomEq Servicing
Corporation, as servicer (the "Servicer") and HSBC Bank USA, as trustee (the
"Trustee"). Capitalized terms used herein but not defined herein shall have the
meanings assigned thereto in the Agreement.

                  This letter relates to U.S. $[__________] Certificate
Principal Balance of Class B2 Certificates (the "Certificates") which are held
in the name of [name of transferor] (the "Transferor") to effect the transfer of
the Certificates to a person who wishes to take delivery thereof in the form of
an equivalent beneficial interest [name of transferee] (the "Transferee").

                  In connection with such request, the Transferor hereby
certifies that such transfer has been effected in accordance with the transfer
restrictions set forth in the Agreement and the private placement memorandum
dated April 28, 2004 relating to the Certificates and that the following
additional requirements (if applicable) were satisfied:

             (a) the offer of the Certificates was not made to a person in the
United States;

             (b) at the time the buy order was originated, the Transferee was
outside the United States or the Transferor and any person acting on its behalf
reasonably believed that the Transferee was outside the United States;

             (c) no directed selling efforts were made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;

                                     B-1-11

<PAGE>

             (d) the transfer or exchange is not part of a plan or scheme to
evade the registration requirements of the Securities Act;

             (e) the Transferee is not a U.S. Person, as defined in Regulation S
under the Securities Act;

             (f) the transfer was made in accordance with the applicable
provisions of Rule 903(b)(2) or (3) or Rule 904(b)(1), as the case may be; and

             (g) the Transferee understands that the Certificates have not been
and will not be registered under the Securities Act, that any offers, sales or
deliveries of the Certificates purchased by the Transferee in the United States
or to U.S. persons prior to the date that is 40 days after the later of (i) the
commencement of the offering of the Certificates and (ii) the Closing Date, may
constitute a violation of United States law, and that (x) distributions of
principal and interest and (y) the exchange of beneficial interests in a
Temporary Regulation S Global Certificate for beneficial interests in the
related Permanent Regulation S Global Certificate, in each case, will be made in
respect of such Certificates only following the delivery by the Holder of a
certification of non-U.S. beneficial ownership, at the times and in the manner
set forth in the Agreement.

                                     B-1-12

<PAGE>

                  You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.

                                         [Name of Transferor]

                                         By:
                                             -------------------------------
                                         Name:
                                         Title:

                                     B-1-13

<PAGE>

                                   EXHIBIT B-2
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                                      ____________, 20__

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

                  Re:  People's Choice Home Loan Securities Corp., Series 2004-1
                       Mortgage Pass-Through Certificates,
                       Class C, Class P and Class R Certificates
                       -----------------------------------------

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 Seller 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, or (e) has taken any other action, that (as to any of (a) through
(e) above) would constitute a distribution of the Certificates under the
Securities Act of 1933 (the "Act'), that would render the disposition of any
Certificate a violation of Section 5 of the Act or any state securities law, or
that would require registration or qualification pursuant thereto. The Seller
will not act, in any manner set forth in the foregoing sentence with respect to
any Certificate. The Seller has not and will not sell or otherwise transfer any
of the Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.

                                  Very truly yours,

                                  (Transferor)

                                  By:
                                      ----------------------------------------
                                  Name:
                                  Title:

<PAGE>

                            FORM OF TRANSFEREE LETTER

                                              _______________, 20__

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

                  Re:  People's Choice Home Loan Securities Corp., Series 2004-1
                       Mortgage Pass-Through Certificates,
                       Class C, Class P and Class R Certificates
                       -----------------------------------------

Ladies and Gentlemen:

                  In connection with the transfer by ______________________ (the
"Transferor") to __________________________ (the "Transferee") of the captioned
mortgage pass-through certificates (the "Certificates"), the Transferee hereby
certifies as follows:

                  1. The Transferee understands that (a) the Certificates have
             not been and will not be registered or qualified under the
             Securities Act of 1933, as amended (the "Act") or any state
             securities law, (b) the Company is not required to so register or
             qualify the Certificates, (c) the Certificates may be resold only
             if registered and qualified pursuant to the provisions of the Act
             or any state securities law, or if an exemption from such
             registration and qualification is available, (d) the Pooling and
             Servicing Agreement contains restrictions regarding the transfer of
             the Certificates and (e) the Certificates will bear a legend to the
             foregoing effect.

                  2. The Transferee is acquiring the Certificates for its own
             account for investment only and not with a view to or for sale in
             connection with any distribution thereof in any manner that would
             violate the Act or any applicable state securities laws.

                  3. The Transferee is (a) a substantial, sophisticated
             institutional investor having such knowledge and experience in
             financial and business matters, and, in particular, in such matters
             related to securities similar to the Certificates, such that it is
             capable of evaluating the merits and risks of investment in the
             Certificates, (b) able to bear the economic risks of such an
             investment and (c) an "accredited investor" within the meaning of
             Rule 501(a) promulgated pursuant to the Act.

                  4. The Transferee has been furnished with, and has had an
             opportunity to review (a) a copy of the Pooling and Servicing
             Agreement and (b) such other information concerning the
             Certificates, the Mortgage Loans and the Company as has been
             requested by the Transferee from the Company or the Transferor and
             is relevant to the

                                      B-2-2

<PAGE>

             Transferee's decision to purchase the Certificates. The Transferee
             has had any questions arising from such review answered by the
             Company or the Transferor to the satisfaction of the Transferee.

                  5. The Transferee has not and will not nor has it authorized
             or will it authorize any person to (a) offer, pledge, sell, dispose
             of or otherwise transfer any Certificate, any interest in any
             Certificate or any other similar security to any person in any
             manner, (b) solicit any offer to buy or to accept a pledge,
             disposition of other transfer of any Certificate, any interest in
             any Certificate or any other similar security from any person in
             any manner, (c) otherwise approach or negotiate with respect to any
             Certificate, any interest in any Certificate or any other similar
             security with any person in any manner, (d) make any general
             solicitation by means of general advertising or in any other manner
             or (e) take any other action, that (as to any of (a) through (e)
             above) would constitute a distribution of any Certificate under the
             Act, that would render the disposition of any Certificate a
             violation of Section 5 of the 1933 Act or any state securities law,
             or that would require registration or qualification pursuant
             thereto. The Transferee will not sell or otherwise transfer any of
             the Certificates, except in compliance with the provisions of the
             Pooling and Servicing Agreement.

                  6. The Transferee: (a) is not an employee benefit or other
             plan subject to the prohibited transaction provisions of the
             Employee Retirement Income Security Act of 1974, as amended
             ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
             amended ("Plan"), or any other person (including an investment
             manager, a named fiduciary or a trustee of any Plan) acting,
             directly or indirectly, on behalf of or purchasing any Certificate
             with "plan assets" of any Plan within the meaning of the Department
             of Labor ("DOL") regulation at 29 C.F.R. ss.2510.3-101 or (b) has
             provided the Trustee with an opinion of counsel on which the
             Company, the Master Servicer, the Securities Administrator, the
             Trustee and the Servicer may rely, acceptable to and in form and
             substance satisfactory to the Trustee to the effect that the
             purchase of Certificates is permissible under applicable law, will
             not constitute or result in any non-exempt prohibited transaction
             under ERISA or Section 4975 of the Code and will not subject the
             Trust Fund, the Trustee, the Master Servicer, the Securities
             Administrator, the Company or the Servicer to any obligation or
             liability (including obligations or liabilities under ERISA or
             Section 4975 of the Code) in addition to those undertaken in the
             Pooling and Servicing Agreement.

             In addition, the Transferee hereby certifies, represents and
warrants to, and covenants with, the Company, the Trustee, the Securities
Administrator, the Master Servicer and the Servicer that the Transferee will not
transfer such Certificates to any Plan or person unless such Plan or person
meets the requirements set forth in either 6(a) or (b) above.

                                        Very truly yours,

                                        By:
                                           ------------------------------------
                                        Name:
                                        Title:

                                      B-2-3

<PAGE>

                                   EXHIBIT B-3
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                     [Date]

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

                  Re:  People's Choice Home Loan Securities Corp., Series 2004-1
                       Mortgage Pass-Through Certificates
                       Class B2 Certificates
                       ---------------------

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
April 1, 2004, among People's Choice Home Loan Securities Corp. as Company,
Wells Fargo Bank, N.A., as master servicer (the "Master Servicer") and
securities administrator (the "Securities Administrator"), HomEq Servicing
Corporation, as the servicer (the "Servicer") and HSBC Bank USA, as trustee (the
"Trustee") (the "Pooling and Servicing Agreement"), pursuant to which Pooling
and Servicing Agreement the Certificates were issued.

                                      B-3-1

<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:

                                      B-3-2

<PAGE>

                            FORM OF INVESTMENT LETTER
                                                                  [Date]

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

     Re:  People's Choice Home Loan Securities Trust 2004-1, Mortgage Pass-
          Through Certificates, Series 2004-1 (the "Certificates"), including
          the Class B2 Certificates (the "Privately Offered Certificates")
          ----------------------------------------------------------------

Dear Ladies and Gentlemen:

             In connection with our purchase of Privately Offered Certificates,
we confirm that:

                  (i)  we understand that the Privately Offered Certificates are
                       not being registered under the Securities Act of 1933, as
                       amended (the "Act") or any applicable state securities or
                       "Blue Sky" laws, and are being sold to us in a
                       transaction that is exempt from the registration
                       requirements of such laws;

                  (ii) any information we desired concerning the Certificates,
                       including the Privately Offered Certificates, the trust
                       in which the Certificates represent the entire beneficial
                       ownership interest (the "Trust") or any other matter we
                       deemed relevant to our decision to purchase Privately
                       Offered Certificates has been made available to us;

                  (iii)we are able to bear the economic risk of investment in
                       Privately Offered Certificates; we are an institutional
                       "accredited investor" as defined in Section 501(a) of
                       Regulation D promulgated under the Act and a
                       sophisticated institutional investor;

                  (iv) we are acquiring Privately Offered Certificates for our
                       own account, not as nominee for any other person, and not
                       with a present view to any distribution or other
                       disposition of the Privately Offered Certificates;

                  (v)  we agree the Privately Offered Certificates must be held
                       indefinitely by us (and may not be sold, pledged,
                       hypothecated or in any way disposed of) unless
                       subsequently registered under the Act and any applicable
                       state securities or "Blue Sky" laws or an exemption from
                       the registration requirements of the Act and any
                       applicable state securities or "Blue Sky" laws is
                       available;

                  (vi) we agree that in the event that at some future time we
                       wish to dispose of or exchange any of the Privately
                       Offered Certificates (such disposition or

                                      B-3-3

<PAGE>

                       exchange not being currently foreseen or contemplated),
                       we will not transfer or exchange any of the Privately
                       Offered Certificates unless:

                                    (A) (1) the sale is to an Eligible Purchaser
                       (as defined below), (2) a letter to substantially the
                       same effect as either this letter or, if the Eligible
                       Purchaser is a Qualified Institutional Buyer as defined
                       under Rule 144A of the Act, the Rule 144A and Related
                       Matters Certificate in the form attached to the Pooling
                       and Servicing Agreement (as defined below) is executed
                       promptly by the purchaser and delivered to the addressees
                       hereof and (3) all offers or solicitations in connection
                       with the sale, whether directly or through any agent
                       acting on our behalf, are limited only to Eligible
                       Purchasers and are not made by means of any form of
                       general solicitation or general advertising whatsoever;
                       and

                                    (B) if the Privately Offered Certificate is
                       not registered under the Act (as to which we acknowledge
                       you have no obligation), the Privately Offered
                       Certificate is sold in a transaction that does not
                       require registration under the Act and any applicable
                       state securities or "blue sky" laws and, if LaSalle Bank
                       National Association (the "Trustee") so requests, a
                       satisfactory Opinion of Counsel is furnished to such
                       effect, which Opinion of Counsel shall be an expense of
                       the transferor or the transferee;

                  (vii)  we agree to be bound by all of the terms (including
                         those relating to restrictions on transfer) of the
                         Pooling and Servicing (as defined below), pursuant to
                         which the Trust was formed; we have reviewed carefully
                         and understand the terms of the Pooling and Servicing
                         Agreement;

                  (viii) we either: (i) are not acquiring the Privately Offered
                         Certificate directly or indirectly by, or on behalf of,
                         an employee benefit plan or other retirement
                         arrangement which is subject to Title I of the Employee
                         Retirement Income Security Act of 1974, as amended, or
                         section 4975 of the Internal Revenue Code of 1986, as
                         amended, or (ii) it is an insurance company, the source
                         of funds used to acquire or hold the certificate or
                         interest therein is an "insurance company general
                         account," as such term is defined in Prohibited
                         Transaction Exemption ("PTE") 95-60, and the conditions
                         in sections I and III of PTE 95-60 have been satisfied.

                  (ix)   We understand that each of the Class B2 Certificates
                         bears, and will continue to bear, a legend to
                         substantiate the following effect: THIS CERTIFICATE HAS
                         NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
                         SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
                         UNDER ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
                         PURCHASING THIS CERTIFICATE, AGREES THAT THIS
                         CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR

                                      B-3-4

<PAGE>

                         OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE ACT
                         AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE
                         144A UNDER THE ACT ("RULE 144A") TO A PERSON THAT THE
                         HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
                         BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"),
                         PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR
                         THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN
                         EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER
                         TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2)
                         PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY
                         RULE 144 UNDER THE ACT (IF AVAILABLE) OR(3) IN
                         CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
                         INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(A)(1),
                         (2),(3) OR (7) OF REGULATION D UNDER THE ACT PURCHASING
                         NOT FOR DISTRIBUTION IN VIOLATION OF THE ACT, SUBJECT
                         TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
                         SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
                         (B) THE RECEIPT BY THE TRUSTEE OF AN OPINION OF COUNSEL
                         AS TO COMPLIANCE WITH ALL APPLICABLE SECURITIES LAWS OF
                         THE UNITED STATES. THIS CERTIFICATE MAY NOT BE ACQUIRED
                         DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE
                         BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH IS
                         SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
                         SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF
                         THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, UNLESS
                         THE PROPOSED TRANSFEREE REPRESENTS THAT IT IS AN
                         INSURANCE COMPANY, 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 PTE 95-60, AND THE CONDITIONS IN SECTIONS I
                         AND III OF PTE 95-60 HAVE BEEN SATISFIED.

"ELIGIBLE PURCHASER" means a corporation, partnership or other entity which we
have reasonable grounds to believe and do believe (i) can make representations
with respect to itself to substantially the same effect as the representations
set forth herein, and (ii) is either a Qualified Institutional Buyer as defined
under Rule 144A of the Act or an institutional "Accredited Investor" as defined
under Rule 501 of the Act.

Terms not otherwise defined herein shall have the meanings assigned to them in
the Pooling and Servicing Agreement, dated as of April 1, 2004 (the "Pooling and
Servicing Agreement"), among People's Choice Home Loan Securities Corp., as
Company, Wells Fargo Bank, N.A. as master servicer (in such capacity, the
"Master Servicer") and securities administrator, HomEq Servicing Corporation as
servicer and HSBC Bank USA, as trustee.

                                      B-3-5

<PAGE>

If the Purchaser proposes that its Certificates be registered in the name of a
nominee on its behalf, the Purchaser has identified such nominee below, and has
caused such nominee to complete the Nominee Acknowledgment at the end of this
letter.

Name of Nominee (if any): ________________

                                      B-3-6

<PAGE>

                  IN WITNESS WHEREOF, this document has been executed by the
undersigned who is duty authorized to do so on behalf of the undersigned
Eligible Purchaser on the ___ day of ________, 20__.

                               Very truly yours,

                               [PURCHASER]

                               By:
                                  ---------------------------------------------
                                        (Authorized Officer)

                               By:
                                  ---------------------------------------------
                                        (Attorney-in-fact)

---------------------------------
Nominee Acknowledgment

             The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner thereof is
and shall be the Purchaser identified above, for whom the undersigned is acting
as nominee.

                               [NAME OF NOMINEE]

                               By:
                                  ---------------------------------------------
                                        (Authorized Officer)

                               By:
                                  ---------------------------------------------
                                        (Attorney-in-fact)

                                      B-3-7

<PAGE>

                FORM OF RULE 144A AND RELATED MATTERS CERTIFICATE
                -------------------------------------------------

                                                                          [Date]

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

     Re:  People's Choice Home Loan Securities Trust 2004-1, Mortgage Pass-
          Through Certificates, Series 2004-1 (the "Certificates"), including
          the Class B2 Certificates (the "Privately Offered Certificates")
          ----------------------------------------------------------------

Dear Ladies and Gentlemen:

             In connection with our purchase of Privately Offered Certificates,
the undersigned certifies to each of the parties to whom this letter is
addressed that it is a qualified institutional buyer (as defined in Rule 144A
under the Securities Act of 1933, as amended (the "Act")) as follows:

1.       It owned and/or invested on a discretionary basis eligible securities
         (excluding affiliate's securities, bank deposit notes and CD's, loan
         participations, repurchase agreements, securities owned but subject to
         a repurchase agreement and swaps), as described below:

         Date: _________, __ (must be on or after the close of its most recent
         fiscal year)

         Amount: $________; and

2.       The dollar amount set forth above is:

         a. greater than $100 million and the undersigned is one of the
following entities:

                  (1)      an insurance company as defined in Section 2(13) of
                           the Act; or2

                  (2)      an investment company registered under the Investment
                           Company Act or any business development company as
                           defined in Section 2(a)(48) of the Investment Company
                           Act of 1940; or A purchase by an insurance company
                           for one or more of its separate accounts, as defined
                           by Section 2(a)(37) of the Investment Company Act of
                           1940, which are neither registered nor required to be
                           registered thereunder, shall be deemed to be a
                           purchase for the account of such insurance company.

--------
2        A purchase by an insurance company for one or more of its separate
         accounts, as defined by Section 2(a)(37) of the Investment Company Act
         of 1940, which are neither registered nor required to be registered
         thereunder, shall be deemed to be a purchase for the account of such
         insurance company.

                                      B-3-8

<PAGE>

                  (3)  a Small Business Investment Company licensed by the U.S.
                       Small Business Administration under Section 301(c) or (d)
                       of the Small Business Investment Act of 1958; or

                  (4)  a plan (i) established and maintained by a state, its
                       political subdivisions, or any agency or instrumentality
                       of a state or its political subdivisions, the laws of
                       which permit the purchase of securities of this type, for
                       the benefit of its employees and (ii) the governing
                       investment guidelines of which permit the purchase of
                       securities of this type;

                  (5)  or a business development company as defined in Section
                       202(a)(22) of the Investment Advisers Act of 1940; or

                  (6)  a corporation (other than a U.S. bank, savings and loan
                       association or equivalent foreign institution),
                       partnership, Massachusetts or similar business trust, or
                       an organization described in Section 501(c)(3) of the
                       internal Revenue Code; or

                  (7)  a U.S. bank, savings and loan association or equivalent
                       foreign institution, which has an audited net worth of at
                       least $25 million as demonstrated in its latest annual
                       financial statements; or

                  (8)  an investment adviser registered under the Investment
                       Advisers Act; or

             b.   greater than $10 million, and the undersigned is a
                  broker-dealer registered with the SEC; or

             c.   less than $10 million, and the undersigned is a broker-dealer
                  registered with the SEC and will only purchase Rule 144A
                  securities in transactions in which it acts as a riskless
                  principal (as defined in Rule 144A); or

             d.   less than $100 million, and the undersigned is an investment
                  company registered under the Investment Company Act of 1940,
                  which, together with one or more registered investment
                  companies having the same or an affiliated investment adviser,
                  owns at least $100 million of eligible securities; or

             e.   less than $100 million, and the undersigned is an entity, all
                  the equity owners of which are qualified institutional buyers.

                  The undersigned further certifies that it is purchasing a
Privately Offered Certificate for its own account or for the account of others
that independently qualify as "Qualified Institutional Buyers" as defined in
Rule 144A. It is aware that the sale of the Privately Offered Certificates is
being made in reliance on its continued compliance with Rule 144A. It is aware
that the transferor may rely on the exemption from the provisions of Section 5
of the Act provided by Rule 144A. The undersigned understands that the Privately
Offered Certificates may be resold, pledged or transferred only to (i) a person
reasonably believed to be a Qualified

                                      B-3-9

<PAGE>

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 in Rule 144A, or (ii) an institutional
"accredited investor," as such term is defined under Rule 501 of the Act in a
transaction that otherwise does not constitute a public offering.

                  The undersigned agrees that if at some future time it wishes
to dispose of or exchange any of the Privately Offered Certificates, it will not
transfer or exchange any of the Privately Offered Certificates to a Qualified
Institutional Buyer without first obtaining a Rule 144A and Related Matters
Certificate in the form hereof from the transferee and delivering such
certificate to the addressees hereof. Prior to making any transfer of Privately
Offered Certificates, if the proposed Transferee is an institutional "accredited
investor," the transferor shall obtain from the transferee and deliver to the
addressees hereof an Investment Letter in the form attached to the Pooling and
Servicing Agreement, dated as of April 1, 2004, among People's Choice Home Loan
Securities Corp., as Company, Wells Fargo Bank, N.A. as master servicer (in such
capacity, the "Master Servicer") and securities administrator, HomEq Servicing
Corporation as servicer and HSBC Bank USA, as trustee, pursuant to which the
Certificates were issued.

                  The undersigned certifies that it either: (i) is not acquiring
the Privately Offered Certificate directly or indirectly by, or on behalf of, an
employee benefit plan or other retirement arrangement which is subject to Title
I of the Employee Retirement Income Security Act of 1974, as amended, or section
4975 of the Internal Revenue Code of 1986, as amended, or (ii) is providing a
representation that it is an insurance company, the source of funds used to
acquire or hold the certificate or interest therein is an "insurance company
general account," as such term is defined in Prohibited Transaction Exemption
("PTE") 95-60, and the conditions in sections I and III of PTE 95-60 have been
satisfied.

                  If the Purchaser proposes that its Certificates be registered
in the name of a nominee on its behalf, the Purchaser has identified such
nominee below, and has caused such nominee to complete the Nominee
Acknowledgment at the end of this letter.

Name of Nominee (if any): ______________________

                                     B-3-10

<PAGE>

             IN WITNESS WHEREOF, this document has been executed by the
undersigned who is duly authorized to do so on behalf of the undersigned
Eligible Purchaser on the-day o, 20

                                       Very truly yours,

                                       [PURCHASER]

                                       By: ______________________
                                            (Authorized Officer)

                                       By: ______________________
                                            (Attorney-in-fact)

---------------------------------
Nominee Acknowledgment

             The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner thereof is
and shall be the Purchaser identified above, for whom the undersigned is acting
as nominee.

                                       [NAME OF NOMINEE]

                                       By: ______________________
                                            (Authorized Officer)

                                       By: ______________________
                                            (Attorney-in-fact)

                                     B-3-11

<PAGE>

                    FORM OF REGULATION S TRANSFER CERTIFICATE

[Date]

Wells Fargo Bank, N.A.
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
Attention: Corporate Trust Services - People's Choice 2004-1

                  Re:  People's Choice Home Loan Securities Trust Series 2004-1,
                       Mortgage Pass-Through Certificates, Series 2004-1
                       Class B2 Certificates
                       --------------------------------------------------------

Ladies and Gentlemen:

                  Reference is hereby made to the Pooling and Servicing
Agreement (the "Agreement"), dated as of April 1, 2004, among People's Choice
Home Loan Securities Corp. (the "Company"), Wells Fargo Bank, N.A., as master
servicer and securities administrator (the "Master Servicer"), HomEq Servicing
Corporation, as servicer (the "Servicer") and HSBC Bank USA, as trustee (the
"Trustee"). Capitalized terms used herein but not defined herein shall have the
meanings assigned thereto in the Agreement.

                  This letter relates to U.S. $[__________] Certificate
Principal Balance of Class B2 Certificates (the "Certificates") which are held
in the name of [name of transferor] (the "Transferor") to effect the transfer of
the Certificates to a person who wishes to take delivery thereof in the form of
an equivalent beneficial interest [name of transferee] (the "Transferee").

                  In connection with such request, the Transferor hereby
certifies that such transfer has been effected in accordance with the transfer
restrictions set forth in the Agreement and the private placement memorandum
dated April 28, 2004 relating to the Certificates and that the following
additional requirements (if applicable) were satisfied:

             (a) the offer of the Certificates was not made to a person in the
United States;

             (b) at the time the buy order was originated, the Transferee was
outside the United States or the Transferor and any person acting on its behalf
reasonably believed that the Transferee was outside the United States;

             (c) no directed selling efforts were made in contravention of the
requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;

                                     B-3-12

<PAGE>

             (d) the transfer or exchange is not part of a plan or scheme to
evade the registration requirements of the Securities Act;

             (e) the Transferee is not a U.S. Person, as defined in Regulation S
under the Securities Act;

             (f) the transfer was made in accordance with the applicable
provisions of Rule 903(b)(2) or (3) or Rule 904(b)(1), as the case may be; and

             (g) the Transferee understands that the Certificates have not been
and will not be registered under the Securities Act, that any offers, sales or
deliveries of the Certificates purchased by the Transferee in the United States
or to U.S. persons prior to the date that is 40 days after the later of (i) the
commencement of the offering of the Certificates and (ii) the Closing Date, may
constitute a violation of United States law, and that (x) distributions of
principal and interest and (y) the exchange of beneficial interests in a
Temporary Regulation S Global Certificate for beneficial interests in the
related Permanent Regulation S Global Certificate, in each case, will be made in
respect of such Certificates only following the delivery by the Holder of a
certification of non-U.S. beneficial ownership, at the times and in the manner
set forth in the Agreement.

                                     B-3-13

<PAGE>

                  You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.

                                         [Name of Transferor]

                                         By:
                                             -----------------------------------
                                         Name:
                                         Title:

                                     B-3-14

<PAGE>

                                   EXHIBIT B-4
                                   -----------

                        TRANSFER AFFIDAVIT AND AGREEMENT

STATE OF           )
                   ss.:
COUNTY OF          )

         ___________________________ 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 People's Choice
                  Home Loan Securities Corp., Series 2004-1 Mortgage
                  Pass-Through Certificates, Class R Certificates (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
                  ____________________. ____ 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 real 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)

<PAGE>

                  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.

             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 Securities Administrator will not
                  register the transfer of any Class R Certificate unless the
                  transferee, or the transferee's agent, delivers to the
                  Securities Administrator, 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
                  6.02(e) of the Pooling and Servicing Agreement under which the
                  Class R Certificates were issued (in particular, clauses
                  (iii)(A) and (iii)(B) of Section 6.02(e) which authorize the
                  Securities Administrator to deliver payments to a person other
                  than the Owner and negotiate a mandatory sale by the
                  Securities Administrator in the event that the Owner holds
                  such Certificate in violation of Section 6.02(e)); 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.

                                      B-4-2

<PAGE>

             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
                  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 6.02(e) 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 Securities
                  Administrator 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 Certificate, hereby agrees that in
                  the event that the Trust Fund created by the Pooling and
                  Servicing Agreement is terminated pursuant to Section 10.01
                  thereof, the undersigned shall assign and transfer to the
                  Holders of the Class C and the Class P Certificates any
                  amounts in excess of par received in connection with such
                  termination. Accordingly, in the event of such termination,
                  the Securities Administrator is hereby authorized to withhold
                  any such amounts in excess of par and to pay such amounts
                  directly to the Holders of the Class C and the Class P
                  Certificates. This agreement shall bind and be enforceable
                  against any successor, transferee or assigned of the
                  undersigned in the Class R Certificate. In connection with any
                  transfer of the Class R Certificate, the

                                      B-4-3

<PAGE>

                  Owner shall obtain an agreement substantially similar to this
                  clause from any subsequent owner.

                                      B-4-4

<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
_________________, ____.

                                  [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
__________, ____.

                                  --------------------------------------------
                                                    Notary Public

                                  County of
                                            ----------------------------------
                                  State of
                                           ---------------------------

                                  My Commission expires:

                                      B-4-5

<PAGE>

                          FORM OF TRANSFEROR AFFIDAVIT

STATE OF CALIFORNIA        )
                           : ss.:
COUNTY OF                  )

                  _________________________, 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 Certificates (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 or a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit B-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.

                                      B-4-6

<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
________________, ____.

                                  [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
_____________, ____.

                                  --------------------------------------------
                                  Notary Public

                                  County of
                                            ----------------------------------
                                  State of
                                           ---------------------------

                                  My Commission expires:

<PAGE>

                                    EXHIBIT C
                                    ---------

                         FORM OF SERVICER CERTIFICATION

Re:      PEOPLE'S CHOICE HOME LOAN SECURITIES CORP., SERIES 2004-1 MORTGAGE
         PASS-THROUGH CERTIFICATES,

             I, [identify the certifying individual], certify to People's Choice
Home Loan Securities Corp. (the "Company"), HSBC Bank USA (the "Trustee") and
Wells Fargo Bank, N.A. (the "Master Servicer"), and their respective officers,
directors and affiliates, and with the knowledge and intent that they will rely
upon this certification, that:

             1. Based on my knowledge, the information in the Annual Statement
of Compliance, the Annual Independent Public Accountant's Servicing Report and
all servicing reports, officer's certificates and other information relating to
the servicing of the Mortgage Loans submitted to the Master Servicer taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact constituting information required to be provided by HomEq
Servicing Corporation under the Pooling and Servicing Agreement necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading as of the date of this certification.

             2. Based on my knowledge, the servicing information required to be
provided to the Master Servicer by HomEq Servicing Corporation under the Pooling
and Servicing Agreement has been provided to the Master Servicer.

             3. I am responsible for reviewing the activities performed by HomEq
Servicing Corporation under the Pooling and Servicing Agreement and based upon
my knowledge and the review required by the Pooling and Servicing Agreement, and
except as disclosed in the Annual Statement of Compliance or the Annual
Independent Public Accountant's Servicing Report submitted to the Master
Servicer, HomEq Servicing Corporation has fulfilled its obligations under the
Pooling and Servicing Agreement; and

             4. HomEq Servicing Corporation has disclosed to its certified
public accountants and the Master Servicer all significant deficiencies relating
to HomEq Servicing Corporation compliance with the minimum servicing standards
in accordance with a review conducted in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or similar standard as set forth in the
Pooling and Servicing Agreement.

                                       C-1

<PAGE>

             Capitalized terms used and not otherwise defined herein have the
meanings assigned thereto in the Pooling and Servicing Agreement, dated as of
April 1, 2004, among People's Choice Home Loan Securities Corp., HomEq Servicing
Corporation, Wells Fargo Bank, N.A. and HSBC Bank USA.

Date:        _________________________

______________________________________
[Signature]
[Title]

                                       C-2

<PAGE>

<TABLE>
<CAPTION>

                                                     EXHIBIT D

                                           FORM OF STANDARD FILE LAYOUT

COLUMN NAME                    Description                                           Decimal       Format Comment
-----------                    -----------                                           -------       --------------
<S>                            <C>                                                     <C>     <C>
LOAN_NBR                       Loan Number assigned by investor                                Text up to 10 digits
SERVICER LOAN_NBR              Servicer Loan Number                                            Text up to 10 digits
BORROWER_NAME                  Mortgagor name assigned to Note                                 Max length of 30
SCHED_PMT_AMT                  P&I constant                                             2      No commas(,) or dollar signs ($)
NOTE_INT_RATE                  Gross Interest Rate                                      4      Max length of 6
NET_RATE                       Gross Interest Rate less the Service Fee Rate            4      Max length of 6
SERV_FEE_RATE                  Service Fee Rate                                         4      Max length of 6
NEW_PAY_AMT                    ARM loan's forecasted P&I constant                       2      No commas(,) or dollar signs ($)
NEW_LOAN_RATE                  ARM loan's forecasted Gross Interest Rate                4      Max length of 6
ARM_INDEX_RATE                 ARM loan's index Rate used                               4      Max length of 6
ACTL_BEG_BAL                   Beginning Actual Balance                                 2      No commas(,) or dollar signs ($)
ACTL_END_BAL                   Ending Actual Balance                                    2      No commas(,) or dollar signs ($)
NEXT_DUE_DATE                  Borrower's next due date                                        MM/DD/YYYY
CURT_AMT_1                     Curtailment Amount                                       2      No commas(,) or dollar signs ($)
CURT_DATE_1                    Due date Curtailment was applied to                             MM/DD/YYYY
CURT_ADJ_ AMT_1                Curtailment Interest if applicable                       2      No commas(,) or dollar signs ($)
CURT_AMT_2                     Curtailment Amount 2                                     2      No commas(,) or dollar signs ($)
CURT_DATE_2                    Due date Curtailment was applied to                             MM/DD/YYYY
CURT_ADJ_ AMT2                 Curtailment Interest if applicable                       2      No commas(,) or dollar signs ($)
CURT_AMT_3                     Curtailment Amount 3                                     2      No commas(,) or dollar signs ($)
CURT_DATE_3                    Due date Curtailment was applied to                             MM/DD/YYYY
CURT_ADJ_AMT3                  Curtailment Interest, if applicable                      2      No commas(,) or dollar signs ($)
SCHED_BEG_BAL                  Beginning Scheduled Balance                              2      No commas(,) or dollar signs ($)
SCHED_END_BAL                  Ending Scheduled Balance                                 2      No commas(,) or dollar signs ($)
SCHED_PRIN_AMT                 Scheduled Principal portion of P&I                       2      No commas(,) or dollar signs ($)
SCHED_NET_INT                  Scheduled Net Interest (less Service Fee)                2      No commas(,) or dollar signs ($)
                               portion of P&I
LIQ_AMT                        Liquidation Principal Amt to bring balance to            2      No commas(,) or dollar signs ($)
                               zero
PIF_DATE                       Liquidation Date                                                MM/DD/YYYY
ACTION_CODE                    Either 60 for liquidation or 65 for Repurchase                  Max length of 2
PRIN_ADJ_AMT                   Principal Adjustments made to loan, if                   2      No commas(,) or dollar signs ($)
                               applicable
INT_ADJ_AMT                    Interest Adjustment made to loan, if applicable          2      No commas(,) or dollar signs ($)
</TABLE>

                                       D-1

<PAGE>

                                    EXHIBIT E

                       MASTER SERVICING DEFAULT REPORTING
                             DATA FIELD REQUIREMENTS

Data must be submitted to Wells Fargo Bank in an Excel spreadsheet format with
fixed field names and data type. The Excel spreadsheet should be used as a
template CONSISTENTLY every month when submitting data for all loans that are 60
days + delinquent and/or in bankruptcy, foreclosure or REO.

Table: Delinquency

  NAME                                     TYPE              MAX CHARACTER SIZE
  ----                                     ----              ------------------
  Servicer Loan #                          Number            10
  Investor Loan #                          Number            10
  Servicer Investor #                      Text              3
  Borrower Name                            Text              20
  Address                                  Text              30
  State                                    Text              2
  Zip                                      Text              5
  Due Date                                 Date/Time         8
  Loan Type                                Text              8
  BK Filed Date                            Date/Time         8
  BK Chapter                               Text              6
  BK Case Number                           Text              30 Maximum
  Post Petition Due                        Date/Time         8
  Motion for Relief                        Date/Time         8
  Lift of Stay                             Date/Time         8
  BK Discharge/Dismissal Date              Date/Time         8
  Loss Mit Approval Date                   Date/Time         8
  Loss Mit Type                            Text              5
  Loss Mit Code                            Number            2
  Loss Mit Estimated Completion Date       Date/Time         8
  Loss Mit Actual Completion Date          Date/Time         8
  FC Approval Date                         Date/Time         8
  File Referred to Attorney                Date/Time         8
  NOD                                      Date/Time         8
  Complaint Filed                          Date/Time         8
  Scheduled Sale Date                      Date/Time         8
  Actual Sale Date                         Date/Time         8
  F/C Sale Amount                          Currency          8
  Eviction Start Date                      Date/Time         8
  Eviction Completed Date                  Date/Time         8
  List Price                               Currency          8
  List Date                                Date/Time         8

                                       E-1

<PAGE>

  Accepted Offer Price                      Currency          8
  Accepted Offer Date                       Date/Time         8
  Estimated REO Closing Date                Date/Time         8
  Actual REO Sale Date                      Date/Time         8
  Occupant Code                             Text              10
  Property Condition Code                   Text              2
  Property Inspection Date                  Date/Time         8
  Property Value Date                       Date/Time         8
  Current Property Value                    Currency          8
  Repaired Property Value                   Currency          8
  Current LTV                               Currency          8
  FNMA Delinquent Status Code               Text              2
  FNMA Delinquent Reason Code               Text              3

  IF APPLICABLE:
  MI Cancellation Date                      Date/Time         8
  MI Claim Filed Date                       Date/Time         8
  MI Claim Amount                           Currency          8
  MI Claim Reject Date                      Date/Time         8
  MI Claim Resubmit Date                    Date/Time         8
  MI Claim Paid Date                        Date/Time         8
  MI Claim Amount Paid                      Currency          8
  Pool Claim Filed Date                     Date/Time         8
  Pool Claim Amount                         Currency          8
  Pool Claim Reject Date                    Date/Time         8
  Pool Claim Paid Date                      Date/Time         8
  Pool Claim Amount Paid                    Currency          8
  Pool Claim Resubmit Date                  Date/Time         8
  FHA Part A Claim Filed Date               Date/Time         8
  FHA Part A Claim Amount                   Currency          8
  FHA Part A Claim Paid Date                Date/Time         8
  FHA Part A Claim Paid Amount              Currency          8
  FHA Part B Claim Filed Date               Date/Time         8
  FHA Part B Claim Amount                   Currency          8
  FHA Part B Claim Paid Date                Date/Time         8
  FHA Part B Claim Paid Amount              Currency          8
  VA Claim Filed Date                       Date/Time         8
  VA Claim Paid Date                        Date/Time         8
  VA Claim Paid Amount                      Currency          8

                                       E-2

<PAGE>

The Loss Mit Type field should show the approved Loss Mitigation arrangement.
The following are acceptable:

o            ASUM-     Approved Assumption
o            BAP-      Borrower Assistance Program
o            CO-       Charge Off
o            DIL-      Deed-in-Lieu
o            FFA-      Formal Forbearance Agreement
o            MOD-      Loan Modification
o            PRE-      Pre-Sale
o            SS-       Short Sale
o            MISC-     Anything else approved by the PMI or Pool Insurer

Wells Fargo Bank will accept alternative Loss Mitigation Types to those above,
provided that they are consistent with industry standards. If Loss Mitigation
Types other than those above are used, the Servicer must supply Wells Fargo Bank
with a description of each of the Loss Mitigation Types prior to sending the
file.

The Occupant Code field should show the current status of the property. The
acceptable codes are:

o           Mortgagor
o           Tenant
o           Unknown
o           Vacant

The Property Condition field should show the last reported condition of the
property. The acceptable codes are:

o            Damaged
o            Excellent
o            Fair
o            Gone
o            Good
o            Poor
o            Special Hazard
o            Unknown

                                       E-3

<PAGE>

The FNMA Delinquent Reason Code field should show the Reason for Default. The
following FNMA Delinquency Reason Codes to be used are below.

DELINQUENCY CODE       DELINQUENCY DESCRIPTION
       001              FNMA-Death of principal mortgagor
       002              FNMA-Illness of principal mortgagor
       003              FNMA-Illness of mortgagor's family member
       004              FNMA-Death of mortgagor's family member
       005              FNMA-Marital difficulties
       006              FNMA-Curtailment of income
       007              FNMA-Excessive Obligation
       008              FNMA-Abandonment of property
       009              FNMA-Distant employee transfer
       011              FNMA-Property problem
       012              FNMA-Inability to sell property
       013              FNMA-Inability to rent property
       014              FNMA-Military Service
       015              FNMA-Other
       016              FNMA-Unemployment
       017              FNMA-Business failure
       019              FNMA-Casualty loss
       022              FNMA-Energy environment costs
       023              FNMA-Servicing problems
       026              FNMA-Payment adjustment
       027              FNMA-Payment dispute
       029              FNMA-Transfer of ownership pending
       030              FNMA-Fraud
       031              FNMA-Unable to contact borrower
       INC              FNMA-Incarceration

                                       E-4

<PAGE>

The FNMA Delinquent Status Code field should show the Status of Default. The
following FNMA Delinquency Status Codes to be used are below.

STATUS CODE       STATUS DESCRIPTION
09                Forbearance
17                Pre-foreclosure Sale Closing Plan Accepted
24                Government Seizure
26                Refinance
27                Assumption
28                Modification
29                Charge-Off
30                Third Party Sale
31                Probate
32                Military Indulgence
43                Foreclosure Started
44                Deed-in-Lieu Started
49                Assignment Completed
61                Second Lien Considerations
62                Veteran's Affairs-No Bid
63                Veteran's Affairs-Refund
64                Veteran's Affairs-Buydown
65                Chapter 7 Bankruptcy
66                Chapter 11 Bankruptcy
67                Chapter 13 Bankruptcy

                                       E-5

<PAGE>

                                    EXHIBIT F

                                    FORM 332

WELLS FARGO BANK,  N.A.
Form 332

CALCULATION OF REALIZED LOSS

PURPOSE

To provide the Servicer with a form for the calculation of any Realized Loss (or
gain) as a result of a Mortgage Loan having been foreclosed and Liquidated.

DISTRIBUTION

The Servicer will prepare the form in duplicate and send the original together
with evidence of conveyance of title and appropriate supporting documentation to
the Master Servicer with the Monthly Accounting Reports which supports the
Mortgage Loan's removal from the Mortgage Loan Activity Report. The Servicer
will retain the duplicate for its own records.

DUE DATE

With respect to any liquidated Mortgage Loan, the form will be submitted to the
Master Servicer no later than the date on which statements are due to the Master
Servicer under Section 4.02 of this Agreement (the "Statement Date") in the
month following receipt of final liquidation proceeds and supporting
documentation relating to such liquidated Mortgage Loan; provided, that if such
Statement Date is not at least 30 days after receipt of final liquidation
proceeds and supporting documentation relating to such liquidated Mortgage Loan,
then the form will be submitted on the first Statement Date occurring after the
30th day following receipt of final liquidation proceeds and supporting
documentation.

PREPARATION INSTRUCTIONS

The numbers on the form correspond with the numbers listed below.
1.           The actual Unpaid Principal Balance of the Mortgage Loan.
2.           The Total Interest Due less the aggregate amount of servicing fee
             that would have been earned if all delinquent payments had been
             made as agreed.
3-7.         Complete as necessary. All line entries must be supported by copies
             of appropriate statements, vouchers, receipts, canceled checks,
             etc., to document the expense. Entries not properly documented will
             not be reimbursed to the Servicer.
8.           Accrued Servicing Fees based upon the Scheduled Principal Balance
             of the Mortgage Loan as calculated on a monthly basis.
10.          The total of lines 1 through 9.

                                       F-1

<PAGE>

CREDITS

11-17.       Complete as necessary. All line entries must be supported by copies
             of the appropriate claims forms, statements, payment checks, etc.
             to document the credit. If the Mortgage Loan is subject to a
             Bankruptcy Deficiency, the difference between the Unpaid Principal
             Balance of the Note prior to the Bankruptcy Deficiency and the
             Unpaid Principal Balance as reduced by the Bankruptcy Deficiency
             should be input on line 16.
18.          The total of lines 11 through 17.

TOTAL REALIZED LOSS (OR AMOUNT OF ANY GAIN)

19. The total derived from subtracting line 18 from 10. If the amount represents
a realized gain, show the amount in parenthesis ( ).

                                       F-2

<PAGE>

                             WELLS FARGO BANK, N.A.
                          CALCULATION OF REALIZED LOSS

WELLS FARGO BANK,  N.A. Trust:  ___________________________
Prepared by:  __________________            Date:  _______________
Phone:  ______________________

Servicer Loan No.            Servicer Name               Servicer Address

WELLS FARGO BANK, N.A.
Loan No._____________________________
Borrower's Name:________________________________________________________
Property
Address:________________________________________________________________

<TABLE>
<CAPTION>

<S>                                                                             <C>
LIQUIDATION AND ACQUISITION EXPENSES:
             Actual Unpaid Principal Balance of Mortgage Loan                   $ _______________(1)
             Interest accrued at Net Rate                                        ________________(2)
             Attorney's Fees                                                     ________________(3)
             Taxes                                                               ________________(4)
             Property Maintenance                                                ________________(5)
             MI/Hazard Insurance Premiums                                        ________________(6)
             Hazard Loss Expenses                                                ________________(7)
             Accrued Servicing Fees                                              ________________(8)
             Other (itemize)                                                     ________________(9)
_________________________________________                                       $___________________
_________________________________________                                        ___________________
_________________________________________                                        ___________________
_________________________________________                                        ___________________

TOTAL EXPENSES                                                                  $ ______________(10)
CREDITS:
Escrow Balance                                                                  $ ______________(11)
HIP Refund                                                                      ________________(12)
Rental Receipts                                                                 ________________(13)
Hazard Loss Proceeds                                                            ________________(14)
Primary Mortgage Insurance Proceeds                                             ________________(15)
Proceeds from Sale of Acquired Property                                         ________________(16)
Other (itemize)                                                                 ________________(17)
_________________________________________                                       ___________________
_________________________________________                                       ___________________

TOTAL CREDITS                                                                   $________________(18)
TOTAL REALIZED LOSS (OR AMOUNT OF GAIN)                                         $________________(19)
</TABLE>

                                       F-3

<PAGE>

                                   SCHEDULE 1

                             MORTGAGE LOAN SCHEDULE

 (In accordance with Rule 202 of Regulation S-T, Schedule 1, the mortgage loan
schedule, is being filed in paper pursuant to a continuing hardship exemption.)

<PAGE>

                                   SCHEDULE 2

                           PREPAYMENT CHARGE SCHEDULE

                            (Provided upon request.)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}]]