Document:

EX-4.1

                                                             [EXECUTION VERSION]

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

                       MORGAN STANLEY ABS CAPITAL I INC.,

                                  as Depositor,

                             OCWEN FEDERAL BANK FSB,

                                  as Servicer,

                           CDC MORTGAGE CAPITAL INC.,

                             as Unaffiliated Seller,

                                       and

                      DEUTSCHE BANK NATIONAL TRUST COMPANY,

                                   as Trustee,

                         POOLING AND SERVICING AGREEMENT

                            Dated as of July 1, 2002

                       CDC MORTGAGE CAPITAL TRUST 2002-HE2

                       MORTGAGE PASS-THROUGH CERTIFICATES,
                                 SERIES 2002-HE2

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

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                                TABLE OF CONTENTS
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                                                                                                               PAGE
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<S>                                                                                                              <C>
ARTICLE I DEFINITIONS............................................................................................13

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES..........................................47

     SECTION 2.01     CONVEYANCE OF MORTGAGE LOANS...............................................................47
     SECTION 2.02     ACCEPTANCE BY THE TRUSTEE OF THE MORTGAGE LOANS............................................51
     SECTION 2.03     REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE UNAFFILIATED SELLER AND THE SERVICER......52
     SECTION 2.04     THE DEPOSITOR AND THE MORTGAGE LOANS.......................................................55
     SECTION 2.05     DELIVERY OF OPINION OF COUNSEL IN CONNECTION WITH SUBSTITUTIONS AND NON-QUALIFIED
                      MORTGAGES..................................................................................55
     SECTION 2.06     EXECUTION AND DELIVERY OF CERTIFICATES.....................................................56
     SECTION 2.07     REMIC MATTERS..............................................................................56
     SECTION 2.08     REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR............................................56

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.......................................................58

     SECTION 3.01     SERVICER TO SERVICE MORTGAGE LOANS.........................................................58
     SECTION 3.02     SUBSERVICING AGREEMENTS BETWEEN THE SERVICER AND SUBSERVICERS..............................59
     SECTION 3.03     SUCCESSOR SUBSERVICERS.....................................................................60
     SECTION 3.04     LIABILITY OF THE SERVICER..................................................................61
     SECTION 3.05     NO CONTRACTUAL RELATIONSHIP BETWEEN SUBSERVICERS AND THE TRUSTEE...........................61
     SECTION 3.06     ASSUMPTION OR TERMINATION OF SUBSERVICING AGREEMENTS BY TRUSTEE............................61
     SECTION 3.07     COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; ESTABLISHMENT OF CERTAIN ACCOUNTS............62
     SECTION 3.08     SUBSERVICING ACCOUNTS......................................................................64
     SECTION 3.09     COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS; ESCROW ACCOUNTS........................65
     SECTION 3.10     COLLECTION ACCOUNT.........................................................................65
     SECTION 3.11     WITHDRAWALS FROM THE COLLECTION ACCOUNT....................................................67
     SECTION 3.12     INVESTMENT OF FUNDS IN THE ACCOUNT.........................................................68
     SECTION 3.13     MAINTENANCE OF HAZARD INSURANCE AND ERRORS AND OMISSIONS AND FIDELITY COVERAGE.............69
     SECTION 3.14     ENFORCEMENT OF DUE-ON-SALE CLAUSES ASSUMPTION AGREEMENTS...................................71
     SECTION 3.15     REALIZATION UPON DEFAULTED MORTGAGE LOANS..................................................72
     SECTION 3.16     RELEASE OF MORTGAGE FILES..................................................................73
     SECTION 3.17     TITLE, CONSERVATION AND DISPOSITION OF REO PROPERTY........................................74
     SECTION 3.18     NOTIFICATION OF ADJUSTMENTS................................................................76
     SECTION 3.19     ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE MORTGAGE LOANS...............76
     SECTION 3.20     DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF THE SERVICER TO BE HELD FOR THE
                      TRUSTEE....................................................................................76
     SECTION 3.21     SERVICING COMPENSATION.....................................................................77
</TABLE>

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<TABLE>
<S>                                                                                                              <C>
     SECTION 3.22     ANNUAL STATEMENT AS TO COMPLIANCE..........................................................77
     SECTION 3.23     ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING STATEMENT; FINANCIAL STATEMENTS...........77
     SECTION 3.24     TRUSTEE TO ACT AS SERVICER.................................................................78
     SECTION 3.25     COMPENSATING INTEREST......................................................................79
     SECTION 3.26     CREDIT REPORTING; GRAMM-LEACH-BLILEY ACT...................................................79
     SECTION 3.27     ADVANCE FACILITIES.........................................................................79

ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE SERVICER............................................................81

     SECTION 4.01     ADVANCES...................................................................................81
     SECTION 4.02     PRIORITIES OF DISTRIBUTION.................................................................82
     SECTION 4.03     MONTHLY STATEMENTS TO CERTIFICATEHOLDERS...................................................86
     SECTION 4.04     CERTAIN MATTERS RELATING TO THE DETERMINATION OF LIBOR.....................................89
     SECTION 4.05     THE CLASS A INSURANCE POLICY...............................................................89
     SECTION 4.06     EFFECT OF PAYMENTS BY THE CLASS A CERTIFICATE INSURER; SUBROGATION.........................91

ARTICLE V THE CERTIFICATES.......................................................................................92

     SECTION 5.01     THE CERTIFICATES...........................................................................92
     SECTION 5.02     CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES................93
     SECTION 5.03     MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES..........................................97
     SECTION 5.04     PERSONS DEEMED OWNERS......................................................................98
     SECTION 5.05     ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES..................................98
     SECTION 5.06     MAINTENANCE OF OFFICE OR AGENCY............................................................98
     SECTION 5.07     RIGHTS OF THE CLASS A CERTIFICATE INSURER TO EXERCISE RIGHTS OF CLASS A
                      CERTIFICATEHOLDERS.........................................................................98
     SECTION 5.08     TRUSTEE TO ACT SOLELY WITH CONSENT OF THE CLASS A CERTIFICATE INSURER......................99
     SECTION 5.09     MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD FOR BENEFIT OF THE CLASS A
                      CERTIFICATE INSURER........................................................................99
     SECTION 5.10     CLASS A CERTIFICATE INSURER DEFAULT.......................................................100

ARTICLE VI THE DEPOSITOR AND THE SERVICER.......................................................................100

     SECTION 6.01     RESPECTIVE LIABILITIES OF THE DEPOSITOR AND THE SERVICER..................................100
     SECTION 6.02     MERGER OR CONSOLIDATION OF THE DEPOSITOR OR THE SERVICER..................................100
     SECTION 6.03     LIMITATION ON LIABILITY OF THE DEPOSITOR, THE SERVICER AND OTHERS.........................101
     SECTION 6.04     LIMITATION ON RESIGNATION OF THE SERVICER.................................................102
     SECTION 6.05     ADDITIONAL INDEMNIFICATION BY THE SERVICER; THIRD PARTY CLAIMS............................102

ARTICLE VII DEFAULT.............................................................................................102

     SECTION 7.01     EVENTS OF DEFAULT.........................................................................102
     SECTION 7.02     TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR..................................................104
     SECTION 7.03     NOTIFICATION TO CERTIFICATEHOLDERS........................................................105

ARTICLE VIII CONCERNING THE TRUSTEE.............................................................................106

     SECTION 8.01     DUTIES OF THE TRUSTEE.....................................................................106
</TABLE>

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<TABLE>
<S>                                                                                                              <C>
     SECTION 8.02     CERTAIN MATTERS AFFECTING THE TRUSTEE.....................................................107
     SECTION 8.03     TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.....................................108
     SECTION 8.04     TRUSTEE MAY OWN CERTIFICATES..............................................................108
     SECTION 8.05     TRUSTEE'S FEES AND EXPENSES...............................................................108
     SECTION 8.06     ELIGIBILITY REQUIREMENTS FOR THE TRUSTEE..................................................109
     SECTION 8.07     RESIGNATION AND REMOVAL OF THE TRUSTEE....................................................109
     SECTION 8.08     SUCCESSOR TRUSTEE.........................................................................110
     SECTION 8.09     MERGER OR CONSOLIDATION OF THE TRUSTEE....................................................110
     SECTION 8.10     APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.............................................110
     SECTION 8.11     TAX MATTERS...............................................................................112
     SECTION 8.12     PERIODIC FILINGS..........................................................................114
     SECTION 8.13     TAX CLASSIFICATION OF CERTAIN ACCOUNTS....................................................114

ARTICLE IX TERMINATION..........................................................................................115

     SECTION 9.01     TERMINATION UPON LIQUIDATION OR PURCHASE OF THE MORTGAGE LOANS............................115
     SECTION 9.02     FINAL DISTRIBUTION ON THE CERTIFICATES....................................................115
     SECTION 9.03     ADDITIONAL TERMINATION REQUIREMENTS.......................................................116

ARTICLE X MISCELLANEOUS PROVISIONS..............................................................................117

     SECTION 10.01    AMENDMENT.................................................................................117
     SECTION 10.02    RECORDATION OF AGREEMENT; COUNTERPARTS....................................................119
     SECTION 10.03    GOVERNING LAW.............................................................................119
     SECTION 10.04    INTENTION OF PARTIES......................................................................119
     SECTION 10.05    NOTICES...................................................................................120
     SECTION 10.06    SEVERABILITY OF PROVISIONS................................................................121
     SECTION 10.07    ASSIGNMENT................................................................................121
     SECTION 10.08    LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS................................................121
     SECTION 10.09    INSPECTION AND AUDIT RIGHTS...............................................................122
     SECTION 10.10    CERTIFICATES NONASSESSABLE AND FULLY PAID.................................................122
     SECTION 10.11    THE CLASS A CERTIFICATE INSURER DEFAULT...................................................122
     SECTION 10.12    THIRD PARTY BENEFICIARY...................................................................123
     SECTION 10.13    WAIVER OF JURY TRIAL......................................................................123
     SECTION 10.14    LIMITATION OF DAMAGES.....................................................................123
<CAPTION>
<S>               <C>
SCHEDULES

Schedule I        Mortgage Loan Schedule

Schedule II       Representations and Warranties of the Servicer
Schedule III      Representations and Warranties as to the Unaffiliated Seller

EXHIBITS

Exhibit A         Form of Class A, Class M-1, Class M-2, Class B-1 and Class B-2 Certificate
Exhibit B         Form of Class A-IO Certificate
Exhibit C         Form of Class P Certificate
Exhibit D         Form of Class R Certificate
</TABLE>

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Exhibit E         Form of Class X Certificate
Exhibit F         Form of Initial Certification of Trustee
Exhibit G         Form of Final Certification of Trustee
Exhibit H         Form of Transfer Affidavit
Exhibit I         Form of Transferor Certificate
Exhibit J         Form of Rule 144A Letter
Exhibit K         Form of Request for Release
Exhibit L         Form of Subsequent Transfer Agreement

                                       iv
<PAGE>

            THIS  POOLING  AND  SERVICING  AGREEMENT,  dated as of July 1, 2002,
among MORGAN  STANLEY ABS CAPITAL I INC., a Delaware  corporation,  as depositor
(the "DEPOSITOR"),  OCWEN FEDERAL BANK FSB, a federally  chartered savings bank,
as servicer (the "SERVICER"), CDC MORTGAGE CAPITAL INC., a New York corporation,
as unaffiliated  seller (the  "UNAFFILIATED  SELLER") and DEUTSCHE BANK NATIONAL
TRUST COMPANY  (f/k/a  Bankers Trust Company of  California,  N.A.),  a national
banking association, as trustee (the "TRUSTEE"),

                              W I T N E S S E T H:
                               - - - - - - - - - -

            In  consideration of the mutual  agreements  herein  contained,  the
parties hereto agree as follows:

                              PRELIMINARY STATEMENT

            The Trustee shall elect that three segregated asset pools within the
Trust Fund be treated for federal income tax purposes as comprising three REMICs
(each a "REMIC" or, in the  alternative,  the Lower Tier REMIC,  the Middle Tier
REMIC and the Upper Tier REMIC, respectively).  Each Certificate, other than the
Class P and Class R Certificates,  represents ownership of a regular interest in
the  Upper  Tier  REMIC  for  purposes  of the  REMIC  Provisions.  The  Class R
Certificate  represents ownership of the sole class of residual interest in each
of the Lower  Tier  REMIC,  the  Middle  Tier REMIC and the Upper Tier REMIC for
purposes of the REMIC Provisions. Class UT-R, Class MT-R and Class LT-R comprise
the Class R Certificate.  The Startup Day for each REMIC described herein is the
Closing Date. The latest possible maturity date for each regular interest is the
date referenced for such regular interests in this preliminary statement.

            The Upper Tier REMIC  shall  hold as assets the  several  classes of
uncertificated  Middle Tier Regular  Interests,  set out below. Each such Middle
Tier Regular  Interest is hereby  designated as a regular interest in the Middle
Tier REMIC.  The Middle  Tier REMIC shall hold as assets the several  classes of
uncertificated Lower Tier Regular Interests, set out below. Each such Lower Tier
Regular  Interest is hereby  designated as a regular  interest in the Lower Tier
REMIC. Class MT-A, Class MT-M-1, Class MT-M-2, Class MT-B-1 and Class MT-B-2 are
hereby  designated the MT Accretion  Directed  Classes.  The Class P Certificate
represents beneficial ownership of the Prepayment Charges,  which portion of the
Trust Fund shall be treated as a grantor trust.

            The Lower Tier REMIC shall hold as assets all of the assets included
in the Trust Fund other than  Prepayment  Charges  and the Excess  Reserve  Fund
Account.

LOWER TIER CLASS    LOWER TIER     INITIAL LOWER TIER   LATEST POSSIBLE MATURITY
  DESIGNATION      INTEREST RATE    PRINCIPAL AMOUNT                 DATE
----------------   -------------   ------------------   ------------------------
Class LT-1              (1)            $1,472,200             January 25, 2033
Class LT-2              (1)            $1,515,400             January 25, 2033

<PAGE>

Class LT-3              (1)            $1,558,900             January 25, 2033
Class LT-4              (1)            $1,602,500             January 25, 2033
Class LT-5              (1)            $1,591,400             January 25, 2033
Class LT-6              (1)            $1,580,400             January 25, 2033
Class LT-7              (1)            $1,569,500             January 25, 2033
Class LT-8              (1)            $1,558,800             January 25, 2033
Class LT-9              (1)            $1,548,300             January 25, 2033
Class LT-10             (1)            $1,537,800             January 25, 2033
Class LT-11             (1)            $1,526,100             January 25, 2033
Class LT-12             (1)            $1,512,700             January 25, 2033
Class LT-13             (1)            $1,483,100             January 25, 2033
Class LT-14             (1)            $1,449,700             January 25, 2033
Class LT-15             (1)            $1,416,100             January 25, 2033
Class LT-16             (1)            $1,382,700             January 25, 2033
Class LT-17             (1)            $1,350,000             January 25, 2033
Class LT-18             (1)            $1,318,200             January 25, 2033
Class LT-19             (1)            $1,287,000             January 25, 2033
Class LT-20             (1)           $14,130,400             January 25, 2033
Class LT-21             (1)              $920,200             January 25, 2033
Class LT-22             (1)              $898,400             January 25, 2033
Class LT-23             (1)              $877,200             January 25, 2033
Class LT-24             (1)              $856,400             January 25, 2033
Class LT-25             (1)              $836,200             January 25, 2033
Class LT-26             (1)              $816,500             January 25, 2033
Class LT-27             (1)              $797,100             January 25, 2033
Class LT-28             (1)              $778,300             January 25, 2033
Class LT-29             (1)              $759,800             January 25, 2033
Class LT-30             (1)              $741,900             January 25, 2033
Class LT-31             (1)              $724,300             January 25, 2033
Class LT-32             (1)              $707,200             January 25, 2033

                                       2
<PAGE>

Class LT-33             (1)              $690,500             January 25, 2033
Class LT-34             (1)              $674,100             January 25, 2033
Class LT-35             (1)              $658,100             January 25, 2033
Class LT-36             (1)           $26,885,300             January 25, 2033
Class LT-37             (1)          $324,050,491             January 25, 2033
Class LT-R              (2)                (2)

(1)  The interest rate with respect to any Distribution Date for these interests
     is a per annum variable rate equal to the WAC Cap.

(2)  The Class LT-R Interest is the sole class of residual interest in the Lower
     Tier REMIC and it does not have a principal amount or an interest rate.

                  On each  Distribution  Date, all Unpaid Realized Loss Amounts,
prepayments,  and payments of scheduled  principal generated with respect to the
Mortgage Loans shall be allocated in the following order: (i) to the Class LT-37
Interest, until such Class is paid in full or eliminated by such losses and (ii)
to the Class LT-1,  Class LT-2,  Class LT-3, Class LT-4, Class LT-5, Class LT-6,
Class LT-7, Class LT-8, Class LT-9, Class LT-10, Class LT-11, Class LT-12, Class
LT-13,  Class LT-14,  Class LT-15,  Class LT-16, Class LT-17, Class LT-18, Class
LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class LT-23, Class LT-24, Class
LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class LT-29, Class LT-30, Class
LT-31,  Class LT-32,  Class LT-33,  Class LT-34, Class LT-35, and Class LT-36 in
that order until each  respective  Class is paid in full or  eliminated  by such
losses.

                  The Middle  Tier  REMIC  shall hold as assets all of the Lower
Tier Regular Interests.

<TABLE>
<CAPTION>
                                                                                         CORRESPONDING        LATEST
    MIDDLE TIER CLASS        MIDDLE TIER                                                   UPPER TIER        POSSIBLE
       DESIGNATION          INTEREST RATE    INITIAL LOWER TIER PRINCIPAL AMOUNT          REMIC CLASS      MATURITY DATE
------------------------   ---------------   -------------------------------------       --------------    --------------
<S>                              <C>         <C>                                              <C>           <C>
Class MT-A                       (1)         1/2 initial Corresponding Upper Tier             A             January 25,
                                                REMIC Class initial principal balance                           2033

Class MT-M-1                     (1)         1/2 initial Corresponding Upper Tier             M-1           January 25,
                                                REMIC Class initial principal balance                           2033

Class MT-M-2                     (1)         1/2 initial Corresponding Upper Tier             M-2           January 25,
                                                REMIC Class initial principal balance                           2033
</TABLE>

                                       3
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<TABLE>
<CAPTION>
                                                                                         CORRESPONDING        LATEST
    MIDDLE TIER CLASS        MIDDLE TIER                                                   UPPER TIER        POSSIBLE
       DESIGNATION          INTEREST RATE    INITIAL LOWER TIER PRINCIPAL AMOUNT          REMIC CLASS      MATURITY DATE
------------------------   ---------------   -------------------------------------       --------------    --------------
<S>                              <C>         <C>                                              <C>           <C>
Class MT-B-1                     (1)         1/2 initial Corresponding Upper Tier             B-1           January 25,
                                                REMIC Class initial principal balance                           2033

Class MT-B-2                     (1)         1/2 initial Corresponding Upper Tier             B-2           January 25,
                                                REMIC Class initial principal balance                           2033

Class MT-Accrual                 (1)         1/2 Pool Balance plus1/2Subordinated             N/A           January 25,
                                                Amount                                                          2033

Class MT-A-IO                    (2)                             (3)                          A-IO          August 25,
                                                                                                                2005

Class MT-R                       (4)                             (4)
</TABLE>

(1)   On any Distribution  Date, a per annum interest rate equal to the weighted
      average of the per annum  interest  rates on the Lower Tier REMIC  Regular
      Interests where (i) on the first  Distribution Date, the interest rates on
      Class LT-1,  Class LT-2,  Class LT-3,  Class LT-4, Class LT-5, Class LT-6,
      Class LT-7, Class LT-8, Class LT-9, Class LT-10, Class LT-11, Class LT-12,
      Class LT-13,  Class LT-14,  Class LT-15,  Class LT-16,  Class LT-17, Class
      LT-18,  Class LT-19,  Class LT-20,  Class LT-21, Class LT-22, Class LT-23,
      Class LT-24,  Class LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class
      LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class LT-33, Class LT-34,
      Class  LT-35,  and Class  LT-36 are first  reduced  by 5.25%;  (ii) on the
      second  Distribution  Date, the interest rates on Class LT-2,  Class LT-3,
      Class LT-4,  Class LT-5,  Class LT-6,  Class LT-7, Class LT-8, Class LT-9,
      Class LT-10,  Class LT-11,  Class LT-12,  Class LT-13,  Class LT-14, Class
      LT-15,  Class LT-16,  Class LT-17,  Class LT-18, Class LT-19, Class LT-20,
      Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24,  Class LT-25, Class
      LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class LT-30, Class LT-31,
      Class LT-32,  Class LT-33,  Class LT-34,  Class LT-35, and Class LT-36 are
      first reduced by 5.25%; (iii) on the third Distribution Date, the interest
      rates on Class LT-3, Class LT-4, Class LT-5, Class LT-6, Class LT-7, Class
      LT-8,  Class LT-9,  Class LT-10,  Class LT-11,  Class LT-12,  Class LT-13,
      Class LT-14,  Class LT-15,  Class LT-16,  Class LT-17,  Class LT-18, Class
      LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class LT-23, Class LT-24,
      Class LT-25,  Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and  Class  LT-36  are  first  reduced  by  5.25%;   (iv)  on  the  fourth
      Distribution  Date,  the interest rates on Class LT-4,  Class LT-5,  Class
      LT-6, Class LT-7, Class LT-8, Class LT-9, Class LT-10,  Class LT-11, Class
      LT-12,  Class LT-13,  Class LT-14,  Class LT-15, Class LT-16, Class LT-17,
      Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34, Class LT-35, and Class LT-36 are first reduced by 5.25%; (v) on the
      fifth  Distribution  Date, the interest  rates on Class LT-5,  Class LT-6,
      Class LT-7, Class LT-8, Class LT-9, Class LT-10, Class LT-11, Class LT-12,
      Class LT-13, Class LT-14,

                                       4
<PAGE>

      Class LT-15,  Class LT-16,  Class LT-17,  Class LT-18,  Class LT-19, Class
      LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class LT-24, Class LT-25,
      Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class
      LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class LT-36
      are first  reduced  by 5.25%;  (vi) on the sixth  Distribution  Date,  the
      interest rates on Class LT-6,  Class LT-7,  Class LT-8,  Class LT-9, Class
      LT-10,  Class LT-11,  Class LT-12,  Class LT-13, Class LT-14, Class LT-15,
      Class LT-16,  Class LT-17,  Class LT-18,  Class LT-19,  Class LT-20, Class
      LT-21,  Class LT-22,  Class LT-23,  Class LT-24, Class LT-25, Class LT-26,
      Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30,  Class LT-31, Class
      LT-32,  Class LT-33,  Class LT-34,  Class LT-35, and Class LT-36 are first
      reduced by 5.25%;  (vii) on the seventh  Distribution  Date,  the interest
      rates on Class LT-7,  Class LT-8,  Class LT-9,  Class LT-10,  Class LT-11,
      Class LT-12,  Class LT-13,  Class LT-14,  Class LT-15,  Class LT-16, Class
      LT-17,  Class LT-18,  Class LT-19,  Class LT-20, Class LT-21, Class LT-22,
      Class LT-23,  Class LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class
      LT-28,  Class LT-29,  Class LT-30,  Class LT-31, Class LT-32, Class LT-33,
      Class  LT-34,  Class  LT-35,  and Class LT-36 are first  reduced by 5.25%;
      (viii) on the eighth  Distribution Date, the interest rates on Class LT-8,
      Class LT-9,  Class LT-10,  Class LT-11,  Class LT-12,  Class LT-13,  Class
      LT-14,  Class LT-15,  Class LT-16,  Class LT-17, Class LT-18, Class LT-19,
      Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24, Class
      LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class LT-29, Class LT-30,
      Class LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class
      LT-36 are first reduced by 5.25%; (ix) on the ninth Distribution Date, the
      interest rates on Class LT-9, Class LT-10, Class LT-11, Class LT-12, Class
      LT-13,  Class LT-14,  Class LT-15,  Class LT-16, Class LT-17, Class LT-18,
      Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class
      LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class LT-28, Class LT-29,
      Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33,  Class LT-34, Class
      LT-35,  and  Class  LT-36  are first  reduced  by 5.25%;  (x) on the tenth
      Distribution  Date, the interest rates on Class LT-10,  Class LT-11, Class
      LT-12,  Class LT-13,  Class LT-14,  Class LT-15, Class LT-16, Class LT-17,
      Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34,  Class LT-35,  and Class LT-36 are first reduced by 5.25%;  (xi) on
      the eleventh  Distribution  Date, the interest rates on Class LT-11, Class
      LT-12,  Class LT-13,  Class LT-14,  Class LT-15, Class LT-16, Class LT-17,
      Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34,  Class LT-35, and Class LT-36 are first reduced by 5.25%;  (xii) on
      the twelfth  Distribution  Date, the interest rates on Class LT-12,  Class
      LT-13,  Class LT-14,  Class LT-15,  Class LT-16, Class LT-17, Class LT-18,
      Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class
      LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class LT-28, Class LT-29,
      Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33,  Class LT-34, Class
      LT-35,  and  Class  LT-36  are  first  reduced  by  5.25%;  (xiii)  on the
      thirteenth  Distribution  Date, the interest  rates on Class LT-13,  Class
      LT-14,  Class LT-15,  Class LT-16,  Class LT-17, Class LT-18, Class LT-19,
      Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24, Class
      LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class LT-29, Class LT-30,
      Class LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class
      LT-36 are first reduced by 5.25%; (xiv) on the fourteenth

                                       5
<PAGE>

      Distribution  Date, the interest rates on Class LT-14,  Class LT-15, Class
      LT-16,  Class LT-17,  Class LT-18,  Class LT-19, Class LT-20, Class LT-21,
      Class LT-22,  Class LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class
      LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class LT-31, Class LT-32,
      Class LT-33,  Class LT-34,  Class LT-35, and Class LT-36 are first reduced
      by 5.25%; (xv) on the fifteenth  Distribution  Date, the interest rates on
      Class LT-15,  Class LT-16,  Class LT-17,  Class LT-18,  Class LT-19, Class
      LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class LT-24, Class LT-25,
      Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class
      LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class LT-36
      are first reduced by 5.25%; (xvi) on the sixteenth  Distribution Date, the
      interest  rates on Class  LT-16,  Class LT-17,  Class LT-18,  Class LT-19,
      Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24, Class
      LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class LT-29, Class LT-30,
      Class LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class
      LT-36 are first reduced by 5.25%;  (xvii) on the seventeenth  Distribution
      Date, the interest rates on Class LT-17,  Class LT-18,  Class LT-19, Class
      LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class LT-24, Class LT-25,
      Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class
      LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class LT-36
      are first reduced by 5.25%;  (xviii) on the eighteenth  Distribution Date,
      the interest rates on Class LT-18,  Class LT-19, Class LT-20, Class LT-21,
      Class LT-22,  Class LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class
      LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class LT-31, Class LT-32,
      Class LT-33,  Class LT-34,  Class LT-35, and Class LT-36 are first reduced
      by 5.25%; (xix) on the nineteenth Distribution Date, the interest rates on
      Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class
      LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class LT-28, Class LT-29,
      Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33,  Class LT-34, Class
      LT-35,  and Class LT-36 are first reduced by 5.25%;  (xx) on the twentieth
      Distribution  Date, the interest rates on Class LT-20,  Class LT-21, Class
      LT-22,  Class LT-23,  Class LT-24,  Class LT-25, Class LT-26, Class LT-27,
      Class LT-28,  Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class
      LT-33,  Class  LT-34,  Class LT-35,  and Class LT-36 are first  reduced by
      5.25%; (xxi) on the twenty-first  Distribution Date, the interest rates on
      Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24,  Class LT-25, Class
      LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class LT-30, Class LT-31,
      Class LT-32,  Class LT-33,  Class LT-34,  Class LT-35, and Class LT-36 are
      first reduced by 5.25%; (xxii) on the twenty-second Distribution Date, the
      interest  rates on Class  LT-22,  Class LT-23,  Class LT-24,  Class LT-25,
      Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class
      LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class LT-36
      are first reduced by 5.25%; (xxiii) on the twenty-third Distribution Date,
      the interest rates on Class LT-23,  Class LT-24, Class LT-25, Class LT-26,
      Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30,  Class LT-31, Class
      LT-32,  Class LT-33,  Class LT-34,  Class LT-35, and Class LT-36 are first
      reduced  by 5.25%;  (xxiv) on the  twenty-fourth  Distribution  Date,  the
      interest  rates on Class  LT-24,  Class LT-25,  Class LT-26,  Class LT-27,
      Class LT-28,  Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class
      LT-33,  Class  LT-34,  Class LT-35,  and Class LT-36 are first  reduced by
      5.25%; (xxv) on the twenty-fifth  Distribution Date, the interest rates on
      Class LT-25,  Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and Class  LT-36 are first  reduced by 5.25%;  (xxvi) on the  twenty-sixth
      Distribution Date, the interest rates on

                                       6
<PAGE>

      Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class
      LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class LT-36
      are first  reduced by 5.25%;  (xxvii) on the  twenty-seventh  Distribution
      Date, the interest rates on Class LT-27,  Class LT-28,  Class LT-29, Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and Class LT-36 are first reduced by 5.25%;  (xxviii) on the twenty-eighth
      Distribution  Date, the interest rates on Class LT-28,  Class LT-29, Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and Class  LT-36 are first  reduced by 5.25%;  (xxix) on the  twenty-ninth
      Distribution  Date, the interest rates on Class LT-29,  Class LT-30, Class
      LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class LT-36
      are first reduced by 5.25%; (xxx) on the thirtieth  Distribution Date, the
      interest  rates on Class  LT-30,  Class LT-31,  Class LT-32,  Class LT-33,
      Class  LT-34,  Class  LT-35,  and Class LT-36 are first  reduced by 5.25%;
      (xxxi) on the thirty-first  Distribution Date, the interest rates on Class
      LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class LT-36
      are first  reduced  by 5.25%;  (xxxii) on the  thirty-second  Distribution
      Date, the interest rates on Class LT-32,  Class LT-33,  Class LT-34, Class
      LT-35,  and Class  LT-36  are first  reduced  by  5.25%;  (xxxiii)  on the
      thirty-third  Distribution  Date, the interest rates on Class LT-33, Class
      LT-34, Class LT-35, and Class LT-36 are first reduced by 5.25%; (xxxiv) on
      the  thirty-fourth  Distribution  Date, the interest rates on Class LT-34,
      Class  LT-35,  and Class LT-36 are first  reduced by 5.25%;  (xxxv) on the
      thirty-fifth  Distribution  Date, the interest  rates on Class LT-35,  and
      Class  LT-36 are first  reduced by 5.25% and  (xxxvi) on the  thirty-sixth
      Distribution  Date,  the interest  rate on Class LT-36 is first reduced by
      5.25%.

(2)   The Class MT-A-IO Interest will bear interest at a per annum rate equal to
      5.25% for the first 36 Distribution Dates and 0.00% thereafter.

(3)   The Class MT-A-IO will have a notional  principal  balance equal to (i) on
      the first  Distribution  Date, the sum of the principal  balances of Class
      LT-1,  Class LT-2,  Class LT-3,  Class LT-4, Class LT-5, Class LT-6, Class
      LT-7, Class LT-8, Class LT-9, Class LT-10, Class LT-11, Class LT-12, Class
      LT-13,  Class LT-14,  Class LT-15,  Class LT-16, Class LT-17, Class LT-18,
      Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class
      LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class LT-28, Class LT-29,
      Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33,  Class LT-34, Class
      LT-35, and Class LT-36; (ii) on the second  Distribution  Date, the sum of
      the principal  balances of Class LT-2, Class LT-3, Class LT-4, Class LT-5,
      Class LT-6, Class LT-7, Class LT-8, Class LT-9, Class LT-10,  Class LT-11,
      Class LT-12,  Class LT-13,  Class LT-14,  Class LT-15,  Class LT-16, Class
      LT-17,  Class LT-18,  Class LT-19,  Class LT-20, Class LT-21, Class LT-22,
      Class LT-23,  Class LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class
      LT-28,  Class LT-29,  Class LT-30,  Class LT-31, Class LT-32, Class LT-33,
      Class LT-34, Class LT-35, and Class LT-36; (iii) on the third Distribution
      Date, the sum of the principal  balances of Class LT-3,  Class LT-4, Class
      LT-5, Class LT-6,  Class LT-7, Class LT-8, Class LT-9, Class LT-10,  Class
      LT-11,  Class LT-12,  Class LT-13,  Class LT-14, Class LT-15, Class LT-16,
      Class LT-17,  Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21, Class
      LT-22,  Class LT-23,  Class LT-24,  Class LT-25, Class LT-26, Class LT-27,
      Class LT-28,  Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class
      LT-33,  Class  LT-34,  Class LT-35,  and Class  LT-36;  (iv) on the fourth
      Distribution  Date, the sum of the principal balances of Class LT-4, Class
      LT-5, Class LT-6, Class LT-7, Class LT-8, Class

                                       7
<PAGE>

      LT-9, Class LT-10,  Class LT-11,  Class LT-12,  Class LT-13,  Class LT-14,
      Class LT-15,  Class LT-16,  Class LT-17,  Class LT-18,  Class LT-19, Class
      LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class LT-24, Class LT-25,
      Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class
      LT-31,  Class LT-32,  Class LT-33,  Class  LT-34,  Class LT-35,  and Class
      LT-36;  (v) on the  fifth  Distribution  Date,  the  sum of the  principal
      balances of Class LT-5,  Class LT-6,  Class LT-7,  Class LT-8, Class LT-9,
      Class LT-10,  Class LT-11,  Class LT-12,  Class LT-13,  Class LT-14, Class
      LT-15,  Class LT-16,  Class LT-17,  Class LT-18, Class LT-19, Class LT-20,
      Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24,  Class LT-25, Class
      LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class LT-30, Class LT-31,
      Class LT-32,  Class LT-33, Class LT-34, Class LT-35, and Class LT-36; (vi)
      on the sixth Distribution Date, the sum of the principal balances of Class
      LT-6, Class LT-7, Class LT-8, Class LT-9, Class LT-10,  Class LT-11, Class
      LT-12,  Class LT-13,  Class LT-14,  Class LT-15, Class LT-16, Class LT-17,
      Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34,  Class LT-35,  and Class LT-36;  (vii) on the seventh  Distribution
      Date, the sum of the principal  balances of Class LT-7,  Class LT-8, Class
      LT-9, Class LT-10,  Class LT-11,  Class LT-12,  Class LT-13,  Class LT-14,
      Class LT-15,  Class LT-16,  Class LT-17,  Class LT-18,  Class LT-19, Class
      LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class LT-24, Class LT-25,
      Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class
      LT-31,  Class LT-32,  Class LT-33,  Class  LT-34,  Class LT-35,  and Class
      LT-36;  (viii) on the eighth  Distribution  Date, the sum of the principal
      balances of Class LT-8, Class LT-9, Class LT-10, Class LT-11, Class LT-12,
      Class LT-13,  Class LT-14,  Class LT-15,  Class LT-16,  Class LT-17, Class
      LT-18,  Class LT-19,  Class LT-20,  Class LT-21, Class LT-22, Class LT-23,
      Class LT-24,  Class LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class
      LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class LT-33, Class LT-34,
      Class LT-35, and Class LT-36; (ix) on the ninth Distribution Date, the sum
      of the principal  balances of Class LT-9, Class LT-10,  Class LT-11, Class
      LT-12,  Class LT-13,  Class LT-14,  Class LT-15, Class LT-16, Class LT-17,
      Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34,  Class LT-35, and Class LT-36; (x) on the tenth  Distribution Date,
      the sum of the  principal  balances of Class  LT-10,  Class  LT-11,  Class
      LT-12,  Class LT-13,  Class LT-14,  Class LT-15, Class LT-16, Class LT-17,
      Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34,  Class LT-35,  and Class LT-36;  (xi) on the eleventh  Distribution
      Date, the sum of the principal balances of Class LT-11, Class LT-12, Class
      LT-13,  Class LT-14,  Class LT-15,  Class LT-16, Class LT-17, Class LT-18,
      Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class
      LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class LT-28, Class LT-29,
      Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33,  Class LT-34, Class
      LT-35, and Class LT-36; (xii) on the twelfth Distribution Date, the sum of
      the principal  balances of Class LT-12,  Class LT-13,  Class LT-14,  Class
      LT-15,  Class LT-16,  Class LT-17,  Class LT-18, Class LT-19, Class LT-20,
      Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24,  Class LT-25, Class
      LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class LT-30, Class LT-31,
      Class LT-32, Class LT-33,

                                       8
<PAGE>

      Class  LT-34,  Class  LT-35,  and Class  LT-36;  (xiii) on the  thirteenth
      Distribution Date, the sum of the principal balances of Class LT-13, Class
      LT-14,  Class LT-15,  Class LT-16,  Class LT-17, Class LT-18, Class LT-19,
      Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23,  Class LT-24, Class
      LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class LT-29, Class LT-30,
      Class LT-31, Class LT-32, Class LT-33, Class LT-34, Class LT-35, and Class
      LT-36; (xiv) on the fourteenth Distribution Date, the sum of the principal
      balances of Class LT-14,  Class LT-15,  Class  LT-16,  Class LT-17,  Class
      LT-18,  Class LT-19,  Class LT-20,  Class LT-21, Class LT-22, Class LT-23,
      Class LT-24,  Class LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class
      LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class LT-33, Class LT-34,
      Class LT-35, and Class LT-36; (xv) on the fifteenth Distribution Date, the
      sum of the principal  balances of Class LT-15,  Class LT-16,  Class LT-17,
      Class LT-18,  Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34, Class LT-35, and Class LT-36;  (xvi) on the sixteenth  Distribution
      Date, the sum of the principal balances of Class LT-16, Class LT-17, Class
      LT-18,  Class LT-19,  Class LT-20,  Class LT-21, Class LT-22, Class LT-23,
      Class LT-24,  Class LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class
      LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class LT-33, Class LT-34,
      Class LT-35, and Class LT-36; (xvii) on the seventeenth Distribution Date,
      the sum of the  principal  balances of Class  LT-17,  Class  LT-18,  Class
      LT-19,  Class LT-20,  Class LT-21,  Class LT-22, Class LT-23, Class LT-24,
      Class LT-25,  Class LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and Class LT-36;  (xviii) on the eighteenth  Distribution Date, the sum of
      the principal  balances of Class LT-18,  Class LT-19,  Class LT-20,  Class
      LT-21,  Class LT-22,  Class LT-23,  Class LT-24, Class LT-25, Class LT-26,
      Class LT-27,  Class LT-28,  Class LT-29,  Class LT-30,  Class LT-31, Class
      LT-32,  Class LT-33,  Class LT-34,  Class LT-35, and Class LT-36; (xix) on
      the nineteenth  Distribution  Date,  the sum of the principal  balances of
      Class LT-19,  Class LT-20,  Class LT-21,  Class LT-22,  Class LT-23, Class
      LT-24,  Class LT-25,  Class LT-26,  Class LT-27, Class LT-28, Class LT-29,
      Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33,  Class LT-34, Class
      LT-35, and Class LT-36; (xx) on the twentieth  Distribution  Date, the sum
      of the principal  balances of Class LT-20, Class LT-21, Class LT-22, Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34,   Class  LT-35,   and  Class  LT-36;   (xxi)  on  the  twenty-first
      Distribution Date, the sum of the principal balances of Class LT-21, Class
      LT-22,  Class LT-23,  Class LT-24,  Class LT-25, Class LT-26, Class LT-27,
      Class LT-28,  Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32, Class
      LT-33,  Class  LT-34,  Class  LT-35,  and  Class  LT-36;   (xxii)  on  the
      twenty-second  Distribution  Date,  the sum of the  principal  balances of
      Class LT-22,  Class LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class
      LT-27,  Class LT-28,  Class LT-29,  Class LT-30, Class LT-31, Class LT-32,
      Class LT-33,  Class LT-34,  Class LT-35,  and Class LT-36;  (xxiii) on the
      twenty-third Distribution Date, the sum of the principal balances of Class
      LT-23,  Class LT-24,  Class LT-25,  Class LT-26, Class LT-27, Class LT-28,
      Class LT-29,  Class LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class
      LT-34,  Class  LT-35,  and  Class  LT-36;   (xxiv)  on  the  twenty-fourth
      Distribution Date, the sum of the principal balances of Class LT-24, Class
      LT-25,  Class LT-26,  Class LT-27,  Class LT-28, Class LT-29, Class LT-30,
      Class LT-31, Class LT-32, Class LT-33, Class

                                       9
<PAGE>

      LT-34,   Class  LT-35,   and  Class  LT-36;   (xxv)  on  the  twenty-fifth
      Distribution Date, the sum of the principal balances of Class LT-25, Class
      LT-26,  Class LT-27,  Class LT-28,  Class LT-29, Class LT-30, Class LT-31,
      Class LT-32,  Class  LT-33,  Class  LT-34,  Class LT-35,  and Class LT-36;
      (xxvi) on the  twenty-sixth  Distribution  Date,  the sum of the principal
      balances of Class LT-26,  Class LT-27,  Class  LT-28,  Class LT-29,  Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and Class LT-36; (xxvii) on the twenty-seventh  Distribution Date, the sum
      of the principal  balances of Class LT-27, Class LT-28, Class LT-29, Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and Class LT-36; (xxviii) on the twenty-eighth  Distribution Date, the sum
      of the principal  balances of Class LT-28, Class LT-29, Class LT-30, Class
      LT-31,  Class LT-32,  Class LT-33,  Class  LT-34,  Class LT-35,  and Class
      LT-36;  (xix)  on  the  twenty-ninth  Distribution  Date,  the  sum of the
      principal  balances of Class LT-29, Class LT-30, Class LT-31, Class LT-32,
      Class LT-33,  Class  LT-34,  Class  LT-35,  and Class LT-36;  (xxx) on the
      thirtieth  Distribution  Date, the sum of the principal  balances of Class
      LT-30,  Class LT-31,  Class LT-32,  Class LT-33, Class LT-34, Class LT-35,
      and Class LT-36; (xxxi) on the thirty-first  Distribution Date, the sum of
      the principal  balances of Class LT-31,  Class LT-32,  Class LT-33,  Class
      LT-34,  Class  LT-35,  and  Class  LT-36;  (xxxii)  on  the  thirty-second
      Distribution Date, the sum of the principal balances of Class LT-32, Class
      LT-33,  Class  LT-34,  Class  LT-35,  and  Class  LT-36;  (xxxiii)  on the
      thirty-third Distribution Date, the sum of the principal balances of Class
      LT-33,  Class  LT-34,  Class  LT-35,  and  Class  LT-36;  (xxxiv)  on  the
      thirty-fourth  Distribution  Date,  the sum of the  principal  balances of
      Class LT-34,  Class LT-35,  and Class  LT-36;  (xxxv) on the  thirty-fifth
      Distribution  Date,  the sum of the principal  balances of Class LT-35 and
      Class LT-36; (xxxvi) on the thirty-sixth  Distribution Date, the principal
      balance of Class LT-36 and (xxxvii) thereafter, zero.

(4)   The Class MT-R  Interest  is the sole class of  residual  interest  in the
      Middle Tier REMIC and it does not have a  principal  amount or an interest
      rate.

            On each  Distribution  Date, 50% of the increase in the Subordinated
Amount  will be payable  as a  reduction  of the  principal  balances  of the MT
Accretion  Directed  Classes (each such Class will be reduced by an amount equal
to 50% of any  increase in the  Subordinated  Amount that is  attributable  to a
reduction  in the  principal  balance  of its  Corresponding  Class) and will be
accrued  and added to the  principal  balance of the MT Accrual  Class.  On each
Distribution Date, the increase in the principal balance of the MT Accrual Class
may not exceed interest  accruals for such  Distribution Date for the MT Accrual
Class.  In the event that:  (i) 50% of the increase in the  Subordinated  Amount
exceeds (ii)  interest  accruals on the MT Accrual  Class for such  Distribution
Date, the excess for such  Distribution Date (accumulated with all such excesses
for  all  prior  Distribution  Dates)  will  be  added  to any  increase  in the
Subordinated  Amount for purposes of determining the amount of interest  accrual
on the MT  Accrual  Class  payable as  principal  on the MT  Accretion  Directed
Classes on the next  Distribution  Date  pursuant to the first  sentence of this
paragraph.  All payments of scheduled  principal  and  prepayments  of principal
generated by the Mortgage  Loans shall be allocated 50% to the MT Accrual Class,
and 50% to the MT  Accretion  Directed  Classes  (principal  payments  shall  be
allocated among such MT Accretion  Directed Classes in an amount equal to 50% of
the principal  amounts  allocated to their  respective  Corresponding  Classes),
until paid in full.  Notwithstanding the above,  principal payments allocated to
the Class X Certificates that result in the reduction in

                                       10
<PAGE>

the  Subordinated  Amount shall be allocated to the MT Accrual Class (until paid
in full).  Realized losses shall be applied so that after all distributions have
been made on each Distribution Date (i) the principal balances of each of the MT
Accretion  Directed  Class  is equal to 50% of the  principal  balance  of their
Corresponding  Class,  and  (ii)  the MT  Accrual  Class  is equal to 50% of the
aggregate  principal  balance of the Mortgage Pool plus 50% of the  Subordinated
Amount.

            The Upper Tier REMIC shall issue the following  classes of interests
and each Upper Tier  Interest,  other  than the Class UT-R  Interest,  is hereby
designated as a regular interest in the Upper Tier REMIC.

                                 INITIAL
                   UPPER TIER   UPPER TIER
UPPER TIER CLASS    INTEREST    PRINCIPAL     CORRESPONDING     LATEST POSSIBLE
  DESIGNATION         RATE        AMOUNT       CERTIFICATE       MATURITY DATE
----------------   ----------   ----------    -------------    ----------------
   Class A             (1)     $328,101,000    Class A(7)      January 25, 2033
   Class A-IO          (2)          (6)        Class A-IO      August 25, 2005
   Class M-1           (3)     $ 27,342,000    Class M-1(7)    January 25, 2033
   Class M-2           (3)     $ 21,266,000    Class M-2(7)    January 25, 2033
   Class B-1           (3)     $ 16,810,000    Class B-1(7)    January 25, 2033
   Class B-2           (3)     $  6,481,000    Class B-2(7)    January 25, 2033
   Class X             (4)          (4)        Class X         January 25, 2033
   Class UT-R          (5)                     Class R

(1)   The Class A Interest ill bear interest during each Interest Accrual Period
      thereafter  at a per annum rate  equal to (a) on or prior to the  Optional
      Termination Date, the lesser of (i) LIBOR plus 0.290% and (ii) the WAC Cap
      or (b) after the Optional  Termination  Date, the lesser of (i) LIBOR plus
      0.580% and (ii) the WAC Cap.

(2)   The Class A-IO  Interest  will bear  interest at a per annum rate equal to
      5.25% for the first 36 Distribution Dates and 0.00% thereafter.

(3)   The Class M-1,  Class  M-2,  Class B-1 and Class B-2  Interests  will bear
      interest  during each Interest  Accrual  Period  thereafter at a per annum
      rate equal to (a) on or prior to the Optional Termination Date, the lesser
      of (i) LIBOR plus 0.700%,  1.500%,  2.000% and 2.650%,  respectively,  and
      (ii) the WAC Cap or (b) after the Optional Termination Date, the lesser of
      (i) LIBOR plus 1.050%, 2.250%, 3.000% and 3.975%,  respectively,  and (ii)
      the WAC Cap.

(4)   The Class X Interest has an initial principal  balance of $5,063,191,  but
      it will not accrue  interest on such balance but will accrue interest on a
      notional  principal  balance.  As of any  Distribution  Date,  the Class X
      Interest shall have a notional principal balance equal to the aggregate of
      the  principal  balances of the Middle Tier  Regular  Interests  as of the
      first day of the related  Interest  Accrual  Period.  With  respect to any
      Interest  Accrual  Period,  the Class X Interest  shall bear interest at a
      rate equal to the excess, if any, of the

                                       11
<PAGE>

      WAC  Cap  over  the  product  of  (i)  2 and  (ii)  the  weighted  average
      Pass-Through Rate of the Middle Tier REMIC Interests, other than the Class
      MT-A-IO,  where the MT Accrual Class is subject to a cap equal to zero and
      each  MT  Accretion  Directed  Class  is  subject  to a cap  equal  to the
      Pass-Through  Rate  on  its  Corresponding  Class.  With  respect  to  any
      Distribution  Date,  interest  that so accrues on the  notional  principal
      balance of the Class X Interest  shall be deferred  in an amount  equal to
      any increase in the Subordinated  Amount on such  Distribution  Date. Such
      deferred interest shall not itself bear interest.

(5)   The Class UT-R  Interest  is the sole class of  residual  interest  in the
      Upper Tier REMIC. The Class UT-R Interest does not have an interest rate.

(6)   The Class A-IO  Interest will have a notional  principal  balance equal to
      the notional principal balance of Class MT-A-IO.

(7)   Each of these  Certificates  will  represent not only the ownership of the
      Corresponding  Class of Upper Tier Regular  Interest but also the right to
      receive  payments  from the Excess  Reserve Fund Account in respect of any
      Basis Risk  CarryForward  Amounts.  For federal  income tax purposes,  the
      Trustee will treat a  Certificateholder's  right to receive  payments from
      the Excess  Reserve Fund Account as payments  made  pursuant to a notional
      principal contract written by the Class X Certificateholder.

            The minimum denomination for each Class of Certificates,  other than
the Class P, Class R and the Class X Certificates,  will be $25,000 and integral
multiples of $1 thereof.  The Class P, Class R and the Class X Certificates will
each represent a 100% Percentage Interest in such class.

            Set forth below are  designations  of Classes of Certificates to the
categories used herein:

Book-Entry Certificates.........  All  Classes  of  Certificates  other than the
                                  Physical Certificates.

Subordinated Certificates.......  Class M-1,  Class M-2, Class B-1 and Class B-2
                                  Certificates.

Delay Certificates..............  None.

ERISA-Restricted Certificates...  Class R Certificates,  Class P Certificate and
                                  Class X Certificate;  any  certificate  with a
                                  rating below the lowest  applicable  permitted
                                  rating under the Underwriters' Exemption.

Floating Rate Certificates......  Class A and Subordinated Certificates.

Interest Only Certificates......  Class A-IO Certificates.

LIBOR Certificates..............  Class A and Subordinated Certificates.

                                       12
<PAGE>

Non-Delay Certificates..........  Class A, Class A-IO,  Class X and Subordinated
                                  Certificates.

Offered Certificates............  All  Classes  of  Certificates  other than the
                                  Private Certificates.

Physical Certificates...........  Class P, Class X and Class R Certificates.

Private Certificates............  Class P, Class X and Class R Certificates.

Rating Agencies.................  Moody's, Fitch, Inc. and Standard & Poor's.

Regular Certificates............  All  Classes  of  Certificates  other than the
                                  Class P and Class R Certificates.

Residual Certificates...........  Class R Certificates.

                                   ARTICLE I

                                   DEFINITIONS

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

            60+ DAY  DELINQUENT  LOAN:  Each Mortgage Loan with respect to which
any  portion  of a  Scheduled  Payment  is,  as of the last day of the prior Due
Period, two months or more past due (without giving effect to any grace period),
each Mortgage Loan in  foreclosure,  all REO Property and each Mortgage Loan for
which the Mortgagor has filed for bankruptcy.

            ACCEPTED  SERVICING  PRACTICES:  With respect to any Mortgage  Loan,
those mortgage servicing practices set forth in Section 3.01 of this Agreement.

            ACCOUNT:  Any of the Capitalized  Interest  Account,  the Collection
Account,  the Distribution  Account, any Escrow Account, the Excess Reserve Fund
Account, the Class A Insurance Payment Account or the Pre-Funding Account.  Each
Account shall be an Eligible Account.

            ACCRUED CERTIFICATE  INTEREST  DISTRIBUTION  AMOUNT: With respect to
any  Distribution  Date for each Class of  Certificates  (other than the Class X
Certificate), the amount of interest accrued during the related Interest Accrual
Period at the  applicable  Pass-Through  Rate on the related  Class  Certificate
Balance (or with respect to the Class A-IO Certificates, the Class A-IO Notional
Balance)  immediately prior to such  Distribution  Date, as reduced (except with
respect to Class A-IO  Certificates)  by such  Class's  share of Net  Prepayment
Interest  Shortfalls  and Relief Act  Interest  Shortfalls  for the  related Due
Period allocated to such Class pursuant to Section 4.02.

                                       13
<PAGE>

            ADDITION NOTICE:  A written notice from the  Unaffiliated  Seller to
the Trustee,  the Rating  Agencies and the Class A Certificate  Insurer that the
Unaffiliated Seller desires to make a Subsequent Transfer.

            ADJUSTABLE  RATE MORTGAGE LOAN: A Mortgage Loan bearing  interest at
an adjustable rate.

            ADJUSTED  MORTGAGE  RATE:  As to each Mortgage Loan and at any time,
the per annum rate equal to the Mortgage Rate less the Servicing Fee Rate.

            ADJUSTED  NET MORTGAGE  RATE:  As to each  Mortgage  Loan and at any
time, the per annum rate equal to the Mortgage Rate less the Expense Fee Rate.

            ADJUSTMENT  DATE:  As to any  Mortgage  Loan,  the first Due Date on
which the related  Mortgage  Rate  adjusts as set forth in the related  Mortgage
Note and each Due Date  thereafter  on which the  Mortgage  Rate  adjusts as set
forth in the related Mortgage Note.

            ADVANCES: Collectively, the P&I Advances and Servicing Advances.

            ADVANCE FACILITY: As defined in Section 3.27.

            ADVANCE FACILITY TRUSTEE: As defined in Section 3.27.

            ADVANCE REIMBURSEMENT AMOUNT: As defined in Section 3.27.

            ADVANCING PERSON: As defined in Section 3.27.

            AFFILIATE: With respect to any Person, any other Person controlling,
controlled by or under common  control with such first Person.  For the purposes
of this  definition,  "control"  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.

            AGREEMENT:  This Pooling and Servicing  Agreement and all amendments
or supplements hereto.

            AMOUNT HELD FOR FUTURE  DISTRIBUTION:  As to the Certificates on any
Distribution  Date, the aggregate  amount held in the Collection  Account at the
close of business on the related  Determination Date on account of (i) Principal
Prepayments  and  Liquidation  Proceeds on the Mortgage Loans received after the
end of the  related  Prepayment  Period and (ii) all  Scheduled  Payments on the
Mortgage Loans due after the end of the related Due Period.

            APPLIED REALIZED LOSS AMOUNT: With respect to any Distribution Date,
the amount,  if any, by which the  aggregate  Class  Certificate  Balance of the
Regular  Certificates after distributions of principal on such Distribution Date
exceeds the aggregate  Stated  Principal  Balance of the Mortgage Loans for such
Distribution Date.

                                       14
<PAGE>

            APPRAISED  VALUE:  The  value  set  forth  in an  appraisal  made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.

            ASSIGNMENT AND RECOGNITION AGREEMENT:  The BNC Assignment Agreement,
the IFC Assignment  Agreement,  the Community  Bank  Assignment  Agreement,  the
People's  Choice  Assignment   Agreement  or  the  Chapel  Mortgage   Assignment
Agreement, as applicable.

            ASSIGNMENT OF MORTGAGE:  An  assignment  of the Mortgage,  notice of
transfer or equivalent  instrument in recordable form (other than the assignee's
name and recording  information  not yet returned  from the  recording  office),
reflecting the sale of the Mortgage to the Trustee.

            BALLOON  LOAN:  Any  Mortgage  Loan  that  provided  on the  date of
origination for an amortization  schedule  extending  beyond its stated maturity
date.

            BASIC   PRINCIPAL   DISTRIBUTION   AMOUNT:   With   respect  to  any
Distribution  Date, the excess of (i) the Principal  Remittance  Amount for such
Distribution  Date over (ii) the Excess  Subordinated  Amount,  if any, for such
Distribution Date.

            BASIS  RISK  CARRYFORWARD  AMOUNT:  With  respect  to each  Class of
Regular  Certificates,  as of any  Distribution  Date, the sum of (A) if on such
Distribution Date the Pass-Through Rate for any Class of Regular Certificates is
based upon the WAC Cap,  the excess of (i) the amount of interest  such Class of
Certificates  would otherwise be entitled to receive on such  Distribution  Date
had  such  rate  been  calculated  as  the  sum  of  LIBOR  and  the  applicable
Pass-Through  Margin on such Class of Certificates for such  Distribution  Date,
over  (ii)  the  amount  of  interest  payable  on such  Class  of  Certificates
calculated  at the WAC Cap for such  Distribution  Date and (B) the  Basis  Risk
CarryForward Amount for such Class of Certificates for all previous Distribution
Dates not previously paid, together with interest thereon at a rate equal to the
sum  of  LIBOR  and  the  applicable  Pass-Through  Margin  for  such  Class  of
Certificates for such Distribution Date.

            BASIS RISK PAYMENT:  For any  Distribution  Date, an amount equal to
any Basis Risk CarryForward Amount, PROVIDED,  HOWEVER, that with respect to any
Distribution Date, the payment cannot exceed the amounts otherwise distributable
on the Class X  Certificates  plus any Interest Rate Cap Payment with respect to
such Distribution Date.

            BEST'S:  Best's Key Rating Guide,  as the same shall be amended from
time to time.

            BNC: BNC Mortgage, Inc., a Delaware corporation.

            BNC ASSIGNMENT AGREEMENT:  The Assignment and Recognition Agreement,
dated as of July 31, 2002, by and among the Unaffiliated  Seller,  the Depositor
and BNC, and each other  Assignment and  Recognition  Agreement by and among the
Unaffiliated  Seller,  the Depositor and BNC in connection  with any  Subsequent
Transfer of BNC Mortgage Loans.

                                       15
<PAGE>

            BNC MORTGAGE  LOAN: A Mortgage  Loan which was acquired  from BNC by
the Unaffiliated  Seller pursuant to the BNC Purchase  Agreement,  and which has
been acquired by the Trust Fund.

            BNC  PURCHASE  AGREEMENT:  The Amended and  Restated  Mortgage  Loan
Purchase and Warranties Agreement, dated as of February 26, 2002, by and between
the Unaffiliated Seller and BNC.

            BOOK-ENTRY CERTIFICATES: As specified in the Preliminary Statement.

            BUSINESS  DAY: Any day other than (i) Saturday or Sunday,  or (ii) a
day on which banking and savings and loan institutions,  in (a) the State of New
York, New Jersey and Florida,  (b) the state in which the  Servicer's  servicing
operations are located,  or (c) the State in which the Trustee's  operations are
located, are authorized or obligated by law or executive order to be closed.

            CAP AGREEMENT:  The interest rate cap agreement  dated July 31, 2002
with the Cap Provider, as "Party A" thereunder,  and the Unaffiliated Seller, as
"Party B" thereunder, or any replacement thereof.

            CAP  PROVIDER:  CDC  Financial  Products,  Inc.,  and any  successor
thereto.

            CAPITALIZED  INTEREST ACCOUNT: The separate Eligible Account created
and  maintained  by the Trustee  pursuant to Section  3.07(e) in the name of the
Trustee  for  the  benefit  of the  Offered  Certificateholders  and  designated
"Deutsche Bank National Trust  Company,  in trust for registered  holders of CDC
Mortgage  Capital Trust 2002-HE2,  Mortgage  Pass-Through  Certificates,  Series
2002-HE2".

            CAPITALIZED INTEREST  REQUIREMENT:  With respect to the Distribution
Dates occurring in August 2002,  September 2002 and October 2002, the excess, if
any,  of (x) the  Accrued  Certificate  Interest  Distribution  Amounts  for all
classes of the  Offered  Certificates  for such  Distribution  Date over (y) all
scheduled  installments of interest (net of the related Expense Fees) due on the
Mortgage  Loans in the  related  Due  Period.  In no event will the  Capitalized
Interest Requirement be less than zero.

            CERTIFICATE:  Any one of the Certificates executed by the Trustee in
substantially the forms attached hereto as exhibits.

            CERTIFICATE  BALANCE:  With  respect  to any Class of  Certificates,
other than the Class R  Certificate,  at any date,  the maximum dollar amount of
principal to which the Holder  thereof is then entitled  hereunder,  such amount
being equal to the  Denomination  thereof minus all  distributions  of principal
previously  made  with  respect  thereto  and in the  case  of any  Subordinated
Certificates,  reduced by any Applied  Realized Loss Amounts  applicable to such
Class of Subordinated  Certificates.  The Class R Certificate has no Certificate
Balance.

            CERTIFICATE  INSURANCE  POLICY:  The  Financial  Guaranty  Insurance
Policy No. 51309-N,  and all endorsements thereto dated the Closing Date, issued
by  the  Class  A   Certificate   Insurer   for  the  benefit  of  the  Class  A
Certificateholders.

                                       16
<PAGE>

            CERTIFICATE  OWNER:  With respect to a Book-Entry  Certificate,  the
Person who is the beneficial owner of such Book-Entry Certificate.

            CERTIFICATE  REGISTER:  The register  maintained pursuant to Section
5.02.

            CERTIFICATEHOLDER  OR HOLDER: The person in whose name a Certificate
is registered in the Certificate  Register,  except that, solely for the purpose
of giving any consent pursuant to this Agreement,  any Certificate registered in
the name of the Depositor or any affiliate of the Depositor  shall be deemed not
to be Outstanding  and the Percentage  Interest  evidenced  thereby shall not be
taken into account in  determining  whether the  requisite  amount of Percentage
Interests necessary to effect such consent has been obtained; PROVIDED, HOWEVER,
that if any such Person  (including the  Depositor)  owns 100% of the Percentage
Interests  evidenced  by a Class of  Certificates,  such  Certificates  shall be
deemed to be Outstanding for purposes of any provision  hereof that requires the
consent of the Holders of Certificates  of a particular  Class as a condition to
the taking of any action hereunder. The Trustee is entitled to rely conclusively
on a  certification  of the  Depositor  or any  affiliate  of the  Depositor  in
determining which Certificates are registered in the name of an affiliate of the
Depositor.

            CHAPEL  MORTGAGE:   Chapel  Mortgage   Corporation,   a  New  Jersey
corporation.

            CHAPEL MORTGAGE ASSIGNMENT AGREEMENT: The Assignment and Recognition
Agreement,  dated as of July 31, 2002, by and among the Unaffiliated Seller, the
Depositor  and  Chapel  Mortgage,  and each  other  Assignment  and  Recognition
Agreement  by and  among the  Unaffiliated  Seller,  the  Depositor  and  Chapel
Mortgage in connection with any Subsequent  Transfer of Chapel Mortgage Mortgage
Loans.

            CHAPEL  MORTGAGE  MORTGAGE  LOAN: A Mortgage Loan which was acquired
from Chapel Mortgage by the Unaffiliated  Seller pursuant to the Chapel Mortgage
Purchase Agreement, and which has been acquired by the Trust Fund.

            CHAPEL MORTGAGE PURCHASE  AGREEMENT:  The Mortgage Loan Purchase and
Warranties Agreement,  dated as of June 4, 2002, by and between the Unaffiliated
Seller and Chapel Mortgage.

            CLASS:  All Certificates  bearing the same class  designation as set
forth in the Preliminary Statement.

            CLASS A CERTIFICATE  INSURER:  Financial  Security Assurance Inc., a
monoline  stock  insurance  company  organized and created under the laws of the
State of New York, and any successors thereto.

            CLASS A CERTIFICATE  INSURER DEFAULT:  The existence and continuance
of any of the following:

            (a)   the Class A  Certificate  Insurer  shall have failed to make a
      required payment when due under the Class A Insurance Policy;

                                       17
<PAGE>

            (b)   the  Class  A  Certificate  Insurer  shall  have  (i)  filed a
      petition  or  commenced  any case or  proceeding  under any  provision  or
      chapter of the United States Bankruptcy Code, the New York State Insurance
      Law or any other  similar  federal or state law  relating  to  insolvency,
      bankruptcy,  rehabilitation,  liquidation, or reorganization,  (ii) made a
      general  assignment for the benefit of its creditors or (iii) had an order
      for relief entered against it under the United States Bankruptcy Code, the
      New York State  Insurance  Law or any other  similar  federal or state law
      relating  to  insolvency,  bankruptcy,  rehabilitation,   liquidation,  or
      reorganization that is final and nonappealable; or

            (c)   a court of competent jurisdiction,  the New York Department of
      Insurance or any other competent regulatory authority shall have entered a
      final and  nonappealable  order,  judgment  or  decree  (i)  appointing  a
      custodian,  trustee, agent, or receiver for the Certificate Insurer or for
      all or any material portion of its property or (ii) authorizing the taking
      of  possession  by  a  custodian,  trustee,  agent,  or  receiver  of  the
      Certificate Insurer or of all or any material portion of its property.

            CLASS A CERTIFICATES: All Certificates bearing the class designation
of "Class A Certificates".

            CLASS A DEFICIENCY:  With respect to any  Distribution  Date and the
Class A Certificates, an amount equal to the excess of the sum of:

            (i)   the   excess   of  (x)  the   Accrued   Certificate   Interest
      Distribution  Amount  for the Class A  Certificates  on such  Distribution
      Date, over (y) the Interest Amount Available,  less the Premium Amount and
      the Trustee Fee, in each case for such Distribution Date; plus

            (ii)  the  Class  A  Principal  Parity  Amount,  if  any,  for  such
      Distribution Date.

            CLASS A INSURANCE  PAYMENT  ACCOUNT:  The separate  Eligible Account
created and maintained by the Trustee pursuant to Section 4.05(c) in the name of
the Trustee for the  benefit of the Class A  Certificateholders  and the Class A
Certificate  Insurer,  and designated  "Deutsche Bank National Trust Company, in
trust for Financial  Security  Assurance Inc. and the registered  holders of CDC
Mortgage  Capital Trust 2002-HE2,  Mortgage  Pass-Through  Certificates,  Series
2002-HE2."

            CLASS  A  PRINCIPAL   DISTRIBUTION   AMOUNT:  With  respect  to  any
Distribution Date, the excess of (i) the aggregate Class Certificate  Balance of
the Class A Certificates  immediately  prior to such Distribution Date over (ii)
the lesser of (A) the  product of 62.00% of the Current  Maximum  Amount and (B)
the Current Maximum Amount minus 2,025,316.

            CLASS A PRINCIPAL  PARITY AMOUNT:  With respect to any  Distribution
Date, the excess, if any, of (i) the aggregate Class Certificate  Balance of the
Class A Certificates on that  Distribution  Date,  after taking into account any
reduction  therein on such Distribution Date from sources other than the Class A
Insurance Policy over (ii) the Current Maximum Amount on such Distribution Date.

                                       18
<PAGE>

            CLASS  A-IO  CERTIFICATES:   All  Certificates   bearing  the  class
designation of "Class A-IO Certificates".

            CLASS A-IO NOTIONAL BALANCE:  With respect to any Distribution Date,
the lesser of (i) the Class A-IO Scheduled Notional Balance and (ii) the Current
Maximum Amount with respect to such Distribution Date.

            CLASS A-IO SCHEDULED  NOTIONAL  BALANCE:  The applicable  amount set
forth in the following schedule:

            Class A-IO                Class A-IO                   Class A-IO
Period   Notional Balance  Period  Notional Balance  Period     Notional Balance
   1         $81,012,700     14       $60,955,600     27           $33,416,600
   2         $79,540,500     15       $59,505,900     28           $32,619,500
   3         $78,025,100     16       $58,089,800     29           $31,841,200
   4         $76,466,200     17       $56,707,100     30           $31,081,400
   5         $74,863,700     18       $55,357,100     31           $30,339,500
   6         $73,272,300     19       $54,038,900     32           $29,615,200
   7         $71,691,900     20       $52,751,900     33           $28,908,000
   8         $70,122,400     21       $38,621,500     34           $28,217,500
   9         $68,563,600     22       $37,701,300     35           $27,543,400
  10         $67,015,300     23       $36,802,900     36           $26,885,300
  11         $65,477,500     24       $35,925,700     37 and
  12         $63,951,400     25       $35,069,300    thereafter             $0
  13         $62,438,700     26       $34,233,100

            CLASS A-IO WAC RATE: With respect to any Distribution  Date, (a) the
product of the Pass-Through  Rate for the Class A-IO  Certificates and the Class
A-IO Scheduled  Notional Balance prior to such  Distribution Date divided by (b)
the Current Maximum Amount on such Distribution Date.

            CLASS  B-1   CERTIFICATES:   All  Certificates   bearing  the  class
designation of "Class B-1 Certificates".

            CLASS  B-1  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to  any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balance of the Class A  Certificates  (after  taking  into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class M-1 Principal  Distribution Amount
on such Distribution  Date), (C) the Class Certificate  Balance of the Class M-2
Certificates (after taking into account  distribution of the Class M-2 Principal
Distribution  Amount on such  Distribution  Date), and (D) the Class Certificate
Balance of the Class B-1  Certificates  immediately  prior to such  Distribution
Date over (ii) the lesser of (A) 94.30% of the  Current  Maximum  Amount and (B)
the Current Maximum Amount minus approximately $2,025,316.

                                       19
<PAGE>

            CLASS  B-2   CERTIFICATES:   All  Certificates   bearing  the  class
designation of "Class B-2 Certificates".

            CLASS  B-2  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to  any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balance of the Class A  Certificates  (after  taking  into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class M-1 Principal  Distribution Amount
on such Distribution  Date), (C) the Class Certificate  Balance of the Class M-2
Certificates (after taking into account  distribution of the Class M-2 Principal
Distribution  Amount  on such  Distribution  Date),  (D) the  Class  Certificate
Balance of the Class B-1 Certificates (after taking into account distribution of
the Class B-1 Principal  Distribution Amount on such Distribution Date), and (E)
the Class Certificate Balance of the Class B-2 Certificates immediately prior to
such Distribution Date over (ii) the lesser of (A) 97.50% of the Current Maximum
Amount and (B) the Current Maximum Amount minus approximately $2,025,316.

            CLASS CERTIFICATE  BALANCE:  With respect to any Class and as to any
date  of  determination,  the  aggregate  of  the  Certificate  Balances  of all
Certificates of such Class as of such date.

            CLASS  M-1   CERTIFICATES:   All  Certificates   bearing  the  class
designation of "Class M-1 Certificates".

            CLASS  M-1  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to  any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balances of the Class A  Certificates  (after  taking into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date),  and (B) the Class  Certificate  Balance  of the  Class M-1  Certificates
immediately  prior to such  Distribution Date over (ii) the lesser of (A) 75.50%
of the  Current  Maximum  Amount  and  (B)  the  Current  Maximum  Amount  MINUS
approximately $2,025,316.

            CLASS  M-2   CERTIFICATES:   All  Certificates   bearing  the  class
designation of "Class M-2 Certificates".

            CLASS  M-2  PRINCIPAL  DISTRIBUTION  AMOUNT:  With  respect  to  any
Distribution  Date,  the  excess  of (i)  the  sum of (A)  the  aggregate  Class
Certificate  Balances of the Class A  Certificates  (after  taking into  account
distribution of the Class A Principal  Distribution  Amount on such Distribution
Date), (B) the Class  Certificate  Balance of the Class M-1 Certificates  (after
taking into account distribution of the Class A Principal Distribution Amount on
such Distribution  Date), and (C) the Class Certificate Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (ii) the lesser of
(A) 86.00% of the  Current  Maximum  Amount and (B) the Current  Maximum  Amount
MINUS approximately $2,025,316.

            CLASS P CERTIFICATES: All Certificates bearing the class designation
of "Class P Certificates".

            CLASS R CERTIFICATES: All Certificates bearing the class designation
of "Class R Certificates".

                                       20
<PAGE>

            CLASS X CERTIFICATES:  All  Certificates  bearing the designation of
"Class X Certificates".

            CLASS X DISTRIBUTABLE  AMOUNT: On any Distribution  Date, the sum of
(i) the amount of interest that has accrued on the Class X Regular  Interest and
not applied as an Extra Principal Distribution Amount on such Distribution Date,
plus any such accrued interest  remaining  undistributed from prior Distribution
Dates,  and (ii) any  portion  of the  principal  balance of the Class X Regular
Interest which is distributable as a Subordination  Reduction  Amount,  less any
amounts paid as a Basis Risk Payment.

            CLOSING DATE: July 31, 2002.

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

            COLLECTION ACCOUNT: As defined in Section 3.10(a).

            COMMUNITY  BANK:  Community  Bank of Northern  Virginia,  a Virginia
corporation.

            COMMUNITY BANK ASSIGNMENT AGREEMENT:  The Assignment and Recognition
Agreement,  dated as of July 31, 2002, by and among the Unaffiliated Seller, the
Depositor  and  Community  Bank,  and  each  other  Assignment  and  Recognition
Agreement by and among the Unaffiliated Seller, the Depositor and Community Bank
in connection with any Subsequent Transfer of Community Bank Mortgage Loans.

            COMMUNITY  BANK  MORTGAGE  LOAN: A Mortgage  Loan which was acquired
from Community Bank by the  Unaffiliated  Seller  pursuant to the Community Bank
Purchase Agreement, and which has been acquired by the Trust Fund.

            COMMUNITY  BANK PURCHASE  AGREEMENT:  The Mortgage Loan Purchase and
Warranties Agreement,  dated as of July 4, 2002, by and between the Unaffiliated
Seller and Community Bank.

            COMPENSATING  INTEREST: For any Distribution Date, the lesser of (a)
the Prepayment  Interest  Shortfall,  if any, for the Distribution Date, and (b)
the amount of the  Servicing  Fee payable to the Servicer for such  Distribution
Date.

            CONDEMNATION  PROCEEDS:  All awards of  settlements  in respect of a
Mortgaged  Property,  whether  permanent  or  temporary,  partial or entire,  by
exercise of the power of eminent domain or condemnation.

            CORPORATE TRUST OFFICE:  The designated office of the Trustee in the
State of California at which at any particular time its corporate trust business
with respect to this Agreement is administered,  which office at the date of the
execution of this Agreement is located at 1761 East St. Andrew Place, Santa Ana,
California  92705,  Attn:  Trust  Administration-DC02M2,   facsimile  no.  (714)
247-6478 and which is the address to which  notices to and  correspondence  with
the Trustee should be directed.

                                       21
<PAGE>

            CORRESPONDING  CLASS:  The class of interests  in any REMIC  created
under this Agreement  that  correspond to the Class of interests in another such
REMIC or to a Class of Certificates in the manner set out below:

              MIDDLE TIER          UPPER TIER       CORRESPONDING
           CLASS DESIGNATION        INTEREST         CERTIFICATE
           -----------------      -----------       -------------
              Class MT-A             Class A           Class A
             Class MT-M-1           Class M-1         Class M-1
             Class MT-M-2           Class M-2         Class M-2
             Class MT-B-1           Class B-1         Class B-1
             Class MT-B-2           Class B-2         Class B-2
             Class MT-A-IO         Class A-IO        Class A-IO

            CUMULATIVE LOSS PERCENTAGE:  With respect to any Distribution  Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount of Applied  Realized  Loss Amounts  incurred from the Cut-off Date to the
last day of the preceding  calendar  month and the  denominator  of which is the
Scheduled Principal Balance of the Mortgage Loans as of the Cut-off Date.

            CURRENT MAXIMUM AMOUNT:  With respect to any Distribution  Date, the
sum of (i) the aggregate of the Stated Principal  Balances of the Mortgage Loans
in the Trust at such time, and (ii) with respect to each Distribution Date on or
prior to October 25,  2002,  the  Pre-Funding  Amount  immediately  prior to the
Distribution Date, net of investment earnings on deposit therein.

            CUSTODIAL  FILE:  With  respect  to each  Mortgage  Loan,  the  file
retained by the Trustee consisting of items (i) - (viii) of Section 2.01(c).

            CUT-OFF DATE: With respect to the Initial  Mortgage  Loans,  July 1,
2002, and with respect to each Subsequent  Mortgage Loan, the related Subsequent
Cut-off Date.

            CUT-OFF DATE POOL PRINCIPAL BALANCE:  The aggregate Stated Principal
Balances of all Mortgage Loans as of the Cut-off Date.

            CUT-OFF DATE PRINCIPAL BALANCE:  As to any Mortgage Loan, the Stated
Principal Balance thereof as of the close of business on the Cut-off Date.

            DATA TAPE INFORMATION:  The information provided by the Unaffiliated
Seller  as of  July  1,  2002  to the  Depositor  setting  forth  the  following
information with respect to each Mortgage Loan: (1) the Mortgagor's name; (2) as
to each Mortgage Loan, the Scheduled  Principal  Balance as of the Cut-off Date;
(3) the Mortgage  Rate Cap;  (4) the Index;  (5) a code  indicating  whether the
Mortgaged Property is owner-occupied;  (6) the type of Mortgaged  Property;  (7)
the first date on which the 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;  (8) the "paid through  date" based on payments  received from the related
Mortgagor;  (9) the original  principal  amount of the Mortgage Loan;  (10) with
respect to Adjustable Rate Mortgage Loans, the

                                       22
<PAGE>

Maximum  Mortgage  Rate;  (11)  the  type  of  Mortgage  Loan  (I.E.,  fixed  or
adjustable);  (12) a code  indicating  the purpose of the loan (I.E.,  purchase,
rate and term refinance,  equity take-out refinance); (13) a code indicating the
documentation style (I.E., full, asset verification,  income verification and no
documentation);  (14) the credit risk score (FICO  score);  (15) the loan credit
grade  classification (as described in the Underwriting  Guidelines);  (16) with
respect to each Adjustable  Rate Mortgage Loan, the Minimum  Mortgage Rate; (17)
the Mortgage  Rate at  origination;  (18) with respect to each  Adjustable  Rate
Mortgage Loan, the first Adjustment Date immediately following the Cut-off Date;
(19) the Value of the Mortgaged  Property;  (20) a code  indicating  the type of
Prepayment  Charges  applicable  to such  Mortgage  Loan,  if any; and (21) with
respect to each Adjustable  Rate Mortgage Loan, the Periodic  Mortgage Rate Cap.
With respect to the Mortgage Loans in the aggregate,  the Data Tape  Information
shall set forth the  following  information,  as of the  Cut-off  Date:  (1) the
number of  Mortgage  Loans;  (2) the  current  aggregate  outstanding  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.

            DEBT  SERVICE  REDUCTION:  With  respect  to any  Mortgage  Loan,  a
reduction  by a court  of  competent  jurisdiction  in a  proceeding  under  the
Bankruptcy  Code in the  Scheduled  Payment for such  Mortgage Loan which became
final and  non-appealable,  except such a reduction  resulting  from a Deficient
Valuation or any reduction that results in a permanent forgiveness of principal.

            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:  Any  Certificate  evidenced by a Physical
Certificate  and any  Certificate  issued  in lieu of a  Book-Entry  Certificate
pursuant to Section 5.02(e).

            DELAY CERTIFICATES: As specified in the Preliminary Statement.

            DELETED  MORTGAGE  LOAN: A Mortgage Loan that is  repurchased by the
Unaffiliated Seller or the related Originator, as applicable, or replaced with a
Substitute  Mortgage  Loan in  accordance  with the terms hereof and the related
Mortgage Loan Purchase Agreement.

            DELINQUENCY TRIGGER EVENT: With respect to a Distribution Date after
the Stepdown Date,  the event that is in effect if the quotient  (expressed as a
percentage) of (x) the three month rolling daily average of the Stated Principal
Balance  of 60+ Day  Delinquent  Loans  as of the last  day of the  related  Due
Period,  over (y) the Pool Stated Principal  Balance of the Mortgage Loans as of
the last day of the  related  Due Period  exceeds  38.00% of the prior  period's
Senior Enhancement Percentage.

            DELINQUENT:  A mortgage loan is  "Delinquent" if any monthly payment
due on a due date is not made by the close of business on the next scheduled due
date for that  mortgage  loan  (including  all  Mortgage  Loans in  foreclosure,
Mortgage Loans in respect of REO Properties

                                       23
<PAGE>

and Mortgage Loans for which the related Mortgagor has declared  bankruptcy).  A
mortgage  loan is "30  days  Delinquent"  if the  monthly  payment  has not been
received  by the  close  of  business  on  the  corresponding  day of the  month
immediately  succeeding  the month in which that monthly  payment was due or, if
there was no  corresponding  date (E.G., as when a 30-day month follows a 31-day
month in which the payment was due on the 31st day of that  month),  then on the
last  day of that  immediately  preceding  month;  and  similarly  for "60  days
Delinquent" and "90 days Delinquent," etc.

            DELIVERY  DATE:  With  respect to the Initial  Mortgage  Loans,  the
Closing  Date;  with  respect to any  Subsequent  Mortgage  Loans,  the  related
Subsequent Transfer Date therefor.

            DENOMINATION: With respect to each Certificate, the amount set forth
on the face thereof as the "Initial  Certificate Balance of this Certificate" or
the Percentage Interest appearing on the face thereof.

            DEPOSITOR:   Morgan   Stanley  ABS   Capital  I  Inc.,   a  Delaware
corporation, or its successor in interest.

            DEPOSITORY:  The initial  Depository  shall be The Depository  Trust
Company,  the  nominee of which is CEDE & Co., as the  registered  Holder of the
Book-Entry  Certificates.  The  Depository  shall at all  times  be a  "clearing
corporation" as defined in Section 8-102(a)(5) of the Uniform Commercial Code of
the State of New York.

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

            DETERMINATION  DATE:  With  respect  to each  Remittance  Date,  the
Business Day immediately preceding such Remittance Date.

            DISTRIBUTION  ACCOUNT:  The separate  Eligible  Account  created and
maintained by the Trustee pursuant to Section 3.07(d) in the name of the Trustee
for the benefit of the Certificateholders and designated "Deutsche Bank National
Trust  Company,  in trust for registered  holders of CDC Mortgage  Capital Trust
2002-HE2, Mortgage Pass-Through Certificates, Series 2002-HE2".

            DISTRIBUTION  DATE:  The 25th day of each  calendar  month after the
initial issuance of the Certificates,  or if such day is not a Business Day, the
next succeeding Business Day, commencing in August 2002.

            DOCUMENT EXCEPTION REPORT: The report attached to Exhibit G hereto.

            DUE DATE: The day of the month on which the Scheduled Payment is due
on a Mortgage Loan, exclusive of any days of grace.

            DUE  PERIOD:  With  respect to each  Distribution  Date,  the period
commencing on the second day of the calendar month  preceding the month in which
such  Distribution Date occurs and ending on the first day of the calendar month
in which such Distribution Date occurs.

                                       24
<PAGE>

            ELIGIBLE  ACCOUNT:  Either (i) a demand account  maintained  with an
Eligible  Institution  or (ii) a trust  account or  accounts  maintained  with a
federal or state chartered depository institution or trust company acting in its
fiduciary  capacity or (iii) any other account acceptable to each Rating Agency.
Eligible  Accounts may bear interest,  and may include,  if otherwise  qualified
under this definition, accounts maintained with the Trustee.

            ELIGIBLE  INSTITUTION:  A  federal  or  state  chartered  depository
institution  or trust company,  which (x) with respect to any Eligible  Account,
the amounts on deposit in which will be held for 30 days or less, the commercial
paper,  short term debt obligations,  or other short-term  deposits of which are
rated at least A-1 by Fitch, A-1 by Standard & Poor's and "P-1" by Moody's (or a
comparable  rating if another  Rating  Agency is specified  by the  Depositor by
written  notice to the  Servicer  and the  Trustee)  or (y) with  respect to any
Eligible Account,  the amounts on deposit in which will be held for more than 30
days, the long-term  unsecured debt  obligations of which are rated at least AA-
by Fitch, AA- by Standard & Poor's and Aa3 by Moody's (or a comparable rating if
another  Rating  Agency is specified by the  Depositor by written  notice to the
Servicer and the Trustee).

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

            ERISA-QUALIFYING  UNDERWRITING:  A best  efforts or firm  commitment
underwriting  or private  placement  that meets the  requirements  of Prohibited
Transaction  Exemption  97-34,  62 Fed. Reg.  39021  (1997),  as amended (or any
successor  thereto),  or  any  substantially  similar  administrative  exemption
granted by the U.S. Department of Labor.

            ERISA-RESTRICTED   CERTIFICATE:  As  specified  in  the  Preliminary
Statement.

            ESCROW  ACCOUNT:  The Eligible  Account or Accounts  established and
maintained pursuant to Section 3.09(b).

            ESCROW PAYMENTS: As defined in Section 3.09(b) of this Agreement.

            EVENT OF DEFAULT: As defined in Section 7.01.

            EXCESS RESERVE FUND ACCOUNT:  The separate  Eligible Account created
and  maintained by the Trustee  pursuant to Sections  3.07(b) and 3.07(c) in the
name of the  Trustee  for the  benefit  of the  Offered  Certificateholders  and
designated  "Deutsche  Bank  National  Trust  Company,  in trust for  registered
holders  of  CDC  Mortgage   Capital  Trust  2002-HE2,   Mortgage   Pass-Through
Certificates, Series 2002-HE2".

            EXCESS  SUBORDINATED  AMOUNT: With respect to any Distribution Date,
the excess,  if any, of (a) the Subordinated  Amount on such  Distribution  Date
over (b) the Specified Subordinated Amount for such Distribution Date.

            EXPENSE FEES: As to each Mortgage Loan, the sum of the Servicing Fee
and the Trustee Fee.

            EXPENSE FEE RATE: As to each  Mortgage  Loan, a per annum rate equal
to the sum of the Servicing Fee Rate and the Trustee Fee Rate.

                                       25
<PAGE>

            EXTRA PRINCIPAL  DISTRIBUTION  AMOUNT: As of any Distribution  Date,
the lesser of (x) the related Total Monthly Excess Spread for such  Distribution
Date and (y) the Subordination Deficiency for such Distribution Date.

            FANNIE  MAE:  The  Federal  National  Mortgage  Association,  or any
successor thereto.

            FANNIE MAE GUIDES:  The Fannie Mae Sellers' Guide and the Fannie Mae
Servicers' Guide and all amendments or additions thereto.

            FDIC: The Federal Deposit  Insurance  Corporation,  or any successor
thereto.

            FHLMC:  The  Federal  Home Loan  Mortgage  Corporation,  a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.

            FINAL  CERTIFICATION:  A  certification  submitted by the Trustee in
substantially the form of Exhibit G hereto.

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

            FINAL SCHEDULED  DISTRIBUTION DATE: The Final Scheduled Distribution
Date for each  Class of  Certificates  is the  Distribution  Date in each of the
following months:

                                                                FINAL SCHEDULED
                                                               DISTRIBUTION DATE
                                                               -----------------
Class A Certificates........................................   January 25, 2033
Class A-IO Certificates.....................................    August 25, 2005
Class M-1 Certificates......................................   January 25, 2033
Class M-2 Certificates......................................   January 25, 2033
Class B-1 Certificates......................................   January 25, 2033
Class B-2 Certificates......................................   January 25, 2033
Class X Certificates........................................   January 25, 2033
Class P Certificates........................................   January 25, 2033
Class R Certificates........................................   January 25, 2033

            FITCH:  Fitch, Inc. If Fitch is designated as a Rating Agency in the
Preliminary Statement,  for purposes of Section 10.05(b) the address for notices
to Fitch shall be Fitch,  Inc.,  One State St. Plaza,  New York, New York 10004,
Attention:  Residential Mortgage Surveillance Group - Morgan Stanley ABS Capital
I Inc.  2002-HE2,  or such other address as Fitch may  hereafter  furnish to the
Depositor and the Servicer

                                       26
<PAGE>

            FIXED RATE  MORTGAGE  LOAN: A Mortgage  Loan  bearing  interest at a
fixed rate.

            FLOATING  RATE   CERTIFICATES:   As  specified  in  the  Preliminary
Statement.

            FLOOR  AMOUNT:  An amount  equal to the product of (x) 0.50% and (y)
the Maximum Pool Principal Balance.

            GROSS MARGIN:  With respect to each  Adjustable  Rate Mortgage Loan,
the fixed  percentage  amount set forth in the related Mortgage Note to be added
to the applicable Index to determine the Mortgage Rate.

            IFC: IMPAC Funding Corporation, a California corporation.

            IFC ASSIGNMENT AGREEMENT:  The Assignment and Recognition Agreement,
dated as of July 31, 2002, by and among the Unaffiliated  Seller,  the Depositor
and IFC, and each other  Assignment and  Recognition  Agreement by and among the
Unaffiliated  Seller,  the Depositor and IFC in connection  with any  Subsequent
Transfer of IFC Mortgage Loans.

            IFC MORTGAGE  LOAN: A Mortgage  Loan which was acquired  from IFC by
the Unaffiliated  Seller pursuant to the IFC Purchase  Agreement,  and which has
been acquired by the Trust Fund.

            IFC PURCHASE  AGREEMENT:  The Mortgage Loan Purchase and  Warranties
Agreement,  dated as of July 10, 2001 by and between the Unaffiliated Seller and
IFC.

            I&I  PAYMENTS:  Payments  due and  owing  under  the  Insurance  and
Indemnity Agreement.

            INDEX: As to each Adjustable Rate Mortgage Loan, the index from time
to time in effect for the  adjustment  of the Mortgage Rate set forth as such on
the related Mortgage Note.

            INITIAL CUT-OFF DATE: July 1, 2002.

            INITIAL   MORTGAGE  LOANS:  The  Mortgage  Loans  delivered  by  the
Depositor on the Startup Date.

            INITIAL PRE-FUNDED AMOUNT: The amount of $39,433,311.

            INSURANCE  AND  INDEMNITY  AGREEMENT:  The  Insurance  and Indemnity
Agreement  dated as of July 1, 2002 among the Class A Certificate  Insurer,  the
Servicer  and the  Unaffiliated  Seller,  as such  agreement  may be  amended or
supplemented in accordance with the provisions thereof.

            INSURED PAYMENT:  With respect to any Distribution Date, the Class A
Deficiency for that Distribution Date.

                                       27
<PAGE>

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

            INSURANCE PROCEEDS:  With respect to each Mortgage Loan, proceeds of
insurance policies insuring the Mortgage Loan or the related Mortgaged Property.

            INTEREST ACCRUAL PERIOD:  With respect to any Distribution Date, (i)
with respect to each Class of Non-Delay  Certificates (except for the Class A-IO
Certificates)  and the  Corresponding  Class of Lower Tier Regular Interests and
any  Distribution  Date,  the period  beginning with the  immediately  preceding
Distribution  Date (or in the case of the first  Distribution  Date,  the period
from and  including the Closing Date to but  excluding  such first  Distribution
Date)  and  ending  on the day  prior to the  current  Distribution  Date (on an
actual/360  day count basis);  (ii) for the Class A-IO  Certificate,  the period
beginning on the first day of the  calendar  month and ending on the last day of
the calendar month immediately preceding such Distribution Date (on a 30/360 day
count basis).

            INTEREST AMOUNT  AVAILABLE:  With respect to any Distribution  Date,
the sum of (i) the Interest  Remittance  Amount received by the Trustee from the
Servicer  on the  related  Remittance  Date and (ii)  the  Capitalized  Interest
Requirement,  if any, deposited to the Distribution Account on such Distribution
Date.

            INTEREST RATE ADJUSTMENT  DATE: With respect to each Adjustable Rate
Mortgage Loan, the date, specified in the related Mortgage Note and the Mortgage
Loan Schedule, on which the Mortgage Rate is adjusted.

            INTEREST RATE CAP PAYMENT:  Beginning on the first Distribution Date
and continuing through the 23 Distribution Dates thereafter, the amount equal to
the positive  difference,  if any, between LIBOR and 2.50% (on an actual/360 day
count basis).

            INTEREST REMITTANCE AMOUNT: With respect to any Remittance Date, the
sum, without duplication, of:

            (i)   all  scheduled  installments  of interest  due on the Mortgage
      Loans  during the  related  Due Period and  received  or  advanced  by the
      Servicer on or prior to the related Remittance Date;

            (ii)  Compensating  Interest paid by the Servicer on such Remittance
      Date;

            (iii) the interest component of all Substitution  Adjustment Amounts
      and Repurchase Prices;

            (iv)  the interest component of all Condemnation Proceeds, Insurance
      Proceeds and  Liquidation  Proceeds  received by the  Servicer  during the
      related  Prepayment Period (in each case, net (but not to be reduced below
      zero) of unreimbursed  expenses  incurred in connection with a liquidation
      or foreclosure and unreimbursed Advances, if any); and

                                       28
<PAGE>

            (v)   the interest  component of the proceeds of any  termination of
      the Trust Fund.

REDUCED by the Servicing  Fee for the related Due Period,  together with amounts
in reimbursement for Advances previously made with respect to the Mortgage Loans
and other amounts as to which the Servicer is entitled to be reimbursed pursuant
to the Agreement.

            INVESTMENT ACCOUNT: As defined in Section 3.12(a).

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

            LATE PAYMENT RATE: Has the meaning ascribed thereto in the Insurance
and Indemnity Agreement.

            LIBOR:  With  respect to any Interest  Accrual  Period for the LIBOR
Certificates,   the  rate  determined  by  the  Trustee  on  the  related  LIBOR
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 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 rates at
which  one-month  U.S.  dollar  deposits are offered by the  Reference  Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the London
interbank  market.  In such event, the Trustee will request the principal London
office of each of the Reference  Banks to provide a quotation of its rate. If at
least  two such  quotations  are  provided,  the rate for that  date will be the
arithmetic mean of the quotations  (rounded  upwards if necessary to the nearest
whole  multiple  of  1/16%).  If  fewer  than two  quotations  are  provided  as
requested,  the rate for that  date  will be the  arithmetic  mean of the  rates
quoted  by  major  banks  in  New  York  City,  selected  by  the  Servicer,  at
approximately  11:00 a.m. (New York City time) on such date for  one-month  U.S.
dollar loan to leading European banks.

            LIBOR CERTIFICATES: As specified in the Preliminary Statement.

            LIBOR  DETERMINATION  DATE:  With  respect to any  Interest  Accrual
Period  (other  than  the  initial   Interest  Accrual  Period)  for  the  LIBOR
Certificates,  the second London Business Day preceding the commencement of such
Interest Accrual Period.

            LIQUIDATED  MORTGAGE LOAN: With respect to any Distribution  Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in the
calendar month preceding the month of such Distribution Date and as to which the
Servicer has certified (in accordance  with this Agreement) that it has received
all amounts it expects to receive in  connection  with the  liquidation  of such
Mortgage Loan including the final disposition of an REO Property.

                                       29
<PAGE>

            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  coverage  under this  Agreement by reason of its being  purchased,
sold or replaced pursuant to or as contemplated by this Agreement.  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  coverage  under this  Agreement  by reason of its being  purchased
pursuant to this Agreement.

            LIQUIDATION   PROCEEDS:   Cash  received  in  connection   with  the
liquidation  of a defaulted  Mortgage  Loan,  whether  through  trustee's  sale,
foreclosure sale or otherwise.

            LOAN-TO-VALUE  RATIO or LTV: With respect to any Mortgage  Loan, the
ratio (expressed as a percentage) of the original  outstanding  principal amount
of the Mortgage Loan as of the Cut-off Date (unless otherwise indicated), to the
lesser of (a) the Appraised Value of the Mortgaged Property at origination,  and
(b) if the  Mortgage  Loan was made to finance  the  acquisition  of the related
Mortgaged Property, the purchase price of the Mortgaged Property.

            LONDON BUSINESS DAY: Any day on which dealings in deposits of United
States dollars are transacted in the London interbank market.

            LOSS TRIGGER EVENT: With respect to any Distribution Date, the event
that is in effect if the  aggregate  amount of  Applied  Realized  Loss  Amounts
incurred  since the  related  Cut-off  Date  through the last day of the related
Prepayment  Period  divided by the Maximum Pool  Principal  Balance  exceeds the
applicable  percentage as follows with respect to such  Distribution  Date:  (a)
3.50% commencing with the first  Distribution Date, plus an additional 1/12th of
1.75% for each month thereafter for the Distribution Dates occurring from August
2005 to July 2006; (b) 5.25% for the first month,  plus an additional  1/12th of
1.00% for each month thereafter for the Distribution Dates occurring from August
2006 to July 2007; (c) 6.25% for the first month,  plus an additional  1/12th of
0.75% for each month  thereafter for  Distribution  Dates  occurring from August
2007 to July 2008; (d) 7.00% for the first month,  plus an additional  1/12th of
0.25% for each month  thereafter for  Distribution  Dates  occurring from August
2008 to July 2009; and (e) 7.25% for Distribution Dates occurring in August 2009
and thereafter.

            LOWER  TIER  REGULAR  INTEREST:  As  described  in  the  Preliminary
Statement.

            LOWER TIER REMIC: As described in the Preliminary Statement

            MAXIMUM MORTGAGE RATE: With respect to each Adjustable Rate Mortgage
Loan,  a rate  that (i) is set  forth on the Data  Tape  Information  and in the
related  Mortgage  Note  and (ii) is the  maximum  interest  rate to  which  the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be increased  during the
lifetime of such Mortgage Loan.

            MAXIMUM POOL  PRINCIPAL  BALANCE:  The  aggregate  Stated  Principal
Balances of all Initial  Mortgage Loans as of the Initial  Cut-off Date plus the
Initial Pre-Funded Amount.

            MIDDLE  TIER  REGULAR  INTEREST:  As  described  in the  Preliminary
Statement.

                                       30
<PAGE>

            MIDDLE TIER REMIC: As described in the Preliminary Statement.

            MINIMUM MORTGAGE RATE: With respect to each Adjustable Rate Mortgage
Loan,  a rate  that (i) is set  forth on the Data  Tape  Information  and in the
related  Mortgage  Note  and (ii) is the  minimum  interest  rate to  which  the
Mortgage Rate on such Adjustable Rate Mortgage Loan may be decreased  during the
lifetime of such Mortgage Loan.

            MONTHLY STATEMENT: The statement delivered to the Certificateholders
pursuant to Section 4.03.

            MOODY'S: Moody's Investors Service, Inc. If Moody's is designated as
a Rating Agency in the Preliminary  Statement,  for purposes of Section 10.05(b)
the address for notices to Moody's shall be Moody's Investors Service,  Inc., 99
Church  Street,  New  York,  New York  10007,  Attention:  Residential  Mortgage
Pass-Through  Group,  or such other address as Moody's may hereafter  furnish to
the Depositor and the Servicer.

            MORTGAGE: The mortgage, deed of trust or other instrument identified
on the Mortgage Loan Schedule as securing a Mortgage Note.

            MORTGAGE  FILE: The items  pertaining to a particular  Mortgage Loan
contained in either the Servicing File or Custodial File.

            MORTGAGE LOAN PURCHASE AGREEMENT:  The BNC Purchase  Agreement,  the
IFC Purchase  Agreement,  the People's  Choice  Purchase  Agreement,  the Chapel
Mortgage  Purchase  Agreement  or the  Community  Bank  Purchase  Agreement,  as
applicable.

            MORTGAGE LOANS: An individual  Mortgage Loan which is the subject of
this Agreement, each Mortgage Loan originally sold and subject to this Agreement
being  identified on the Mortgage Loan  Schedule,  which Mortgage Loan includes,
without  limitation,  the  Mortgage  File,  the  Scheduled  Payments,  Principal
Prepayments,  Liquidation Proceeds,  Condemnation Proceeds,  Insurance Proceeds,
REO  Disposition  proceeds,  and  all  other  rights,  benefits,   proceeds  and
obligations  arising from or in connection  with such Mortgage  Loan,  excluding
replaced or repurchased Mortgage Loans.

            MORTGAGE LOAN SCHEDULE:  A schedule of Mortgage Loans annexed hereto
as  Schedule I, such  schedule  setting  forth the  following  information  with
respect to each Mortgage Loan: (1) the  Originator's  Mortgage Loan number;  (2)
the city,  state and zip code of the Mortgaged  Property;  (3) a code indicating
whether  the  Mortgaged  Property  is  a  single  family  residence,  two-family
residence,  three-family residence,  four-family residence,  PUD or condominium;
(4) the current  Mortgage  Interest Rate; (5) the current net Mortgage Rate; (6)
the current  Monthly  Payment;  (7) the Gross  Margin;  (8) the original term to
maturity;  (9) the scheduled  maturity date;  (10) the principal  balance of the
Mortgage  Loan as of the Cut-off  Date after  deduction of payments of principal
due  on  or  before  the  Cut-off  Date  whether  or  not  collected;  (11)  the
Loan-to-Value  Ratio;  (12) the next Interest  Rate  Adjustment  Date;  (13) the
lifetime  Mortgage  Interest  Rate  Cap;  (14)  whether  the  Mortgage  Loan  is
convertible  or not;  (15) a code  indicating  the mortgage  guaranty  insurance
company;  (16) the Servicing Fee; (17) the identity of the related Originator of
such Mortgage Loan; (18) the Mortgagor's name; and (19)

                                       31
<PAGE>

the "paid-through"  date (based on payments received from the related Mortgagor)
as of the Cut-off Date.

            MORTGAGE NOTE: The note or other evidence of the  indebtedness  of a
Mortgagor under a Mortgage Loan.

            MORTGAGE RATE: The annual rate of interest borne on a Mortgage Note,
which  shall be  adjusted  from time to time with  respect  to  Adjustable  Rate
Mortgage Loans.

            MORTGAGE  RATE CAPS:  With respect to an  Adjustable  Rate  Mortgage
Loan, the Periodic Mortgage Rate Cap, the Maximum Mortgage Rate, and the Minimum
Mortgage Rate for such Mortgage Loan.

            MORTGAGED  PROPERTY:  The real  property (or  leasehold  estate,  if
applicable)  identified on the Mortgage  Loan Schedule as securing  repayment of
the debt evidenced by a Mortgage Note.

            MORTGAGOR: The obligor(s) on a Mortgage Note.

            NET MONTHLY EXCESS CASH FLOW: For any  Distribution  Date the amount
remaining for distribution  pursuant to subsection  4.02(a)(iii)  (before giving
effect to distributions pursuant to such subsection).

            NET PREPAYMENT  INTEREST  SHORTFALL:  For any Distribution Date, the
amount by which the sum of the Prepayment Interest Shortfalls exceeds the sum of
the Compensating Interest payments made on such Distribution Date.

            NIM CLOSING DATE: On or about August 9, 2002.

            NIMS  TRUST:  CDC  Mortgage  Capital  Inc.  NIM Trust  2002-HE2N,  a
Delaware business trust.

            NON-DELAY CERTIFICATES: As specified in the Preliminary Statement.

            NONRECOVERABLE  ADVANCE:  Any Servicing Advances  previously made or
proposed to be made in respect of a Mortgage Loan or REO Property, which, 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
Insurance Proceeds,  Liquidation Proceeds or otherwise. The determination by the
Servicer  that  it has  made a  Nonrecoverable  Advance  or  that  any  proposed
Servicing Advances, if made, would constitute a Nonrecoverable Advance, shall be
evidenced by an Officers' Certificate delivered to the Trustee.

            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,  will not or, in the case of a
proposed  P&I Advance,  would not be  ultimately  recoverable  from related late
payments,  Insurance  Proceeds or Liquidation  Proceeds on such Mortgage Loan or
REO Property as provided herein.

                                       32
<PAGE>

            NOTICE OF FINAL DISTRIBUTION:  The notice to be provided pursuant to
Section 9.02 to the effect that final  distribution  on any of the  Certificates
shall be made only upon presentation and surrender thereof.

            OFFERED CERTIFICATES: As specified in the Preliminary Statement.

            OFFICER'S  CERTIFICATE:  A  certificate  signed by an officer of the
Servicer with  responsibility for the servicing of the Mortgage Loans and listed
on a list delivered to the Trustee pursuant to this Agreement.

            OPINION  OF  COUNSEL:  A  written  opinion  of  counsel,  who may be
in-house counsel for the Servicer or the Subservicer,  reasonably  acceptable to
the Trustee and to the Class A Certificate Insurer, PROVIDED that any Opinion of
Counsel  relating to (a)  qualification  of the Mortgage Loans in a REMIC or (b)
compliance with the REMIC  Provisions,  must be (unless otherwise stated in such
Opinion of Counsel) an opinion of counsel who (i) is in fact  independent of the
Servicer  of the  Mortgage  Loans,  (ii)  does not have any  material  direct or
indirect  financial  interest  in the  Servicer of the  Mortgage  Loans or in an
affiliate of either and (iii) is not connected with the Servicer of the Mortgage
Loans as an officer, employee, director or person performing similar functions.

            OPTIONAL TERMINATION DATE: means:

            (i)   For so long as the Class X Certificates are 100% owned, either
      directly  or  indirectly,  by the  Unaffiliated  Seller  or any  Affiliate
      thereof,  then the  Servicer may cause the  Optional  Termination  Date to
      occur on any Distribution Date when the aggregate Stated Principal Balance
      of the  Mortgage  Loans is 10.00% or less of the  Maximum  Pool  Principal
      Balance; and

            (ii)  If the  Class  X  Certificates  are  not  100%  owned,  either
      directly  or  indirectly,  by the  Unaffiliated  Seller  or any  Affiliate
      thereof,  then the Holders of a majority in Class  Certificate  Balance of
      the Class X Certificates may cause the Optional  Termination Date to occur
      on any Distribution  Date when the aggregate  Stated Principal  Balance of
      the  Mortgage  Loans  is  10.00%  or less of the  Maximum  Pool  Principal
      Balance,  and, if such Class X  Certificateholders  do not do so, then the
      Servicer shall also have such right.

            ORIGINATOR:  The party that  originated  or acquired a Mortgage Loan
and, more  specifically,  (i) with respect to any BNC Mortgage  Loan,  BNC, (ii)
with respect to any IFC Mortgage  Loan,  IFC, (iii) with respect to any People's
Choice Mortgage Loan,  People's Choice, (iv) with respect to any Chapel Mortgage
Mortgage  Loan,  Chapel  Mortgage  and (v) with  respect to any  Community  Bank
Mortgage Loan, Community Bank.

            OTS: Office of Thrift Supervision, and any successor thereto.

            OUTSTANDING:  With  respect  to the  Certificates  as of any date of
determination,  all Certificates  theretofore  executed and authenticated  under
this Agreement except:

                                       33
<PAGE>

            (i)   Certificates  theretofore canceled by the Trustee or delivered
      to the Trustee for cancellation; and

            (ii)  Certificates  in exchange  for which or in lieu of which other
      Certificates  have been executed and delivered by the Trustee  pursuant to
      this Agreement.

            OUTSTANDING  MORTGAGE LOAN: As of any Due Date, a Mortgage Loan with
a Stated  Principal  Balance  greater  than zero which was not the  subject of a
Principal  Prepayment  in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.

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

            P&I ADVANCE:  As to any Mortgage Loan or REO  Property,  any advance
made by the  Servicer  in respect  of any  Remittance  Date with  respect to any
Mortgage  Loan  representing  the  aggregate of all  payments of  principal  and
interest on such Mortgage Loan, net of the related Servicing Fee, that were due,
and that were  delinquent  or unpaid on the  related  Determination  Date,  plus
certain  amounts  representing  assumed  payments not covered by any current net
income on the Mortgaged  Properties  acquired by  foreclosure or deed in lieu of
foreclosure as determined pursuant to Section 4.01.

            PASS-THROUGH   MARGIN:   With  respect  to  each  Class  of  Regular
Certificates,   prior  to  the  first   Distribution  Date  after  the  Optional
Termination Date the following percentages: Class A Certificates,  0.290%, Class
M-1   Certificates,   0.700%,   Class  M-2  Certificates,   1.500%,   Class  B-1
Certificates,   2.000%  and  Class  B-2  Certificates,   2.650%.  On  the  first
Distribution Date after the Optional  Termination Date, the Pass-Through Margins
shall increase to: Class A Certificates, 0.580%, Class M-1 Certificates, 1.050%,
Class M-2 Certificates,  2.250%,  Class B-1  Certificates,  3.000% and Class B-2
Certificates, 3.975%.

            PASS-THROUGH  RATE:  For each Class of  Certificates  and each Lower
Tier Regular Interest,  the per annum rate set forth or calculated in the manner
described in the Preliminary Statement.

            PEOPLE'S  CHOICE:   People's  Choice  Home  Loan,  Inc.,  a  Wyoming
corporation.

            PEOPLE'S CHOICE ASSIGNMENT AGREEMENT: The Assignment and Recognition
Agreement,  dated as of July 31, 2002, by and among the Unaffiliated Seller, the
Depositor  and  People's  Choice,  and each  other  Assignment  and  Recognition
Agreement  by and among the  Unaffiliated  Seller,  the  Depositor  and People's
Choice in connection  with any Subsequent  Transfer of People's  Choice Mortgage
Loans.

            PEOPLE'S  CHOICE  MORTGAGE  LOAN: A Mortgage Loan which was acquired
from People's Choice by the Unaffiliated  Seller pursuant to the People's Choice
Purchase Agreement, and which has been acquired by the Trust Fund.

                                       34
<PAGE>

            PEOPLE'S CHOICE PURCHASE  AGREEMENT:  The Mortgage Loan Purchase and
Warranties  Agreement,   dated  as  of  April  16,  2002,  by  and  between  the
Unaffiliated Seller and People's Choice.

            PERCENTAGE INTEREST: As to any Certificate,  the percentage interest
evidenced  thereby in  distributions  required to be made on the related  Class,
such  percentage  interest  being set forth on the face  thereof or equal to the
percentage  obtained by dividing the  Denomination  of such  Certificate  by the
aggregate of the Denominations of all Certificates of the same Class.

            PERIODIC  MORTGAGE  RATE CAP:  With  respect to an  Adjustable  Rate
Mortgage Loan, the periodic limit on each Mortgage  Interest Rate  adjustment as
set forth in the related Mortgage Note.

            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  Servicer,  the  Trustee  or any of their  respective
Affiliates:

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

            (ii)  demand and time  deposits in,  certificates  of deposit of, or
      bankers'  acceptances  (which shall each have an original  maturity of not
      more than 90 days and,  in the case of bankers'  acceptances,  shall in no
      event  have an  original  maturity  of more  than 365 days or a  remaining
      maturity of more than 30 days)  denominated  in United States  dollars and
      issued by, any Eligible Institution;

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

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

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

            (vi)  units of money  market  funds,  including  money  market funds
      advised by the  Depositor  or an Affiliate  thereof,  that have been rated
      "Aaa" by Moody's, "AAA" by Fitch and "AAA" by Standard & Poor's; and

            (vii) if  previously  confirmed in writing to the Trustee and to the
      Class A  Certificate  Insurer,  any  other  demand,  money  market or time
      deposit, or any other

                                       35
<PAGE>

      obligation,  security or  investment,  as may be  acceptable to the Rating
      Agencies as a permitted  investment  of funds backing "Aaa" or "AAA" rated
      securities;

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 person other than (i) the United States,
any State or political  subdivision thereof, or any agency or instrumentality of
any of the foregoing, (ii) a foreign government,  International  Organization or
any agency or instrumentality of either of the foregoing,  (iii) an organization
(except  certain  farmers'  cooperatives  described  in section 521 of the Code)
which is exempt  from tax  imposed by Chapter 1 of the Code  (including  the tax
imposed by section 511 of the Code on unrelated  business taxable income) on any
excess inclusions (as defined in section 860E(c)(1) of the Code) with respect to
any  Residual  Certificate,  (iv)  rural  electric  and  telephone  cooperatives
described in section  1381(a)(2)(C) of the Code, (v) a Person that is not a U.S.
Person,  (vi) an "electing large partnership"  within the meaning of section 775
of the Code and (vii) any other Person so designated by the Depositor based upon
an Opinion of Counsel that the  Transfer of an Ownership  Interest in a Residual
Certificate to such Person may cause the REMIC hereunder to fail to qualify as a
REMIC at any time that the  Certificates  are  outstanding.  The  terms  "United
States," "State" and  "International  Organization"  shall have the meanings set
forth in section 7701 of the Code or successor  provisions.  A corporation  will
not be treated  as an  instrumentality  of the United  States or of any State or
political  subdivision  thereof for these  purposes if all of its activities are
subject  to tax and,  with the  exception  of the  Federal  Home  Loan  Mortgage
Corporation,  a  majority  of its board of  directors  is not  selected  by such
government unit.

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

            PHYSICAL CERTIFICATES: As specified in the Preliminary Statement.

            POOL STATED  PRINCIPAL  BALANCE:  As to any  Distribution  Date, the
aggregate  of the  Stated  Principal  Balances  of the  Mortgage  Loans for such
Distribution  Date which were  Outstanding  Mortgage Loans as of the last day of
the related Due Period.

            PREFERENCE AMOUNT: Any amounts distributed in respect of the Class A
Certificates  which are recovered  from any Holder of a Class A Certificate as a
voidable  preference  by a trustee in  bankruptcy  pursuant to the United States
Bankruptcy Code or other similar law in accordance  with a final,  nonappealable
order of a court having  competent  jurisdiction  and which have not theretofore
been repaid to such Holder.

            PREFERENCE CLAIM: As defined in Section 4.05(f) hereof.

            PRE-FUNDING  ACCOUNT:  The  separate  Eligible  Account  created and
maintained by the Trustee pursuant to Section 3.07(f) in the name of the Trustee
for the benefit of the

                                       36
<PAGE>

Certificateholders,  and designated  "Deutsche  Bank National Trust Company,  in
trust for registered  holders of CDC Mortgage  Capital Trust 2002-HE2,  Mortgage
Pass-Through Certificates, Series 2002-HE2".

            PRE-FUNDING  AMOUNT: With respect to any date, the amount on deposit
in the Pre-Funding Account.

            PRE-FUNDING  EARNINGS:  The actual  investment  earnings realized on
amounts deposited in the Pre-Funding Account.

            PRE-FUNDING  PERIOD:  The period  commencing on the Startup Date and
ending on the  earliest  to occur of (i) the date on which the amount on deposit
in the Pre-Funding  Account (exclusive of any investment  earnings) is less than
$100,000,  (ii) the date on which any Event of Default  occurs and (iii) October
24, 2002.

            PREMIUM AMOUNT:  The product of the Premium Rate and the Certificate
Balance of the Class A Certificates immediately prior to such Distribution Date.

            PREMIUM  RATE:  The rate at which the  "Premium"  is  determined  as
described in the letter dated July 31, 2002 between the Unaffiliated  Seller and
the  Class A  Certificate  Insurer  (a copy of which  shall be  provided  by the
Unaffiliated Seller to the Trustee).

            PREPAYMENT  CHARGE:  Any  prepayment  premium,   penalty  or  charge
collected  by the Servicer  with respect to a Mortgage  Loan from a Mortgagor in
connection with any voluntary Principal Prepayment in full pursuant to the terms
of the related Mortgage Note.

            PREPAYMENT INTEREST SHORTFALL:  With respect to any Remittance Date,
the sum of, for each Mortgage Loan that was during the related Prepayment Period
the subject of a Principal  Prepayment  in Full that was applied by the Servicer
to reduce the  outstanding  principal  balance of such  Mortgage  Loan on a date
preceding the Due Date in the succeeding  Prepayment  Period, an amount equal to
the  product of (a) the  Mortgage  Rate net of the  Servicing  Fee Rate for such
Mortgage  Loan,  (b) the amount of the  Principal  Prepayment  for such Mortgage
Loan, (c) 1/360 and (d) the number of days  commencing on the date on which such
Principal  Prepayment  was  applied  and  ending on the last day of the  related
Prepayment Period.

            PREPAYMENT  PERIOD:  With  respect  to any  Distribution  Date,  the
calendar  month  preceding the calendar  month in which such  Distribution  Date
occurs.

            PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, the sum of
(i) the Basic Principal  Distribution Amount for such Distribution Date and (ii)
the Extra Principal Distribution Amount for such Distribution Date.

            PRINCIPAL PREPAYMENT:  Any full or partial payment or other recovery
of principal on a Mortgage Loan (including upon  liquidation of a Mortgage Loan)
which is received in advance of its scheduled Due Date, excluding any prepayment
penalty or premium thereon and which is not accompanied by an amount of interest
representing  scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment.

                                       37
<PAGE>

            PRINCIPAL  PREPAYMENT IN FULL:  Any Principal  Prepayment  made by a
Mortgagor of the entire principal balance of a Mortgage Loan.

            PRINCIPAL  REMITTANCE  AMOUNT:  With respect to any Remittance Date,
the sum, without duplication, of:

            (i)   all  scheduled  installments  of principal due on the Mortgage
Loans  during the related Due Period and received or advanced by the Servicer on
or prior to the related Remittance Date;

            (ii)  the  principal   component  of  all   Condemnation   Proceeds,
Insurance Proceeds and Liquidation Proceeds during the related Prepayment Period
(in each case, net of remaining (I.E., not deducted from the Interest Remittance
Amount)  unreimbursed  expenses  incurred in connection  with a  liquidation  or
foreclosure and unreimbursed Advances, if any);

            (iii) all partial or full prepayments on the Mortgage Loans received
during the related Prepayment Period;

            (iv)  the principal component of all Substitution Adjustment Amounts
and Repurchase Prices; and

            (v)   the principal  component of the proceeds of any termination of
the Trust Fund.

reduced by remaining  amounts (I.E.,  not deducted from the Interest  Remittance
Amount)  in  reimbursement  for  Advances  previously  made with  respect to the
Mortgage  Loans and other  amounts as to which the  Servicer  is  entitled to be
reimbursed pursuant to this Agreement.

            PRIVATE CERTIFICATES: As specified in the Preliminary Statement.

            PROSPECTUS  SUPPLEMENT:  The Prospectus  Supplement,  dated July 23,
2002, relating to the Offered Certificates.

            PTCE 95-60: As defined in Section 5.02(b).

            PUD: Planned Unit Development.

            QUALIFIED  INSURER:  A  mortgage  guaranty  insurance  company  duly
qualified as such under the laws of the state of its principal place of business
and each state  having  jurisdiction  over such insurer in  connection  with the
insurance  policy issued by such insurer,  duly  authorized and licensed in such
states to transact a mortgage guaranty  insurance business in such states and to
write the insurance provided by the insurance policy issued by it, approved as a
FNMA- or  FHLMC-approved  mortgage  insurer  or having a claims  paying  ability
rating  of at  least  "AA"  or  equivalent  rating  by a  nationally  recognized
statistical  rating  organization.  Any  replacement  insurer  with respect to a
Mortgage Loan must have at least as high a claims paying  ability  rating as the
insurer it replaces had on the Closing Date.

                                       38
<PAGE>

            RATING  AGENCY:  Each  of  the  Rating  Agencies  specified  in  the
Preliminary  Statement.  If such  organization  or a  successor  is no longer in
existence,  "Rating  Agency"  shall be such  nationally  recognized  statistical
rating  organization,  or  other  comparable  Person,  as is  designated  by the
Depositor, notice of which designation shall be given to the Trustee. References
herein to a given rating or rating  category of a Rating  Agency shall mean such
rating category without giving effect to any modifiers.  For purposes of Section
10.05(b),  the  addresses for notices to each Rating Agency shall be the address
specified  therefor in the definition  corresponding  to the name of such Rating
Agency, or such other address as either such Rating Agency may hereafter furnish
to the Depositor and the Servicer.

            RECORD DATE:  With respect to any  Distribution  Date,  the close of
business on the Business  Day  immediately  preceding  such  Distribution  Date;
PROVIDED,  HOWEVER,  that for any  Certificate  issued in Definitive  Form,  the
Record Date shall be the close of business on the last Business Day of the month
immediately preceding such applicable Distribution Date.

            REFERENCE BANK: As defined in Section 4.04.

            REGULAR CERTIFICATES: As specified in the Preliminary Statement.

            REIMBURSEMENT AMOUNT: As of any Distribution Date, the sum of (a)(i)
all Insured  Payments  previously  received  by the  Trustee and all  Preference
Amounts previously paid by the Class A Certificate  Insurer and in each case not
previously  repaid to the  Class A  Certificate  Insurer  pursuant  to  Sections
6.05(a)(ii)  hereof plus (ii) interest  accrued on each such Insured Payment and
Preference  Amounts not  previously  repaid  calculated at the Late Payment Rate
from the date the Trustee  received the related  Insured  Payment or  Preference
Amounts were paid by the Class A Certificate Insurer and (b)(i) any amounts then
due and  owing to the  Class A  Certificate  Insurer  under  the  Insurance  and
Indemnity  Agreement  (excluding  the  Premium  Amount due on such  Distribution
Date), as certified to the Trustee by the Class A Certificate  Insurer plus (ii)
interest on such amounts at the rate  specified in the  Insurance  and Indemnity
Agreement.  The Class A  Certificate  Insurer  shall  notify the Trustee and the
Unaffiliated Seller of the amount of any Reimbursement Amount.

            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 Soldiers' and Sailors' Civil Relief Act of 1940, as amended,
and similar state laws.

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

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

            REMIC TRUST:  The segregated pool of assets  consisting of the Trust
Fund, exclusive of Prepayment Charges and the Excess Reserve Fund Account.

                                       39
<PAGE>

            REMITTANCE DATE: The 18th day (or if such 18th day is not a Business
Day, the first Business Day immediately preceding) of any month.

            REO DISPOSITION: The final sale by the Servicer of any REO Property.

            REO IMPUTED  INTEREST:  As to any REO Property,  for any period,  an
amount  equivalent  to interest (at the Mortgage  Rate net of the  Servicing Fee
Rate that would have been  applicable  to the related  Mortgage Loan had it been
outstanding) on the unpaid principal balance of the Mortgage Loan as of the date
of acquisition  thereof (as such balance is reduced  pursuant to Section 3.17 by
any income from the REO Property treated as a recovery of principal).

            REO  PROPERTY:  A  Mortgaged  Property  acquired  by the Trust  Fund
through  foreclosure  or  deed-in-lieu  of  foreclosure  in  connection  with  a
defaulted Mortgage Loan.

            REPRESENTATIVE: Morgan Stanley & Co. Incorporated, as representative
on behalf of itself, Lehman Brothers Inc. and Banc of America Securities LLC.

            REPURCHASE PRICE: With respect to any Mortgage Loan, an amount equal
to the sum of (i) the unpaid  principal  balance of such Mortgage Loan as of the
date of repurchase  and (ii) (x) if such Mortgage Loan is being  repurchased  by
the  Unaffiliated  Seller,  the sum of (A)  interest  on such  unpaid  principal
balance of such  Mortgage  Loan at the Mortgage  Rate from the last date through
which  interest has been paid and  distributed to the Trustee to the last day of
the  month in which  such  repurchase  occurs,  (B) all  unreimbursed  Servicing
Advances and (C) all expenses reasonably incurred by the Servicer,  the Trustee,
the Class A Certificate Insurer or the Unaffiliated  Seller, as the case may be,
in  respect  of a breach or  defect,  including,  without  limitation,  expenses
arising  out of any such  party's  enforcement  of the  Originator's  repurchase
obligation,  to the extent not included in (B), or (y) if such  Mortgage Loan is
being repurchased by the related  Originator,  all other amounts payable by such
Originator  in accordance  with the terms of the related  Mortgage Loan Purchase
Agreement.

            REQUEST  FOR  RELEASE:  The Request  for  Release  submitted  by the
Servicer to the Trustee, substantially in the form of Exhibit K.

            RESIDUAL CERTIFICATES: As specified in the Preliminary Statement.

            RESPONSIBLE OFFICER: When used with respect to the Trustee, any Vice
President,  any Assistant Vice President, any Assistant Secretary, any Assistant
Treasurer or any other officer of the Trustee customarily  performing  functions
similar to those performed by any of the above  designated  officers who at such
time shall be officers to whom, with respect to a particular matter, such matter
is referred  because of such  officer's  knowledge of and  familiarity  with the
particular   subject   and  who  shall  have  direct   responsibility   for  the
administration of this Agreement.

            RULE 144A LETTER: As defined in Section 5.02(b).

            SCHEDULED PAYMENT:  The scheduled monthly payment on a Mortgage Loan
due on any Due Date allocable to principal and/or interest on such Mortgage Loan
which, unless

                                       40
<PAGE>

otherwise  specified  herein,  shall give  effect to any  related  Debt  Service
Reduction  and any  Deficient  Valuation  that affects the amount of the monthly
payment due on such Mortgage Loan.

            SCHEDULED PRINCIPAL BALANCE:  With respect to any Mortgage Loan: (a)
as of the Cut-off Date, the outstanding  principal balance of such Mortgage Loan
as of such date, net of the principal portion of all unpaid Monthly Payments, if
any,  due on or  before  such  date;  (b) as of any Due Date  subsequent  to the
Cut-off Date up to and including  the Due Date in the calendar  month in 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  reduction  in the
principal  balance of such  Mortgage  Loan  incurred  with respect  thereto as a
result of a Deficient  Valuation occurring before such Due Date, but only to the
extent such reduction in principal balance 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.

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

            SENIOR  ENHANCEMENT  PERCENTAGE:  With  respect to any  Distribution
Date, the percentage obtained by dividing (x) the sum of (i) the aggregate Class
Certificate  Balance of the Subordinated  Certificates and (ii) the Subordinated
Amount  (in each  case  after  taking  into  account  the  distributions  of the
Principal  Distribution  Amount for such  Distribution  Date) by (y) the Current
Maximum Amount for that Distribution Date.

            SENIOR  SPECIFIED  ENHANCEMENT   PERCENTAGE:   As  of  any  date  of
determination, 38.00%.

            SERVICER:  Ocwen  Federal  Bank FSB, a federally  chartered  savings
bank, and its successors and assigns, in its capacity as servicer hereunder.

            SERVICER  TERMINATION  TEST: With respect to any Distribution  Date,
the  Servicer  Termination  Test will be failed with  respect to the Servicer if
either:

            (a)   the Cumulative Loss Percentage exceeds (i) in months 1 through
      24, 2.50%, (ii) in months 25 through 36, 4.00%, (iii) in months 37 through
      48, 5.25% and (iv) in month 49 and thereafter, 6.70%; or

            (b)   the quotient  (expressed  as a  percentage)  of (x) the Stated
      Principal  Balance of Mortgage Loans 60 days  Delinquent or more as of the
      end of the related Due Period  (including  Mortgage  Loans in  bankruptcy,
      foreclosure or represented by an REO

                                       41
<PAGE>

      Property) over (y) the aggregate Stated Principal  Balance of the Mortgage
      Loans as of the end of the related Due Period, exceeds 20%.

            SERVICING  ADVANCES:   The  reasonable   "out-of-pocket"  costs  and
expenses  (including  legal fees) incurred by the Servicer in the performance of
its servicing  obligations  in connection  with a default,  delinquency or other
unanticipated  event,  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 foreclosures and litigation,  in
respect  of  a  particular  Mortgage  Loan,  (iii)  the  management   (including
reasonable fees in connection therewith) and liquidation of any REO Property and
(iv) the  performance  of its  obligations  under  Section  3.01,  Section 3.09,
Section 3.13 and Section 3.15 hereof. The Servicer shall not be required to make
any Nonrecoverable Advances.

            SERVICING  FEE:  With  respect  to each  Mortgage  Loan  and for any
calendar month, an amount equal to one month's  interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which  interest on such Mortgage Loan accrues for such calendar  month.  Such
fee shall be payable monthly,  and shall be pro rated for any portion of a month
during which the Mortgage Loan is serviced by the Servicer under this Agreement.
The  Servicing  Fee is payable  solely  from,  the interest  portion  (including
recoveries  with  respect to interest  from  Liquidation  Proceeds  and proceeds
received  with  respect to REO  Properties,  to the extent  permitted by Section
3.11)  of such  Monthly  Payment  collected  by the  Servicer,  or as  otherwise
provided under Section 3.11.

            SERVICING FEE RATE:  With respect to each Mortgage  Loan,  0.50% per
annum.

            SERVICING  FILE:  With  respect  to each  Mortgage  Loan,  the  file
retained by the Servicer  consisting  of originals or copies of all documents in
the Mortgage File which are not  delivered to the Trustee in the Custodial  File
and copies of each of the other Mortgage Loan documents required to be delivered
by the related  Originator  pursuant to the terms of the related  Mortgage  Loan
Purchase Agreement.

            SERVICING  OFFICER:  Any  officer of the  Servicer  involved  in, or
responsible  for, the  administration  and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee by the Servicer on the Closing Date pursuant to this  Agreement,  as
such list may from time to time be amended.

            SIMILAR LAW: As defined in Section 5.02(b).

            SPECIFIED SUBORDINATED AMOUNT: With respect to any Distribution Date
prior to the  Stepdown  Date,  an  amount  equal to  1.25% of the  Maximum  Pool
Principal  Balance and with  respect to any  Distribution  Date on and after the
Stepdown  Date, an amount equal to 2.50% of the Current  Maximum Amount for that
Distribution  Date,  subject  to a minimum  amount  equal to the  Floor  Amount;
PROVIDED,  HOWEVER,  that if, on any  Distribution  Date,  a  Trigger  Event has
occurred,   the  Specified   Subordinated   Amount  shall  equal  the  Specified
Subordinated Amount for

                                       42
<PAGE>

the immediately preceding Distribution Date until the Distribution Date on which
a Trigger Event is no longer occurring.

            STANDARD & POOR'S: Standard & Poor's Ratings Services, a division of
the McGraw-Hill  Companies,  Inc. If Standard & Poor's is designated as a Rating
Agency in the  Preliminary  Statement,  for  purposes  of Section  10.05(b)  the
address for notices to Standard & Poor's  shall be Standard & Poor's,  55 Water,
New York, New York 10041,  Attention:  Residential Mortgage Surveillance Group -
Morgan Stanley ABS Capital I Inc. 2002-HE2,  or such other address as Standard &
Poor's may hereafter furnish to the Depositor and the Servicer.

            STARTUP DAY: The Closing Date.

            STATED  PRINCIPAL  BALANCE:  As  to  each  Mortgage  Loan,  (i)  the
principal  balance of the Mortgage  Loan at the Cut-off Date after giving effect
to payments of  principal  due on or before  such date,  to the extent  actually
received,  minus (ii) all amounts  previously  distributed  to the Trustee  with
respect to the related  Mortgage  Loan  representing  payments or  recoveries of
principal, including Advances in respect of scheduled payments of principal. For
purposes of any Distribution  Date, the Stated Principal Balance of any Mortgage
Loan will  give  effect to any  scheduled  payments  of  principal  received  or
advanced  prior to the related  Remittance  Date and any  unscheduled  principal
payments and other unscheduled principal collections received during the related
Prepayment Period.

            STEPDOWN DATE: The later to occur of (i) the earlier to occur of (a)
the Distribution  Date in August 2005 and (b) the Distribution Date on which the
aggregate Class Certificate  Balances of the Class A Certificates are reduced to
zero and (ii) the  first  Distribution  Date on  which  the  Senior  Enhancement
Percentage (calculated for this purpose only after taking into account scheduled
and  unscheduled  payments of principal on the Mortgage Loans on the last day of
the related Due Period but prior to any  applications of Principal  Distribution
Amount to the  Offered  Certificates  on the  applicable  Distribution  Date) is
greater than or equal to the Senior Specified Enhancement Percentage.

            SUBORDINATED  AMOUNT:  As of any Distribution  Date, the excess,  if
any,  of (a) the  Current  Maximum  Amount  for that  Distribution  Date on such
Distribution  Date over (b) the aggregate of the Class  Certificate  Balances of
the Class A and Subordinated  Certificates as of such  Distribution  Date (after
giving  effect  to the  payment  of the  Principal  Remittance  Amount  on  such
Certificates on such Distribution Date).

            SUBORDINATED   CERTIFICATES:   As  specified   in  the   Preliminary
Statement.

            SUBORDINATION DEFICIENCY: With respect to any Distribution Date, the
excess,  if any, of (a) the  Specified  Subordinated  Amount  applicable to such
Distribution   Date  over  (b)  the  Subordinated   Amount  applicable  to  such
Distribution Date.

            SUBORDINATION  REDUCTION  AMOUNT:  With respect to any  Distribution
Date,  an amount equal to the lesser of (a) the Excess  Subordinated  Amount and
(b) the Total Monthly Excess Spread.

            SUBSERVICER: As defined in Section 3.02(a).

                                       43
<PAGE>

            SUBSERVICING ACCOUNT: As defined in Section 3.08.

            SUBSERVICING AGREEMENT: As defined in Section 3.02 hereof.

            SUBSEQUENT  CUT-OFF DATE: As to any Subsequent  Mortgage Loans,  the
date specified in the Addition Notice delivered in connection  therewith,  which
date shall be the close of  business on the first day of the month in which such
Subsequent Mortgage Loans will be conveyed to the Trust Fund.

            SUBSEQUENT MORTGAGE LOANS: The Mortgage Loans hereafter  transferred
and assigned to the Trust Fund pursuant to Section 2.01(d),  each of which shall
have been  purchased by the  Unaffiliated  Seller under a Mortgage Loan Purchase
Agreement.

            SUBSEQUENT TRANSFER: The transfer and assignment by the Depositor to
the Trust of the Subsequent Mortgage Loans pursuant to the terms hereof.

            SUBSEQUENT  TRANSFER  AGREEMENT:  A subsequent transfer agreement in
substantially the form of Exhibit L.

            SUBSEQUENT  TRANSFER  DATE:  The  Business Day on which a Subsequent
Transfer occurs.

            SUBSTITUTE  MORTGAGE  LOAN:  A  Mortgage  Loan  substituted  by  the
Unaffiliated  Seller or an Originator for a Deleted  Mortgage Loan in accordance
with  the  terms  of  this  Agreement  or the  related  Mortgage  Loan  Purchase
Agreement,  which must,  on the date of such  substitution,  as  confirmed  in a
Request for Release,  substantially  in the form of Exhibit K, (i) have a Stated
Principal  Balance,  after  deduction of the principal  portion of the Scheduled
Payment  due in the month of  substitution,  not in excess of, and not more than
10% less than, the Stated  Principal  Balance of the Deleted Mortgage Loan; (ii)
be  accruing  interest  at a rate no lower  than and not more  than 1% per annum
higher than, that of the Deleted Mortgage Loan; (iii) have a Loan-to-Value Ratio
no higher than that of the Deleted  Mortgage Loan; (iv) have a remaining term to
maturity  no  greater  than  (and not more  than one year less than that of) the
Deleted Mortgage Loan; and (v) comply with each  representation and warranty set
forth in Sections  3.01(f) and (h) of the  Unaffiliated  Seller's  Agreement and
each  representation  and warranty  set forth in the  applicable  Mortgage  Loan
Purchase Agreement.

            SUBSTITUTION  ADJUSTMENT  AMOUNT:  The meaning ascribed to such term
pursuant to Section 2.03.

            TAX SERVICE CONTRACT: As defined in Section 3.09(a).

            TELERATE PAGE 3750:  The display page currently so designated on the
Bridge  Telerate  Service (or such other page as may  replace  that page on that
service for displaying comparable rates or prices).

            TOTAL MONTHLY EXCESS SPREAD: As to any Distribution  Date, an amount
equal  to the  excess  if  any,  of (i) the  interest  collected  (prior  to the
Remittance  Date) or advanced  on the  Mortgage  Loans for Due Dates  during the
related Due Period (net of Expense Fees, Premium

                                       44
<PAGE>

Amount  and  Reimbursement  Amounts,  if any) over (ii) the sum of the  interest
payable to the Classes of Floating Rate Certificates and Class A-IO Certificates
on such Distribution Date.

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

            TRANSFER AFFIDAVIT: As defined in section 5.02(b).

            TRANSFEROR CERTIFICATE: As defined in Section 5.02(b).

            TRIGGER EVENT: The occurrence of either a Delinquency  Trigger Event
or a Loss Trigger Event.

            TRUST FUND: The corpus of the trust created hereunder  consisting of
(i) the  Mortgage  Loans and all  interest  and  principal  received  on or with
respect  thereto after the related  Cut-off Date,  other than such amounts which
were due on the Mortgage Loans on or before the related  Cut-off Date; (ii) each
Account, and all amounts deposited therein pursuant to the applicable provisions
of this  Agreement;  (iii)  property  that secured a Mortgage  Loan and has been
acquired by  foreclosure,  deed-in-lieu  of foreclosure  or otherwise;  (iv) all
rights of the Depositor  against the Unaffiliated  Seller under the Unaffiliated
Seller's  Agreement;  (v) all rights of the  Depositor  against each  Originator
under the related Assignment and Recognition  Agreement and the related Mortgage
Loan  Purchase  Agreement;  (vi) the  Class A  Insurance  Policy;  (vii) the Cap
Agreement; and (viii) all proceeds of the conversion,  voluntary or involuntary,
of any of the foregoing.

            TRUSTEE:  Deutsche  Bank National  Trust Company and its  successors
and, if a successor trustee is appointed hereunder, such successor.

            TRUSTEE FEE: As to any Distribution Date, an amount equal to the sum
of (a) the product of  one-twelfth  of the Trustee Fee Rate times the sum of (i)
the aggregate Stated Principal  Balances of the Mortgage Loans at the end of the
prior Due Period,  and (ii) the amount on deposit in the Pre-Funding  Account at
the end of such  prior  Due  Period  and (b)  any  reasonable  compensation  and
expenses  of a separate  trustee or  co-trustee  to be paid  pursuant to Section
8.10(d).

            TRUSTEE FEE RATE:  With respect to each Mortgage  Loan,  0.0065% per
annum.

            UNAFFILIATED   SELLER'S   AGREEMENT:   The   Unaffiliated   Seller's
Agreement,  dated as of the date hereof,  among the Unaffiliated  Seller and the
Depositor  relating  to the sale of the  Mortgage  Loans  from the  Unaffiliated
Seller to the Depositor.

            UNPAID INTEREST  AMOUNTS:  As of any Distribution Date and any Class
of  Certificates,  the sum of (a)  the  excess  of (i)  the  sum of the  Accrued
Certificate  Interest  Distribution  Amount for such  Distribution  Date and any
portion of such  Accrued  Certificate  Interest  Distribution  Amount from prior
Distribution  Dates remaining unpaid over (ii) the amount in respect of interest
on such Class of Certificates actually distributed on the preceding Distribution
Date and (b) 30 days'  interest  on such excess at the  applicable  Pass-Through
Rate (to the extent permitted by applicable law).

                                       45
<PAGE>

            UNPAID   REALIZED  LOSS  AMOUNT:   With  respect  to  any  Class  of
Subordinated  Certificates and as to any Distribution Date, is the excess of (i)
Applied  Realized  Loss  Amounts with respect to such Class over (ii) the sum of
all  distributions  in reduction of such  Applied  Realized  Loss Amounts on all
previous  Distribution Dates. Any amounts distributed to a Class of Subordinated
Certificates  in respect of any Unpaid  Realized Loss Amount will not be applied
to reduce the Class Certificate Balance of such Class.

            UPPER  TIER  REGULAR  INTEREST:  As  described  in  the  Preliminary
Statement.

            UPPER TIER REMIC: As described in the Preliminary Statement.

            U.S.  PERSON:  Shall  mean (i) a citizen or  resident  of the United
States; (ii) a corporation (or entity treated as a corporation for tax purposes)
created or organized in the United States or under the laws of the United States
or of any state thereof,  including, for this purpose, the District of Columbia;
(iii) a  partnership  (or entity  treated  as a  partnership  for tax  purposes)
organized in the United  States or under the laws of the United States or of any
state thereof,  including,  for this purpose,  the District of Columbia  (unless
provided otherwise by future Treasury regulations);  (iv) an estate whose income
is includible  in gross income for United States income tax purposes  regardless
of its source;  or (v) 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 U.S.  Persons have  authority to control all  substantial  decisions of the
trust.  Notwithstanding the last clause of the preceding sentence, to the extent
provided in Treasury  regulations,  certain  trusts in  existence  on August 20,
1996,  and treated as U.S.  Persons prior to such date, may elect to continue to
be U.S. Persons.

            VOTING  RIGHTS:  The  portion  of the  voting  rights  of all of the
Certificates  which  is  allocated  to  any  Certificate.  As  of  any  date  of
determination,  (a) 1% of all Voting  Rights  shall be  allocated to the Class X
Certificates,  if any (such Voting  Rights to be allocated  among the holders of
Certificates of each such Class in accordance with their  respective  Percentage
Interests),  (b) 1% of all  Voting  Rights  shall be  allocated  to the  Class P
Certificates,  if any,  (c) 2% of all Voting  Rights  shall be  allocated to the
Class A-IO Certificates only during the first 36 Distribution Dates, and (d) the
remaining  Voting  Rights  shall be  allocated  among  Holders of the  remaining
Classes of  Certificates  in  proportion  to the  Certificate  Balances of their
respective Certificates on such date.

            WAC CAP: With respect to the Mortgage  Loans as of any  Distribution
Date, the product of (i) the weighted average of the Adjusted Net Mortgage Rates
then in effect on the beginning of the related Due Period on the Mortgage Loans,
minus (a) the Class A-IO WAC Rate and (b) the Premium Rate, and (ii) a fraction,
the numerator of which is 30 and the  denominator  of which is the actual number
of days in the Interest Accrual Period related to such Distribution Date.

                                       46
<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

            Section 2.01. CONVEYANCE OF MORTGAGE LOANS.

            (a)   The  Depositor,  concurrently  with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the
Trustee for the benefit of the  Certificateholders,  without  recourse,  all the
right,  title and interest of the Depositor in and to the Trust Fund, other than
any Subsequent  Mortgage Loans,  which will be so sold,  transferred,  assigned,
set-over and conveyed on the related Subsequent Transfer Date.

            (b)   In  connection  with  the  transfer  and  assignment  of  each
Mortgage Loan, the  Unaffiliated  Seller has delivered or caused to be delivered
to the Trustee for the benefit of the Certificateholders the following documents
or  instruments  with respect to each  Mortgage  Loan so assigned (to the extent
such  documents  or  instruments  are  required to be  delivered  by the related
Originator under each Mortgage Loan Purchase Agreement):

            (i)   the   original   Mortgage   Note   bearing   all   intervening
      endorsements evidencing a complete chain of assignment from the originator
      to the  related  Originator,  endorsed  "Pay to the  order  of  _________,
      without  recourse" and signed in the name of the related  Originator by an
      authorized officer. To the extent that there is no room on the face of the
      Mortgage Notes for  endorsements,  the  endorsement may be contained on an
      allonge,  if state law so allows  and the  Trustee  is so  advised  by the
      related  Originator  that state law so allows.  If the  Mortgage  Loan was
      acquired  by  an  Originator  in a  merger,  the  endorsement  must  be by
      "[related Originator],  successor by merger to [name of predecessor]".  If
      the Mortgage  Loan was acquired or  originated  by the related  Originator
      while doing  business  under  another  name,  the  endorsement  must be by
      "[related Originator], formerly known as [previous name]";

            (ii)  the original of any guarantee  executed in connection with the
      Mortgage Note;

            (iii) the original Mortgage with evidence of recording  thereon.  If
      in connection with any Mortgage Loan, the original  Mortgage with evidence
      of  recording  thereon  can not be  delivered  on or prior to the  related
      Delivery  Date  because of a delay caused by the public  recording  office
      where such  Mortgage has been  delivered for  recordation  or because such
      Mortgage has been lost or because such public recording office retains the
      original recorded Mortgage,  then the related  Originator,  as required by
      the  terms  of the  related  Mortgage  Loan  Purchase  Agreement,  will be
      required to deliver to the Trustee a photocopy  of such  Mortgage  and (i)
      the original  recorded  Mortgage or a copy of such  Mortgage  certified by
      such  public  recording  office  to be a true  and  complete  copy  of the
      original  recorded  Mortgage  promptly upon receipt thereof by the related
      Originator  (but in any event  within 360 days from the  related  Delivery
      Date); or (ii) in the case of a Mortgage where a public  recording  office
      retains the original  recorded Mortgage or in the case where a Mortgage is
      lost after recordation in a public recording

                                       47
<PAGE>

      office, a copy of such Mortgage  certified by such public recording office
      to be a true and complete copy of the original recorded Mortgage;

            (iv)   the originals of all assumption,  modification, consolidation
      or extension agreements, if any, with evidence of recording thereon;

            (v)    the original Assignment  of Mortgage for each  Mortgage  Loan
      endorsed in blank, in form and substance acceptable for recording;

            (vi)   the  originals of all  intervening  assignments  of mortgage,
      evidencing  a complete  chain of  assignment  from the  originator  to the
      related  Originator,  with  evidence of  recording  thereon or if any such
      intervening assignment has not been returned from the applicable recording
      office or has been lost or if such  public  recording  office  retains the
      original recorded assignments of mortgage;

            (vii)  the original  or  duplicate  lender's  title  policy  and all
      riders_thereto  or, if such  original is  unavailable,  either an original
      title binder or an original or copy of the title commitment, and if copies
      then certified to be true and complete by the title company; and

            (viii) the  security   agreement,  chattel  mortgage  or  equivalent
      document executed in connection with the Mortgage, if any.

            From  time to  time,  the  Servicer  shall  forward  to the  Trustee
additional original documents,  additional  documents  evidencing an assumption,
modification,  consolidation  or  extension of a Mortgage  Loan  approved by the
Servicer,  in  accordance  with the terms of this  Agreement.  All such mortgage
documents  held by the Trustee as to each  Mortgage  Loan shall  constitute  the
"CUSTODIAL FILE".

            On or prior to the related  Delivery Date, the  Unaffiliated  Seller
shall  deliver,  or cause the  related  Originator  to  deliver,  to the Trustee
Assignments of Mortgages,  in blank, for each Mortgage Loan. If an Assignment of
Mortgage is required to be recorded  pursuant to the terms  hereof,  the Trustee
shall  promptly  forward  such  Assignments  of  Mortgage  to the  Servicer  for
recording. No later than thirty (30) Business Days following the date of receipt
by the Servicer of the recording information for a Mortgage,  the Servicer shall
promptly  submit or cause to be submitted for  recording,  at the expense of the
Unaffiliated  Seller (the  Unaffiliated  Seller to seek  reimbursement  from the
related Originator under the applicable Mortgage Loan Purchase Agreement) in the
appropriate public office for real property records, each Assignment of Mortgage
referred to in Section 2.01(b)(v).  Notwithstanding the foregoing,  however, for
administrative  convenience and  facilitation of servicing and to reduce closing
costs,  the  Assignment  of Mortgage  shall not be required to be completed  and
submitted  for  recording  with  respect to any  Mortgage  Loan  (other than any
Mortgage  Loan  where the  Mortgaged  Property  is  located  in any state  where
recordation  is required by any Rating  Agency to obtain the initial  ratings on
the Certificates,  which states as of the date hereof, are Florida and Maryland)
until the earliest to occur of (i) direction by Class A  Certificate  Insurer or
(ii) upon a determination  by the Servicer that recordation is necessary for the
enforcement  of rights under,  or  satisfaction  or  assignment  of, the related
Mortgage, at which time, the Servicer shall record any such

                                       48
<PAGE>

Assignment of Mortgage in accordance with the terms hereof. If any Assignment of
Mortgage is required to be recorded  pursuant to the terms hereof,  the Mortgage
shall be assigned from the related Originator,  to "Deutsche Bank National Trust
Company,  as trustee under the Pooling and Servicing  Agreement dated as of July
1, 2002,  Morgan Stanley ABS Capital I Inc.  Trust  2002-HE2." In the event that
any such assignment is lost or returned  unrecorded because of a defect therein,
the Unaffiliated Seller shall cause the related Originator to promptly prepare a
substitute  assignment  to cure  such  defect  and  thereafter  cause  each such
assignment to be duly recorded.  In the event the  Unaffiliated  Seller does not
pay or  otherwise  reimburse  the  Servicer  for any of the  foregoing  costs of
recording any such Assignment of Mortgage,  the Servicer shall be entitled to be
reimbursed  from the Trust  Fund  from  amounts  on  deposit  in the  Collection
Account. In the event the related Originator fails to reimburse the Unaffiliated
Seller  for the  recording  costs  described  above,  upon  receipt  of  written
direction  from the  Unaffiliated  Seller,  the Trustee  shall assign its rights
under the  applicable  Mortgage Loan Purchase  Agreement  solely with respect to
payment of such expenses to the Unaffiliated Seller.

            On or prior to the  Closing  Date,  the  Unaffiliated  Seller  shall
deliver  to the  Trustee  a copy of the Data  Tape  Information  in  electronic,
machine readable medium in a form mutually acceptable to the Trustee. Within ten
days of the Closing Date,  the  Unaffiliated  Seller shall deliver a copy of the
complete Mortgage Loan Schedule to the Trustee.

            In the event that such  original or copy of any  document  submitted
for recordation to the appropriate  public  recording office is not so delivered
to the Trustee  within 90 days  following the related  Delivery Date, and in the
event that the Originator does not cure such failure within 30 days of discovery
or receipt of written  notification  of such  failure  from the  Depositor,  the
Trustee or the Class A Certificate Insurer, the Trustee shall notify the related
Originator to repurchase the Mortgage Loan pursuant to the related Mortgage Loan
Purchase Agreement,  upon the request of the Depositor, the Trustee or the Class
A Certificate  Insurer,  at the Repurchase  Price and in the manner specified in
Section 2.03. The foregoing  repurchase  provision  shall not apply in the event
that the related Originator cannot deliver such original or copy of any document
submitted for recordation to the appropriate  public recording office within the
specified period due to a delay caused by the recording office in the applicable
jurisdiction;  PROVIDED that the related Originator shall instead be required to
deliver a  recording  receipt of such  recording  office  or, if such  recording
receipt is not available, an officer's certificate of a servicing officer of the
Originator confirming that such document has been accepted for recording.

            (c)   PURCHASE AND SALE OF SUBSEQUENT MORTGAGE LOANS.

            (i)   Subject to the  satisfaction  of the  conditions  set forth in
      paragraph  (ii)  below,  and upon the  Trustee's  receipt of a  Subsequent
      Transfer Agreement executed by all other parties thereto, in consideration
      of the Trustee's delivery on the related  Subsequent  Transfer Dates to or
      upon the order of the  Depositor  of all or a portion  of the  balance  of
      funds in the  Pre-Funding  Account,  the Depositor shall on any Subsequent
      Transfer Date sell,  transfer,  assign, set over and convey to the Trustee
      without  recourse but subject to terms and  provisions of this  Agreement,
      all of the  right,  title  and  interest  of the  Depositor  in and to the
      Subsequent Mortgage Loans, including the outstanding

                                       49
<PAGE>

      principal of and interest due on such Subsequent  Mortgage Loans,  and all
      other  related  assets  included  or to be included in the Trust Fund with
      respect thereto.

            The amount released from the  Pre-Funding  Account with respect to a
transfer of Subsequent Mortgage Loans shall be one-hundred percent (100%) of the
aggregate Stated Principal Balances as of the related Subsequent Cut-off Date of
the Subsequent Mortgage Loans so transferred.

            (ii)  The  Subsequent  Mortgage  Loans  and the other  property  and
      rights  related  thereto   described  in  paragraph  (a)  above  shall  be
      transferred by the Depositor to the Trust Fund only upon the  satisfaction
      of each of the following  conditions on or prior to the related Subsequent
      Transfer Date:

                  (a)   the   Unaffiliated   Seller  shall  have   provided  the
            Depositor,  the  Trustee,  the  Rating  Agencies  and  the  Class  A
            Certificate  Insurer  with a timely  Addition  Notice,  which  shall
            include a Mortgage Loan Schedule,  listing the  Subsequent  Mortgage
            Loans and shall  have  provided  any  other  information  reasonably
            requested by any of the  foregoing  with  respect to the  Subsequent
            Mortgage Loans;

                  (b)   the  Servicer  shall have  deposited  in the  Collection
            Account  all   collections  of  (x)  principal  in  respect  of  the
            Subsequent  Mortgage  Loans  received  and  due  after  the  related
            Subsequent  Cut-off  Date  and (y)  interest  due on the  Subsequent
            Mortgage Loans after the related Subsequent Cut-off Date;

                  (c)   as of each  Subsequent  Transfer Date, the  Unaffiliated
            Seller was not insolvent nor will be made insolvent by such transfer
            nor is the Unaffiliated Seller aware of any pending insolvency;

                  (d)   such   addition   will  not  result  in  a   "prohibited
            transaction" (as defined in the REMIC Provisions) for any REMIC held
            by the Trust  Fund,  and will not cause any REMIC  held by the Trust
            Fund to cease to qualify as a REMIC,  as  evidenced by an Opinion of
            Counsel with respect to such matters (which may be a blanket opinion
            dated the Closing Date);

                  (e)   the Pre-Funding Period shall not have terminated;

                  (f)   the  Unaffiliated  Seller  shall have  delivered  to the
            Trustee  an  executed  Assignment  and  Recognition  Agreement  with
            respect to each related  Originator of Subsequent  Mortgage Loans to
            be added to the Trust Fund on such Subsequent Transfer Date;

                  (g)   the  Unaffiliated  Seller  shall have  delivered  to the
            Trustee an Officer's Certificate confirming the satisfaction of each
            condition  precedent  specified  in  this  paragraph  (ii),  and the
            Opinion of Counsel referenced in clause (d); and

                                       50
<PAGE>

                  (h)   the  Unaffiliated  Seller and the  Depositor  shall have
            delivered to the Trustee an executed  copy of a Subsequent  Transfer
            Agreement, substantially in the form of Exhibit L hereto.

            (iii) The  obligation  of the Trust Fund to purchase the  Subsequent
      Mortgage   Loans  on  a  Subsequent   Transfer  Date  is  subject  to  the
      requirements  that,  following  the purchase of such  Subsequent  Mortgage
      Loans, and with respect to the entire mortgage loan pool:

                  (a)   no more than 2.50% may be second liens;

                  (b)   no more than 25.00% may be Fixed Rate Mortgage Loans;

                  (c)   the weighted  average  original term to maturity may not
            exceed 360 months;

                  (d)   the weighted  average  gross  Mortgage  Rate must not be
            less than 8.75%, or more than 9.25%;

                  (e)   the  weighted  average LTV must not exceed  81%,  and no
            more than  48.00% of the  Mortgage  Loans may have LTVs in excess of
            80%;

                  (f)   no Mortgage Loan may have a Stated Principal  Balance in
            excess of $1,000,000 as of the related Cut-off Date;

                  (g)   at  least  90.00%  of  the  Mortgage   Loans  must  have
            prepayment penalties;

                  (h)   the weighted  average  Gross  Margin for the  Adjustable
            Rate Mortgage Loans must be at least 6.20%; and

                  (i)   the weighted  average  credit score (FICO score) must be
            at least 605, and not more than 2.00% of the Mortgage Loans may have
            credit scores below 500.

            Any of the  above  requirements  may be waived  or  modified  in any
respect by the Class A Certificate Insurer.

            (iv)  In  connection   with  the  transfer  and  assignment  of  the
      Subsequent  Mortgage  Loans,  the  Unaffiliated  Seller shall  satisfy the
      document delivery requirements set forth in Section 2.01(b).

            Section 2.02 ACCEPTANCE BY THE TRUSTEE OF THE MORTGAGE LOANS.

            The Trustee shall acknowledge, on each Delivery Date, receipt of the
documents identified in the Initial  Certification in the form annexed hereto as
Exhibit F, and declares that it holds and will hold such documents and the other
documents  delivered to it pursuant to Section  2.01,  and that it holds or will
hold such other assets as are included in the Trust Fund, in trust for

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<PAGE>

the exclusive use and benefit of all present and future  Certificateholders  and
the Class A Certificate  Insurer. The Trustee acknowledges that it will maintain
possession  of the related  Mortgage  Notes in the State of  California,  unless
otherwise permitted by the Rating Agencies and the Class A Certificate Insurer.

            In  connection  with each  Delivery,  the Trustee  shall deliver via
facsimile (with original to follow the next Business Day) to the Depositor,  the
Unaffiliated Seller and the Class A Certificate Insurer an Initial Certification
on or prior to the  related  Delivery  Date,  certifying  receipt of the related
Mortgage Notes and  Assignments of Mortgage for each related  Mortgage Loan. The
Trustee  shall  not be  responsible  to  verify  the  validity,  sufficiency  or
genuineness of any document in any Custodial File.

            Within 120 days after the related  Delivery  Date, the Trustee shall
ascertain  that  all  documents  required  to be  delivered  to it  are  in  its
possession,  and shall deliver to the Depositor, the Unaffiliated Seller and the
Class A Certificate Insurer a Final Certification to the effect that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan specifically  identified in such certification
as an  exception  and not  covered  by such  certification):  (i) all  documents
required to be delivered to it are in its  possession;  (ii) such documents have
been reviewed by it and appear regular on their face and relate to such Mortgage
Loan; (iii) based on its examination and only as to the foregoing documents, the
information  set forth in items (1), (2) and (18) of the Mortgage  Loan Schedule
and  items  (1),  (9) and  (17) of the Data  Tape  Information  respecting  such
Mortgage  Loan is  correct;  and (iv) each  Mortgage  Note has been  endorsed as
provided in Section 2.01 of this Agreement. The Trustee shall not be responsible
to verify the  validity,  sufficiency  or  genuineness  of any  document  in any
Custodial File. Upon receipt of such Final Certification,  if the Depositor, the
Unaffiliated  Seller  or the Class A  Certificate  Insurer  determines  that any
noncompliance  identified  by the  Trustee  is a breach of a  representation  or
warranty  relating to such Mortgage Loan , such party shall give written  notice
to the Trustee thereof.

            The Trustee shall retain  possession  and custody of each  Custodial
File in  accordance  with and  subject  to the  terms and  conditions  set forth
herein.  The Servicer shall promptly deliver to the Trustee,  upon the execution
or receipt  thereof,  the  originals  of such  other  documents  or  instruments
constituting the Custodial File as come into the possession of the Servicer from
time to time.

            Section  2.03  REPRESENTATIONS,  WARRANTIES  AND  COVENANTS  OF  THE
UNAFFILIATED SELLER AND THE SERVICER.

            (a) The Servicer hereby makes the representations and warranties set
      forth in Schedule II hereto to the  Depositor  and the Trustee,  as of the
      Closing Date.

            (b)   CDC Mortgage Capital Inc., in its capacity as the Unaffiliated
      Seller,  hereby  makes the  representations  and  warranties  set forth in
      Schedule III hereto, as of the Closing Date.

            (c) It is understood and agreed by the Servicer and the Unaffiliated
      Seller that the  representations  and warranties set forth in Section 2.03
      shall survive the transfer of the

                                       52
<PAGE>

      Mortgage  Loans to the Trust  Fund,  and shall inure to the benefit of the
      Trust Fund notwithstanding any restrictive or qualified endorsement on any
      Mortgage Note or Assignment of Mortgage or the  examination  or failure to
      examine any Mortgage File.  Upon  discovery by any of the  Depositor,  the
      Unaffiliated  Seller, the Class A Certificate  Insurer, the Trustee or the
      Servicer of a breach by the  Unaffiliated  Seller of any of the  foregoing
      representations or any of the representations and warranties made pursuant
      to Sections 3.01(f) and (h) of the Unaffiliated  Seller's  Agreement or by
      any Originator of the  representations and warranties made pursuant to the
      related Assignment and Recognition  Agreement,  the party discovering such
      breach shall give prompt written notice to the others.

            (d)   Within 90 days of the earlier of either discovery by or notice
      to the Unaffiliated  Seller of any breach of a representation  or warranty
      set forth in Section 3.01(f) or (h) of the Unaffiliated Seller's Agreement
      that  materially and adversely  affects the value of the Mortgage Loans or
      the  interest  of the  Trustee,  the Class A  Certificate  Insurer  or the
      Certificateholders  therein,  the  Unaffiliated  Seller shall use its best
      efforts to cure such breach in all material  respects  and, if such breach
      cannot be remedied,  the  Unaffiliated  Seller  shall,  (i) if such 90 day
      period  expires prior to the second  anniversary  of the related  Delivery
      Date,  remove such Mortgage Loan from the Trust Fund and substitute in its
      place a  Substitute  Mortgage  Loan,  in the  manner  and  subject  to the
      conditions  set  forth  in this  Section  2,03;  or (ii)  repurchase  such
      Mortgage Loan at the Repurchase Price;  PROVIDED,  HOWEVER,  that any such
      substitution  pursuant  to (i) above  shall not be  effected  prior to the
      delivery  to the  Trustee of the  Opinion of Counsel  required  by Section
      2.05,  if any,  and a Request  for  Release  substantially  in the form of
      Exhibit K, and the Mortgage File for any such Substitute Mortgage Loan

            With  respect  to  any  Substitute   Mortgage  Loan  or  Loans,  the
Unaffiliated  Seller  shall  deliver  to the  Trustee  for  the  benefit  of the
Certificateholders  the Mortgage Note, the Mortgage,  the related  Assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.01,  with the Mortgage Note endorsed and the Mortgage  assigned as required by
Section  2.01.  No  substitution  is permitted to be made in any calendar  month
after the Determination Date for such month. Scheduled Payments due with respect
to Substitute Mortgage Loans in the Due Period of substitution shall not be part
of the Trust Fund and will be  retained by the  related  Originator  on the next
succeeding Distribution Date. For the Due Period of substitution,  distributions
to  Certificateholders  will  include  the  monthly  payment  due on any Deleted
Mortgage Loan for such Due Period and thereafter the related Originator shall be
entitled to retain all  amounts  received  in respect of such  Deleted  Mortgage
Loan.

            For any month in which the  Unaffiliated  Seller  substitutes one or
more  Substitute  Mortgage  Loans for one or more Deleted  Mortgage  Loans,  the
Servicer will  determine  the amount (if any) by which the  aggregate  principal
balance of all such Substitute  Mortgage Loans as of the date of substitution is
less than the aggregate  Stated  Principal  Balance of all such Deleted Mortgage
Loans  (after  application  of the  scheduled  principal  portion of the monthly
payments due in the Due Period of substitution).  The Unaffiliated  Seller shall
deposit the amount of such shortage (the "SUBSTITUTION ADJUSTMENT AMOUNT") plus,
an amount equal to the  aggregate of any  unreimbursed  Advances and accrued and
unpaid  Servicing  Fees with  respect to such  Deleted  Mortgage  Loans into the
Collection Account on or before the Remittance Date for the Distribution Date in
the month  succeeding the calendar month during which the related  Mortgage Loan
became required to be purchased or replaced hereunder.

                                       53
<PAGE>

            (e)   Upon  discovery  that any  document  does not comply  with the
      requirements set forth in clauses (i) through (iv) of the Trustee's review
      of the  Custodial  Files  pursuant  to Section  2.02 or receipt of written
      notice of a breach of a representation and warranty or written notice that
      a Mortgage  Loan does not  constitute  a "qualified  mortgage"  within the
      meaning of  Section  860G(a)(3)  of the Code,  the  Trustee  shall in turn
      promptly  notify the applicable  Originator  (with a copy to the Servicer,
      the Class A Certificate Insurer and the Unaffiliated Seller) in writing of
      such non compliance or breach and request that the related Originator cure
      such non  compliance  or breach  within  the time  period set forth in the
      applicable  Mortgage Loan Purchase Agreement (but in any event,  within 60
      days  from  the  date  the  related  Originator  is  notified  of such non
      compliance or breach) and if the related Originator does not cure such non
      compliance  or breach in all material  respects  during such  period,  the
      Trustee shall notify such Originator to repurchase such Mortgage Loan from
      the Trust Fund at the Repurchase  Price, and such repurchase must occur no
      later than the 90th day following the  Trustee's  original  notice of such
      noncompliance  or breach if such  noncompliance  or breach is a failure of
      the Mortgage Loan to constitute a "qualified  mortgage" within the meaning
      of Section 860G(a)(3) of the Code.

            (f)   Upon delivery of the Final  Certification with respect to each
      Mortgage  Loan,  the Trustee will notify the related  Originator  within 5
      Business Days of such delivery of any missing documents from the Custodial
      File and if the related Originator does not deliver such missing documents
      within 60 days from the date the  related  Originator  is notified of such
      noncompliance  or breach,  the Trustee  shall  notify such  Originator  to
      repurchase such Mortgage Loan from the Trust Fund at the Repurchase Price.

            (g)   Based  solely on  information  received  with  respect  to any
      Substitute  Mortgage  Loan from the  Unaffiliated  Seller  or the  related
      Originator,  as  applicable,  the Servicer  shall amend the Mortgage  Loan
      Schedule  to reflect  the removal of such  Deleted  Mortgage  Loan and the
      substitution  of the  Substitute  Mortgage  Loan or Loans and the Servicer
      shall deliver the amended Mortgage Loan Schedule to the Trustee. Upon such
      substitution,  the  Substitute  Mortgage Loan or Loans shall be subject to
      the terms of this Agreement in all respects,  and the Unaffiliated  Seller
      shall be deemed to have made with respect to such Substitute Mortgage Loan
      or  Loans,  as of  the  date  of  substitution,  the  representations  and
      warranties made pursuant to Sections  3.01(f) and (h) of the  Unaffiliated
      Seller's  Agreement  with  respect to such  Mortgage  Loan.  Upon any such
      substitution  and the  deposit  to the  Collection  Account  of the amount
      required to be deposited  therein in connection with such  substitution as
      described  in the  following  paragraph,  the  Trustee  shall  release the
      Mortgage File relating to such Deleted  Mortgage Loan to the  Unaffiliated
      Seller or the related  Originator,  as  applicable,  and shall execute and
      deliver at the Unaffiliated Seller's or related Originator's direction, as
      applicable,  such  instruments of transfer or assignment  prepared by such
      party, in each case without recourse,  as shall be necessary to vest title
      in the Unaffiliated Seller or the related Originator,  or its designee, as
      applicable,   the  Trustee's   interest  in  any  Deleted   Mortgage  Loan
      substituted for pursuant to this Section 2.03.

            (h)   In the  event  that the  Unaffiliated  Seller  or the  related
      Originator,  as  applicable,  shall have  repurchased a Mortgage Loan, the
      Repurchase  Price therefor  shall be deposited in the  Collection  Account
      pursuant  to  Section  3.10  on or  before  the  Remittance  Date  for the
      Distribution  Date in the  month  following  the  month  during  which the
      Unaffiliated  Seller or the  related  Originator,  as  applicable,  became
      obligated hereunder to repurchase or replace

                                       54
<PAGE>

      such  Mortgage  Loan and upon such deposit of the  Repurchase  Price,  the
      delivery of the Opinion of Counsel required by Section 2.05 and receipt of
      a Request for Release in the form of Exhibit K hereto,  the Trustee  shall
      release  the  related  Custodial  File to such  Person as  directed by the
      Servicer,  and the Trustee  shall  execute  and  deliver at such  Person's
      direction  such  instruments  of transfer or  assignment  prepared by such
      Person, in each case without  recourse,  as shall be necessary to transfer
      title from the Trustee.  It is understood  and agreed that the  obligation
      under this  Agreement  of any Person to cure,  repurchase  or replace  any
      Mortgage  Loan as to which a breach has occurred and is  continuing  shall
      constitute  the sole remedy  against such Persons  respecting  such breach
      available to Certificateholders,  the Depositor,  the Unaffiliated Seller,
      the Class A  Certificate  Insurer or the Trustee on their  behalf.  In the
      event such required  repurchase or replacement does not occur, the Trustee
      shall take such  actions  as  directed  upon  written  direction  from the
      Depositor  or the  Class  A  Certificate  Insurer  and  the  provision  of
      reasonable  indemnity  satisfactory  to the  Trustee  in  accordance  with
      Sections 6.03 and 8.02.

            (i)   If the  Unaffiliated  Seller  is  required  to  repurchase  or
      replace a Mortgage Loan pursuant to the terms hereof,  upon receipt by the
      Trustee of written  direction from the Unaffiliated  Seller and either the
      related Repurchase Price or Substitute  Mortgage Loan, as applicable,  the
      Trustee  shall  assign to the  Unaffiliated  Seller its  rights  under the
      related  Mortgage  Loan  Purchase  Agreement  solely with  respect to such
      Mortgage Loan by an assignment in form and substance mutually satisfactory
      to the Unaffiliated Seller and the Trustee.

            (j)   The  representations  and  warranties  made  pursuant  to this
      Section 2.03 shall survive  delivery of the respective  Custodial Files to
      the Trustee.

            Section 2.04 THE DEPOSITOR AND THE MORTGAGE LOANS.

            The Depositor  hereby  represents and warrants to the Trustee and to
the Class A  Certificate  Insurer with respect to each  Mortgage  Loan as of the
date hereof or such other date set forth herein that as of the related  Delivery
Date, and following the transfer of the Mortgage Loans to it by the Unaffiliated
Seller,  the  Depositor  had good title to the  Mortgage  Loans and the Mortgage
Notes were subject to no offsets, defenses or counterclaims.

            The Depositor  hereby assigns,  transfers and conveys to the Trustee
all of its rights with respect to the Initial  Mortgage Loans and shall, on each
subsequent  Transfer  Date,  convey all of its right,  title and  interest  with
respect to the related subsequent Mortgage Loans.

            Section  2.05  DELIVERY  OF OPINION OF  COUNSEL IN  CONNECTION  WITH
SUBSTITUTIONS AND NON-QUALIFIED MORTGAGES.

            Notwithstanding  any  contrary  provision  of  this  Agreement,   no
substitution  pursuant to Section 2.03 shall be made more than 30 days after the
related  Delivery Date unless the Unaffiliated  Seller  delivers,  or causes the
related  Originator  to  deliver,  as  applicable,  to the Trustee an Opinion of
Counsel, at the expense of the Unaffiliated Seller or the related Originator, as
applicable,  addressed to the Trustee, to the effect that such substitution will
not (i) result in the imposition of the tax on "prohibited  transactions" on the
Trust Fund or  contributions  after the  Startup  Date,  as defined in  Sections
860F(a)(2) and 860G(d) of the Code, respectively or (ii)

                                       55
<PAGE>

cause  the  Trust  Fund to fail to  qualify  as a REMIC  at any  time  that  any
Certificates are outstanding.

            Section 2.06 EXECUTION AND DELIVERY OF CERTIFICATES.

            The Trustee  acknowledges  the transfer and  assignment to it of the
Trust Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor,  the Certificates in authorized
denominations  evidencing  directly or  indirectly  the entire  ownership of the
Trust Fund.  The Trustee  agrees to hold the Trust Fund and  exercise the rights
referred  to above for the  benefit of all  present  and  future  Holders of the
Certificates, and for the benefit of the Class A Certificate Insurer.

            Section 2.07 REMIC MATTERS.

            The Preliminary  Statement sets forth the  designations  for federal
income tax purposes of all  interests  created  hereby.  The  "Startup  Day" for
purposes of the REMIC Provisions shall be the Closing Date. The "latest possible
maturity  date" is  January  25,  2033,  which is the  sixth  Distribution  Date
following the latest Mortgage Loan maturity date.

            Section 2.08 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

            The  Depositor  hereby  represents,  warrants  and  covenants to the
Trustee,  the Servicer and to the Class A Certificate Insurer and the that as of
the date of this Agreement or as of such date specifically provided herein:

            (a)   The  Depositor  is  a  corporation  duly  organized,   validly
existing and in good standing under the laws of the State of Delaware;

            (b)   The Depositor has the corporate  power and authority to convey
the Mortgage  Loans and to execute,  deliver and perform,  and to enter into and
consummate the transactions contemplated by, this Agreement;

            (c)   This Agreement has been duly and validly authorized,  executed
and  delivered by the  Depositor,  all  requisite  corporate  action having been
taken, and, assuming the due authorization, execution and delivery hereof by the
other  parties  hereto,  constitutes  or will  constitute  the legal,  valid and
binding  agreement  of the  Depositor,  enforceable  against  the  Depositor  in
accordance  with  its  terms,  except  as such  enforcement  may be  limited  by
bankruptcy,  insolvency,  reorganization,   moratorium  or  other  similar  laws
relating  to or  affecting  the rights of  creditors  generally,  and by general
equity  principles  (regardless  of whether such  enforcement is considered in a
proceeding in equity or at law);

            (d)   No   consent,   approval,   authorization   or   order  of  or
registration or filing with, or notice to, any  governmental  authority or court
is required for the execution,  delivery and performance of or compliance by the
Depositor with this Agreement or the consummation by the Depositor of any of the
transactions  contemplated  hereby,  except as have been made on or prior to the
Closing Date;

                                       56
<PAGE>

            (e)   None of the  execution  and  delivery of this  Agreement,  the
consummation  of  the  transactions  contemplated  hereby  or  thereby,  or  the
fulfillment of or compliance  with the terms and  conditions of this  Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes  or will  constitute  a  default  or  results  or will  result in an
acceleration  under (A) the  charter or bylaws of the  Depositor,  or (B) of any
term, condition or provision of any material indenture,  deed of trust, contract
or  other  agreement  or  instrument  to  which  the  Depositor  or  any  of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will  result in a  violation  of any law,  rule,  regulation,  order,
judgment or decree  applicable  to the  Depositor  of any court or  governmental
authority having  jurisdiction over the Depositor or its subsidiaries;  or (iii)
results in the creation or imposition of any lien,  charge or encumbrance  which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;

            (f)   There are no actions,  suits or proceedings  before or against
or  investigations  of,  the  Depositor  pending,  or to  the  knowledge  of the
Depositor,   threatened,  before  any  court,  administrative  agency  or  other
tribunal, and no notice of any such action, which, in the Depositor's reasonable
judgment, might materially and adversely affect the performance by the Depositor
of its obligations  under this Agreement,  or the validity or  enforceability of
this Agreement;

            (g)   The  Depositor  is not in default with respect to any order or
decree of any court or any order,  regulation  or demand of any federal,  state,
municipal or  governmental  agency that may materially and adversely  affect its
performance hereunder; and

            (h)   Immediately  prior  to  the  transfer  and  assignment  by the
Depositor to the Trustee,  the Depositor had, or, with respect to the subsequent
Mortgage Loans, will have, good title to, and was, or will be, the sole owner of
each Mortgage Loan, free of any interest of any other Person,  and the Depositor
has  transferred,  or shall  transfer,  all right,  title and  interest  in each
Mortgage Loan to the Trustee. The transfer of the Mortgage Note and the Mortgage
as and in the manner  contemplated  by this  Agreement is sufficient  either (i)
fully to transfer to the Trustee, for the benefit of the  Certificateholders and
for the  benefit  of the Class A  Certificate  Insurer,  all right,  title,  and
interest of the Depositor  thereto as note holder and mortgagee or (ii) to grant
to the Trustee, for the benefit of the Certificateholders and for the benefit of
the Class A Certificate  Insurer,  the security  interest referred to in Section
10.04 hereof.

            It is understood and agreed that the representations, warranties and
covenants  set  forth  in  this  Section  2.08  shall  survive  delivery  of the
respective Custodial Files to the Trustee or to a custodian, as the case may be,
and shall inure to the benefit of the Trustee.

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<PAGE>

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

            Section 3.01 SERVICER TO SERVICE MORTGAGE LOANS.

            (a)   For  and on  behalf  of the  Certificateholders  and  for  the
benefit of the Class A  Certificate  Insurer,  the  Servicer  shall  service and
administer the Mortgage Loans in accordance with the terms of this Agreement and
the respective  Mortgage Loans and, to the extent consistent with such terms, in
the same manner in which it services and administers  similar mortgage loans for
its own portfolio,  giving due consideration to customary and usual standards of
practice of mortgage lenders and loan servicers  administering  similar mortgage
loans but without regard to:

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

            (ii)  the  ownership  or  non-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  or  any   Subservicer's   right  to  receive
      compensation for its services  hereunder or with respect to any particular
      transaction.

            To the extent consistent with the foregoing, the Servicer shall seek
to maximize  the timely and complete  recovery of principal  and interest on the
Mortgage Notes. Subject only to the above-described  servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Servicer shall
have full power and authority,  acting alone or through Subservicers as provided
in Section 3.02, to do or cause to be done any and all things in connection with
such  servicing  and  administration  which it may deem  necessary or desirable.
Without  limiting the generality of the foregoing,  the Servicer in its own name
or in the name of a  Subservicer  is  hereby  authorized  and  empowered  by the
Trustee  when the  Servicer  believes  it  appropriate  in its best  judgment in
accordance with the servicing  standards set forth above, to execute and deliver
any and all instruments of satisfaction or  cancellation,  or of partial or full
release or discharge, and all other comparable instruments,  with respect to the
Mortgage  Loans  and  the  Mortgaged  Properties  and to  institute  foreclosure
proceedings  or  obtain a  deed-in-lieu  of  foreclosure  so as to  convert  the
ownership  of such  properties,  and to hold or cause  to be held  title to such
properties,  on behalf of the Trustee. 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 3.15, the Trustee shall  execute,  at the
written request of the Servicer, and furnish to the Servicer and any Subservicer
such  documents as are  necessary or  appropriate  to enable the Servicer or any
Subservicer to carry out

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<PAGE>

their  servicing and  administrative  duties  hereunder,  and the Trustee hereby
grants to the Servicer, and this Agreement shall constitute, a power of attorney
to  carry  out  such  duties  including  a power of  attorney  to take  title to
Mortgaged  Properties  after  foreclosure on behalf of the Trustee.  The Trustee
shall  execute a separate  power of  attorney in favor of the  Servicer  for the
purposes  described  herein to the extent  necessary  or desirable to enable the
Servicer to perform its duties  hereunder.  The Trustee  shall not be liable for
the actions of the Servicer or any Subservicers under such powers of attorney.

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

            (c)   Notwithstanding  anything in this  Agreement to the  contrary,
the Servicer may not make any future  advances  with respect to a Mortgage  Loan
(except as provided in Section  4.01) and the Servicer  shall not (i) permit any
modification  with respect to any  Mortgage  Loan that would change the Mortgage
Rate, reduce or increase the principal balance (except for reductions  resulting
from actual  payments of  principal)  or change the final  maturity date on such
Mortgage Loan or (ii) permit any  modification,  waiver or amendment of any term
of any  Mortgage  Loan that would both (A) effect an exchange or  reissuance  of
such  Mortgage  Loan  under  Section  1001 of the Code (or final,  temporary  or
proposed Treasury regulations promulgated thereunder) and (B) cause any REMIC to
fail to  qualify  as a REMIC  under  the  Code or the  imposition  of any tax on
"prohibited  transactions" or  "contributions  after the startup date" under the
REMIC  Provisions,  or (iii)  except as provided in Section  3.07(a),  waive any
Prepayment Charges.

            (d)   The  Servicer may  delegate  its  responsibilities  under this
Agreement; PROVIDED, HOWEVER, that no such delegation shall release the Servicer
from the responsibilities or liabilities arising under this Agreement.

            Section  3.02  SUBSERVICING  AGREEMENTS  BETWEEN  THE  SERVICER  AND
SUBSERVICERS.

            (a)   Subject to the consent of the Class A Certificate  Insurer (so
long as no Class A Certificate  Insurer Default has occurred and is continuing),
which consent shall not be  unreasonably  withheld,  the Servicer may enter into
Subservicing Agreements with Subservicers,  for the servicing and administration
of the Mortgage Loans.

            Each Subservicer shall be (i) authorized to transact business in the
state or states in which the related  Mortgaged  Properties it is to service are
situated,  if and  to the  extent  required  by  applicable  law to  enable  the
Subservicer  to perform its  obligations  hereunder  and under the  Subservicing
Agreement,  (ii) an  institution  approved as a mortgage loan  originator by the
Federal  Housing  Administration  or an  institution  that has deposit  accounts
insured by the

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<PAGE>

FDIC and (iii) a Freddie  Mac or Fannie Mae  approved  mortgage  servicer.  Each
Subservicing Agreement must impose on the Subservicer requirements conforming to
the  provisions  set forth in Section  3.08 and  provide  for  servicing  of the
Mortgage Loans  consistent with the terms of this  Agreement.  The Servicer will
examine each Subservicing Agreement and will be familiar with the terms thereof.
The terms of any Subservicing Agreement will not be inconsistent with any of the
provisions of this Agreement.  The Servicer and the  Subservicers may enter into
and make amendments to the Subservicing Agreements or enter into different forms
of  Subservicing  Agreements;  PROVIDED,  HOWEVER,  that any such  amendments or
different  forms shall be consistent with and not violate the provisions of this
Agreement, and that no such amendment or different form shall be made or entered
into  which  could  be  reasonably  expected  to be  materially  adverse  to the
interests of the  Trustee,  without the consent of the  Trustee.  Any  variation
without the consent of the Trustee from the provisions set forth in Section 3.08
relating to insurance or priority  requirements  of  Subservicing  Accounts,  or
credits  and  charges to the  Subservicing  Accounts or the timing and amount of
remittances by the Subservicers to the Servicer,  are conclusively  deemed to be
inconsistent  with this Agreement and therefore  prohibited.  The Servicer shall
deliver to the Trustee, the Unaffiliated Seller, the Class A Certificate Insurer
and the Depositor copies of all Subservicing  Agreements,  and any amendments or
modifications  thereof,  promptly upon the Servicer's  execution and delivery of
such instruments.

            (b)   As part of its servicing  activities  hereunder,  the Servicer
(except as otherwise  provided in the last sentence of this paragraph),  for the
benefit of the Trustee,  shall enforce the obligations of each Subservicer under
the  related  Subservicing  Agreement,   including,   without  limitation,   any
obligation to make  advances in respect of delinquent  payments as required by a
Subservicing Agreement.  Such enforcement,  including,  without limitation,  the
legal  prosecution of claims,  termination of Subservicing  Agreements,  and the
pursuit of other appropriate remedies,  shall be in such form and carried out to
such an extent  and at such time as the  Servicer,  in its good  faith  business
judgment,  would require were it the owner of the related  Mortgage  Loans.  The
Servicer shall pay the costs of such  enforcement at its own expense,  and shall
be reimbursed  therefor  only (i) from a general  recovery  resulting  from such
enforcement,  to the extent,  if any, that such recovery exceeds all amounts due
in respect of the  related  Mortgage  Loans or (ii) from a specific  recovery of
costs,  expenses  or  attorneys'  fees  against  the  party  against  whom  such
enforcement is directed.

            Section 3.03 SUCCESSOR SUBSERVICERS.

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

            Any  Subservicing  Agreement  shall include the provision  that such
agreement may be immediately  terminated by the Depositor or the Trustee without
fee,  in  accordance  with the terms of this  Agreement,  in the event  that the
Servicer shall, for any reason, no longer be the Servicer (including termination
due to an Event of Default).

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<PAGE>

            Section 3.04 LIABILITY OF THE SERVICER.

            Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer  or reference to actions taken  through a Subservicer  or otherwise,
the Servicer shall remain  obligated and primarily liable to the Trustee for the
servicing  and  administering  of the  Mortgage  Loans  in  accordance  with the
provisions of Section 3.01 without diminution of such obligation or liability by
virtue  of  such  Subservicing  Agreements  or  arrangements  or  by  virtue  of
indemnification  from the  Subservicer and to the same extent and under the same
terms and conditions as if the Servicer  alone were servicing and  administering
the Mortgage  Loans.  The Servicer shall be entitled to enter into any agreement
with a Subservicer for  indemnification  of the Servicer by such Subservicer and
nothing  contained  in this  Agreement  shall be deemed to limit or modify  such
indemnification.

            Section 3.05 NO CONTRACTUAL  RELATIONSHIP  BETWEEN  SUBSERVICERS AND
THE TRUSTEE.

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

            Section 3.06 ASSUMPTION OR TERMINATION OF SUBSERVICING AGREEMENTS BY
TRUSTEE.

            In the event the Servicer at any time shall for any reason no longer
be the Servicer  (including by reason of the  occurrence of a Event of Default),
the  Trustee  or its  designee  shall  thereupon  assume  all of the  rights and
obligations of the Servicer under each Subservicing  Agreement that the Servicer
may have entered into, with copies thereof  provided to the Trustee prior to the
Trustee  assuming  such rights and  obligations,  unless the  Trustee  elects to
terminate any Subservicing Agreement in accordance with its terms as provided in
Section 3.03.

            Upon such  assumption,  the Trustee,  its designee or the  successor
servicer  shall be deemed,  subject to Section  3.03, to have assumed all of the
Servicer's interest therein and to have replaced the Servicer as a party to each
Subservicing  Agreement to the same extent as if each Subservicing Agreement had
been  assigned to the assuming  party,  except that (i) the  Servicer  shall not
thereby be relieved  of any  liability  or  obligations  under any  Subservicing
Agreement  that arose  before it ceased to be the  Servicer and (ii) none of the
Depositor,  the Trustee,  their  designees or any  successor  Servicer  shall be
deemed to have assumed any  liability or  obligation  of the Servicer that arose
before it ceased to be the Servicer.

            The  Servicer at its expense  shall,  upon  request of the  Trustee,
deliver  to the  assuming  party all  documents  and  records  relating  to each
Subservicing  Agreement  and the  Mortgage  Loans  then  being  serviced  and an
accounting of amounts collected and held by or on

                                       61
<PAGE>

behalf of it, and  otherwise  use its best  efforts to effect  the  orderly  and
efficient transfer of the Subservicing Agreements to the assuming party.

            Section  3.07   COLLECTION  OF  CERTAIN   MORTGAGE  LOAN   PAYMENTS;
ESTABLISHMENT OF CERTAIN ACCOUNTS.

            (a)   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
the terms and  provisions  of any  applicable  insurance  policies,  follow such
collection  procedures  as it  would  follow  with  respect  to  mortgage  loans
comparable to the Mortgage Loans and held for its own account.  Consistent  with
the  foregoing,  the  Servicer  may (i) waive  any late  payment  charge  or, if
applicable, any penalty interest, or (ii) extend the due dates for the Scheduled
Payments  due on a  Mortgage  Note for a period  of not  greater  than 180 days;
PROVIDED that any  extension  pursuant to clause (ii) above shall not affect the
amortization  schedule of any  Mortgage  Loan for  purposes  of any  computation
hereunder,  except  as  provided  below.  In the  event of any such  arrangement
pursuant to clause (ii) above,  the Servicer shall make timely  advances on such
Mortgage Loan during such  extension  pursuant to Section 4.01 and in accordance
with the  amortization  schedule  of such  Mortgage  Loan  without  modification
thereof by reason of such  arrangements,  subject to Section 4.01(d) pursuant to
which the  Servicer  shall not be  required to make any such  advances  that are
Nonrecoverable P&I Advances. Notwithstanding the foregoing, the Servicer may not
waive,  in whole or in part, a  Prepayment  Charge,  except under the  following
circumstances:  (i) such waiver relates to a default or a reasonably foreseeable
default and would, in the reasonable judgment of the Servicer, maximize recovery
of total proceeds  taking into account the value of such  Prepayment  Charge and
the related  Mortgage  Loan, and doing so is standard and customary in servicing
mortgage  loans  similar  to the  Mortgage  Loans  (including  any  waiver  of a
Prepayment  Charge in connection  with a refinancing  of a Mortgage Loan that is
related to a default or a reasonably  foreseeable default), and in no event will
the Servicer  waive a Prepayment  Charge in connection  with a refinancing  of a
Mortgage  Loan that is not  related  to a default  or a  reasonably  foreseeable
default or (ii) such  Prepayment  Charge is not  permitted  to be  collected  by
applicable law. If a Prepayment  Charge is waived other than as permitted by the
prior  sentence,  then the Servicer is required to pay the amount of such waived
Prepayment  Charge,  for the benefit of the Holders of the Class P Certificates,
by depositing such amount into the Collection  Account  together with and at the
time that the amount  prepaid on the  related  Mortgage  Loan is  required to be
deposited into the Collection Account.

            (b)   (i)   The Trustee shall  establish and maintain the Excess
      Reserve  Fund  Account,  on behalf of the Class X  Certificateholders,  to
      secure their  limited  recourse  obligation  to pay to the  Floating  Rate
      Certificateholders Basis Risk CarryForward Amounts.

            (ii)  On each  Distribution  Date,  the  Trustee  shall  deposit the
      amount of any Basis Risk  Payment  and any  Interest  Rate Cap Payment for
      such date into the Excess Reserve Fund Account.

            (c)   (i)   On each  Distribution Date on which there exists a Basis
      Risk CarryForward  Amount on any Class of Certificates,  the Trustee shall
      (1) withdraw from

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<PAGE>

      the  Distribution  Account and deposit in the Excess Reserve Fund Account,
      as set forth in Section 4.02(a)(iii)(f),  the lesser of (a) the sum of (x)
      the Class X  Distributable  Amount (without regard to the reduction in the
      definition thereof with respect to the Basis Risk CarryForward Amount) (to
      the  extent  remaining  after  the  distributions  specified  in  Sections
      4.02(a)(iii)(a)-(e))  and (y) the Interest Rate Cap Payment,  if any, with
      respect to such  Distribution  Date,  and (b) the Basis Risk  CarryForward
      Amount and (2)  withdraw  from the Excess  Reserve  Fund  Account  amounts
      necessary to pay to such Class or Classes of  Certificates  the Basis Risk
      CarryForward  Amount. Such payments shall be allocated to those Classes on
      a PRO RATA basis based upon the amount of Basis Risk  CarryForward  Amount
      owed to each such  Class and  shall be paid in the  priority  set forth in
      Section 4.02(a)(iii)(g) hereof.

            (ii)  The Trustee shall account for the Excess  Reserve Fund Account
      as an outside  reserve  fund  within the  meaning of  Treasury  regulation
      1.860G-2(h)  and not as an asset of any  REMIC  created  pursuant  to this
      Agreement.  The beneficial owner of the Excess Reserve Fund Account is the
      Class  X  Certificateholder.   For  all  federal  tax  purposes,   amounts
      transferred  by the Upper Tier REMIC to the Excess  Reserve  Fund  Account
      shall  be  treated  as  distributions  by  the  Trustee  to  the  Class  X
      Certificateholder.

            (iii) Any Basis Risk CarryForward Amounts paid by the Trustee to the
      Floating Rate Certificateholders  shall be accounted for by the Trustee as
      amounts paid first to the Holders of the Class X  Certificate  and then to
      the  respective  Class  or  Classes  of  Floating  Rate  Certificates.  In
      addition,    the   Trustee   shall   account   for   the   Floating   Rate
      Certificateholders'  rights to receive payments of Basis Risk CarryForward
      Amounts as rights in a limited recourse interest rate cap contract written
      by  the  Class  X  Certificateholders   in  favor  of  the  Floating  Rate
      Certificateholders.

            (iv)  Notwithstanding any provision contained in this Agreement, the
      Trustee shall not be required to make any payments from the Excess Reserve
      Fund Account except as expressly set forth in this Section 3.07(c).

            (d)   The Trustee  shall  establish  and maintain  the  Distribution
Account on behalf of the  Certificateholders.  The Trustee shall,  promptly upon
receipt, deposit in the Distribution Account and retain therein the following:

            (i)   the aggregate  amount  remitted by the Servicer to the Trustee
      pursuant to Section 3.11;

            (ii)  any amount deposited by the Servicer  pursuant to Section 3.10
      in connection with any losses on Permitted Investments; and

            (iii) any other amounts deposited hereunder which are required to be
      deposited in the Distribution Account.

            In the event that the  Servicer  shall remit any amount not required
to be  remitted,  it may at any time  direct the  Trustee in writing to withdraw
such amount from the Distribution  Account, any provision herein to the contrary
notwithstanding.  Such direction may be accomplished by delivering notice to the
Trustee which describes the amounts deposited in error

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in the Distribution  Account.  All funds deposited in the  Distribution  Account
shall be held by the Trustee in trust for the Certificateholders until disbursed
in accordance  with this Agreement or withdrawn in accordance with Section 4.02.
In no  event  shall  the  Trustee  incur  liability  for  withdrawals  from  the
Distribution Account at the direction of the Servicer.

            (e)   The Trustee  shall  establish  and  maintain  the  Capitalized
Interest Account, on behalf of the Certificateholders.  On the Closing Date, the
Trustee  shall deposit  $177,692 to the  Capitalized  Interest  Account from the
proceeds  of  the  sale  of  the  Offered  Certificates.  Withdrawals  from  the
Capitalized  Interest  Account shall be made in accordance with Sections 4.02(c)
and (d) hereof.  The Trustee shall account for the Capitalized  Interest Account
as an outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h)
and not as an  asset  of any  REMIC  created  pursuant  to this  Agreement.  The
beneficial  owner of the Capitalized  Interest Account shall be the Unaffiliated
Seller.

            (f)   The Trustee  shall  establish  and  maintain  the  Pre-Funding
Account, on behalf of the  Certificateholders.  On the Closing Date, the Trustee
shall deposit the Initial Pre-Funded Amount to the Pre-Funding  Account from the
proceeds  of  the  sale  of  the  Offered  Certificates.  Withdrawals  from  the
Pre-Funding  Account shall be made in accordance  with Sections  4.02(e) and (f)
hereof.

            (g)   The Trustee  may invest the funds in the  Accounts if directed
in writing by the  Servicer,  with  respect to the  Collection  Account  and the
Distribution  Account  or by  the  Unaffiliated  Seller,  with  respect  to  the
Pre-Funding  Account  and the  Capitalized  Interest  Account in each  case,  in
Permitted  Investments,  which  directions  shall be in accordance  with Section
3.12.  Amounts  on  deposit  in the Excess  Reserve  Fund  Account  shall not be
invested.

            (h)   The Servicer  shall give prior written  notice to the Trustee,
each Rating Agency and the  Depositor of any proposed  change of the location of
the Collection Account.

            Section 3.08 SUBSERVICING ACCOUNTS.

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

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            Section 3.09  COLLECTION OF TAXES,  ASSESSMENTS  AND SIMILAR  ITEMS;
ESCROW ACCOUNTS.

            (a)   The  Servicer  shall  ensure that each of the  Mortgage  Loans
shall be covered by a paid-in-full, life-of-the-loan tax service contract with a
nationally  recognized provider acceptable to the Servicer (each, a "TAX SERVICE
CONTRACT").  Each Tax Service Contract shall be assigned to the Trustee,  or its
designee, at the Servicer's expense in the event that the Servicer is terminated
as Servicer of the related Mortgage Loan.

            (b)   To the extent that the services  described  in this  paragraph
(b) are not otherwise  provided pursuant to the Tax Service Contracts  described
in paragraph (a) hereof, the Servicer undertakes to perform such functions.  The
Servicer  shall  establish  and  maintain,   or  cause  to  be  established  and
maintained,  one or more  accounts  (the  "ESCROW  ACCOUNTS"),  which  shall  be
Eligible  Accounts.  The Servicer  shall deposit in the clearing  account (which
account must be an Eligible  Account) in which it customarily  deposits payments
and collections on mortgage loans in connection with its mortgage loan servicing
activities  on a daily  basis,  and in no event more than one Business Day after
the Servicer's receipt thereof,  all collections from the Mortgagors (or related
advances  from  Subservicers)  for the  payment  of taxes,  assessments,  hazard
insurance  premiums  and  comparable  items for the  account  of the  Mortgagors
("ESCROW  PAYMENTS")  collected  on  account  of the  Mortgage  Loans  and shall
thereafter deposit such Escrow Payments in the Escrow Accounts, in no event more
than two Business Days after the deposit of such funds in the clearing  account,
for the purpose of effecting the payment of any such items as required under the
terms of this  Agreement.  Withdrawals  of amounts from an Escrow Account may be
made  only  to (i)  effect  payment  of  taxes,  assessments,  hazard  insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a Subservicer to
the  extent  provided  in the  related  Subservicing  Agreement)  out of related
collections  for any advances  made  pursuant to Section  3.01 (with  respect to
taxes and  assessments)  and Section  3.13 (with  respect to hazard  insurance);
(iii) refund to Mortgagors  any sums as may be  determined to be overages;  (iv)
pay interest,  if required and as described  below, to Mortgagors on balances in
the  Escrow  Account;  (v)  clear  and  terminate  the  Escrow  Account  at  the
termination of the Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement or (vi) recover amounts  deposited in error.
As part of its servicing duties,  the Servicer or Subservicers  shall pay to the
Mortgagors  interest on funds in Escrow Accounts,  to the extent required by law
and,  to the extent  that  interest  earned on funds in the Escrow  Accounts  is
insufficient,  to pay such  interest  from its or their own funds,  without  any
reimbursement  therefor.  To the extent  that a Mortgage  does not  provide  for
Escrow Payments, the Servicer shall determine whether any such payments are made
by the Mortgagor in a manner and at a time that avoids the loss of the Mortgaged
Property  due to a tax  sale or the  foreclosure  of a tax  lien.  The  Servicer
assumes full  responsibility  for the payment of all such bills within such time
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 Payments
and shall make  advances from its own funds to effect such  payments;  PROVIDED,
HOWEVER, that such advances are deemed to be Servicing Advances.

            Section 3.10 COLLECTION ACCOUNT.

            (a)   On behalf of the Trustee,  the Servicer  shall  establish  and
maintain,  or cause  to be  established  and  maintained,  one or more  Eligible
Accounts (such account or

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accounts,  the  "COLLECTION  ACCOUNT"),  held in trust  for the  benefit  of the
Trustee.  On behalf of the Trustee,  the Servicer  shall  deposit or cause to be
deposited in the clearing account (which account must be an Eligible Account) in
which it  customarily  deposits  payments and  collections  on mortgage loans in
connection with its mortgage loan servicing  activities on a daily basis, and in
no event more than one Business Day after the Servicer's  receipt  thereof,  and
shall thereafter  deposit in the Collection  Account,  in no event more than two
Business Days after the deposit of such funds into the clearing account,  as and
when received or as otherwise  required  hereunder,  the following  payments and
collections received or made by it subsequent to the related Cut-off Date (other
than in respect of principal or interest on the related Mortgage Loans due on or
before the related Cut-off Date, and except for $88,740.18 in interest, which is
being retained by the  Unaffiliated  Seller),  or payments (other than Principal
Prepayments)  received  by it on or  prior  to  the  related  Cut-off  Date  but
allocable to a Due Period subsequent thereto:

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

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

            (iii) all Insurance  Proceeds to the extent such Insurance  Proceeds
      are not to be applied to the restoration of the related Mortgaged Property
      or  released  to the  related  Mortgagor  in  accordance  with the express
      requirements of law or in accordance with prudent and customary  servicing
      practices and Liquidation Proceeds;

            (iv)  any amounts required to be deposited  pursuant to Section 3.12
      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  3.13(a)  in respect of any  blanket
      policy deductibles;

            (vi)  all proceeds of any Mortgage Loan  repurchased or purchased in
      accordance with this Agreement; and

            (vii) all Prepayment Charges collected by the Servicer.

            The foregoing  requirements  for deposit in the Collection  Accounts
shall be exclusive,  it being  understood and agreed that,  without limiting the
generality of the foregoing, payments in the nature of late payment charges, NSF
fees, reconveyance fees, assumption fees and other similar fees and charges need
not be  deposited  by the  Servicer in the  Collection  Account and shall,  upon
collection,  belong to the Servicer as additional compensation for its servicing
activities.  In the event the Servicer shall deposit in the  Collection  Account
any amount not required to be  deposited  therein,  it may at any time  withdraw
such amount from the Collection  Account,  any provision  herein to the contrary
notwithstanding.

            (b)   Funds in the  Collection  Account may be invested in Permitted
Investments  in accordance  with the  provisions  set forth in Section 3.12. The
Servicer shall give notice to the

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Trustee and the Depositor of the location of the Collection  Account  maintained
by it when established and prior to any change thereof.

            Section 3.11 WITHDRAWALS FROM THE COLLECTION 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 4.01:

            (i)    On or prior to the  Remittance  Date, to remit to the Trustee
      the Interest  Remittance  Amount and the  Principal  Remittance  Amount in
      respect  of the  related  Distribution  Date  together  with  all  amounts
      representing  Prepayment  Charges from the Mortgage Loans received  during
      the related Prepayment Period;

            (ii)   to reimburse the Servicer for P&I  Advances,  but only to the
      extent of amounts  received which represent Late  Collections  (net of the
      related Servicing Fees) of Monthly Payments on Mortgage Loans with respect
      to which such P&I Advances were made in accordance  with the provisions of
      Section 4.01;

            (iii)  to  pay  the  Servicer  or any  Subservicer  (a)  any  unpaid
      Servicing Fees or (b) any unreimbursed  Servicing Advances with respect to
      each  Mortgage  Loan,  but only to the  extent  of any  Late  Collections,
      Liquidation  Proceeds,  Insurance  Proceeds  or  other  amounts  as may be
      collected by the Servicer  from a Mortgagor,  or otherwise  received  with
      respect to such Mortgage Loan (or the related REO Property);

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

            (v)    to pay to the Unaffiliated  Seller or the related Originator,
      as applicable, with respect to each Mortgage Loan that has previously been
      purchased or replaced by the Unaffiliated  Seller or such  Originator,  as
      applicable,  pursuant  to this  Agreement,  all amounts  received  thereon
      subsequent to the date of purchase or substitution, as the case may be;

            (vi)   to  reimburse  the  Servicer for any P&I Advance or Servicing
      Advance  previously  made  which  the  Servicer  has  determined  to  be a
      Nonrecoverable   P&I  Advance  or  Nonrecoverable   Servicing  Advance  in
      accordance with the provisions of Section 4.01;

            (vii)  to pay, or to reimburse  the Servicer for advances in respect
      of,  expenses  incurred in  connection  with any Mortgage Loan pursuant to
      Section 3.15;

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

            (ix)   to reimburse  the  Servicer,  the  Unaffiliated  Seller,  the
      Depositor, the Class A Certificate Insurer 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

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<PAGE>

      of this  Agreement  that  were  included  in the  Repurchase  Price of the
      Mortgage Loan,  including any expenses  arising out of the  enforcement of
      the purchase  obligation to the extent not otherwise  paid pursuant to the
      terms hereof;

            (x)   to withdraw any amounts deposited in the Collection Account in
      error; and

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

            (b)   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  (a)(ii),  (iii), (v), (vi),  (vii),  (viii) and (ix)
above.  The Servicer shall provide written  notification  to the Trustee,  on or
prior to the next succeeding  Remittance  Date, upon making any withdrawals from
the Collection Account pursuant to subclause (a)(vii) above.

            Section 3.12 INVESTMENT OF FUNDS IN THE ACCOUNT.

            (a)    The  Servicer  may direct the  Trustee to invest the funds in
the Collection Account and the Distribution Account, and the Unaffiliated Seller
may direct the  Trustee to invest the funds in the  Pre-Funding  Account and the
Capitalized  Interest  Account  (each of such  Accounts,  for  purposes  of this
Section 3.12, an "INVESTMENT  ACCOUNT"),  in one or more  Permitted  Investments
bearing interest or sold at a discount,  and maturing,  unless payable on demand
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.
All such  Permitted  Investments  shall be held to maturity,  unless  payable on
demand.  Any  investment of funds in an Investment  Account shall be made in the
name of the Trustee.  The Trustee shall be entitled to sole  possession  (except
with respect to  investment  direction of funds held in the related  Account and
any  income  and gain  realized  thereon)  over  each such  investment,  and any
certificate  or  other  instrument  evidencing  any  such  investment  shall  be
delivered  directly to the Trustee or its agent,  together  with any document of
transfer  necessary to transfer title to such investment to the Trustee.  In the
event amounts on deposit in an Investment  Account are at any time invested in a
Permitted Investment payable on demand, the Trustee may:

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

            (y)    demand  payment  of all  amounts  due  thereunder  that  such
                   Permitted   Investment   would  not  constitute  a  Permitted
                   Investment  in respect of funds  thereafter on deposit in the
                   Investment Account.

            (b)   (i)   All  income and gain  realized  from the  investment  of
      funds  deposited in the Collection  Account and the  Distribution  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 the manner set forth in
      Section 3.11 in the case of income in the Collection Account,

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      and on each  Distribution  Date,  the  Trustee  shall  withdraw  from  the
      Distribution  Account, and remit to the Servicer all amounts in respect of
      such income and gain in the Distribution Account. Whether in regard to the
      Collection Account or the Distribution Account, the Servicer shall deposit
      in the Collection Account or the Distribution Account, as applicable,  the
      amount of any loss of principal  incurred in respect of any such Permitted
      Investment made with funds in such accounts  immediately  upon realization
      of such loss.

            (ii)  All  income and gain  realized  from the  investment  of funds
      deposited in the Pre-Funding Account and the Capitalized  Interest Account
      held by or on behalf of the Unaffiliated  Seller shall be retained in such
      Investment  Account,  subject to  withdrawal  as provided in Section 4.02.
      Whether in regard to the Pre-Funding  Account or the Capitalized  Interest
      Account,  the Unaffiliated Seller shall deposit in the Pre-Funding Account
      or the Capitalized Interest Account, as applicable, the amount of any loss
      of principal  incurred in respect of any such  Permitted  Investment  made
      with funds in such accounts immediately upon realization of such loss.

            (c)   Except as otherwise  expressly provided in this Agreement,  if
any  default  occurs  in  the  making  of a  payment  due  under  any  Permitted
Investment,  or if a default occurs in any other performance  required under any
Permitted  Investment,  the Trustee shall take such action as may be appropriate
to  enforce  such  payment  or   performance,   including  the  institution  and
prosecution of appropriate proceedings.  The Trustee shall not be liable for the
amount of any loss  incurred in respect of any  investment or lack of investment
of funds held in any Investment  Account or the Distribution  Account if made in
accordance with this Section 3.12.

            Section   3.13  MAINTENANCE  OF  HAZARD  INSURANCE  AND  ERRORS  AND
OMISSIONS AND FIDELITY COVERAGE.

            (a)   The Servicer  shall cause to be  maintained  for each Mortgage
Loan fire insurance with extended coverage on the related Mortgaged  Property in
an  amount  which is at least  equal to the least of (i) the  current  principal
balance of such Mortgage Loan, (ii) the amount necessary to fully compensate for
any damage or loss to the  improvements  that are a part of such  property  on a
replacement cost basis and (iii) the maximum insurable value of the improvements
which are a part of such Mortgaged Property,  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 shall also
cause  to be  maintained  fire  insurance  with  extended  coverage  on each REO
Property  in an amount  which is at least equal to the lesser of (i) the maximum
insurable value of the  improvements  which are a part of such property and (ii)
the outstanding  principal  balance of the related  Mortgage Loan at the time it
became an REO Property,  plus accrued  interest at the Mortgage Rate and related
Servicing  Advances.  The  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 the  procedures  that the Servicer would follow in
servicing loans held for its own account, subject to the terms and conditions of
the related  Mortgage  and Mortgage  Note) shall be deposited in the  Collection
Account, subject to withdrawal pursuant to Section 3.11. Any cost

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<PAGE>

incurred by the Servicer in maintaining  any such  insurance  shall not, for the
purpose of  calculating  distributions  to the  Trustee,  be added to the unpaid
principal balance of the related Mortgage Loan,  notwithstanding  that the terms
of such Mortgage Loan so permit.  It is understood and agreed that no earthquake
or other  additional  insurance  is to be required of any  Mortgagor  other than
pursuant  to such  applicable  laws and  regulations  as shall at any time be in
force and as shall require such additional insurance.  If the Mortgaged Property
or REO Property is at any time in an area identified in the Federal  Register by
the Federal  Emergency  Management  Agency as having  special  flood hazards and
flood  insurance  has  been  made  available,  the  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
(or such other rating that is comparable to such rating) insuring against hazard
losses on all of the Mortgage  Loans,  it shall  conclusively  be deemed to have
satisfied  its  obligations  as set  forth in the first  two  sentences  of this
Section  3.13,  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 3.13, 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  claims under any such blanket  policy in a timely fashion in accordance
with the terms of such policy.

            (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 the Servicer's  obligations  under this Agreement,
which  policy or  policies  shall be in such form and amount that would meet the
requirements  of  Fannie  Mae or  Freddie  Mac if it were the  purchaser  of the
Mortgage Loans,  unless the Servicer has obtained a waiver of such  requirements
from Fannie Mae or Freddie Mac. The Servicer shall also maintain a fidelity bond
in the form and amount that would meet the requirements of Fannie Mae or Freddie
Mac, unless the Servicer has obtained a waiver of such  requirements from Fannie
Mae or Freddie Mac. The  Servicer  shall  provide the Trustee with copies of any
such insurance  policies and fidelity bond. 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.  The
Servicer  shall also cause each  Subservicer  to maintain a policy of  insurance
covering  errors  and  omissions  and a  fidelity  bond  which  would  meet such
requirements.

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            Section  3.14   ENFORCEMENT   OF  DUE-ON-SALE   CLAUSES   ASSUMPTION
AGREEMENTS.

            The Servicer  will, to the extent it has knowledge of any conveyance
or prospective conveyance of any Mortgaged Property by any Mortgagor (whether by
absolute  conveyance  or by contract of sale,  and whether or not the  Mortgagor
remains or is to remain  liable  under the Mortgage  Note and/or the  Mortgage),
exercise its rights to  accelerate  the maturity of such Mortgage Loan under the
"due-on-sale"  clause, if any, applicable thereto;  PROVIDED,  HOWEVER, that the
Servicer  shall not be  required  to take such  action if, in its sole  business
judgment,  the  Servicer  believes it is not in the best  interests of the Trust
Fund and shall not exercise any such rights if  prohibited by law from doing so.
If the 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  will  enter into an
assumption  and  modification  agreement  from or with the  person  to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person  becomes  liable under the Mortgage Note and, to the extent  permitted by
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original  Mortgagor is released  from  liability  and such
person is  substituted  as the Mortgagor  and becomes  liable under the Mortgage
Note,  PROVIDED that no such substitution  shall be effective unless such person
satisfies the underwriting criteria of the Servicer, has a credit risk rating at
least  equal  to  that  of  the  original  Mortgagor.  In  connection  with  any
assumption,   modification  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 and as it applies
to other mortgage loans owned solely by it. 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,  or a new policy meeting the  requirements  of this Section is obtained.
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 Scheduled Payment) may be amended or modified, except as otherwise
required  pursuant to the terms  thereof.  The Servicer shall notify the Trustee
that  any such  substitution,  modification  or  assumption  agreement  has been
completed  by  forwarding   to  the  Trustee  the  executed   original  of  such
substitution  or  assumption  agreement,  which  document  shall be added to the
related Mortgage File and shall, for all purposes,  be considered a part of such
Mortgage  File  to the  same  extent  as all  other  documents  and  instruments
constituting a part thereof.

            Notwithstanding  the foregoing  paragraph or any other  provision of
this Agreement, the 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 3.14, 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.

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            Section 3.15 REALIZATION UPON DEFAULTED MORTGAGE LOANS.

            The Servicer shall use its best efforts,  consistent  with customary
servicing practices as described in Section 3.01, to foreclose upon or otherwise
comparably  convert  (which may  include an  acquisition  of REO  Property)  the
ownership of  properties  securing  such of the Mortgage  Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent  payments  pursuant to Section 3.07,  and which are not
released  from this  Agreement  pursuant  to any  other  provision  hereof.  The
Servicer  shall use reasonable  efforts to realize upon such defaulted  Mortgage
Loans in such manner as will  maximize the receipt of principal  and interest by
the Trustee,  taking into account, among other things, the timing of foreclosure
proceedings.  The  foregoing is subject to the  provisions  that, in any case in
which 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 sole  discretion  (i) that such
restoration  will  increase  the net  proceeds  of  liquidation  of the  related
Mortgage Loan to the Trustee,  after  reimbursement to itself for such expenses,
and  (ii)  that  such  expenses  will be  recoverable  by the  Servicer  through
Insurance Proceeds or Liquidation  Proceeds from the related Mortgaged Property,
as contemplated in Section 3.11. The Servicer shall be responsible for all other
costs and expenses  incurred by it in any such proceedings;  PROVIDED,  HOWEVER,
that it shall be entitled to reimbursement thereof from the related property, as
contemplated in Section 3.11.

            The proceeds of any liquidation or REO  Disposition,  as well as any
recovery   resulting  from  a  partial   collection  of  Insurance  Proceeds  or
Liquidation Proceeds or any income from an REO Property,  will be applied in the
following order of priority: first, to reimburse the Servicer or any Subservicer
for any related  unreimbursed  Servicing  Advances,  pursuant to Section 3.11 or
3.17; second, to accrued and unpaid interest on the Mortgage Loan or REO Imputed
Interest,  at  the  Mortgage  Rate,  to  the  date  of  the  liquidation  or REO
Disposition,  or to the Due Date  prior  to the  Remittance  Date on which  such
amounts are to be  distributed  if not in connection  with a liquidation  or REO
Disposition;  third, to reimburse the Servicer for any related  unreimbursed P&I
Advances,  pursuant to Section 3.11;  and fourth,  as a recovery of principal of
the  Mortgage  Loan.  If the amount of the  recovery so allocated to interest is
less than a full  recovery  thereof,  that amount will be  allocated as follows:
first, to unpaid  Servicing  Fees; and second,  as interest at the Mortgage Rate
(net of the  Servicing  Fee Rate).  The portion of the  recovery so allocated to
unpaid  Servicing  Fees shall be reimbursed  to the Servicer or any  Subservicer
pursuant to Section  3.11 or 3.17.  The portions of the recovery so allocated to
interest at the Mortgage  Rate (net of the  Servicing Fee Rate) and to principal
of the  Mortgage  Loan shall be applied as  follows:  first,  to  reimburse  the
Servicer or any Subservicer for any related  unreimbursed  Servicing Advances in
accordance  with Section 3.11 or 3.17, and second,  to the Trustee in accordance
with the  provisions of Section 4.02,  subject to the last  paragraph of Section
3.17 with respect to certain excess recoveries from an REO Disposition.

            Notwithstanding  anything  to  the  contrary  contained  herein,  in
connection with a foreclosure or acceptance of a deed in lieu of foreclosure, in
the event the Servicer has received actual notice of, or has actual knowledge of
the  presence  of,  hazardous  or toxic  substances  or  wastes  on the  related
Mortgaged  Property,  or if the Trustee otherwise  requests,  the Servicer shall
cause an  environmental  inspection or review of such  Mortgaged  Property to be
conducted by a

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qualified  inspector.  Upon  completion of the  inspection,  the Servicer  shall
promptly  provide  the  Trustee  with a  written  report  of  the  environmental
inspection.

            After reviewing the environmental  inspection  report,  the Servicer
shall  determine how to proceed with respect to the Mortgaged  Property.  In the
event (a) the  environmental  inspection  report  indicates  that the  Mortgaged
Property is contaminated by hazardous or toxic  substances or wastes and (b) the
Servicer  determines to proceed with foreclosure or acceptance of a deed in lieu
of  foreclosure,  the Servicer  shall be  reimbursed  for all  reasonable  costs
associated with such  foreclosure or acceptance of a deed in lieu of foreclosure
and any related  environmental  clean-up costs, as applicable,  from the related
Liquidation  Proceeds,  or if the Liquidation Proceeds are insufficient to fully
reimburse the  Servicer,  the Servicer  shall be entitled to be reimbursed  from
amounts in the Collection  Account pursuant to Section 3.11 hereof. In the event
the Servicer  determines not to proceed with foreclosure or acceptance of a deed
in  lieu  of  foreclosure,   the  Servicer  shall  be  reimbursed  from  general
collections  for  all  Servicing  Advances  made  with  respect  to the  related
Mortgaged Property from the Collection Account pursuant to Section 3.11 hereof.

            Section 3.16 RELEASE OF MORTGAGE FILES.

            (a)   Upon the payment in full of any Mortgage  Loan, or the receipt
by the  Servicer of a  notification  that payment in full shall be escrowed in a
manner customary for such purposes,  the Servicer will, within five (5) Business
Days of the  payment in full,  notify  the  Trustee  by a  certification  (which
certification  shall include a statement to the effect that all amounts received
or to be received  in  connection  with such  payment  which are  required to be
deposited in the Collection  Account  pursuant to Section 3.10 have been or will
be so deposited) of a Servicing  Officer and shall request delivery to it of the
Custodial  File.  Upon receipt of such  certification  and request,  the Trustee
shall promptly  release the related  Custodial File to the Servicer  within five
(5) Business  Days. No expenses  incurred in connection  with any  instrument of
satisfaction  or deed of  reconveyance  shall be  chargeable  to the  Collection
Account.

            (b)   From  time to time and as  appropriate  for the  servicing  or
foreclosure of any Mortgage Loan, including, for this purpose,  collection under
any insurance  policy  relating to the Mortgage Loans,  the Trustee shall,  upon
request of the Servicer  and delivery to the Trustee,  of a Request for Release,
release the related  Custodial File to the Servicer,  and the Trustee shall,  at
the direction of the Servicer,  execute such  documents as shall be necessary to
the  prosecution  of any such  proceedings  and the  Servicer  shall  retain the
Mortgage File in trust for the benefit of the Trustee.  Such Request for Release
shall  obligate  the  Servicer  to  return  each and every  document  previously
requested  from the Custodial  File to the Trustee when the need therefor by the
Servicer no longer exists,  unless the Mortgage Loan has been liquidated and the
Liquidation  Proceeds  relating to the Mortgage Loan have been  deposited in the
Collection  Account or the Mortgage File or such document has been  delivered to
an attorney, or to a public trustee or other public official as required by law,
for purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or  non-judicially,  and
the Servicer has delivered to the Trustee a certificate  of a Servicing  Officer
certifying  as to the name and address of the Person to which such Mortgage File
or such  document was  delivered  and the purpose or purposes of such  delivery.
Upon receipt of a certificate of a Servicing  Officer stating that such Mortgage
Loan  was  liquidated  and  that  all  amounts  received  or to be  received  in

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connection  with such  liquidation  that are required to be  deposited  into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO  Property,  a copy of the  Request  for  Release  of  Documents  shall be
released by the Trustee to the Servicer or its designee.

            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  reasonably  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,  or shall
exercise and deliver to the Servicer a power of attorney sufficient to authorize
the Servicer to execute such  documents on its behalf.  Each such  certification
shall  include a request  that such  pleadings  or  documents be executed by the
Trustee  and a  statement  as to the reason  such  documents  or  pleadings  are
required and that the  execution  and  delivery  thereof by the Trustee will not
invalidate  or  otherwise  affect  the  lien  of the  Mortgage,  except  for the
termination of such a lien upon completion of the foreclosure or trustee's sale.

            Section 3.17 TITLE, CONSERVATION AND DISPOSITION OF REO PROPERTY.

            (a)   This Section shall apply only to REO  Properties  acquired for
the account of the Trustee and shall not apply to any REO Property relating to a
Mortgage Loan which was purchased or  repurchased  from the Trustee  pursuant to
any  provision  hereof.  In the event  that  title to any such REO  Property  is
acquired, the deed or certificate of sale shall be issued to the Servicer, or to
its nominee, on behalf of the Trustee.

            (b)   The Servicer shall manage, conserve,  protect and operate each
REO  Property for the Trustee  solely for the purpose of its prompt  disposition
and sale.  The  Servicer,  either  itself or  through an agent  selected  by the
Servicer,  shall manage,  conserve,  protect and operate the REO Property in the
same manner that it manages,  conserves,  protects and operates other foreclosed
property  for its own account,  and in the same manner that similar  property in
the same locality as the REO Property is managed.  The Servicer shall attempt to
sell the same (and may  temporarily  rent the same for a period not greater than
one year,  except as otherwise  provided  below) on such terms and conditions as
the Servicer deems to be in the best interest of the Trustee. The Servicer shall
notify the Trustee from time to time as to the status of each REO Property.

            (c)   The Servicer  shall use its best efforts to dispose of the REO
Property  as soon as  possible  (subject  to the  Trustee's  right  to veto  any
proposed  sale of REO  Property)  and shall sell such REO  Property in any event
within one year  after  title has been  taken to such REO  Property,  unless the
Servicer  determines,  and gives an  appropriate  notice to the  Trustee to such
effect,  that a longer period is necessary for the orderly  liquidation  of such
REO Property.  If a period longer than one year is permitted under the foregoing
sentence and is necessary to sell any REO  Property,  the Servicer  shall report
monthly  to the  Trustee  as to the  progress  being  made in  selling  such REO
Property.  Notwithstanding  its veto rights,  the Trustee has no obligation with
respect to REO dispositions.

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            (d)   [Reserved].

            (e)   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  deposit  such  funds in the
Collection Account.

            (f)   The  Servicer  shall  deposit  net  of  reimbursement  to  the
Servicer for any related  outstanding  Servicing  Advances and unpaid  Servicing
Fees provided in Section 3.11 hereof, or cause to be deposited, on a daily basis
in the Collection  Account all revenues received with respect to the related REO
Property and shall withdraw  therefrom funds necessary for the proper operation,
management and maintenance of the REO Property.

            (g)   The Servicer,  upon an REO  Disposition,  shall be entitled to
reimbursement  for any related  unreimbursed  Servicing  Advances as well as any
unpaid  Servicing  Fees  from  proceeds  received  in  connection  with  the REO
Disposition, as further provided in Section 3.11.

            (h)   Any net proceeds which are in excess of the applicable  Stated
Principal  Balance plus all unpaid REO Imputed Interest thereon through the date
of the REO Disposition shall be retained by the Servicer as additional servicing
compensation.

            (i)   The Servicer shall use its reasonable best efforts to sell, or
cause the  Subservicer to sell, any REO Property as soon as possible,  but in no
event later than the conclusion of the third  calendar year beginning  after the
year of its  acquisition  by the REMIC  unless (i) the  Servicer  applies for an
extension of such period from the Internal Revenue Service pursuant to the REMIC
Provisions and Code Section 856(e)(3), in which event such REO Property shall be
sold within the applicable  extension  period,  or (ii) the Servicer obtains for
the Trustee an Opinion of Counsel,  addressed to the Depositor,  the Trustee and
the  Servicer,  to the effect that the holding by the REMIC of such REO Property
subsequent  to such  period  will  not  result  in the  imposition  of  taxes on
"prohibited  transactions"  as defined in Section  860F of the Code or cause the
REMIC to fail to qualify as a REMIC  under the REMIC  Provisions  or  comparable
provisions  of  relevant  state laws at any time.  The  Servicer  shall  manage,
conserve,  protect and operate each REO Property for the Trustee  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)  or result in the receipt by the REMIC of any  "income  from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code or
any "net income from  foreclosure  property"  which is subject to taxation under
Section  860G(a)(1)  of the  Code.  Pursuant  to its  efforts  to sell  such REO
Property,  the Servicer  shall either itself or through an agent selected by the
Servicer  protect and conserve  such REO Property in the same manner and to such
extent as is customary  in the  locality  where such REO Property is located and
may, incident to its conservation and protection of the interests of the Trustee
on behalf of the Certificateholders,  rent the same, or any part thereof, as the
Servicer  deems to be in the best  interest  of the  Trustee  on  behalf  of the
Certificateholders  for the  period  prior  to the  sale of such  REO  Property;
PROVIDED,  HOWEVER,  that any rent  received or accrued with respect to such REO
Property qualifies as "rents from real property" as defined in Section 856(d) of
the Code.

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            Section 3.18 NOTIFICATION OF ADJUSTMENTS.

            With respect to each  Adjustable  Rate Mortgage  Loan,  the Servicer
shall adjust the Mortgage Rate on the related  Interest Rate Adjustment Date and
shall adjust the Scheduled  Payment on the related mortgage  payment  adjustment
date, if applicable,  in compliance with the  requirements of applicable law and
the related  Mortgage and Mortgage  Note. The Servicer shall execute and deliver
any and all necessary notices required under applicable law and the terms of the
related  Mortgage  Note and Mortgage  regarding  the Mortgage Rate and Scheduled
Payment adjustments. The Servicer shall promptly, upon written request therefor,
deliver to the Trustee such  notifications  and any additional  applicable  data
regarding such  adjustments and the methods used to calculate and implement such
adjustments.  Upon the  discovery  by the Servicer or the receipt of notice from
the Trustee that the Servicer has failed to adjust a Mortgage  Rate or Scheduled
Payment in accordance with the terms of the related  Mortgage Note, the Servicer
shall  deposit in the  Collection  Account  from its own funds the amount of any
interest loss caused as such interest loss occurs.

            Section  3.19  ACCESS  TO  CERTAIN   DOCUMENTATION  AND  INFORMATION
REGARDING THE MORTGAGE LOANS.

            The Servicer shall provide,  or cause the Subservicer to provide, to
the Depositor,  the Unaffiliated  Seller, the Class A Certificate  Insurer,  the
Trustee,  the OTS or the FDIC and the examiners and  supervisory  agents thereof
access to the documentation regarding the Mortgage Loans in its possession. Such
access shall be afforded  without  charge,  but only upon  reasonable  and prior
written  request and during normal business hours at the offices of the Servicer
or any  Subservicer.  Nothing in this Section shall derogate from the obligation
of any such  party to observe  any  applicable  law  prohibiting  disclosure  of
information  regarding  the  Mortgagors  and the  failure  of any such  party to
provide access as provided in this Section as a result of such obligation  shall
not constitute a breach of this Section.

            Section  3.20  DOCUMENTS,  RECORDS  AND FUNDS IN  POSSESSION  OF THE
SERVICER TO BE HELD FOR THE TRUSTEE.

            The  Servicer  shall  account  fully to the  Trustee  for any  funds
received by the  Servicer or which  otherwise  are  collected by the Servicer as
Liquidation  Proceeds or Insurance Proceeds in respect of any Mortgage Loan. All
Mortgage  Files and funds  collected  or held by, or under the  control  of, the
Servicer  in respect of any  Mortgage  Loans,  whether  from the  collection  of
principal and interest payments or from Liquidation Proceeds,  including but not
limited to, any funds on deposit in the Collection Account, shall be held by the
Servicer  for and on behalf of the  Trustee and shall be and remain the sole and
exclusive property of the Trustee,  subject to the applicable provisions of this
Agreement.  The Servicer also agrees that it shall not create,  incur or subject
any Mortgage File or any funds that are  deposited in any Account,  or any funds
that  otherwise  are or may become due or payable to the Trustee for the benefit
of the  Certificateholders,  to any claim, lien,  security  interest,  judgment,
levy,  writ of  attachment  or other  encumbrance,  or assert by legal action or
otherwise  any claim or right of setoff  against any Mortgage  File or any funds
collected on, or in connection with, a Mortgage Loan, except,  however, that the
Servicer shall be entitled to set off against and deduct from any such funds any
amounts that are properly due and payable to the Servicer under this Agreement.

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            Section 3.21 SERVICING COMPENSATION.

            (a)   As  compensation  for its activities  hereunder,  the Servicer
shall,  with respect to each Mortgage  Loan, be entitled to retain from deposits
to the Collection Account and from Liquidation Proceeds,  Insurance Proceeds and
REO Proceeds  related to such Mortgage  Loan,  the Servicing Fee with respect to
each  Mortgage  Loan  (less  any  portion  of  such  amounts   retained  by  any
Subservicer).  In  addition,  the Servicer  shall be entitled to recover  unpaid
Servicing  Fees out of  related  late  collections  to the extent  permitted  in
Section 3.11.  The right to receive the Servicing Fee may not be  transferred in
whole or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement;  PROVIDED,  HOWEVER, that
the Servicer  may pay from the  Servicing  Fee any amounts due to a  Subservicer
pursuant to a Subservicing Agreement entered into under Section 3.02.

            (b)   Additional servicing compensation in the form of assumption or
modification fees, late payment charges,  NSF fees,  reconveyance fees and other
similar fees and charges  (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 3.11(a)(iv) to
withdraw from the Collection Account and the Distribution Account, as additional
servicing compensation, interest or other income earned on deposits therein.

            (c)   The Servicer shall be required to pay all expenses incurred by
it in connection with its servicing  activities  hereunder (including payment of
premiums for any blanket  policy  insuring  against  hazard  losses  pursuant to
Section  3.13,  servicing  compensation  of the  Subservicer  to the  extent not
retained by it and the fees and  expenses  of  independent  accountants  and any
agents  appointed by the Servicer),  and shall not be entitled to  reimbursement
therefor except as specifically provided in Section 3.11.

            Section 3.22 ANNUAL STATEMENT AS TO COMPLIANCE.

            The Servicer will deliver or cause to be delivered to the Depositor,
the Rating Agencies,  the Unaffiliated  Seller, the Class A Certificate Insurer,
and the Trustee on or before April 15 of each calendar year, commencing in 2003,
an Officers'  Certificate  stating,  as to each  signatory  thereof,  that (i) a
review of the activities of the Servicer during the preceding  calendar year and
of performance  under this Agreement or a similar  agreement has been made under
such officers'  supervision,  and (ii) to the best of such officers'  knowledge,
based on such review,  the Servicer has fulfilled all of its  obligations  under
this  Agreement  throughout  such  year,  or, if there has been a default in the
fulfillment of any such  obligation,  specifying each such default known to such
officers and the nature and status thereof.

            Section  3.23  ANNUAL  INDEPENDENT  PUBLIC  ACCOUNTANTS'   SERVICING
STATEMENT; FINANCIAL STATEMENTS.

            Not later than April 15th of each calendar year  commencing in 2003,
the  Servicer,  at its  expense,  shall cause a  nationally  recognized  firm of
independent  certified  public  accountants  to  furnish to the  Depositor,  the
Unaffiliated  Seller, the Class A Certificate  Insurer,  the Rating Agencies and
the Trustee a report stating that (i) it has obtained a letter of representation
regarding  certain matters from the management of the Servicer which includes an

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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
in all material  respects,  subject to such exceptions and other  qualifications
that may be  appropriate.  In  rendering  its report  such firm may rely,  as to
matters  relating  to the direct  servicing  of  residential  mortgage  loans by
Subservicers,  upon comparable reports of firms of independent  certified public
accountants  rendered on the basis of examinations  conducted in accordance with
the same  standards  (rendered  within one year of such  report) with respect to
those Subservicers.

            Section 3.24 TRUSTEE TO ACT AS SERVICER.

            In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of an Event of Default),  the Trustee or
its successor  shall  thereupon  assume all of the rights and obligations of the
Servicer  hereunder arising thereafter (except that the Trustee shall not be (i)
liable  for  losses of the  Servicer  pursuant  to  Section  3.10 or any acts or
omissions of the predecessor Servicer hereunder, (ii) obligated to make Advances
if it is  prohibited  from  doing  so by  applicable  law,  (iii)  obligated  to
effectuate  repurchases or substitutions of Mortgage Loans hereunder,  including
but not limited to repurchases or  substitutions  pursuant to Section 2.03, (iv)
responsible for expenses of the Servicer  pursuant to Section 2.03 or (v) deemed
to have made any representations and warranties of the Servicer hereunder).  Any
such assumption shall be subject to Section 7.02.

            Every  subservicing  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.

            If the  Servicer  shall for any  reason  no  longer be the  Servicer
(including  by  reason  of any  Event of  Default),  the  Trustee  (or any other
successor Servicer) may, at its option, succeed to any rights and obligations of
the  Servicer  under any  subservicing  agreement in  accordance  with the terms
thereof;  PROVIDED that the Trustee (or any other successor  Servicer) shall not
incur  any  liability  or have any  obligations  in its  capacity  as  successor
Servicer  under a  subservicing  agreement  arising  prior  to the  date of such
succession  unless it expressly  elects to succeed to the rights and obligations
of the Servicer  thereunder;  and the Servicer  shall not thereby be relieved of
any liability or obligations  under the subservicing  agreement arising prior to
the date of such succession.

            The Servicer shall, upon request of the Trustee,  but at the expense
of the  Servicer,  deliver  to the  assuming  party all  documents  and  records
relating to each  subservicing  agreement  (if any) and the Mortgage  Loans then
being serviced  thereunder and an accounting of amounts collected held by it and
otherwise use its best efforts to effect the orderly and  efficient  transfer of
the subservicing agreement to the assuming party.

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            Section 3.25 COMPENSATING INTEREST.

            The Servicer shall remit to the Trustee on each  Remittance  Date an
amount  from its own funds  equal to the lesser of (a) the  Prepayment  Interest
Shortfall, if any, for such Remittance Date, and (b) the amount of the Servicing
Fee payable to the Servicer for such Remittance Date.

            Section 3.26 CREDIT REPORTING; GRAMM-LEACH-BLILEY ACT.

            (a)   The  Servicer  agrees  to  accurately  and  fully  report  its
borrower  credit files with  respect to the  Mortgage  Loans to all three credit
repositories in a timely manner.

            (b)   The   Servicer    shall   comply   with   Title   V   of   the
Gramm-Leach-Bliley  Act of  1999  and  all  applicable  regulations  promulgated
thereunder,  relating to the Mortgage Loans and the related  borrowers and shall
provide all required notices thereunder.

            Section 3.27 ADVANCE FACILITIES.

            With the prior written  consent of the Class A Certificate  Insurer,
the Servicer is hereby  authorized  to enter into a financing or other  facility
(an "ADVANCE  FACILITY") under which (l) the Servicer sells,  assigns or pledges
to another  Person (an  "ADVANCING  PERSON")  the  Servicer's  rights under this
Agreement  to be  reimbursed  for any Advances  and/or (2) 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.  Except as  provided in the
preceding sentence,  no consent of any 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.

            Reimbursement  amounts  ("ADVANCE   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).

            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.

            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.

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            The  documentation  establishing  any Advance Facility shall require
that Advance  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 Advance  Reimbursement Amount distributed to such Advancing
Person or to a trustee or  custodian  (an  "ADVANCE  FACILITY  TRUSTEE") on each
Distribution Date, to enable the Advancing Person or Advance Facility Trustee to
make the FIFO  allocation of each Advance  Reimbursement  Amount with respect to
each Mortgage Loan. The Servicer shall remain entitled to be reimbursed pursuant
to the Advance  Facility 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.

            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 Depositor,  the  Unaffiliated  Seller and the Servicer without the
consent  of  any  Certificateholder,  but  with  the  consent  of  the  Class  A
Certificate Insurer, notwithstanding anything to the contrary in this Agreement.
Prior to entering into an Advance Facility, the Servicer shall notify the lender
under such facility in writing that: (a) the 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 such  Advances  only to the extent  provided  herein,  and the
Trustee is not otherwise  obligated or liable to repay any 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 Advances funded by the
lender,  subject to the restrictions  and priorities  created in this Agreement;
(c) the  Trustee  shall  not have any  responsibility  to track or  monitor  the
administration of the financing arrangement between the Servicer and the lender;
(d) if the  Servicer  is  replaced by a  successor  servicer,  the lender  shall
continue  to be  entitled  to receive  reimbursements  as provided in clause (a)
above but shall  have no  further  right to make  advances  with  respect to the
transaction  subject  to this  Agreement;  and (e) (i) the  pledge,  if any,  of
Servicer's  rights to the lender under the facility conveys no rights (such as a
right to fees  after  the  removal  of the  Servicer  or the  right to  become a
substitute  servicer)  under this  Agreement,  or against  the Trust  Fund,  any
investor in or guarantor of  securities  issued  hereunder,  or any person other
than the Servicer,  (ii) the Servicer is only pledging assets and rights that it
owns and any  purported  pledge of any assets or rights that are not property of
the  Servicer  shall be of force and effect and will not be deemed to create any
additional  rights or assets of either the lender or the  Servicer and (iii) the
lender  shall  take such  steps as are  reasonably  necessary  to  confirm  to a
successor  servicer that it has no rights in any collateral due or payable on or
after  the date of  servicing  transfer  other  than the  Servicer's  rights  to
reimbursement of Advances (to be repaid pursuant to the terms of this Agreement)
for Advances made prior to such servicing transfer.

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                                   ARTICLE IV

                                DISTRIBUTIONS AND
                            ADVANCES BY THE SERVICER

            Section 4.01 ADVANCES.

            (a)   The amount of P&I  Advances to be made by the Servicer for any
Remittance  Date shall equal,  subject to Section  4.01(c),  the sum of (i) with
respect to the Mortgage Loans, the aggregate amount of Scheduled  Payments (with
each interest portion thereof net of the related  Servicing Fee), due on the Due
Date  immediately  preceding  such  Remittance  Date in respect of such Mortgage
Loans, which Scheduled Payments were not received as of the close of business on
the last Business Day of the immediately  preceding  calendar  month,  plus (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 Scheduled  Payments  (with each interest  portion
thereof  net of the  related  Servicing  Fee)  that  would  have been due on the
related Due Date in respect of the related  Mortgage Loans,  over the net income
from such REO Property transferred to the Collection Account for distribution on
such Remittance Date.

            (b)   On  the   Remittance   Date,   the  Servicer  shall  remit  in
immediately  available  funds to the  Trustee an amount  equal to the  aggregate
amount of P&I Advances,  if any, to be made in respect of the Mortgage Loans and
REO  Properties for the related  Remittance  Date either (i) from its own funds,
(ii) from the Collection Account, to the extent of funds held therein for future
distribution  (in which case, it will cause to be made an  appropriate  entry in
the records of Collection Account that Amounts Held For Future Distribution have
been,  as permitted by this Section  4.01,  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 and REO  Properties.  Any Amounts Held For Future
Distribution  and so used shall be  appropriately  reflected  in the  Servicer's
records and replaced by the Servicer by deposit in the Collection  Account on or
before any future Remittance Date to the extent required.

            (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 coverage under this Agreement, except as otherwise provided
in this Section.

            (d)   Notwithstanding  anything  herein  to  the  contrary,  no  P&I
Advance or  Servicing  Advance  shall be  required to be made  hereunder  by the
Servicer if such P&I Advance or Servicing  Advance would, if made,  constitute a
Nonrecoverable P&I Advance or Nonrecoverable  Advance.  The determination by the
Servicer  that it has made a  Nonrecoverable  P&I  Advance  or a  Nonrecoverable

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<PAGE>

Advance or that any proposed P&I Advance or Servicing  Advance,  if made,  would
constitute  a   Nonrecoverable   P&I  Advance  or  a   Nonrecoverable   Advance,
respectively,  shall be evidenced by an  Officers'  Certificate  of the Servicer
delivered to the Trustee.

            (e)   Except as otherwise  provided  herein,  the Servicer  shall be
entitled to reimbursement pursuant to Section 3.11 hereof for Servicing Advances
from recoveries from the related Mortgagor or from all Liquidation  Proceeds and
other  payments or recoveries  (including  Insurance  Proceeds and  Condemnation
Proceeds) with respect to the related Mortgage Loan.

            Section 4.02 PRIORITIES OF DISTRIBUTION.

            (a)   On  each   Distribution   Date,  the  Trustee  will  make  the
disbursements  and  transfers  from amounts then on deposit in the  Distribution
Account in the following order of priority:

            (i)   (x)   from  the  Interest  Amount  Available,  to the  Class A
      Certificate  Insurer,  the  Premium  Amount and to the Trustee the Trustee
      Fee, in each case for such Distribution Date; to the holders of each Class
      of Certificates, in the following order of priority:

                  (y)   from the remaining  Interest Amount  Available,  plus in
      the case of clause (a) below, the related portion of any Insured Payment,

                  (a)   concurrently  to the Class A Certificates  and the Class
            A-IO Certificates,  the Accrued  Certificate  Interest  Distribution
            Amount for such Class and any Unpaid Interest Amounts for such Class
            for such Distribution Date, as described in Section 4.02(a);

                  (b)   to the Class A  Certificate  Insurer,  the amount of any
            Reimbursement  Amount then owing to it on account of a prior drawing
            relating to interest on the Class A Certificates;

                  (c)   to the Class M-1 Certificates,  the Accrued  Certificate
            Interest  Distribution  Amount for such  Class on such  Distribution
            Date;

                  (d)   to the Class M-2 Certificates,  the Accrued  Certificate
            Interest  Distribution  Amount for such  Class on such  Distribution
            Date;

                  (e)   to the Class B-1 Certificates,  the Accrued  Certificate
            Interest  Distribution  Amount for such  Class on such  Distribution
            Date;

                  (f)   to the Class B-2 Certificates,  the Accrued  Certificate
            Interest  Distribution  Amount for such  Class on such  Distribution
            Date;

            (ii)  (A)   on each  Distribution  Date (1) before the Stepdown Date
      or (2) with respect to which a Trigger Event is in effect,  to the holders
      of the related Class or Classes of Offered  Certificates  then entitled to
      distributions of principal as set forth below,  from the amounts remaining
      on deposit in the Distribution Account after making distributions

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<PAGE>

      pursuant  to  clause  (i)  above,   an  amount  equal  to  the   Principal
      Distribution Amount in the following order of priority:

                  (a)   to the Class A Certificates, until the Class Certificate
            Balance thereof is reduced to zero;

                  (b)   to the Class A  Certificate  Insurer,  the amount of any
            Reimbursement  Amount then owing to it on account of a prior drawing
            relating to principal on the Class A Certificates; and

                  (c)   sequentially  to the Class M-1, Class M-2, Class B-1 and
            Class B-2  Certificates,  in that order,  until the respective Class
            Certificate Balances are reduced to zero;

            (B)   on each  Distribution  Date (1) on and after the Stepdown Date
      and (2) as long as a Trigger Event is not in effect, to the holders of the
      related  Class  or  Classes  of  Offered  Certificates  then  entitled  to
      distribution  of  principal,  from  amounts  remaining  on  deposit in the
      Distribution  Account  after making  distributions  pursuant to clause (i)
      above,  an amount equal to, in the aggregate,  the Principal  Distribution
      Amount in the following amounts and order of priority:

                  (a)   the lesser of (x) the Principal  Distribution Amount and
            (y)  the  Class  A  Principal  Distribution  Amount  to the  Class A
            Certificates, until the Class Certificate Balance thereof is reduced
            to zero;

                  (b)   the  lesser  of (x)  the  excess  of (i)  the  Principal
            Distribution  Amount over (ii) the amount distributed to the Class A
            Certificateholders  in clause (ii)(B)(a) above and (y) the amount of
            any  Reimbursement  Amount  then  owing to the  Class A  Certificate
            Insurer on account of a prior  drawing  relating to principal on the
            Class A Certificates;

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

                  (d)   the  lesser  of (x)  the  excess  of (i)  the  Principal
            Distribution  Amount over (ii) the amount distributed to the Class A
            Certificateholders  in  clause  (ii)(B)(a)  above and to the Class A
            Certificate  Insurer in clause (ii)(B)(b) above and to the Class M-1
            Certificates  in  clause  (ii)(B)(c)  above  and (y) the  Class  M-2
            Principal  Distribution Amount to the Class M-2  Certificateholders,
            until the Class  Certificate  Balance  thereof  has been  reduced to
            zero;

                  (e)   the  lesser  of (x)  the  excess  of (i)  the  Principal
            Distribution  Amount over (ii) the amount distributed to the Class A
            Certificateholders  in  clause  (ii)(B)(a)  above,  to the  Class  A
            Certificate  Insurer in clause  (ii)(B)(b)  above,  to

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<PAGE>

            the Class M-1  Certificates  in clause  (ii)(B)(c)  above and to the
            Class M-2 Certificates in clause  (ii)(B)(d) above and (y) the Class
            B-1    Principal    Distribution    Amount    to   the   Class   B-1
            Certificateholders,  until the Class Certificate Balance thereof has
            been reduced to zero;

                  (f)   the  lesser  of (x)  the  excess  of (i)  the  Principal
            Distribution  Amount over (ii) the amount distributed to the Class A
            Certificateholders  in  clause  (ii)(B)(a)  above,  to the  Class  A
            Certificate  Insurer in clause  (ii)(B)(b)  above,  to the Class M-1
            Certificates   in  clause   (ii)(B)(c)   above,  to  the  Class  M-2
            Certificates  in  clause  (ii)(B)(d)  above  and  to the  Class  B-1
            Certificates  in  clause  (ii)(B)(e)  above  and (y) the  Class  B-2
            Principal  Distribution Amount to the Class B-2  Certificateholders,
            until the Class  Certificate  Balance  thereof  has been  reduced to
            zero;

            (iii) any amount  remaining in the  Distribution  Account  after the
      distributions  in  clauses  (i)  and  (ii)  above,  plus  as  specifically
      indicated  below,  from  amounts on deposit  in the  Excess  Reserve  Fund
      Account, shall be distributed in the following order of priority:

                  (a)   to the Class A Certificate Insurer, to the extent of any
            remaining Reimbursement Amount then owing to it;

                  (b)   to the holders of the Class M-1 Certificates, any Unpaid
            Interest Amounts for such Class;

                  (c)   to the holders of the Class M-1 Certificates, any Unpaid
            Realized Loss Amount for such Class;

                  (d)   to the holders of the Class M-2 Certificates, any Unpaid
            Interest Amounts for such Class;

                  (e)   to the holders of the Class M-2 Certificates, any Unpaid
            Realized Loss Amount for such Class;

                  (f)   to the holders of the Class B-1 Certificates, any Unpaid
            Interest Amounts for such Class;

                  (g)   to the holders of the Class B-1 Certificates, any Unpaid
            Realized Loss Amount for such Class;

                  (h)   to the holders of the Class B-2 Certificates, any Unpaid
            Interest Amounts for such Class;

                  (i)   to the holders of the Class B-2 Certificates, any Unpaid
            Realized Loss Amount for such Class;

                  (j)   to the Excess  Reserve Fund  Account,  the amount of any
            Basis Risk Payment for such Distribution Date;

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<PAGE>

                  (k)   from  amounts  on deposit  in the  Excess  Reserve  Fund
            Account, including any Interest Rate Cap Payment, an amount equal to
            any Basis Risk CarryForward Amount with respect to any Floating Rate
            Certificate  for  such   Distribution  Date  to  the  Floating  Rate
            Certificates  in the  same  order  and  priority  in  which  Accrued
            Certificate  Interest  Distribution  Amount is allocated among those
            Classes of Certificates; and

                  (l)   to  the  holders  of  the  Class  P  Certificates,   the
            outstanding principal balance thereof, if any, and to the holders of
            the Class X Certificates, the remainder of the Class X Distributable
            Amount not distributed pursuant to Sections  4.02(a)(iii)(a)-(k) (to
            the  extent  stated  in  clause  (i) of the  definition  of  Class X
            Distributable  Amount,  as  interest,  and to the  extent  stated in
            clause (ii) of the definition of Class X  Distributable  Amount,  as
            principal); and

            (iv)  to the  holders  of the Class R  Certificates,  any  remaining
      amount.

            (b)   On each Distribution Date, all amounts representing Prepayment
Charges from the Mortgage Loans received  during the related  Prepayment  Period
will be distributed to the holders of the Class P Certificates.

            (c)   On  the  August   2002,   September   2002  and  October  2002
Distribution  Dates,  the Trustee shall transfer from the  Capitalized  Interest
Account to the Distribution  Account the Capitalized  Interest  Requirement,  if
any, for such Distribution Date.

            (d)   On the Distribution Date following either the final Subsequent
Transfer  Date or October  24,  2002  whichever  date is  earlier,  any  amounts
remaining in the Capitalized  Interest  Account and all Pre-Funding  Earnings in
the Pre-Funding  Account,  after taking into account the transfers in respect of
the  Distribution  Date  described  in clause  (c)  above,  shall be paid by the
Trustee to the Unaffiliated Seller.

            (e)   On each  Subsequent  Transfer  Date, the  Unaffiliated  Seller
shall instruct in writing the Trustee to withdraw from the  Pre-Funding  Account
an amount equal to 100% of the  aggregate  Stated  Principal  Balances as of the
related  Subsequent  Cut-off Date of the  Subsequent  Mortgage Loans sold to the
Trust Fund on such  Subsequent  Transfer Date and pay such amount to or upon the
order of the Unaffiliated  Seller upon  satisfaction of the conditions set forth
in Section  2.01(c)  hereof  with  respect to such  transfer.  The  Trustee  may
conclusively rely on such written instructions from the Unaffiliated Seller.

            (f)   If the Pre-Funding Amount (exclusive of Pre-Funding  Earnings)
has been  reduced to $100,000 or less by the close of business on  September  1,
2002 then, on the September 25, 2002  Distribution  Date, after giving effect to
any  reductions  in the  Pre-Funding  Amount on such  date,  the  Trustee  shall
withdraw  from  the  Pre-Funding  Account  on  such  date  and  deposit  in  the
Distribution Account the amount on deposit in the Pre-Funding Account other than
any Pre-Funding Earnings; if the Pre-Funding Amount has not been reduced to zero
by the close of business on October 24, 2002,  the Trustee  shall  withdraw from
the  Pre-Funding  Account  the  amount  on  deposit  therein,   other  than  the
Pre-Funding  Earnings,   and  deposit  such  amount  on  the  October  25,  2002
Distribution Date into the Distribution Account. Each amount so deposited

                                       85
<PAGE>

to  the  Distribution  Account  pursuant  to the  preceding  sentence  shall  be
distributed  to the  Holders of the Offered  Certificates  (other than the Class
A-IO Certificates), PRO RATA, based on their relative Class Certificate Balances
immediately  prior to the related  Distribution  Date, as a separate  payment of
principal, on the related Distribution Date.

            (g)   On any  Distribution  Date,  any Relief Act Shortfalls and Net
Prepayment Interest Shortfalls for such Distribution Date will be allocated as a
reduction in the following order:

            (1)   First,  to the  amount  of  interest  payable  to the  Class X
      Certificates; and

            (2)   Second,  PRO RATA,  as a reduction of the Accrued  Certificate
      Interest  Distribution Amount for the Class A, Class M-1, Class M-2, Class
      B-1 and Class B-2  Certificates,  based on the amount of interest to which
      such classes would otherwise be entitled.

            Section 4.03 MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

            (a)   Not later than each Distribution  Date, the Trustee shall make
available  to  each   Certificateholder,   the  Servicer,  the  Depositor,   the
Unaffiliated  Seller,  the Class A Certificate  Insurer and each Rating Agency a
statement setting forth with respect to the related distribution:

            (i)   the  amount   thereof   allocable  to  principal,   separately
      identifying  the  aggregate  amount  of  any  Principal   Prepayments  and
      Liquidation Proceeds included therein;

            (ii)  the amount thereof allocable to interest,  any Unpaid Interest
      Amounts  included in such  distribution  and any remaining Unpaid Interest
      Amounts  after  giving  effect  to  such  distribution,   any  Basis  Risk
      CarryForward Amount for such Distribution Date and the amount of all Basis
      Risk  CarryForward  Amount covered by withdrawals  from the Excess Reserve
      Fund Account on such Distribution Date;

            (iii) if  the   distribution   to  the  Holders  of  such  Class  of
      Certificates is less than the full amount that would be  distributable  to
      such Holders if there were sufficient funds available therefor, the amount
      of the  shortfall  and the  allocation  thereof as between  principal  and
      interest,  including  any Basis Risk  CarryForward  Amount not  covered by
      amounts in the Excess Reserve Fund Account;

            (iv)  the Class  Certificate  Balance of each Class of  Certificates
      after giving effect to the distribution of principal on such  Distribution
      Date;

            (v)   the  Pool  Stated   Principal   Balance   for  the   following
      Distribution Date;

            (vi)  the amount of the  Servicing  Fees paid to or  retained by the
      Servicer  or  Subservicer  (with  respect  to  the  Subservicers,  in  the
      aggregate) with respect to such Distribution Date;

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<PAGE>

            (vii)   the Pass-Through Rate for each such Class of Certificates
      with respect to such Distribution Date;

            (viii)  the amount of Advances included in the distribution on such
      Distribution  Date and the  aggregate  amount of Advances  reported by the
      servicer as outstanding  as of the close of business on such  Distribution
      Date;

            (ix)    the number and  aggregate  Scheduled  Principal  Balances of
      Mortgage  Loans (1) as to which the Scheduled  Payment is delinquent 31 to
      60 days,  61 to 90 days and 91 or more  days,  (2) that  have  become  REO
      Property,  (3) that are in foreclosure and (4) that are in bankruptcy,  in
      each  case as of the close of  business  on the last  Business  Day of the
      immediately preceding month;

            (x)     with  respect  to  any  Mortgage  Loan  that  became  an REO
      Property during the preceding  calendar month,  the loan number and Stated
      Principal Balance of such Mortgage Loan as of the close of business on the
      Determination  Date  preceding  such  Distribution  Date  and the  date of
      acquisition thereof;

            (xi)    the total number and principal balance of any REO Properties
      (and  market  value,  if  available)  as of the close of  business  on the
      Determination Date preceding such Distribution Date;

            (xii)   whether  a  Trigger  Event has  occurred  and is  continuing
      (including  the  calculation  of  thereof  and the  aggregate  outstanding
      balance of all 60+ Day Delinquent Loans);  (xiii) the amount on deposit in
      the Excess Reserve Fund Account (after giving effect to  distributions  on
      such Distribution Date);

            (xiv)   the  aggregate  amount  of  Applied  Realized  Loss  Amounts
      incurred  during  the  preceding  calendar  month  and  aggregate  Applied
      Realized Loss Amounts through such Distribution Date;

            (xv)    the  amount  of any Net  Monthly  Excess  Cash  Flow on such
      Distribution  Date and the  allocation  thereof to the  Certificateholders
      with respect to Applied Realized Losses and Unpaid Interest Amounts;

            (xvi)   the Subordinated Amount and Required Subordinated Amount;

            (xvii)  the Interest  Remittance  Amount,  the Principal  Remittance
      Amount and the  Prepayment  Charges  remitted by Servicer  with respect to
      that Distribution Date;

            (xviii) the Pre-Funded Amount as of the end of the prior Due Period;

            (xix)   the amount of any principal  prepayment on the  Certificates
      resulting from the application of unused Pre-Funding Account moneys;

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<PAGE>

            (xx)    the Class A  Deficiency  Amount and the Insured  Payment for
      such Distribution Date;

            (xxi)   the   Reimbursement   Amount   immediately   prior  to  such
      Distribution  Date,  and  the  amount  of  any  payments  to the  Class  A
      Certificate Insurer on account thereof on such Distribution Date; and

            (xxii)  the Interest Rate Cap Payment, if any, for such Distribution
      Date.

            (b)     The  Trustee's   responsibility   for  providing  the  above
statement  is  limited  to the  availability,  timeliness  and  accuracy  of the
information  derived  from the  Servicer  or,  in the case of the  Reimbursement
Amount, from the Class A Certificate Insurer. The Trustee will provide the above
statement  via the  Trustee's  internet  website,  except that the Trustee shall
deliver a hard copy of such statement to the Class A Certificate Insurer on each
Distribution   Date.  The  Trustee's   website  will  initially  be  located  at
http://www-apps.gis.deutsche-bank.com\invr  and  assistance in using the website
can  be  obtained  by  calling  the  Trustee's   investor   relations   desk  at
1-800-735-7777.  A paper copy of the statement  will also be made available upon
request.

            (c)   Within  a  reasonable  period  of time  after  the end of each
calendar year, the Trustee shall cause to be furnished to each Person who at any
time during the calendar year was a  Certificateholder,  a statement  containing
the  information  set forth in clauses  (a)(i),  (a)(ii)  and  (a)(vii)  of this
Section 4.03  aggregated  for such calendar year or applicable  portion  thereof
during which such Person was a Certificateholder. Such obligation of the Trustee
shall  be  deemed  to have  been  satisfied  to the  extent  that  substantially
comparable  information  shall  be  provided  by  the  Trustee  pursuant  to any
requirements of the Code as from time to time in effect.

            (d)   Not later than the  Determination  Date,  the  Servicer  shall
furnish to the Trustee a monthly  remittance  advice  statement  containing such
information  as shall be  reasonably  requested  by the  Trustee to provide  the
reports  required by Section 4.03(a) as to the  accompanying  remittance and the
period  ending  on the  close  of  business  on  the  last  Business  Day of the
immediately preceding month.

            The  Servicer  shall  furnish  to the  Trustee  an  individual  loan
accounting  report,  as of the last  Business  Day of each  month,  to  document
Mortgage  Loan  payment  activity on an  individual  Mortgage  Loan basis.  With
respect to each month, the  corresponding  individual loan accounting report (in
electronic  format)  shall be  received by the Trustee no later than the related
Determination Date, which report shall contain the following:

            (i)     with respect to each Scheduled  Payment,  the amount of such
      remittance  allocable to principal  (including a separate breakdown of any
      Principal  Prepayment,  including  the  date of such  prepayment,  and any
      prepayment penalties or premiums, along with a detailed report of interest
      on principal prepayment amounts remitted in accordance with Section 3.25);

            (ii)    with respect to each Scheduled  Payment,  the amount of such
      remittance allocable to interest and assumption fees;

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            (iii) the amount of servicing  compensation received by the Servicer
      during the prior distribution period;

            (iv)  the individual and aggregate Stated  Principal  Balance of the
      Mortgage Loans;

            (v)   the individual and aggregate  Scheduled  Principal Balances of
      the Mortgage Loans;

            (vi)  the  aggregate  of any  expenses  reimbursed  to the  Servicer
      during the prior distribution period pursuant to Section 3.05; and

            (vii) the number  and  aggregate  Scheduled  Principal  Balances  of
      Mortgage Loans (a) as to which the Scheduled  Payment is delinquent (1) 31
      to 60 days,  (2) 61 to 90 days  and (3) 91 days or  more;  (b) as to which
      foreclosure has commenced;  (c) as to which REO Property has been acquired
      and (d) that are in bankruptcy.

            Section 4.04 CERTAIN MATTERS RELATING TO THE DETERMINATION OF LIBOR.

            Until all of the LIBOR  Certificates  are paid in full,  the Trustee
will at all times  retain at least  four  Reference  Banks  for the  purpose  of
determining LIBOR with respect to each Interest Determination Date. The Servicer
initially shall designate the Reference Banks.  Each "REFERENCE BANK" shall be a
leading bank engaged in transactions in Eurodollar deposits in the international
Eurocurrency  market,  shall not control,  be controlled  by, or be under common
control  with,  the Trustee and shall have an  established  place of business in
London.  If any such Reference Bank should be unwilling or unable to act as such
or if the Servicer  should  terminate its  appointment  as Reference  Bank,  the
Servicer shall promptly appoint or cause to be appointed another Reference Bank.
The Trustee shall have no liability or  responsibility to any Person for (i) the
selection of any Reference  Bank for purposes of  determining  LIBOR or (ii) any
inability  to  retain  at  least  four  Reference   Banks  which  is  caused  by
circumstances beyond its reasonable control.

            The Pass-Through Rate for each Class of LIBOR  Certificates for each
Interest  Accrual  Period  shall be  determined  by the  Trustee  on each  LIBOR
Determination  Date so long as the LIBOR  Certificates  are  outstanding  on the
basis of LIBOR and the respective formulae appearing in footnotes  corresponding
to the LIBOR  Certificates  in the table  relating  to the  Certificates  in the
Preliminary   Statement.   The  Trustee   shall  not  have  any   liability   or
responsibility  to  any  Person  for  its  inability,   following  a  good-faith
reasonable effort, to obtain quotations from the Reference Banks or to determine
the arithmetic mean referred to in the definition of LIBOR,  all as provided for
in this Section 4.04 and the definition of LIBOR. The establishment of LIBOR and
each Pass-Through  Rate for the LIBOR  Certificates by the Trustee shall (in the
absence of manifest error) be final,  conclusive and binding upon each Holder of
a Certificate and the Trustee.

            Section 4.05 THE CLASS A INSURANCE POLICY.

            (a)   Within  two (2)  days  following  each  Remittance  Date,  the
Trustee shall determine with respect to the immediately  following  Distribution
Date, the amount to be on

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deposit in the Distribution Account on such Distribution Date as a result of the
(i) Servicer's  remittance of the Interest  Remittance  Amount and the Principal
Remittance Amount on the related  Remittance Date, and (ii) any transfers to the
Distribution  Account  made from the  Capitalized  Interest  Account  and/or the
Pre-Funding  Account relating to such Distribution Date pursuant to Section 4.02
hereof, excluding the amount of any Insured Payment.

            (b)   If on any Distribution Date there is a Class A Deficiency, the
Trustee  shall  complete  a  Notice  in the  form of  Exhibit  A to the  Class A
Insurance  Policy and submit such notice to the Class A  Certificate  Insurer no
later than 12:00 noon New York City time on the second  Business  Day  preceding
such  Distribution  Date as a claim for an Insured Payment in an amount equal to
such Class A Deficiency.

            (c)   The Trustee shall  establish a separate  Eligible  Account for
the benefit of Holders of the Class A  Certificates  and the Class A Certificate
Insurer referred to herein as the "Class A Insurance Payment Account" over which
the  Trustee  shall have  exclusive  control and sole right of  withdrawal.  The
Trustee  shall  deposit upon receipt any amount paid under the Class A Insurance
Policy in the  Insurance  Payment  Account and  distribute  such amount only for
purposes  of  payment to the Class A  Certificateholders  of the Class A Insured
Amount and such  amount may not be applied  to satisfy  any costs,  expenses  or
liabilities of the Servicer,  the Trustee or the Trust Fund.  Amounts paid under
the Class A Insurance  Policy,  to the extent  needed to pay the Class A Insured
Amount  shall  be  transferred  to  the  Distribution  Account  on  the  related
Distribution  Date  and  disbursed  by  the  Class  A  Trustee  to the  Class  A
Certificateholders  in  accordance  with Section 4.02. It shall not be necessary
for such  payments  to be made by checks  or wire  transfers  separate  from the
checks  or  wire  transfers  used  to pay  other  distributions  to the  Class A
Certificateholders with other funds available to make such payment. However, the
amount of any payment of principal or of interest on the Class A Certificates to
be paid from funds  transferred from the Class A Insurance Payment Account shall
be noted as provided in paragraph (d) below in the  Certificate  Register and in
the statement to be furnished to Holders of the Class A Certificates pursuant to
Section 4.03(a).  Funds held in the Class A Insurance  Payment Account shall not
be invested. Any funds remaining in the Class A Insurance Payment Account on the
first Business Day following a Distribution  Date shall be returned to the Class
A  Certificate  Insurer  pursuant  to the  written  instructions  of the Class A
Certificate Insurer by the end of such Business Day.

            (d)   The Trustee  shall keep a complete and accurate  record of the
amount of interest and principal paid in respect of any Class A Certificate from
moneys  received  under the Class A Insurance  Policy.  The Class A  Certificate
Insurer shall have the right to inspect such records at reasonable  times during
normal business hours upon one Business Day's prior notice to the Trustee.

            (e)   In the event that the Trustee has received a certified copy of
an order of the  appropriate  court that any Insured  Payment has been voided in
whole or in part as a preference  payment under  applicable  bankruptcy law, the
Trustee shall so notify the Class A Certificate  Insurer,  shall comply with the
provisions  of the Class A  Insurance  Policy to obtain  payment  by the Class A
Certificate  Insurer of such voided Insured  Payment,  and shall, at the time it
provides notice to the Class A Certificate Insurer, notify, by mail to the Class
A Certificateholders of the affected Certificates that, in the event any Class A
Certificateholder's

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Insured Payment is so recovered, such Class A Certificateholder will be entitled
to payment  pursuant to the Class A Insurance  Policy,  a copy of which shall be
made available through the Trustee, the Class A Certificate Insurer or the Class
A Certificate  Insurer's  fiscal agent, if any, and the Trustee shall furnish to
the Class A  Certificate  Insurer  or its  fiscal  agent,  if any,  its  records
evidencing  the  payments  which have been made by the Trustee and  subsequently
recovered from the Class A Certificateholders,  and dates on which such payments
were made.

            (f)   The  Trustee  shall  promptly  notify the Class A  Certificate
Insurer  of any  proceeding  or  the  institution  of any  action,  of  which  a
Responsible  Officer of the Trustee has actual knowledge,  seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "PREFERENCE  CLAIM") of any distribution  made with respect to
the Class A  Certificates.  Each Class A  Certificateholder,  by its purchase of
Class A  Certificates,  the  Servicer  and the Trustee  agree that,  the Class A
Certificate  Insurer (so long as no Class A Certificate  Insurer Default exists)
may at  any  time  during  the  continuation  of any  proceeding  relating  to a
Preference  Claim  direct  all  matters  relating  to  such  Preference   Claim,
including,  without  limitation,  (i) the  direction  of any appeal of any order
relating to such Preference Claim and (ii) the posting of any surety, supersedes
or performance bond pending any such appeal. In addition and without  limitation
of the  foregoing,  the Class A Certificate  Insurer shall be subrogated to, and
each Class A Certificateholder,  the Trustee hereby delegates and assigns to the
Class A Certificate  Insurer, to the fullest extent permitted by law, the rights
the  Trustee  and each  Class A  Certificateholder  in the  conduct  of any such
Preference Claim, including,  without limitation, all rights of any party to any
adversary  proceeding  or  action  with  respect  to any court  order  issued in
connection with any such Preference Claim.

            (g)   The   Trustee   shall,   upon   retirement   of  the  Class  A
Certificates,  furnish  to the  Class A  Certificate  Insurer  a notice  of such
retirement,  and, upon retirement of the Class A Certificates and the expiration
of the term of the Class A  Insurance  Policy,  surrender  the Class A Insurance
Policy to the Class A Certificate Insurer for cancellation.

            Section 4.06 EFFECT OF PAYMENTS BY THE CLASS A CERTIFICATE  INSURER;
SUBROGATION.

            Anything  herein to the contrary  notwithstanding,  any payment with
respect to  principal of or interest on the Class A  Certificates  which is made
with moneys received pursuant to the terms of the Class A Insurance Policy shall
not be considered  payment of the Class A Certificates  from the Trust Fund. The
Depositor,  the  Servicer  and the Trustee  acknowledge,  and each Holder by its
acceptance  of a Class A  Certificate  agrees,  that  without  the  need for any
further  action on the part of the Class A Certificate  Insurer,  the Depositor,
the  Servicer,  the Trustee or the  Certificate  Registrar (a) to the extent the
Class A Certificate Insurer makes payments,  directly or indirectly,  on account
of principal of or interest on the Class A  Certificates  to the Holders of such
Class A Certificates,  the Class A Certificate  Insurer will be fully subrogated
to, and each Class A  Certificateholder,  the  Servicer  and the Trustee  hereby
delegate and assign to the Class A Certificate  Insurer,  to the fullest  extent
permitted  by law,  the rights of such  Holders to receive  such  principal  and
interest from the Trust Fund, including,  without limitation, any amounts due to
the Class A  Certificateholders  in respect of securities law violations arising
from  the  offer  and  sale of the  Class A  Certificates,  and (b) the  Class A
Certificate  Insurer  shall be paid such  amounts  from the  sources  and in the
manner  provided  herein for the payment of such  amounts and as provided in the
Insurance and Indemnity

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Agreement. The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Class A Certificate  Insurer for action to preserve or
enforce  the Class A  Certificate  Insurer's  rights  or  interests  under  this
Agreement  without limiting the rights or affecting the interests of the Holders
as otherwise set forth herein.

                                   ARTICLE V

                                THE CERTIFICATES

            Section 5.01 THE CERTIFICATES.

            The Certificates shall be substantially in the forms attached hereto
as exhibits.  The  Certificates  shall be issuable in  registered  form,  in the
minimum  denominations,  integral  multiples in excess thereof  (except that one
Certificate  in each Class may be issued in a different  amount which must be in
excess of the applicable minimum  denomination) and aggregate  denominations per
Class set forth in the Preliminary Statement.

            The Depositor hereby directs the Trustee to register the Class X and
the Class P Certificates  initially to "Morgan Stanley & Co.  Incorporated"  and
then on the NIM Closing Date as follows:  "Deutsche Bank National Trust Company,
as Indenture  Trustee on behalf of the  Noteholders of the CDC Mortgage  Capital
NIM Trust  2002-HE2N",  and to deliver such Class X and Class P Certificates  on
the NIM Closing Date to Deutsche Bank National Trust Company,  as trustee of the
NIM Trust.

            Subject to Section 9.02  respecting  the final  distribution  on the
Certificates,  on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately  available funds to the account of such holder at a bank
or other entity having appropriate  facilities  therefor,  if such Holder has so
notified  the Trustee at least five  Business  Days prior to the related  Record
Date or (y) by check mailed by first class mail to such Certificateholder at the
address of such holder appearing in the Certificate Register.

            The Certificates shall be executed by manual or facsimile  signature
on behalf of the  Trustee by an  authorized  officer.  Certificates  bearing the
manual  or  facsimile  signatures  of  individuals  who  were,  at the time such
signatures were affixed,  authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so  authorized  prior  to the  countersignature  and  delivery  of  any  such
Certificates  or did not hold such offices at the date of such  Certificate.  No
Certificate  shall be entitled to any benefit under this Agreement,  or be valid
for any purpose,  unless  countersigned by the Trustee by manual signature,  and
such countersignature upon any Certificate shall be conclusive evidence, and the
only  evidence,  that such  Certificate  has been duly  executed  and  delivered
hereunder.  All Certificates shall be dated the date of their  countersignature.
On the Closing Date, the Trustee shall countersign the Certificates to be issued
at the direction of the Depositor, or any affiliate thereof.

            The Depositor shall provide, or cause to be provided, to the Trustee
on a continuous  basis,  an adequate  inventory of  Certificates  to  facilitate
transfers.

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            Section  5.02  CERTIFICATE  REGISTER;  REGISTRATION  OF TRANSFER AND
EXCHANGE OF CERTIFICATES.

            (a)   The  Trustee  shall  maintain,  or cause to be  maintained  in
accordance  with the provisions of Section 5.06, a Certificate  Register for the
Trust Fund in which,  subject to the provisions of subsections (b) and (c) below
and to such  reasonable  regulations  as it may  prescribe,  the  Trustee  shall
provide for the  registration of Certificates  and of transfers and exchanges of
Certificates as herein provided.  Upon surrender for registration of transfer of
any  Certificate,  the Trustee  shall  execute and  deliver,  in the name of the
designated  transferee or transferees,  one or more new Certificates of the same
Class and aggregate Percentage Interest.

            At the option of a Certificateholder,  Certificates may be exchanged
for  other  Certificates  of the same  Class  in  authorized  denominations  and
evidencing  the  same  aggregate  Percentage  Interest  upon  surrender  of  the
Certificates  to be exchanged  at the office or agency of the Trustee.  Whenever
any  Certificates  are so surrendered  for exchange,  the Trustee shall execute,
authenticate,  and deliver the Certificates which the  Certificateholder  making
the exchange is entitled to receive.  Every Certificate presented or surrendered
for  registration  of  transfer or exchange  shall be  accompanied  by a written
instrument of transfer in form  satisfactory to the Trustee duly executed by the
holder thereof or his attorney duly authorized in writing.

            No service  charge to the  Certificateholders  shall be made for any
registration  of  transfer or  exchange  of  Certificates,  but payment of a sum
sufficient  to cover  any tax or  governmental  charge  that may be  imposed  in
connection with any transfer or exchange of Certificates may be required.

            All  Certificates   surrendered  for  registration  of  transfer  or
exchange  shall be  cancelled  and  subsequently  destroyed  by the  Trustee  in
accordance with the Trustee's customary procedures.

            (b)   No transfer of a Private Certificate shall be made unless such
transfer  is made  pursuant to an  effective  registration  statement  under the
Securities Act and any applicable  state  securities  laws or is exempt from the
registration  requirements under said Act and such state securities laws. Except
with respect to the transfer of the Class X and Class P Certificates to the NIMs
Trust  on the  Closing  Date,  in the  event  that a  transfer  is to be made in
reliance upon an exemption  from the  Securities  Act and such laws, in order to
assure  compliance with the Securities Act and such laws, the  Certificateholder
desiring to effect  such  transfer  shall  certify to the Trustee in writing the
facts  surrounding the transfer in substantially the form set forth in Exhibit I
(the  "TRANSFEROR  CERTIFICATE")  and either (i) there shall be delivered to the
Trustee a letter in substantially the form of Exhibit J (the "RULE 144A LETTER")
or (ii) there shall be delivered to the Trustee at the expense of the transferor
an Opinion of Counsel that such transfer may be made without  registration under
the  Securities  Act.  The  Depositor  shall  provide to any Holder of a Private
Certificate  and any  prospective  transferee  designated  by any  such  Holder,
information  regarding the related  Certificates and the Mortgage Loans and such
other  information as shall be necessary to satisfy the condition to eligibility
set  forth in Rule  144A(d)(4)  for  transfer  of any such  Certificate  without
registration  thereof  under the  Securities  Act  pursuant to the  registration
exemption provided by Rule 144A. The Trustee and the Servicer

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<PAGE>

shall  cooperate  with the  Depositor  in  providing  the Rule 144A  information
referenced in the preceding sentence,  including providing to the Depositor such
information  regarding the  Certificates,  the Mortgage  Loans and other matters
regarding the Trust Fund as the Depositor shall  reasonably  request to meet its
obligation under the preceding  sentence.  Each Holder of a Private  Certificate
desiring to effect such transfer shall,  and does hereby agree to, indemnify the
Trustee and the Depositor and the Servicer against any liability that may result
if the transfer is not so exempt or is not made in accordance  with such federal
and state laws.

            Except  with  respect  to the  transfer  of the  Class X and Class P
Certificates  to  the  NIMs  Trust  on  the  Closing  Date,  no  transfer  of an
ERISA-Restricted  Certificate  shall  be made  unless  the  Trustee  shall  have
received  either (i) a  representation  from the transferee of such  Certificate
acceptable  to and in form and  substance  satisfactory  to the  Trustee (in the
event such Certificate is a Private Certificate or a Residual Certificate,  such
requirement  is  satisfied  only by the  Trustee's  receipt of a  representation
letter  from the  transferee  substantially  in the form of  Exhibit  I), to the
effect that such  transferee  is not an  employee  benefit  plan or  arrangement
subject to Section 406 of ERISA, a plan subject to Section 4975 of the Code or a
plan  subject to any  Federal,  state or local law  ("SIMILAR  LAW")  materially
similar to the foregoing provisions of ERISA or the Code, nor a person acting on
behalf of any such plan or arrangement  nor using the assets of any such plan or
arrangement to effect such transfer, or (ii) if the ERISA-Restricted Certificate
is a  Private  Certificate  other  than a  Residual  Certificate  or a  Class  P
Certificate that has been the subject of an ERISA-Qualifying  Underwriting,  and
the purchaser is an insurance company, a representation that the purchaser is an
insurance  company that is purchasing such  Certificates with funds contained in
an "insurance  company general account" (as such term is defined in Section V(e)
of Prohibited  Transaction  Class  Exemption  95-60 ("PTCE  95-60") and that the
purchase and holding of such  Certificates  are covered under Sections I and III
of PTCE  95-60 or (iii)  in the  case of any such  ERISA-Restricted  Certificate
other  than  a  Residual  Certificate  or  Class  P  Certificate  presented  for
registration  in the name of an  employee  benefit  plan  subject  to Title I of
ERISA, a plan or arrangement  subject to Section 4975 of the Code (or comparable
provisions of any subsequent enactments), or a plan subject to Similar Law, or a
trustee of any such plan or any other  person  acting on behalf of any such plan
or  arrangement  or using such  plan's or  arrangement's  assets,  an Opinion of
Counsel  satisfactory to the Trustee and the Servicer,  which Opinion of Counsel
shall  not be an  expense  of the  Trustee,  the  Servicer  or the  Trust  Fund,
addressed  to the  Trustee,  to the effect that the  purchase or holding of such
ERISA-Restricted  Certificate  will not  result in the  assets of the Trust Fund
being  deemed to be "plan  assets"  and  subject to the  prohibited  transaction
provisions  of ERISA and the Code or similar  violation  of Similar Law and will
not subject the Trustee or the Servicer to any  obligation  in addition to those
expressly undertaken in this Agreement or to any liability.  For purposes of the
preceding sentence, with respect to an ERISA-Restricted  Certificate that is not
a Private Certificate or a Residual Certificate, in the event the representation
letter   referred  to  in  the  preceding   sentence  is  not  furnished,   such
representation  shall  be  deemed  to  have  been  made  to the  Trustee  by the
transferee's    (including   an   initial   acquiror's)    acceptance   of   the
ERISA-Restricted   Certificates.  In  the  event  that  such  representation  is
violated, or any attempt to transfer to a plan or arrangement subject to Section
406 of ERISA,  a plan  subject to Section  4975 of the Code or a plan subject to
Similar  Law, or a person  acting on behalf of any such plan or  arrangement  or
using the  assets of any such  plan or  arrangement,  without  such  Opinion  of
Counsel, such attempted transfer or acquisition shall be void and of no effect.

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<PAGE>

            To the extent  permitted under  applicable law  (including,  but not
limited to,  ERISA),  the Trustee  shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in fact
not  permitted  by this  Section  5.02(b) or for making any payments due on such
Certificate  to the Holder  thereof or taking any other  action with  respect to
such Holder under the  provisions of this  Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.

            (c)   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
the  rights of each  Person  acquiring  any  Ownership  Interest  in a  Residual
Certificate are expressly subject to the following provisions:

            (i)   Each Person  holding or acquiring any Ownership  Interest in a
      Residual  Certificate  shall be a Permitted  Transferee and shall promptly
      notify the  Trustee of any change or  impending  change in its status as a
      Permitted Transferee.

            (ii)  No  Ownership  Interest  in  a  Residual  Certificate  may  be
      registered on the Closing Date or thereafter transferred,  and the Trustee
      shall not register the Transfer of any  Residual  Certificate  unless,  in
      addition to the certificates required to be delivered to the Trustee under
      subparagraph  (b) above,  the Trustee  shall have been  furnished  with an
      affidavit (a "TRANSFER  AFFIDAVIT")  of the initial  owner or the proposed
      transferee in the form attached hereto as Exhibit H.

            (iii) Each Person  holding or acquiring any Ownership  Interest in a
      Residual  Certificate shall agree (A) to obtain a Transfer  Affidavit from
      any other Person to whom such Person  attempts to Transfer  its  Ownership
      Interest  in a Residual  Certificate,  (B) to obtain a Transfer  Affidavit
      from any  Person  for whom such  Person is acting as  nominee,  trustee or
      agent in connection  with any Transfer of a Residual  Certificate  and (C)
      not to Transfer its  Ownership  Interest in a Residual  Certificate  or to
      cause the Transfer of an Ownership  Interest in a Residual  Certificate to
      any other  Person if it has  actual  knowledge  that such  Person is not a
      Permitted Transferee.

            (iv)  Any attempted or purported  Transfer of any Ownership Interest
      in a Residual  Certificate  in violation of the provisions of this Section
      5.02(c) shall be absolutely  null and void and shall vest no rights in the
      purported Transferee. If any purported transferee shall become a Holder of
      a Residual  Certificate  in  violation of the  provisions  of this Section
      5.02(c), then the last preceding Permitted Transferee shall be restored to
      all rights as Holder thereof  retroactive to the date of  registration  of
      Transfer  of such  Residual  Certificate.  The  Trustee  shall be under no
      liability  to any Person for any  registration  of  Transfer of a Residual
      Certificate  that is in fact not  permitted  by Section  5.02(b)  and this
      Section 5.02(c) or for making any payments due on such  Certificate to the
      Holder  thereof or taking any other  action  with  respect to such  Holder
      under  the  provisions  of this  Agreement  so long  as the  Transfer  was
      registered  after receipt of the related  Transfer  Affidavit,  Transferor
      Certificate  and the Rule 144A Letter.  The Trustee  shall be entitled but
      not  obligated to recover from any Holder of a Residual  Certificate  that
      was in fact not a Permitted  Transferee at the time it became a Holder or,
      at such

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<PAGE>

      subsequent  time as it  became  other  than a  Permitted  Transferee,  all
      payments made on such Residual  Certificate at and after either such time.
      Any such  payments so recovered by the Trustee shall be paid and delivered
      by  the  Trustee  to the  last  preceding  Permitted  Transferee  of  such
      Certificate.

            (v)   The  Depositor  shall use its best efforts to make  available,
      upon  receipt  of  written  request  from  the  Trustee,  all  information
      necessary to compute any tax imposed under Section  860E(e) of the Code as
      a result of a Transfer of an Ownership Interest in a Residual  Certificate
      to any Holder who is not a Permitted Transferee.

            The restrictions on Transfers of a Residual Certificate set forth in
this Section  5.02(c) shall cease to apply (and the  applicable  portions of the
legend on a Residual  Certificate  may be  deleted)  with  respect to  Transfers
occurring after delivery to the Trustee of an Opinion of Counsel,  which Opinion
of  Counsel  shall  not be an  expense  of the  Trust  Fund,  the  Trustee,  the
Unaffiliated Seller or the Servicer,  to the effect that the elimination of such
restrictions  will not cause the Trust  Fund  hereunder  to fail to qualify as a
REMIC at any  time  that the  Certificates  are  outstanding  or  result  in the
imposition of any tax on the Trust Fund, a Certificateholder  or another Person.
Each  Person  holding  or  acquiring  any  Ownership   Interest  in  a  Residual
Certificate  hereby consents to any amendment of this Agreement which,  based on
an Opinion of Counsel furnished to the Trustee,  is reasonably  necessary (a) to
ensure that the record  ownership of, or any beneficial  interest in, a Residual
Certificate is not transferred,  directly or indirectly, to a Person that is not
a Permitted  Transferee and (b) to provide for a means to compel the Transfer of
a  Residual  Certificate  which  is held  by a  Person  that is not a  Permitted
Transferee to a Holder that is a Permitted Transferee.

            (d)   The preparation and delivery of all  certificates and opinions
referred to above in this Section 5.02 in connection  with transfer  shall be at
the expense of the parties to such transfers.

            (e)   Except as provided below, the Book-Entry Certificates shall at
all times remain  registered in the name of the Depository or its nominee and at
all times:  (i)  registration of the  Certificates may not be transferred by the
Trustee  except  to  another  Depository;  (ii) the  Depository  shall  maintain
book-entry  records with respect to the  Certificate  Owners and with respect to
ownership and transfers of such  Book-Entry  Certificates;  (iii)  ownership and
transfers of  registration  of the Book-Entry  Certificates  on the books of the
Depository shall be governed by applicable rules  established by the Depository;
(iv) the  Depository  may  collect  its usual and  customary  fees,  charges and
expenses from its Depository  Participants;  (v) the Trustee shall deal with the
Depository,   Depository   Participants  and  indirect  participating  firms  as
representatives  of the Certificate  Owners of the Book-Entry  Certificates  for
purposes of exercising the rights of holders under this Agreement,  and requests
and directions for and votes of such  representatives  shall not be deemed to be
inconsistent if they are made with respect to different  Certificate Owners; and
(vi) the  Trustee  may  rely  and  shall be  fully  protected  in  relying  upon
information   furnished  by  the  Depository  with  respect  to  its  Depository
Participants  and  furnished  by the  Depository  Participants  with  respect to
indirect  participating  firms and persons  shown on the books of such  indirect
participating firms as direct or indirect Certificate Owners.

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            All transfers by Certificate Owners of Book-Entry Certificates shall
be  made  in  accordance  with  the  procedures  established  by the  Depository
Participant  or  brokerage  firm  representing  such  Certificate   Owner.  Each
Depository   Participant   shall  only  transfer   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.

            If (x) (i) the  Depository or the  Depositor  advises the Trustee in
writing that the Depository is no longer  willing or able to properly  discharge
its  responsibilities  as  Depository,  and (ii) the Trustee or the Depositor is
unable to locate a qualified successor,  (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository or (z) after the  occurrence of an Event of Default,  Certificate
Owners  representing at least 51% of the  Certificate  Balance of the Book-Entry
Certificates  together  advise  the  Trustee  and  the  Depository  through  the
Depository  Participants in writing that the continuation of a book-entry system
through the  Depository  is no longer in the best  interests of the  Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the  occurrence  of any such  event and of the  availability  of  definitive,
fully-registered  Certificates  (the "DEFINITIVE  Certificates")  to Certificate
Owners  requesting the same.  Upon surrender to the Trustee of the related Class
of  Certificates  by the Depository,  accompanied by the  instructions  from the
Depository   for   registration,   the  Trustee   shall  issue  the   Definitive
Certificates.  Neither the  Servicer,  the  Depositor  nor the Trustee  shall be
liable for any delay in delivery of such  instruction and each may  conclusively
rely on, and shall be protected in relying on, such instructions.  The Depositor
shall  provide  the  Trustee  with an  adequate  inventory  of  certificates  to
facilitate  the  issuance  and  transfer of  Definitive  Certificates.  Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Depository shall be deemed to be imposed upon and
performed  by the  Trustee,  to the  extent  applicable  with  respect  to  such
Definitive  Certificates  and the  Trustee  shall  recognize  the Holders of the
Definitive  Certificates as  Certificateholders  hereunder;  PROVIDED,  that the
Trustee shall not by virtue of its assumption of such obligations  become liable
to any party for any act or failure to act of the Depository.

            Section 5.03 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

            If (a) any mutilated  Certificate is surrendered to the Trustee,  or
the Trustee receives  evidence to its  satisfaction of the destruction,  loss or
theft of any  Certificate  and (b)  there is  delivered  to the  Depositor,  the
Servicer,  the Class A  Certificate  Insurer  and the Trustee  such  security or
indemnity as may be required by them to hold each of them harmless, then, in the
absence of notice to the Trustee that such  Certificate  has been  acquired by a
bona fide  purchaser,  the Trustee shall execute,  countersign  and deliver,  in
exchange  for or in lieu  of any  such  mutilated,  destroyed,  lost  or  stolen
Certificate,  a new Certificate of like Class, tenor and Percentage Interest. In
connection with the issuance of any new Certificate under this Section 5.03, the
Trustee may require  the payment of a sum  sufficient  to cover any tax or other
governmental  charge  that may be  imposed  in  relation  thereto  and any other
expenses  (including the fees and expenses of the Trustee) connected  therewith.
Any  replacement   Certificate  issued  pursuant  to  this  Section  5.03  shall
constitute  complete and  indefeasible  evidence of ownership,  as if originally
issued,  whether or not the lost, stolen or destroyed Certificate shall be found
at any time.

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            Section 5.04 PERSONS DEEMED OWNERS.

            The Servicer,  the Trustee,  the Depositor,  the Class A Certificate
Insurer and any agent of the Servicer,  the  Depositor,  the Class A Certificate
Insurer or the  Trustee  may treat the Person in whose name any  Certificate  is
registered  as the  owner  of such  Certificate  for the  purpose  of  receiving
distributions  as  provided  in  this  Agreement  and  for  all  other  purposes
whatsoever,  and neither the Servicer,  the Trustee, the Depositor,  the Class A
Certificate  Insurer nor any agent of the Servicer,  the Depositor,  the Class A
Certificate  Insurer  or the  Trustee  shall be  affected  by any  notice to the
contrary.

            Section  5.05  ACCESS  TO  LIST  OF  CERTIFICATEHOLDERS'  NAMES  AND
ADDRESSES.

            If three or more  Certificateholders (a) request such information in
writing  from the  Trustee,  (b) state  that such  Certificateholders  desire to
communicate  with other  Certificateholders  with  respect to their rights under
this  Agreement  or  under  the  Certificates,  and  (c)  provide  a copy of the
communication  which  such  Certificateholders  propose to  transmit,  or if the
Depositor  or  Servicer  shall  request  such  information  in writing  from the
Trustee,  then the Trustee shall,  within ten Business Days after the receipt of
such request,  provide the Depositor, the Servicer or such Certificateholders at
such recipients' expense the most recent list of the  Certificateholders of such
Trust   Fund  held  by  the   Trustee,   if  any.   The   Depositor   and  every
Certificateholder,  by  receiving  and  holding a  Certificate,  agree  that the
Trustee shall not be held  accountable  by reason of the  disclosure of any such
information as to the list of the  Certificateholders  hereunder,  regardless of
the source from which such information was derived.

            Section 5.06 MAINTENANCE OF OFFICE OR AGENCY.

            The Trustee will  maintain or cause to be  maintained at its expense
an office or offices or agency or agencies  in New York City where  Certificates
may be  surrendered  for  registration  of  transfer  or  exchange.  The Trustee
initially  designates the offices of its agent for such purposes  located at c/o
DTC Transfer Agent Services, 55 Water Street,  Jeanette Park Entrance, New York,
New  York  10041.   The  Trustee  will  give  prompt   written   notice  to  the
Certificateholders of any change in such location of any such office or agency.

            Section 5.07 RIGHTS OF THE CLASS A  CERTIFICATE  INSURER TO EXERCISE
RIGHTS OF CLASS A CERTIFICATEHOLDERS.

            By accepting its Class A Certificate, each Class A Certificateholder
agrees that unless a Class A Certificate  Insurer  Default  exists,  the Class A
Certificate Insurer shall be deemed to be the Class A Certificateholders for all
purposes  (other  than with  respect  to the  receipt  of payment on the Class A
Certificates)  and shall  have the right to  exercise  all rights of the Class A
Certificateholders  under  this  Agreement  and under  the Class A  Certificates
without  any  further  consent  of the  Class A  Certificateholders,  including,
without limitation:

            (a)   the right to require  the  Unaffiliated  Seller to  repurchase
Mortgage  Loans  pursuant to Section 2.03 hereof to the extent set forth in such
Section;

            (b)   the right to give notices of breach or to terminate the rights
and obligations of the Servicer as servicer pursuant to Section 7.01 hereof;

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            (c)   the right to direct  the  actions  of the  Trustee  during the
continuance  of a Servicer  default  pursuant  to Sections  3.24,  7.01 and 7.02
hereof;

            (d)   the  right  to  institute  proceedings  against  the  Servicer
pursuant to Section 7.01 hereof;

            (e)   the right to direct the Trustee to investigate certain matters
pursuant to Sections 8.01 and 8.02 hereof;

            (f)   the right to remove  the  Trustee  pursuant  to  Section  8.07
hereof;

            (g)   any   rights  or   remedies   expressly   given  the  Class  A
Certificateholders.

            In addition, each Certificateholder  agrees that, subject to Section
10.11,  unless  a  Class  A  Certificate  Insurer  Default  exists,  the  rights
specifically  enumerated  above may only be exercised by the  Certificateholders
with the prior written consent of the Class A Certificate Insurer.

            Section  5.08  TRUSTEE  TO ACT  SOLELY  WITH  CONSENT OF THE CLASS A
CERTIFICATE INSURER.

            Unless a Class A Certificate  Insurer  Default  exists,  the Trustee
shall not, without the Class A Certificate  Insurer's consent or unless directed
by the Class A Certificate Insurer:

            (a)   terminate  the  rights  and  obligations  of the  Servicer  as
Servicer pursuant to Section 7.01 hereof;

            (b)   agree to any amendment pursuant to Section 10.01 hereof; or

            (c)   undertake any litigation.

            The Class A  Certificate  Insurer  may,  in writing  and in its sole
discretion  renounce  all or  any of its  rights  under  this  Agreement  or any
requirement  for the Class A  Certificate  Insurer's  consent  for any period of
time.

            Section  5.09  MORTGAGE  LOANS,  TRUST  FUND AND  ACCOUNTS  HELD FOR
BENEFIT OF THE CLASS A CERTIFICATE INSURER.

            (a)   The Trustee shall hold the Trust Fund and the Custodial  Files
for the benefit of the  Certificateholders  and the Class A Certificate  Insurer
and all references in this Agreement and in the  Certificates  to the benefit of
Holders of the  Certificates  shall be deemed to include the Class A Certificate
Insurer.  The  Trustee  shall  cooperate  in all  reasonable  respects  with any
reasonable request by the Class A Certificate  Insurer for action to preserve or
enforce  the Class A  Certificate  Insurer's  rights  or  interests  under  this
Agreement  and the Class A  Certificates  unless,  as stated  in an  Opinion  of
Counsel  addressed  to the Trustee  and the Class A  Certificate  Insurer,  such
action  is  adverse  to the  interests  of the  Class  A  Certificateholders  or
diminishes the rights of the Class A  Certificateholders  or imposes  additional
burdens or restrictions on the Class A Certificateholders.

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<PAGE>

            (b)   The  Servicer  hereby  acknowledges  and agrees  that it shall
service the Mortgage Loans for the benefit of the Certificateholders and for the
benefit of the Class A Certificate Insurer, and all references in this Agreement
to the benefit of or actions on behalf of the Certificateholders shall be deemed
to include the Class A Certificate Insurer.

            Section 5.10 CLASS A CERTIFICATE INSURER DEFAULT.

            Notwithstanding  anything  elsewhere  in  this  Agreement  or in the
Certificates to the contrary,  if a Class A Certificate  Insurer Default exists,
or if and to the  extent  the Class A  Certificate  Insurer  has  delivered  its
written  renunciation of all of its rights under this Agreement,  all provisions
of this Agreement  which (a) permit the Class A Certificate  Insurer to exercise
rights  of the Class A  Certificateholders,  (b)  restrict  the  ability  of the
Certificateholders,  the  Servicer  or the Trustee to act without the consent or
approval of the Class A Certificate  Insurer,  (c) provide that a particular act
or thing must be acceptable to the Class A Certificate  Insurer,  (d) permit the
Class A  Certificate  Insurer to direct (or otherwise to require) the actions of
the Trustee, the Servicer or the Certificateholders, (e) provide that any action
or omission  taken with the consent,  approval or  authorization  of the Class A
Certificate Insurer shall be authorized hereunder or shall not subject the party
taking or omitting to take such action to any  liability  hereunder or (f) which
have a similar  effect,  shall be of no further force and effect and the Trustee
shall administer the Trust Fund and perform its obligations hereunder solely for
the  benefit  of the  Holders  of the  Certificates.  Nothing  in the  foregoing
sentence,  nor any action taken  pursuant  thereto or in  compliance  therewith,
shall be  deemed  to have  released  the Class A  Certificate  Insurer  from any
obligation   or  liability  it  may  have  to  any  party  or  to  the  Class  A
Certificateholders hereunder, under any other agreement,  instrument or document
(including,   without  limitation,  the  Class  A  Insurance  Policy)  or  under
applicable law.

                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

            Section  6.01  RESPECTIVE  LIABILITIES  OF  THE  DEPOSITOR  AND  THE
SERVICER.

            The  Depositor  and the Servicer  shall each be liable in accordance
herewith only to the extent of the  obligations  specifically  and  respectively
imposed upon and undertaken by them herein.

            Section  6.02  MERGER  OR  CONSOLIDATION  OF  THE  DEPOSITOR  OR THE
SERVICER.

            The  Depositor  and the  Servicer  will each keep in full effect its
existence,  rights and franchises as a corporation  or federal  savings bank, as
the case may be, under the laws of the United States or under the laws of one of
the states  thereof and will each obtain and  preserve its  qualification  to do
business  as  a  foreign   corporation  in  each   jurisdiction  in  which  such
qualification   is  or  shall  be   necessary   to  protect  the   validity  and
enforceability  of this  Agreement,  or any of the Mortgage Loans and to perform
its respective duties under this Agreement.

            Any Person into which the Depositor or the Servicer may be merged or
consolidated,  or any Person resulting from any merger or consolidation to which
the Depositor or the Servicer shall be a party, or any person  succeeding to the
business of the Depositor or the

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Servicer,  shall be the successor of the Depositor or the Servicer,  as the case
may be,  hereunder,  without the execution or filing of any paper or any further
act on the part of any of the parties  hereto,  anything  herein to the contrary
notwithstanding;  PROVIDED,  HOWEVER,  that the successor or surviving Person to
the  Servicer  shall be  qualified  to sell  mortgage  loans to,  and to service
mortgage loans on behalf of, Fannie Mae or FHLMC.

            Section 6.03 LIMITATION ON LIABILITY OF THE DEPOSITOR,  THE SERVICER
AND OTHERS.

            Neither the  Depositor,  the Servicer,  the Trustee nor any of their
respective directors, officers, employees or agents shall be under any liability
to the Certificateholders for any action taken or for refraining from the taking
of any  action  in good  faith  pursuant  to this  Agreement,  or for  errors in
judgment;   PROVIDED,  HOWEVER,  that  this  provision  shall  not  protect  the
Depositor,  the Servicer,  the Trustee or any such Person  against any breach of
representations  or warranties  made by it herein or protect the Depositor,  the
Servicer,  the  Trustee  or any such  Person  from  any  liability  which  would
otherwise  be imposed by  reasons  of  willful  misfeasance,  bad faith or gross
negligence  (or with respect to the Servicer or the Trustee,  negligence) in the
performance  of duties or by reason of reckless  disregard  of  obligations  and
duties hereunder. The Depositor and any director,  officer, employee or agent of
the  Depositor  may rely in good faith on any  document  of any kind PRIMA FACIE
properly  executed and submitted by any Person  respecting  any matters  arising
hereunder. The Depositor,  the Servicer, the Trustee and any director,  officer,
employee  or  agent of the  Depositor,  the  Servicer  or the  Trustee  shall be
indemnified by the Trust Fund and held harmless  against any loss,  liability or
expense  incurred  in  connection  with  any  audit,   controversy  or  judicial
proceeding  relating to a  governmental  taxing  authority  or any legal  action
relating to this Agreement or the  Certificates  (including,  as to the Trustee,
the undertaking of actions as directed by the Unaffiliated Seller or the Class A
Certificate Insurer pursuant to Section 2.03), other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
(or with respect to the Servicer or the Trustee,  negligence) in the performance
of their respective duties hereunder or by reason of reckless disregard of their
respective  obligations and duties  hereunder.  The Depositor shall not be under
any  obligation  to appear in,  prosecute or defend any legal action that is not
incidental  to its  respective  duties  hereunder  and which in its  opinion may
involve it in any expense or liability;  PROVIDED,  HOWEVER,  that the Depositor
may in its  discretion  undertake  any such  action (or  direct  the  Trustee to
undertake  any such  actions  pursuant to Section 2.03 hereof for the benefit of
the  Certificateholders)  that it may deem  necessary or desirable in respect of
this  Agreement and the rights and duties of the parties hereto and interests of
the  Trustee and the  Certificateholders  hereunder.  In such  event,  the legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses,  costs and  liabilities of the Trust Fund, and the Depositor  shall be
entitled to be reimbursed therefor out of the Collection Account.

            Neither the Servicer nor any of the officers, employees or agents of
the Servicer  shall be under any  liability to the Trustee or the  Depositor for
any action taken or for  refraining  from the taking of any action in good faith
pursuant to this  Agreement;  PROVIDED,  HOWEVER,  that this provision shall not
protect  the  Servicer or any such person  against any breach of  warranties  or
representations made herein, or failure to perform its obligations in compliance
with the terms of this  Agreement,  or any  liability  which would  otherwise be
imposed by reason of any breach of the terms and  conditions of this  Agreement.
The Servicer and any officer, employee or agent of the Servicer may rely in good
faith on any document of any kind PRIMA FACIE properly executed

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<PAGE>

and  submitted  by any Person  respecting  any matters  arising  hereunder.  The
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its duties to service the Mortgage Loans
in accordance with this Agreement and which in its opinion may involve it in any
expenses or liability;  PROVIDED,  HOWEVER,  that the Servicer may undertake any
such  action  which  it may deem  necessary  or  desirable  in  respect  to this
Agreement and the rights and duties of the parties  hereto.  In such event,  the
legal  expenses and costs of such action and any liability  resulting  therefrom
shall be expenses,  costs and  liabilities  of the Trust Fund,  and the Servicer
shall be entitled to be reimbursed therefor out of the Collection Account.

            Section 6.04 LIMITATION ON RESIGNATION OF THE SERVICER.

            The  Servicer  shall not assign  this  Agreement  or resign from the
obligations  and duties  hereby  imposed  on it except by mutual  consent of the
Servicer,  the  Depositor  and the  Trustee or upon the  determination  that its
duties  hereunder  are no  longer  permissible  under  applicable  law and  such
incapacity cannot be cured by the Servicer.  Any such  determination  permitting
the  resignation  of the Servicer shall be evidenced by an Opinion of Counsel to
such effect  delivered to the Depositor and the Trustee which Opinion of Counsel
shall be in form and substance  acceptable to the Depositor and the Trustee.  No
such resignation shall become effective until a successor shall have assumed the
Servicer's responsibilities and obligations hereunder.

            Section 6.05 ADDITIONAL INDEMNIFICATION BY THE SERVICER; THIRD PARTY
CLAIMS.

            The Servicer shall indemnify the Depositor,  the Unaffiliated Seller
and the Trustee  and hold them  harmless  against  any and all  claims,  losses,
damages, penalties, fines, forfeitures,  reasonable and necessary legal fees and
related  costs,  judgments,  and any other costs,  fees and expenses that any of
them may sustain in any way related to any breach by the Servicer, of any of its
representations  and warranties referred to in Section 2.03(a) or the failure of
the Servicer to perform its duties and service the Mortgage  Loans in compliance
with the terms of this  Agreement.  The  Servicer  immediately  shall notify the
Depositor, the Unaffiliated Seller and the Trustee if a claim is made by a third
party with  respect to any such  breach or  failure by the  Servicer  under this
Agreement,  assume  (with  the  prior  written  consent  of the  Depositor,  the
Unaffiliated  Seller and the  Trustee) the defense of any such claim and pay all
expenses  in  connection  therewith,  including  reasonable  counsel  fees,  and
promptly pay,  discharge and satisfy any judgment or decree which may be entered
against it or the Depositor,  the Unaffiliated  Seller or the Trustee in respect
of such  claim;  PROVIDED,  that if it is  determined  that the  Servicer is not
obligated to indemnify such parties in accordance  with this Section 6.05,  each
such party (or the Trust Fund,  if  applicable)  shall  promptly  reimburse  the
Servicer in connection with each of the foregoing payments made to such party by
the Servicer.

                                  ARTICLE VII

                                     DEFAULT

            Section 7.01 EVENTS OF DEFAULT.

            "EVENT  OF  DEFAULT,"  wherever  used  herein,  means any one of the
following events:

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            (a)   any  failure  by the  Servicer  to  remit to the  Trustee  any
payment  required to be made under the terms of this Agreement  which  continues
unremedied  for a period of one Business  Day after the date upon which  written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by the Depositor,  by the Class A Certificate  Insurer or by the
Trustee or to the Trustee by Certificateholders  evidencing percentage interests
of at least 25% in the Certificates; or

            (b)   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 set forth in this Agreement which continues unremedied for a period
of forty-five days (except that such number of days shall be fifteen in the case
of a  failure  to pay  any  premium  for any  insurance  policy  required  to be
maintained  under  this  Agreement)  after the  earlier of (i) the date on which
written  notice of such failure,  requiring the same to be remedied,  shall have
been given to the Servicer by the Depositor, by the Class A Certificate Insurer,
or by the  Trustee,  or to the  Trustee by  Certificateholders  of  Certificates
evidencing  percentage  interests of at least 25% in the  Certificates  and (ii)
actual knowledge of such failure by a Servicing Officer of the Servicer; or

            (c)   a  decree  or  order  of a  court  or  agency  or  supervisory
authority  having  jurisdiction for the appointment of a conservator or receiver
or liquidator in any insolvency,  bankruptcy,  readjustment of debt, marshalling
of assets and  liabilities  or similar  proceedings,  or for the  winding-up  or
liquidation  of its affairs,  shall have been  entered  against the Servicer and
such decree or order shall have remained in force undischarged or unstayed for a
period of sixty days; or

            (d)   the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency,  bankruptcy,  readjustment of debt,
marshalling of assets and  liabilities or similar  proceedings of or relating to
the Servicer or of or relating to all or substantially all of its property; or

            (e)   the Servicer  shall admit in writing its  inability to pay its
debts  generally  as they become due,  file a petition to take  advantage of any
applicable  insolvency or  reorganization  statute,  make an assignment  for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or

            (f)   any failure by the Servicer of the Servicer  Termination Test;
or

            (g)   any  failure of the  Servicer  to make any P&I  Advance on any
Remittance  Date required to be made from its own funds pursuant to Section 4.01
which  continues  unremedied  for one Business  Day  immediately  following  the
Remittance Date; or

            (h)   a breach of any  representation  and  warranty of the Servicer
referred to in Section  2.03(a),  which  materially  and  adversely  affects the
interests of the  Certificateholders and which continues unremedied for a period
of thirty days after the date upon which written  notice of such breach is given
to the Servicer by the Trustee,  by the Class A Certificate  Insurer,  or by the
Depositor,  or to the Trustee by Certificateholders  entitled to at least 25% of
the Voting Rights in the Certificates.

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<PAGE>

            If an Event of Default  described in clauses (a) through (h) of this
Section 7.01 shall occur, then, and in each and every such case, so long as such
Event of  Default  shall not have been  remedied,  the  Trustee  may,  or at the
direction of the Class A Certificate Insurer, or of Holders holding at least 51%
of the Voting Rights,  the Trustee  shall,  by notice in writing to the Servicer
(with a copy to each Rating Agency), terminate all of the rights and obligations
of the Servicer  under this  Agreement and in and to the Mortgage  Loans and the
proceeds  thereof,  other  than its  rights  as a  Certificateholder  hereunder;
PROVIDED, HOWEVER, that the Trustee shall not be required to give written notice
to the Servicer of the  occurrence  of an Event of Default  described in clauses
(b) through (h) of this Section 7.01 unless and until a  Responsible  Officer of
the Trustee has actual  knowledge of the occurrence of such an Event of Default.
On and after the receipt by the Servicer of such written  notice,  all authority
and power of the Servicer hereunder,  whether with respect to the Mortgage Loans
or otherwise, shall pass to and be vested in the Trustee. The Trustee shall make
any P&I  Advance  which the  Servicer  failed to make  subject to Section  4.01,
whether or not the obligations of the Servicer have been terminated  pursuant to
this  Section.  The Trustee is hereby  authorized  and  empowered to execute and
deliver, on behalf of the Servicer,  as  attorney-in-fact or otherwise,  any and
all documents and other  instruments,  and to do or accomplish all other acts or
things  necessary  or  appropriate  to effect  the  purposes  of such  notice of
termination,  whether to complete the transfer and  endorsement or assignment of
the  Mortgage  Loans and  related  documents,  or  otherwise.  Unless  expressly
provided in such written notice, no such termination shall affect any obligation
of the  Servicer to pay amounts  owed  pursuant to Article  VIII.  The  Servicer
agrees to  cooperate  with the  Trustee  in  effecting  the  termination  of the
Servicer's responsibilities and rights hereunder, including, without limitation,
the  transfer  to the  Trustee of all cash  amounts  which  shall at the time be
credited to the  Collection  Account,  or thereafter be received with respect to
the Mortgage Loans.

            Notwithstanding  any  termination  of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a  Scheduled  Payment  on a  Mortgage  Loan which was due prior to the notice
terminating  such Servicer's  rights and  obligations as Servicer  hereunder and
received  after such notice,  that portion  thereof to which such Servicer would
have been entitled  pursuant to Section 3.11,  and any other amounts  payable to
such Servicer  hereunder the entitlement to which arose prior to the termination
of its  activities  hereunder  in  accordance  with Section 3.11 and in the time
period specified in Section 3.11.

            Section 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

            On and after the time the Servicer  receives a notice of termination
pursuant to Section 3.24 or Section 7.01, the Trustee shall,  unless the Class A
Certificate Insurer shall have named an alternative successor Servicer and given
written notice thereof to the Trustee of at least 30 days prior to the effective
date of the  transfer  of  servicing  to such  successor,  subject to and to the
extent  provided  in Section  3.05,  be the  successor  to the  Servicer  in its
capacity as servicer  under this  Agreement  and the  transactions  set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities  relating thereto placed on the Servicer by the terms and provisions
hereof and  applicable  law  including  the  obligation  to make P&I Advances or
Servicing  Advances  pursuant to Section 4.01.  As  compensation  therefor,  the
Trustee shall be entitled to all funds  relating to the Mortgage  Loans that the
Servicer  would  have  been  entitled  to charge to the  Collection  Account  or
Distribution Account if the Servicer had continued to act

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hereunder  including,  if the  Servicer was  receiving  the  Servicing  Fee, the
Servicing Fee and the income on  investments  or gain related to the  Collection
Account and Distribution Account.

            Notwithstanding  the  foregoing,  if  the  Trustee  has  become  the
successor to the Servicer in accordance  with Section 7.01,  the Trustee may, if
it shall be unwilling to so act, or shall, if it is prohibited by applicable law
from making P&I Advances and Servicing  Advances  pursuant to Section 4.01 or if
it is  otherwise  unable to so act,  appoint,  or petition a court of  competent
jurisdiction to appoint, any established mortgage loan servicing institution the
appointment  of which does not adversely  affect the then current  rating of the
Certificates by each Rating Agency,  as the successor to the Servicer  hereunder
in the  assumption  of  all or any  part  of  the  responsibilities,  duties  or
liabilities of the Servicer hereunder. Any successor to the Servicer shall be an
institution  which is a Fannie Mae and FHLMC  approved  seller/servicer  in good
standing,  which has a net worth of at least  $30,000,000,  which is  willing to
service the Mortgage  Loans and which executes and delivers to the Depositor and
the Trustee an agreement accepting such delegation and assignment, containing an
assumption  by such  Person of the  rights,  powers,  duties,  responsibilities,
obligations  and  liabilities  of the Servicer  (other than  liabilities  of the
Servicer  under Section 6.03 incurred prior to termination of the Servicer under
Section  7.01),  with  like  effect  as if  originally  named as a party to this
Agreement;  PROVIDED that each Rating Agency acknowledges that its rating of the
Certificates in effect  immediately prior to such assignment and delegation will
not be  qualified or reduced,  as a result of such  assignment  and  delegation.
Pending  appointment  of a successor  to the  Servicer  hereunder,  the Trustee,
unless  the  Trustee is  prohibited  by law from so  acting,  shall,  subject to
Section 3.05, act in such capacity as hereinabove  provided.  In connection with
such appointment and assumption,  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 the  Servicing  Fee  Rate  and  amounts  paid  to the  Servicer  from
investments.  The Trustee and such successor shall take such action,  consistent
with this  Agreement,  as shall be necessary to effectuate any such  succession.
Neither the Trustee nor any other  successor  servicer  shall be deemed to be in
default hereunder by reason of any failure to make, or any delay in making,  any
distribution  hereunder or any portion thereof or any failure to perform, or any
delay in performing,  any duties or responsibilities  hereunder,  in either case
caused by the failure of the  Servicer  to deliver or  provide,  or any delay in
delivering or providing, any cash, information, documents or records to it.

            Any  successor to the Servicer as servicer  shall give notice to the
Mortgagors of such change of servicer and shall,  during the term of its service
as  servicer,  maintain  in force the policy or  policies  that the  Servicer is
required to maintain pursuant to Section 6.05.

            Section 7.03 NOTIFICATION TO CERTIFICATEHOLDERS.

            (a)   Upon any  termination  of or appointment of a successor to the
Servicer,   the  Trustee   shall  give   prompt   written   notice   thereof  to
Certificateholders, the Class A Certificate Insurer, the Unaffiliated Seller and
to each Rating Agency.

            (b)   Within 60 days after the  occurrence  of any Event of Default,
the  Trustee  shall  transmit  by mail to all  Certificateholders,  the  Class A
Certificate Insurer, the Unaffiliated

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Seller and each  Rating  Agency  notice of each such Event of Default  hereunder
known to the  Trustee,  unless  such Event of  Default  shall have been cured or
waived.

                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

            Section 8.01 DUTIES OF THE TRUSTEE.

            The Trustee,  before the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred,  shall  undertake to
perform such duties and only such duties as are  specifically  set forth in this
Agreement.  In case an Event of Default has  occurred and remains  uncured,  the
Trustee  shall  exercise  such of the  rights  and  powers  vested in it by this
Agreement,  and use the same  degree  of care and skill in their  exercise  as a
prudent person would exercise or use under the  circumstances  in the conduct of
such person's own affairs.

            The  Trustee,   upon  receipt  of  all  resolutions,   certificates,
statements,  opinions, reports, documents, orders or other instruments furnished
to the Trustee that are  specifically  required to be furnished  pursuant to any
provision of this Agreement shall examine them to determine  whether they are in
the form required by this  Agreement.  The Trustee shall not be responsible  for
the  accuracy or content of any  resolution,  certificate,  statement,  opinion,
report, document, order, or other instrument.

            No  provision  of this  Agreement  shall be construed to relieve the
Trustee from liability for its own negligent  action,  its own negligent failure
to act or its own willful misconduct.

            Unless an Event of Default  known to the Trustee has occurred and is
continuing,

            (a)   the duties and  obligations of the Trustee shall be determined
solely by the express  provisions  of this  Agreement,  the Trustee shall not be
liable except for the performance of the duties and obligations specifically set
forth in this Agreement,  no implied covenants or obligations shall be read into
this Agreement against the Trustee, and the Trustee may conclusively rely, as to
the  truth of the  statements  and the  correctness  of the  opinions  expressed
therein,  upon  any  certificates  or  opinions  furnished  to the  Trustee  and
conforming to the requirements of this Agreement which it believed in good faith
to be  genuine  and  to  have  been  duly  executed  by the  proper  authorities
respecting any matters arising hereunder;

            (b)   the Trustee  shall not be liable for an error of judgment made
in good faith by a Responsible  Officer or Responsible  Officers of the Trustee,
unless it is finally proven that the Trustee was negligent in  ascertaining  the
pertinent facts; and

            (c)   the  Trustee  shall not 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 Class A Certificate  Insurer, or of Holders of Certificates
evidencing  not less than 25% of the Voting Rights of  Certificates  relating to
the  time,  method,  and  place of  conducting  any  proceeding  for any  remedy

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available to the Trustee,  or exercising  any trust or power  conferred upon the
Trustee under this Agreement.

            Section 8.02 CERTAIN MATTERS AFFECTING THE TRUSTEE.

            Except as otherwise provided in Section 8.01:

            (a)   the Trustee  may request and rely upon and shall be  protected
in acting or refraining from acting upon any resolution,  Officer's Certificate,
certificate  of  auditors  or  any  other  certificate,  statement,  instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper  party or parties and the  Trustee  shall have no  responsibility  to
ascertain  or confirm  the  genuineness  of any  signature  of any such party or
parties;

            (b)   the Trustee may consult with  counsel,  financial  advisers or
accountants  and  the  advice  of  any  such  counsel,   financial  advisers  or
accountants and any Opinion of Counsel shall be full and complete  authorization
and  protection  in  respect of any action  taken or  suffered  or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel;

            (c)   the Trustee shall not 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;

            (d)   the Trustee shall not be bound to make any investigation  into
the  facts  or  matters  stated  in  any  resolution,   certificate,  statement,
instrument,  opinion, report, notice, request, consent, order, approval, bond or
other paper or  document,  unless  requested  in writing so to do by the Class A
Certificate Insurer, or by Holders of Certificates  evidencing not less than 25%
of the Voting Rights allocated to each Class of Certificates;

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

            (f)   the  Trustee  shall not be  required to risk or expend its own
funds or otherwise  incur any financial  liability in the  performance of any of
its duties or in the  exercise  of any of its rights or powers  hereunder  if it
shall have  reasonable  grounds for  believing  that  repayment of such funds or
adequate indemnity against such risk or liability is not assured to it;

            (g)   the Trustee shall not be liable for any loss on any investment
of funds  pursuant to this  Agreement  (other  than as issuer of the  investment
security);

            (h)   the Trustee shall not be deemed to have  knowledge of an Event
of Default  until a  Responsible  Officer  of the  Trustee  shall have  received
written notice thereof; and

            (i)   the Trustee  shall be under no  obligation  to exercise any of
the trusts,  rights or powers  vested in it by this  Agreement or to  institute,
conduct or defend any litigation

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<PAGE>

hereunder or in relation hereto at the request, order or direction of any of the
Certificateholders,  pursuant to this Agreement,  unless such Certificateholders
shall have offered to the Trustee reasonable security or indemnity  satisfactory
to the Trustee against the costs, expenses and liabilities which may be incurred
therein or thereby.

            Section 8.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.

            The recitals contained herein and in the Certificates shall be taken
as the statements of the Depositor and the Trustee assumes no responsibility for
their  correctness.  The Trustee makes no  representations as to the validity or
sufficiency of this Agreement or of the  Certificates or of any Mortgage Loan or
related  document  other  than  with  respect  to the  Trustee's  execution  and
countersignature  of the Certificates.  The Trustee shall not be accountable for
the use or application by the Depositor or the Servicer of any funds paid to the
Depositor or the  Servicer in respect of the  Mortgage  Loans or deposited in or
withdrawn from the Collection Account by the Depositor or the Servicer.

            The Trustee shall have no responsibility for filing or recording any
financing  or  continuation  statement  in any  public  office at any time or to
otherwise  perfect or maintain the  perfection of any security  interest or lien
granted to it  hereunder  (unless  the Trustee  shall have become the  successor
Servicer).

            The Trustee executes the Certificates not in its individual capacity
but  solely as  Trustee of the Trust  Fund  created  by this  Agreement,  in the
exercise  of the  powers  and  authority  conferred  and  vested  in it by  this
Agreement.  Each of the  undertakings  and  agreements  made on the  part of the
Trustee on behalf of the Trust Fund in the Certificates is made and intended not
as a personal  undertaking  or agreement by the Trustee but is made and intended
for the purpose of binding only the Trust Fund.

            Section 8.04 TRUSTEE MAY OWN CERTIFICATES.

            The Trustee in its  individual or any other  capacity may become the
owner or pledgee  of  Certificates  with the same  rights as it would have if it
were not the Trustee.

            Section 8.05 TRUSTEE'S FEES AND EXPENSES.

            (a)   As compensation for its activities  under this Agreement,  the
Trustee may withdraw from the Distribution Account on each Distribution Date the
Trustee Fee for the  Distribution  Date. The Trustee and any director,  officer,
employee,  or agent of the Trustee shall be indemnified by the Servicer  against
any loss, liability, or expense (including reasonable attorney's fees) resulting
from  any  failure  by the  Servicer  to  perform  its  obligations  under  this
Agreement. This indemnity shall survive the termination of this Agreement or the
resignation or removal of the Trustee under this Agreement.

            The Trustee shall not be entitled to payment or  reimbursement  from
the Unaffiliated Seller for any routine ongoing expenses incurred by the Trustee
in the  ordinary  course of its duties as Trustee,  Registrar,  or paying  agent
under  this  Agreement  or for any  other  expenses,  including  indemnification
payments, except as set forth herein.

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            Section 8.06 ELIGIBILITY REQUIREMENTS FOR THE TRUSTEE.

            The  Trustee  hereunder  shall  at all  times  be a  corporation  or
association organized and doing business under the laws of a 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,  subject
to supervision  or  examination by federal or state  authority and with a credit
rating  which  would not cause  either of the Rating  Agencies  to reduce  their
respective  then current  ratings of the  Certificates  (or having provided such
security  from  time  to time as is  sufficient  to  avoid  such  reduction)  as
evidenced in writing by each Rating Agency.  If such  corporation or association
publishes  reports of  condition  at least  annually,  pursuant to law or to the
requirements of the aforesaid  supervising or examining authority,  then for the
purposes  of  this  Section  8.06  the  combined  capital  and  surplus  of such
corporation  or  association  shall be deemed  to be its  combined  capital  and
surplus as set forth in its most recent  report of  condition so  published.  In
case at any time the Trustee shall cease to be eligible in accordance  with this
Section 8.06,  the Trustee shall resign  immediately  in the manner and with the
effect  specified in Section 8.07. The entity serving as Trustee may have normal
banking and trust  relationships  with the Depositor  and its  affiliates or the
Servicer and its affiliates;  PROVIDED,  HOWEVER,  that such entity cannot be an
affiliate of the Depositor,  the Unaffiliated  Seller or the Servicer other than
the Trustee in its role as successor to the Servicer.

            Section 8.07 RESIGNATION AND REMOVAL OF THE TRUSTEE.

            The Trustee may at any time resign and be discharged from the trusts
hereby created by giving  written  notice of  resignation to the Depositor,  the
Servicer,  the Class A Certificate Insurer, the Unaffiliated Seller, each Rating
Agency not less than 60 days before the date  specified  in such  notice,  when,
subject to Section 8.08, such resignation is to take effect, and acceptance by a
successor trustee in accordance with Section 8.08 meeting the qualifications set
forth in Section 8.06. If no successor trustee meeting such qualifications shall
have been so appointed  and have accepted  appointment  within 30 days after the
giving of such notice or  resignation,  the  resigning  Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee.

            If at any time the Trustee  shall cease to be eligible in accordance
with Section 8.06 and shall fail to resign after written  request thereto by the
Depositor,  or if at any time the Trustee shall become  incapable of acting,  or
shall be adjudged as bankrupt or  insolvent,  or a receiver of the Trustee or of
its property  shall be  appointed,  or any public  officer  shall take charge or
control  of the  Trustee  or of its  property  or  affairs  for the  purpose  of
rehabilitation, conservation or liquidation, or a tax is imposed with respect to
the Trust  Fund by any state in which the  Trustee  or the Trust Fund is located
and the  imposition  of such  tax  would  be  avoided  by the  appointment  of a
different trustee, then the Depositor or the Servicer may remove the Trustee and
appoint a successor  trustee  reasonably  acceptable  to the Class A Certificate
Insurer  by  written  instrument,  in  triplicate,  one copy of  which  shall be
delivered to the Trustee, one copy to the Servicer and one copy to the successor
trustee.

            The Class A  Certificate  Insurer  or the  Holders  of  Certificates
entitled to at least 51% of the Voting Rights may at any time remove the Trustee
and  appoint a  successor  trustee  by written  instrument  or  instruments,  in
triplicate, signed by such Holders or their attorneys-in-fact

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<PAGE>

duly  authorized,  one complete set of which shall be delivered by the successor
Trustee to the  Servicer,  one  complete  set to the  Trustee so removed and one
complete set to the successor so appointed.  The successor  trustee shall notify
each Rating Agency of any removal of the Trustee.

            Any  resignation  or removal of the  Trustee  and  appointment  of a
successor  trustee  pursuant to this Section 8.07 shall  become  effective  upon
acceptance of appointment by the successor trustee as provided in Section 8.08.

            Section 8.08 SUCCESSOR TRUSTEE.

            Any  successor  trustee  appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and  the  Servicer  an  instrument  accepting  such  appointment  hereunder  and
thereupon the  resignation  or removal of the  predecessor  trustee shall become
effective  and  such  successor  trustee,  without  any  further  act,  deed  or
conveyance,  shall become fully vested with all the rights,  powers,  duties and
obligations of its predecessor hereunder,  with the like effect as if originally
named as trustee herein.  The Depositor,  the Class A Certificate  Insurer,  the
Servicer and the predecessor  trustee shall execute and deliver such instruments
and do such  other  things as may  reasonably  be  required  for more  fully and
certainly  vesting and  confirming  in the  successor  trustee all such  rights,
powers, duties, and obligations.

            No successor  trustee shall accept  appointment  as provided in this
Section  8.08 unless at the time of its  acceptance,  the  successor  trustee is
eligible under Section 8.06 and its  appointment  does not adversely  affect the
then current rating of the Certificates.

            Upon acceptance of appointment by a successor trustee as provided in
this Section  8.08,  the Depositor  shall mail notice of the  succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice  within 10 days after  acceptance  of  appointment  by the successor
trustee,  the  successor  trustee  shall  cause such  notice to be mailed at the
expense of the Depositor.

            Section 8.09 MERGER OR CONSOLIDATION OF THE TRUSTEE.

            Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation  resulting from any merger,
conversion  or  consolidation  to which  the  Trustee  shall be a party,  or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee  hereunder,  PROVIDED that such corporation  shall be eligible under
Section 8.06 without the  execution or filing of any paper or further act on the
part  of  any  of  the  parties   hereto,   anything   herein  to  the  contrary
notwithstanding.

            Section 8.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

            Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal  requirements of any  jurisdiction in which
any part of the Trust Fund or property  securing  any  Mortgage  Note may at the
time be located,  the Servicer  and the Trustee  acting  jointly  shall have the
power and shall  execute  and  deliver  all  instruments  to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and

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<PAGE>

to vest in such Person or Persons,  in such  capacity and for the benefit of the
Certificateholders,  such title to the Trust Fund or any part thereof, whichever
is applicable,  and,  subject to the other provisions of this Section 8.10, such
powers, duties,  obligations,  rights and trusts as the Servicer and the Trustee
may  consider  appropriate.  If the  Servicer  shall  not  have  joined  in such
appointment  within 15 days after the receipt by it of a request to do so, or in
the case an Event of Default shall have occurred and be continuing,  the Trustee
alone shall have the power to make such  appointment.  No co-trustee or separate
trustee  hereunder  shall be  required  to meet the  terms of  eligibility  as a
successor trustee under Section 8.06 and no notice to  Certificateholders of the
appointment  of any  co-trustee  or separate  trustee  shall be  required  under
Section 8.08.

            Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:

            (a)   To the extent  necessary  to  effectuate  the purposes of this
Section 8.10, all rights,  powers,  duties and obligations  conferred or imposed
upon the Trustee,  except for the obligation of the Trustee under this Agreement
to advance funds on behalf of the  Servicer,  shall be conferred or imposed upon
and  exercised  or  performed  by the  Trustee  and  such  separate  trustee  or
co-trustee jointly (it being understood that such separate trustee or co-trustee
is not  authorized to act separately  without the Trustee  joining in such act),
except  to the  extent  that  under  any law of any  jurisdiction  in which  any
particular act or acts are to be performed  (whether as Trustee  hereunder or as
successor  to the  Servicer  hereunder),  the Trustee  shall be  incompetent  or
unqualified  to perform such act or acts,  in which event such  rights,  powers,
duties and obligations  (including the holding of title to the applicable  Trust
Fund or any portion  thereof in any such  jurisdiction)  shall be exercised  and
performed  singly by such  separate  trustee  or  co-trustee,  but solely at the
direction of the Trustee;

            (b)   No trustee  hereunder shall be held personally  liable because
of any act or omission of any other trustee hereunder and such appointment shall
not,  and  shall not be deemed  to,  constitute  any such  separate  trustee  or
co-trustee as agent of the Trustee;

            (c)   The  Trustee  may at any time  accept  the  resignation  of or
remove any separate trustee or co-trustee; and

            (d)   The  Trustee,  and not the  Servicer,  shall be liable for the
payment of reasonable  compensation and expenses to any such separate trustee or
co-trustee  from the Trustee  Fee  payable to the  Trustee on each  Distribution
Date.

            Any notice,  request or other  writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees, when
and as effectively as if given to each of them. Every instrument  appointing any
separate  trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee,  upon its acceptance
of the trusts conferred,  shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided  therein,  subject to all the  provisions of this  Agreement,
specifically including every provision of this Agreement relating to the conduct
of,  affecting the liability of, or affording  protection  and indemnity to, the
Trustee.  Every  such  instrument  shall be filed  with the  Trustee  and a copy
thereof given to the Servicer and the Depositor.

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<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.

            Section 8.11 TAX MATTERS.

            It is  intended  that the  assets  with  respect  to which any REMIC
election  pertaining  to the  Trust  Fund is to be  made,  as set  forth  in the
Preliminary  Statement,  shall  constitute,  and that  the  conduct  of  matters
relating  to such  assets  shall be such as to qualify  such  assets as, a "real
estate  mortgage  investment  conduit" as defined in and in accordance  with the
REMIC  Provisions.  In furtherance of such intention,  the Trustee covenants and
agrees that it shall act as agent (and the Trustee is hereby appointed to act as
agent) on behalf of any the REMIC and that in such capacity it shall:

            (a)   prepare  and  file in a  timely  manner,  a U.S.  Real  Estate
Mortgage  Investment  Conduit Income Tax Return (Form 1066 or any successor form
adopted by the Internal  Revenue Service) and prepare and file with the Internal
Revenue  Service and  applicable  state or local tax  authorities  income tax or
information returns for each taxable year with respect to any REMIC described in
the Preliminary  Statement  containing such  information and at the times and in
the  manner  as may be  required  by the  Code  or  state  or  local  tax  laws,
regulations,   or  rules,  and  furnish  to  Certificateholders  the  schedules,
statements  or  information  at such times and in such manner as may be required
thereby;

            (b)   within  thirty  days  of  the  Closing  Date,  furnish  to the
Internal  Revenue  Service on Forms 8811 or as otherwise  may be required by the
Code,  the name,  title,  address,  and telephone  number of the person that the
holders of the  Certificates may contact for tax information  relating  thereto,
together with such  additional  information as may be required by such Form, and
update such information at the time or times in the manner required by the Code;

            (c)   make an election that each of the Lower Tier REMIC, the Middle
Tier REMIC and the Upper Tier  REMIC be  treated as a REMIC on the  federal  tax
return for its first  taxable year (and, if necessary,  under  applicable  state
law);

            (d)   prepare  and  forward  to  the  Certificateholders  and to the
Internal  Revenue  Service  and,  if  necessary,  state  tax  authorities,   all
information  returns and reports as and when  required to be provided to them in
accordance with the REMIC Provisions,  including the calculation of any original
issue  discount  using the  Prepayment  Assumption (as defined in the Prospectus
Supplement);

            (e)   provide  information  necessary  for  the  computation  of tax
imposed on the  transfer  of a Residual  Certificate  to a Person  that is not a
Permitted  Transferee,  or an  agent  (including  a  broker,  nominee  or  other
middleman) of a Non-Permitted  Transferee,  or a pass-through  entity in which a
Non-Permitted Transferee is the record holder of an interest (the

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reasonable cost of computing and furnishing  such  information may be charged to
the Person liable for such tax);

            (f)   to the extent that they are under its control, conduct matters
relating to such assets at all times that any Certificates are outstanding so as
to maintain the status as a REMIC under the REMIC Provisions;

            (g)   not knowingly or intentionally take any action or omit to take
any action that would  cause the  termination  of the REMIC  status of any REMIC
created hereunder;

            (h)   pay, from the sources  specified in the last paragraph of this
Section  8.11,  the amount of any  federal or state  tax,  including  prohibited
transaction  taxes as described  below,  imposed on any REMIC created  hereunder
before its  termination  when and as the same shall be due and payable (but such
obligation  shall not prevent the Trustee or any other  appropriate  Person from
contesting  any such tax in  appropriate  proceedings  and shall not prevent the
Trustee from  withholding  payment of such tax, if permitted by law, pending the
outcome of such proceedings);

            (i)   cause  federal,  state  or  local  income  tax or  information
returns to be signed by the  Trustee or such other  person as may be required to
sign such returns by the Code or state or local laws, regulations or rules;

            (j)   maintain  records  relating to each REMIC  created  hereunder,
including the income,  expenses,  assets, and liabilities  thereof on a calendar
year basis and on the accrual method of accounting and the fair market value and
adjusted basis of the assets  determined at such intervals as may be required by
the Code,  as may be  necessary  to prepare the  foregoing  returns,  schedules,
statements or information; and

            (k)   as and when  necessary and  appropriate,  represent each REMIC
created hereunder in any administrative or judicial  proceedings  relating to an
examination  or  audit  by  any  governmental   taxing  authority,   request  an
administrative  adjustment  as  to  any  taxable  year  of  each  REMIC  created
hereunder, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations  relating to any tax item of any REMIC created
hereunder,  and  otherwise  act on behalf of the  REMIC in  relation  to any tax
matter or controversy involving it.

            The Trustee shall treat the rights of the Class P Certificateholders
to  Prepayment  Charges as the  beneficial  ownership  of interests in a grantor
trust,  and not as an  obligation of any REMIC  created  hereunder,  for federal
income tax purposes.

            To enable the  Trustee to perform its duties  under this  Agreement,
the  Depositor  shall  provide to the Trustee  within ten days after the Closing
Date all information or data that the Trustee requests in writing and determines
to be relevant for tax  purposes to the  valuations  and offering  prices of the
Certificates,  including the price, yield, prepayment assumption,  and projected
cash flows of the Certificates and the Mortgage Loans.  Moreover,  the Depositor
shall provide  information to the Trustee  concerning the value to each Class of
Certificates  of the right to receive Basis Risk  CarryForward  Amounts from the
Excess  Reserve Fund Account.  Thereafter,  the  Depositor  shall provide to the
Trustee promptly upon written request therefor any

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additional  information  or data  that  the  Trustee  may,  from  time to  time,
reasonably  request to enable  the  Trustee  to  perform  its duties  under this
Agreement.  The  Depositor  hereby  indemnifies  the  Trustee  for  any  losses,
liabilities, damages, claims, or expenses of the Trustee arising from any errors
or  miscalculations of the Trustee that result from any failure of the Depositor
to provide,  or to cause to be  provided,  accurate  information  or data to the
Trustee on a timely basis.

            If any tax is  imposed  on  "prohibited  transactions"  of any REMIC
created  hereunder  as defined in Section  860F(a)(2)  of the Code,  on the "net
income from foreclosure property" of such REMIC as defined in Section 860G(c) of
the Code,  on any  contribution  to the REMIC after the Startup Day  pursuant to
Section 860G(d) of the Code, or any other tax is imposed,  including any minimum
tax imposed on the REMIC  pursuant to Sections 23153 and 24874 of the California
Revenue and Taxation Code, if not paid as otherwise provided for herein, the tax
shall be paid by (i) the  Trustee  if such tax  arises  out of or  results  from
negligence of the Trustee in the  performance  of any of its  obligations  under
this  Agreement,  (ii) the  Servicer if such tax arises out of or results from a
breach by the Servicer of any of its obligations under this Agreement, (iii) the
Unaffiliated  Seller  shall pay if such tax arises  out of or  results  from the
Unaffiliated  Seller's  obligation  to  repurchase a Mortgage  Loan  pursuant to
Section 2.03, or (iv) in all other cases, or if the Trustee, the Servicer or the
Unaffiliated  Seller fails to honor its obligations  under the preceding clauses
(i) or (ii), any such tax will be paid with amounts  otherwise to be distributed
to the Certificateholders, as provided in Section 4.02(a).

            Section 8.12 PERIODIC FILINGS.

            Pursuant to written  instructions  from the  Depositor,  the Trustee
shall  prepare,  execute  and file  all  periodic  reports  required  under  the
Securities  Exchange  Act of 1934 in  conformity  with the  terms of the  relief
granted to issuers similar to the Trust Fund. In connection with the preparation
and filing of such periodic reports, the Depositor and the Servicer shall timely
provide to the  Trustee  all  material  information  available  to them which is
required  to be  included  in such  reports  and not  known to them to be in the
possession of the Trustee and such other  information as the Trustee  reasonably
may request from either of them and otherwise  reasonably  shall  cooperate with
the Trustee.  The Trustee shall have no liability with respect to any failure to
properly prepare or file such periodic reports resulting from or relating to the
Trustee's  inability or failure to obtain any information not resulting from its
own negligence or willful misconduct.

            Section 8.13 TAX CLASSIFICATION OF CERTAIN ACCOUNTS.

            For federal income tax purposes,  the Trustee shall treat the Excess
Reserve Fund Account as an outside reserve fund,  within the meaning of Treasury
Regulation  ss.  1.860G-2(h),  that is  beneficially  owned by the holder of the
Class X  Certificate.  The  Trustee  shall  treat the rights  that each Class of
Certificates has to receive payments of Basis Risk CarryForward Amounts from the
Excess Reserve Fund Account as rights to receive payments under an interest rate
cap contract  written by the Class X  Certificateholder  in favor of each Class.
Accordingly,  each  Class of  Certificates  (excluding  the Class X, Class P and
Class R  Certificates)  will  comprise  two  components  - an Upper Tier Regular
Interest and an interest in a notional  principal  contract.  The Trustee  shall
allocate the issue price for a Class of Certificates  between two components for

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purposes  of  determining  the issue  price of the Upper Tier  Regular  Interest
component based on information received from the Depositor.

                                   ARTICLE IX

                                  TERMINATION

            Section  9.01  TERMINATION  UPON  LIQUIDATION  OR  PURCHASE  OF  THE
MORTGAGE LOANS.

            Subject to Section 9.03, the obligations and responsibilities of the
Depositor, the Servicer and the Trustee created hereby with respect to the Trust
Fund  shall  terminate  upon the  earlier of (a) the  purchase,  on or after the
applicable   Optional   Termination  Date,  by  the  Servicer  or  the  Class  X
Certificateholders of all Mortgage Loans (and REO Properties) at the price equal
to the sum of (i) 100% of the Stated  Principal  Balance of each  Mortgage  Loan
(other  than in respect  of REO  Property)  plus one  month's  accrued  interest
thereon at the applicable  Adjusted Mortgage Rate and (ii) the lesser of (x) the
appraised  value  of  any  REO  Property  as  determined  by the  higher  of two
appraisals  completed by two independent  appraisers selected by the Servicer at
the  expense  of the  Servicer  and (y) the  Stated  Principal  Balance  of each
Mortgage Loan related to any REO Property,  in each case plus accrued and unpaid
interest thereon at the applicable  Adjusted Net Mortgage Rate and (b) the later
of (i) the maturity or other  liquidation (or any Advance with respect  thereto)
of the last Mortgage Loan remaining in the Trust Fund and the disposition of all
REO  Property and (ii) the  distribution  to  Certificateholders  of all amounts
required to be distributed to them pursuant to this Agreement. In no event shall
the trusts  created hereby  continue  beyond the expiration of 21 years from the
death  of the  survivor  of the  descendants  of  Joseph  P.  Kennedy,  the late
Ambassador of the United States to the Court of St. James's,  living on the date
hereof.

            No such purchase will be permitted  without the consent of the Class
A Certificate  Insurer,  unless no draw on the Class A Insurance Policy would be
made or unreimbursed on the final Distribution Date.

            Section 9.02 FINAL DISTRIBUTION ON THE CERTIFICATES.

            If on any Determination Date, the Servicer determines that there are
no  Outstanding  Mortgage  Loans and no other  funds or assets in the Trust Fund
other than the funds in the  Collection  Account,  the Servicer shall direct the
Trustee promptly to send a Notice of Final Distribution each  Certificateholder.
If the Servicer or the Class X  Certificateholder  elects to terminate the Trust
Fund  pursuant to clause (a) of Section 9.01, at least 20 days prior to the date
the   Notice  of  Final   Distribution   is  to  be   mailed  to  the   affected
Certificateholders  such  electing  party  shall  notify the  Depositor  and the
Trustee of the date the  Servicer  or the Class X  Certificateholder  intends to
terminate the Trust Fund and of the applicable  repurchase price of the Mortgage
Loans and REO Properties.

            A Notice of Final Distribution,  specifying the Distribution Date on
which  Certificateholders  may surrender their  Certificates  for payment of the
final  distribution and cancellation,  shall be given promptly by the Trustee by
letter to Certificateholders  mailed not earlier than the 15th day and not later
than the 10th day of the month next preceding the month

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of such final distribution.  Any such Notice of Final Distribution shall specify
(a) the Distribution Date upon which final distribution on the Certificates will
be made upon  presentation  and surrender of  Certificates at the office therein
designated,  (b) the amount of such final distribution,  (c) the location of the
office or agency at which such  presentation and surrender must be made, and (d)
that the Record  Date  otherwise  applicable  to such  Distribution  Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office therein specified.  The Trustee will give such Notice
of Final  Distribution  to each  Rating  Agency at the time such Notice of Final
Distribution is given to Certificateholders.

            In the  event  such  Notice  of Final  Distribution  is  given,  the
Servicer shall cause all funds in the  Collection  Account to be remitted to the
Trustee for deposit in the Distribution Account on the Business Day prior to the
applicable  Distribution  Date in an amount equal to the final  distribution  in
respect of the  Certificates.  Upon such final deposit with respect to the Trust
Fund and the  receipt by the  Trustee of a Request  for  Release  therefor,  the
Trustee  shall  promptly  release to the  Servicer the  Custodial  Files for the
Mortgage Loans.

            Upon  presentation  and surrender of the  Certificates,  the Trustee
shall cause to be distributed to the  Certificateholders  of each Class, in each
case on the final  Distribution Date and in the order set forth in Section 4.02,
in  proportion  to  their  respective  Percentage  Interests,  with  respect  to
Certificateholders of the same Class, an amount equal to (i) as to each Class of
Regular Certificates  (except the Class X Certificate),  the Certificate Balance
thereof plus for each such Class and the Class X  Certificate  accrued  interest
thereon  in the  case  of an  interest-bearing  Certificate  and  (ii) as to the
Residual  Certificates,  the  amount,  if any,  which  remains on deposit in the
Distribution  Account  (other than the amounts  retained to meet  claims)  after
application pursuant to clause (i) above.

            In  the  event  that  any  affected   Certificateholders  shall  not
surrender  Certificates  for  cancellation  within  six  months  after  the date
specified in the above mentioned written notice, the Trustee shall give a second
written  notice  to  the  remaining   Certificateholders   to  surrender   their
Certificates for cancellation  and receive the final  distribution  with respect
thereto.  If within  six  months  after the  second  notice  all the  applicable
Certificates  shall not have been surrendered for cancellation,  the Trustee may
take appropriate  steps, or may appoint an agent to take  appropriate  steps, to
contact  the  remaining   Certificateholders   concerning   surrender  of  their
Certificates,  and the cost  thereof  shall be paid out of the  funds  and other
assets  which  remain a part of the Trust  Fund.  If within  one year  after the
second notice all Certificates shall not have been surrendered for cancellation,
the Class R  Certificateholders  shall be  entitled to all  unclaimed  funds and
other assets of the Trust Fund which remain subject hereto.

            Section 9.03 ADDITIONAL TERMINATION REQUIREMENTS.

            In the  event the  Servicer  or the  Class X  Certificateholder,  as
applicable,  exercises its purchase option with respect to the Mortgage Loans as
provided in Section 9.01, the Trust Fund shall be terminated in accordance  with
the following additional requirements, unless the Trustee has been supplied with
an  Opinion  of  Counsel,  at  the  expense  of the  Servicer  or  the  Class  X
Certificateholder,  as applicable, to the effect that the failure to comply with
the  requirements  of this Section 9.03 will not (i) result in the imposition of
taxes on "prohibited transactions" on either REMIC as defined in Section 860F of
the Code, or (ii) cause either the Lower Tier REMIC

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or the  Upper  Tier  REMIC to fail to  qualify  as a REMIC at any time  that any
Certificates are outstanding:

            (a)   The Trustee  shall sell all of the assets of the Trust Fund to
the Servicer or the Class X  Certificateholder,  as applicable,  and,  within 90
days of such sale,  shall distribute to the  Certificateholders  the proceeds of
such sale in complete  liquidation  of each of the Lower Tier REMIC,  the Middle
Tier REMIC and the Upper Tier REMIC.

            (b)   The  Trustee  shall  attach a statement  to the final  federal
income tax return for each of the Lower Tier  REMIC,  the Middle  Tier REMIC and
the Upper Tier REMIC stating that pursuant to Treasury  Regulation ss. 1.860F-1,
the first day of the 90-day  liquidation period for each such REMIC was the date
on which the  Trustee  sold the assets of the Trust Fund to the  Servicer or the
Class X Certificateholder, as applicable.

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

            Section 10.01 AMENDMENT.

            This  Agreement  may  be  amended  from  time  to  time  (x)  by the
Depositor,  the Servicer and the Trustee,  with the prior written consent of the
Class A Certificate  Insurer,  (y) with the consent of the  Unaffiliated  Seller
unless the  Trustee  receives  an Opinion of Counsel  (which  Opinion of Counsel
shall not be an  expense  of the  Trustee or the Trust  Fund)  stating  that the
amendment will not adversely affect the Unaffiliated Seller, but (z) without the
consent of any of the  Certificateholders  (i) to cure any ambiguity or mistake,
(ii) to correct any defective  provision  herein or to supplement  any provision
herein which may be inconsistent with any other provision  herein,  (iii) to add
to the duties of the Depositor or the Servicer, (iv) to add any other provisions
with respect to matters or questions arising hereunder or (v) to modify,  alter,
amend,  add to or  rescind  any of the  terms or  provisions  contained  in this
Agreement; PROVIDED, that any action pursuant to clauses (iv) or (v) above shall
not, as evidenced by an Opinion of Counsel  (which  Opinion of Counsel shall not
be an  expense  of the  Trustee  or the  Trust  Fund),  adversely  affect in any
material respect the interests of any Certificateholder;  and PROVIDED, FURTHER,
that the  amendment  shall  not be deemed to  adversely  affect in any  material
respect the interests of the  Certificateholders  if the Person  requesting  the
amendment  obtains a letter from each Rating  Agency  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
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.

            In addition,  this  Agreement  may also be amended from time to time
(x) by the Trustee,  the  Depositor  and the  Servicer,  with the prior  written
consent  of the Class A  Certificate  Insurer,  and (y) with the  consent of the
Unaffiliated  Seller  unless the Trustee  receives an Opinion of Counsel  (which
Opinion of Counsel  shall not be an  expense of the  Trustee or the Trust  Fund)
stating that the amendment will not adversely  affect the  Unaffiliated  Seller,
but (z) without the consent of the Certificateholders,  to modify,  eliminate or
add to any of its provisions to such

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extent as shall be necessary or helpful to (i) maintain the qualification of the
Lower Tier REMIC, the Middle Tier REMIC and the Upper Tier REMIC under the Code,
(ii) avoid or minimize the risk of the  imposition  of any tax on the Lower Tier
REMIC,  the Middle Tier REMIC or the Upper Tier REMIC  pursuant to the Code that
would be a claim at any time prior to the final  redemption of the  Certificates
or (iii)  comply with any other  requirements  of the Code;  PROVIDED,  that the
Trustee  has been  provided  an Opinion of Counsel,  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,  to the effect  that such  action is
necessary or helpful to, as applicable,  (i) maintain such  qualification,  (ii)
avoid or minimize the risk of the  imposition of such a tax or (iii) comply with
any such requirements of the Code.

            This  Agreement  may also be  amended  from  time to time (x) by the
Depositor,  the Servicer and the Trustee,  with the prior written consent of the
Class A Certificate  Insurer,  (y) with the consent of the  Unaffiliated  Seller
unless the  Trustee  receives  an Opinion of Counsel  (which  Opinion of Counsel
shall not be an  expense  of the  Trustee or the Trust  Fund)  stating  that the
amendment will not adversely affect the Unaffiliated  Seller, and (z), except as
set forth in  Section  3.27,  with the  consent of the  Holders of  Certificates
evidencing  Percentage Interests aggregating not less than 66-2/3% of each Class
of Certificates  (based on the aggregate  outstanding  principal balance of such
class at such time) affected  thereby,  for the purpose of adding any provisions
to or  changing  in any  manner or  eliminating  any of the  provisions  of this
Agreement  or  of  modifying  in  any  manner  the  rights  of  the  Holders  of
Certificates;  PROVIDED, HOWEVER, that no such amendment shall (i) reduce in any
manner  the  amount  of,  or  delay  the  timing  of,  payments  required  to be
distributed  on any  Certificate  without  the  consent  of the  Holder  of such
Certificate,  (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the consent of the Holders of Certificates of such Class evidencing,  as
to such Class,  Percentage Interests aggregating not less than 66-2/3%, or (iii)
reduce  the  aforesaid  percentages  of  Certificates  the  Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all such Certificates then outstanding.

            Notwithstanding  any  contrary  provision  of  this  Agreement,  the
Trustee  shall not consent to any  amendment to this  Agreement  unless it shall
have first received an Opinion of Counsel, which opinion shall not be an expense
of the Trustee or the Trust Fund,  to the effect  that such  amendment  will not
cause the imposition of any tax on any REMIC or the  Certificateholders or cause
any REMIC to fail to  qualify as a REMIC at any time that any  Certificates  are
outstanding.

            Notwithstanding the foregoing provisions of this Section 10.01, with
respect to any amendment that significantly modifies the permitted activities of
the  Trustee  or  the  Servicer,  any  Certificate  beneficially  owned  by  the
Depositor,  the Unaffiliated Seller or any of their respective  Affiliates shall
be deemed not to be outstanding  (and shall not be considered  when  determining
the percentage of  Certificateholders  consenting or when  calculating the total
number of  Certificates  entitled to consent) for purposes of determining if the
requisite  consents of  Certificateholders  under this  Section  10.01 have been
obtained.

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            Promptly  after the  execution of any  amendment  to this  Agreement
requiring the consent of  Certificateholders,  the Trustee shall furnish written
notification   of  the   substance   or  a  copy  of  such   amendment  to  each
Certificateholder and each Rating Agency.

            It shall not be  necessary  for the  consent  of  Certificateholders
under  this  Section  10.01  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.

            Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund),  satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements  for amending  this  Agreement  have been complied  with;  and (ii)
either (A) the amendment does not adversely  affect in any material  respect the
interests  of any  Certificateholder  or (B) the  conclusion  set  forth  in the
immediately  preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

            Section 10.02 RECORDATION OF AGREEMENT; COUNTERPARTS.

            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 Servicer at its expense,  but only upon
receipt of 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 10.03 GOVERNING LAW.

            THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE  LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE  PERFORMED  IN THE  STATE  OF NEW  YORK AND THE  OBLIGATIONS,  RIGHTS  AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

            Section 10.04 INTENTION OF PARTIES.

            It is the express  intent of the parties  hereto that the conveyance
(i) of the  Mortgage  Loans by the  Depositor  and (ii) of the Trust Fund by the
Depositor to the Trustee each be, and be construed as, an absolute sale thereof.
It is, further, not the intention of the parties that such conveyances be deemed
a pledge thereof. However, in the event that,  notwithstanding the intent of the
parties,  such assets are held to be the property of the Depositor,  as the case
may be,

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or if for any other reason this Agreement is held or deemed to create a security
interest in either such assets,  then (i) this Agreement shall be deemed to be a
security  agreement  within the  meaning of the Uniform  Commercial  Code of the
State of New York and (ii) the conveyances  provided for in this Agreement shall
be deemed to be an assignment  and a grant by the Depositor to the Trustee,  for
the  benefit of the  Certificateholders,  of a security  interest  in all of the
assets transferred, whether now owned or hereafter acquired.

            The Depositor for the benefit of the  Certificateholders  and of the
Class A Certificate Insurer shall, to the extent consistent with this Agreement,
take such actions as may be necessary to ensure  that,  if this  Agreement  were
deemed to create a security  interest in the Trust Fund, such security  interest
would be deemed to be a  perfected  security  interest of first  priority  under
applicable  law  and  will be  maintained  as such  throughout  the  term of the
Agreement.  The Depositor  shall arrange for filing any Uniform  Commercial Code
continuation  statements in  connection  with any security  interest  granted or
assigned to the Trustee for the benefit of the Certificateholders.

            Section 10.05 NOTICES.

            (a)   The Trustee  shall use its best  efforts to  promptly  provide
notice to each Rating  Agency with respect to each of the  following of which it
has actual knowledge:

            1.    Any material change or amendment to this Agreement;

            2.    The  occurrence  of any  Event  of  Default  that has not been
                  cured;

            3.    The  resignation or termination of the Servicer or the Trustee
and the appointment of any successor;

            4.    The repurchase or  substitution  of Mortgage Loans pursuant to
Section 2.03; and

            5.    The final payment to Certificateholders.

            (b)   In addition, the Trustee shall promptly furnish to each Rating
Agency copies of the following:

            1.    Each report to  Certificateholders  described in Section 4.03;
and

            2.    Any  notice of a  purchase  of a  Mortgage  Loan  pursuant  to
Section 2.02, 2.03 or 3.11.

            All  directions,  demands and notices  hereunder shall be in writing
and shall be deemed to have been duly given when delivered to (a) in the case of
the Depositor or the Representative, Morgan Stanley ABS Capital I Inc. or Morgan
Stanley & Co. Incorporated,  1585 Broadway, New York, New York 10036, Attention:
Michelle Wilke,  Esq., (b) in the case of the Servicer,  Ocwen Federal Bank FSB,
1675 Palm  Beach  Lakes  Blvd.,  Suite  10A,  West Palm  Beach,  Florida  33401,
Attention: Secretary, or such other address as may be hereafter furnished to the
parties hereto in writing, (c) in the case of the Trustee to the Corporate Trust
Office,

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Deutsche Bank National  Trust  Company,  1761 East St. Andrew Place,  Santa Ana,
California  92705-4934,  Attention:  Trust Administration  DC02M2, or such other
address as the Trustee may hereafter  furnish to the parties hereto,  (d) in the
case of the Unaffiliated Seller, CDC Mortgage Capital, Inc., 9 West 57th Street,
New York, New York 10019,  Attention  General Counsel,  or such other address as
the Unaffiliated  Seller may hereafter furnish to the parties hereto, (e) in the
case of each of the Rating  Agencies,  the  address  specified  therefor  in the
definition  corresponding  to the name of such Rating Agency and (f) in the case
of any Originator,  the address  specified  therefor in the applicable  Mortgage
Loan Purchase  Agreement.  Notices to  Certificateholders  shall be deemed given
when  mailed,  first  class  postage  prepaid,  to  their  respective  addresses
appearing in the Certificate Register.

            Section 10.06 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 10.07 ASSIGNMENT.

            Notwithstanding anything to the contrary contained herein, except as
provided in Section  6.02,  this  Agreement  may not be assigned by the Servicer
without  the prior  written  consent  of the  Trustee,  the Class A  Certificate
Insurer and Depositor;  PROVIDED,  HOWEVER,  that,  subject to Section 3.27, the
Servicer may pledge or sell its interest in any  reimbursements for P&I Advances
or Servicing Advances hereunder.

            Section 10.08 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.

            The death or incapacity of any  Certificateholder  shall not operate
to  terminate  this  Agreement  or the trust  created  hereby,  nor entitle such
Certificateholder's  legal  representative or heirs to claim an accounting or to
take any  action or  commence  any  proceeding  in any court for a  petition  or
winding  up of the  trust  created  hereby,  or  otherwise  affect  the  rights,
obligations and liabilities of the parties hereto or any of them.

            No  Certificateholder  shall  have  any  right  to vote  (except  as
provided herein) or in any manner otherwise control the operation and management
of the Trust Fund, or the obligations of the parties hereto,  nor shall anything
herein set forth or contained in the terms of the  Certificates  be construed so
as to constitute the Certificateholders from time to time as partners or members
of an association; nor shall any Certificateholder be under any liability to any
third  party by reason of any  action  taken by the  parties  to this  Agreement
pursuant to any provision hereof.

            No  Certificateholder  shall have any right by virtue or by availing
itself of any  provisions  of this  Agreement to institute  any suit,  action or
proceeding in equity or at law upon or under or with respect to this  Agreement,
unless such Holder  previously  shall have given to the Trustee a written notice
of an Event of Default and of the continuance  thereof, as herein provided,  and
unless the Holders of  Certificates  evidencing  not less than 25% of the Voting

                                      121
<PAGE>

Rights evidenced by the Certificates, and the Class A Certificate Insurer, shall
also have made written request to the Trustee to institute such action,  suit or
proceeding  in its own name as Trustee  hereunder  and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses,
and liabilities to be incurred therein or thereby,  and the Trustee, for 60 days
after its  receipt of such  notice,  request and offer of  indemnity  shall have
neglected or refused to institute any such action, suit or proceeding;  it being
understood   and   intended,    and   being   expressly   covenanted   by   each
Certificateholder  with every other  Certificateholder  and the Trustee, that no
one or more Holders of Certificates  shall have any right in any manner whatever
by  virtue  or by  availing  itself  or  themselves  of any  provisions  of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates,  or to obtain or seek to obtain priority over or preference
to any other such Holder or to enforce any right under this Agreement, except in
the manner herein provided and for the common benefit of all Certificateholders.
For the protection and enforcement of the provisions of this Section 10.08, each
and every  Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.

            Section 10.09 INSPECTION AND AUDIT RIGHTS.

            The Servicer agrees that, on reasonable prior notice, it will permit
any  representative  of the  Depositor,  the  Unaffiliated  Seller,  the Class A
Certificate  Insurer or the Trustee during the Servicer's normal business hours,
to examine all the books of account,  records,  reports and other  papers of the
Servicer relating to the Mortgage Loans, to make copies and extracts  therefrom,
to cause such books to be audited by independent  certified  public  accountants
selected by the party  conducting  the  inspection  and to discuss its  affairs,
finances  and  accounts  relating  to the  Mortgage  Loans  with  its  officers,
employees and independent public accountants (and by this provision the Servicer
hereby  authorizes  said  accountants to discuss with such  representative  such
affairs,  finances and accounts),  all at such reasonable  times and as often as
may be reasonably requested.  Any out-of-pocket expense of the Servicer incident
to the  exercise  by  the  Depositor,  the  Unaffiliated  Seller,  the  Class  A
Certificate  Insurer or the Trustee of any right under this Section  10.09 shall
be borne by the Servicer.

            Section 10.10 CERTIFICATES NONASSESSABLE AND FULLY PAID.

            It is the intention of the Depositor that  Certificateholders  shall
not be personally  liable for  obligations of the Trust Fund, that the interests
in the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

            Section 10.11 THE CLASS A CERTIFICATE INSURER DEFAULT.

            Any right  conferred  to the Class A  Certificate  Insurer  shall be
suspended  during  any  period in which a Class A  Certificate  Insurer  Default
exists.  At such time as the  Class A  Certificates  are no  longer  outstanding
hereunder,  and no amounts  owed to the Class A  Certificate  Insurer  hereunder
remain  unpaid,  the  Class  A  Certificate  Insurer's  rights  hereunder  shall
terminate.

                                      122
<PAGE>

            Section 10.12 THIRD PARTY BENEFICIARY.

            The parties agree that the Class A  Certificate  Insurer is intended
and shall have all rights of a third-party beneficiary of this Agreement.

            Section 10.13 WAIVER OF JURY TRIAL.

            EACH PARTY HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY,  WAIVES
(TO THE EXTENT  PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY OF ANY DISPUTE  ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT
ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

            Section 10.14 LIMITATION OF DAMAGES.

            NOTWITHSTANDING  ANYTHING  CONTAINED  HEREIN  TO THE  CONTRARY,  THE
PARTIES  HERETO  AGREE THAT NO PARTY  HERETO  SHALL BE LIABLE TO ANY OTHER PARTY
HERETO FOR ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER, WHETHER IN
CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR ANY OTHER LEGAL OR
EQUITABLE PRINCIPLES;  PROVIDED THAT, THE FOREGOING PROVISION SHALL NOT LIMIT OR
RELIEVE ANY PARTY HERETO OF ANY OBLIGATION UNDER THIS AGREEMENT TO INDEMNIFY ANY
OTHER PARTY HERETO AGAINST (X) ANY DAMAGES  IMPOSED UPON SUCH PARTY BY ANY THIRD
PARTY CLAIM OR ORDER, DECREE OR ACTION OF ANY REGULATORY OR ADMINISTRATIVE BODY,
OR (Y) WITH RESPECT TO ANY LOSSES SUSTAINED OR EXPENSES INCURRED BY OR ON BEHALF
OF THE TRUST (IT BEING  UNDERSTOOD  THAT TRUST LOSSES  CAUSED BY THE  SERVICER'S
FAILURE  TO  PERFORM  ITS  DUTIES  SHALL NOT BE  CONSIDERED  "CONSEQUENTIAL"  OR
"SPECIAL"  DAMAGES FOR PURPOSES OF THE LIMITATION  PROVIDED ABOVE,  AND SHALL BE
COVERED BY THE INDEMNIFICATION PROVIDED HEREIN).

                                  * * * * * * *

                                      123
<PAGE>

            IN WITNESS  WHEREOF,  the Depositor,  the Trustee,  the Unaffiliated
Seller and the  Servicer  have caused  their names to be signed  hereto by their
respective officers thereunto duly authorized as of the day and year first above
written.

                            MORGAN STANLEY ABS CAPITAL I INC.,
                            as Depositor

                            By:
                               -------------------------------------------------
                               Name:
                               Title:

                            DEUTSCHE BANK NATIONAL TRUST COMPANY,
                            solely as Trustee and not in its individual capacity

                            By:
                               -------------------------------------------------
                               Name:
                               Title:

                            By:
                               -------------------------------------------------
                               Name:
                               Title:

                            OCWEN FEDERAL BANK FSB,
                            as Servicer

                            By:
                               -------------------------------------------------
                               Name:
                               Title:

                            CDC MORTGAGE CAPITAL INC.,
                            as Unaffiliated Seller

                            By:
                               -------------------------------------------------
                               Name:
                               Title:

<PAGE>

                            By:
                               -------------------------------------------------
                               Name:
                               Title:

<PAGE>

                                   SCHEDULE I

                             Mortgage Loan Schedule

          [See Exhibit A to the Unaffiliated Seller's Agreement, Tab 2]

                                       I-1
<PAGE>

                                   SCHEDULE II

                       CDC MORTGAGE CAPITAL TRUST 2002-HE2

                       Mortgage Pass-Through Certificates,

                                 Series 2002-HE2

                 REPRESENTATIONS AND WARRANTIES OF THE SERVICER

            OCWEN   FEDERAL   BANK  FSB  (the   "SERVICER")   hereby  makes  the
representations  and  warranties set forth in this Schedule II to the Depositor,
the Unaffiliated  Seller, the Class A Certificate Insurer and the Trustee, as of
the  Closing  Date.  Capitalized  terms used but not  otherwise  defined in this
Schedule  II  shall  have the  meanings  ascribed  thereto  in the  Pooling  and
Servicing  Agreement  (the  "POOLING AND SERVICING  AGREEMENT")  relating to the
above-referenced Series.

            (1)   The  Servicer  is a  federally  chartered  savings  bank  duly
      organized,  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 Pooling and Servicing 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 Mortgage Loan and to service the Mortgage Loans in
      accordance with the terms of this Pooling and Servicing Agreement;

            (2)   The Servicer has the full power and  authority to service each
      Mortgage Loan, and to execute,  deliver and perform, and to enter into and
      consummate  the  transactions  contemplated  by this Pooling and Servicing
      Agreement and has duly  authorized by all necessary  action on the part of
      the Servicer the execution,  delivery and  performance of this Pooling and
      Servicing Agreement;  and this Pooling and Servicing  Agreement,  assuming
      the due authorization, execution and delivery thereof by the other parties
      thereto,  constitutes  a  legal,  valid  and  binding  obligation  of  the
      Servicer,  enforceable  against the Servicer in accordance with its terms,
      except to the extent that (a) the enforceability thereof may be limited by
      bankruptcy,  insolvency,  moratorium,  receivership and other similar laws
      relating to  creditors'  rights  generally  and (b) the remedy of specific
      performance  and  injunctive  and other forms of  equitable  relief may be
      subject  to the  equitable  defenses  and to the  discretion  of the court
      before which any proceeding therefor may be brought;

            (3)   The  execution  and  delivery of this  Pooling  and  Servicing
      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 organizational  documents 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

                                      II-1
<PAGE>

      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 Pooling and Servicing  Agreement or (y)
      the business, operations, financial condition, properties or assets of the
      Servicer taken as a whole;

            (4)   The Servicer is an approved  seller/servicer for Fannie Mae or
      Freddie Mac in good standing and is a HUD approved  mortgagee  pursuant to
      Section 203 and Section 211 of the National Housing Act;

            (5)   No  litigation  is pending  against  the  Servicer  that would
      materially and adversely affect the execution,  delivery or enforceability
      of this Pooling and Servicing  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;

            (6)   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
      Pooling and Servicing Agreement or the consummation by the Servicer of the
      transactions contemplated by this Pooling and Servicing Agreement,  except
      for such consents, approvals,  authorizations or orders, if any, that have
      been obtained prior to the Closing Date; and

            (7)   The Servicer  covenants  that its  computer and other  systems
      used in  servicing  the Mortgage  Loans  operate in a manner such that the
      Servicer can service the Mortgage  Loans in  accordance  with the terms of
      this Pooling and Servicing Agreement.

                                      II-2
<PAGE>

                                  SCHEDULE III

            CDC Mortgage  Capital  Inc.  hereby  makes the  representations  and
warranties  set  forth  in  this  Schedule  III to the  Depositor,  the  Class A
Certificate Insurer and the Trustee, as of the Closing Date.

(a)   DUE ORGANIZATION AND AUTHORITY.  The Unaffiliated  Seller is a corporation
      duly  organized,  validly  existing and in good standing under the laws of
      the  state  of New  York and has all  licenses  necessary  to carry on its
      business as now being  conducted  and is licensed,  qualified  and in good
      standing in each state  wherein it owns or leases any material  properties
      or where a  Mortgaged  Property  is  located,  if the  laws of such  state
      require  licensing or  qualification  in order to conduct  business of the
      type  conducted  by  the  Unaffiliated   Seller,  and  in  any  event  the
      Unaffiliated  Seller is in  compliance  with the laws of any such state to
      the extent  necessary;  the  Unaffiliated  Seller  has the full  corporate
      power, authority and legal right to execute and deliver this Agreement and
      to  perform  its  obligations  hereunder;  the  execution,   delivery  and
      performance  of  this  Agreement  by  the  Unaffiliated   Seller  and  the
      consummation of the  transactions  contemplated  hereby have been duly and
      validly authorized;  this Agreement and all agreements contemplated hereby
      have been duly  executed and delivered and  constitute  the valid,  legal,
      binding and enforceable obligations of the Unaffiliated Seller, regardless
      of whether such enforcement is sought in a proceeding in equity or at law;
      and all  requisite  corporate  action has been  taken by the  Unaffiliated
      Seller to make this Agreement and all agreements contemplated hereby valid
      and binding upon the Unaffiliated Seller in accordance with their terms;

(b)   NO CONFLICTS.  Neither the execution and delivery of this  Agreement,  the
      consummation of the transactions  contemplated hereby, nor the fulfillment
      of or compliance  with the terms and  conditions of this  Agreement,  will
      conflict  with or result in a breach of any of the  terms,  conditions  or
      provisions of the  Unaffiliated  Seller's  charter or by-laws or any legal
      restriction  or any  agreement  or  instrument  to which the  Unaffiliated
      Seller is now a party or by which it is bound,  or constitute a default or
      result  in an  acceleration  under  any  of  the  foregoing,  except  such
      unfulfillment,  non-compliance  or default or acceleration does not in the
      aggregate  have a  material  adverse  effect on the  operation,  business,
      condition  (business or otherwise) of the Unaffiliated Seller or result in
      the violation of any law, rule,  regulation,  order, judgment or decree to
      which the  Unaffiliated  Seller or its  property is  subject,  except such
      violation does not in the aggregate have a material  adverse effect on the
      operation, business, condition (business or otherwise) of the Unaffiliated
      Seller or result in the  creation  or  imposition  of any lien,  charge or
      encumbrance  that would have an adverse  effect upon any of its properties
      pursuant to the terms of any  mortgage,  contract,  deed of trust or other
      instrument;

(c)   NO  LITIGATION  PENDING.   There  is  no  action,   suit,   proceeding  or
      investigation   pending  nor,  to  the  Unaffiliated  Seller's  knowledge,
      threatened   against   the   Unaffiliated   Seller,   before   any  court,
      administrative  agency or other tribunal  asserting the invalidity of this
      Agreement,  seeking to prevent the consummation of any of the transactions
      contemplated by this Agreement or which,  either in any one instance or in
      the aggregate,  may result in any material adverse change in the business,
      operations, financial condition, properties

                                     III-1
<PAGE>

      or assets of the Unaffiliated Seller, or in any material impairment of the
      right or  ability  of the  Unaffiliated  Seller  to carry on its  business
      substantially  as now  conducted,  or which would draw into  question  the
      validity  of this  Agreement  or of any  action  taken  or to be  taken in
      connection with the obligations of the  Unaffiliated  Seller  contemplated
      herein,  or which would be likely to impair  materially the ability of the
      Unaffiliated Seller to perform under the terms of this Agreement;

(d)   NO CONSENT REQUIRED. No consent,  approval,  authorization or order of, or
      registration or filing with, or notice to any court or governmental agency
      or body  including  HUD, the FHA or the VA is required for the  execution,
      delivery and  performance by the  Unaffiliated  Seller of or compliance by
      the  Unaffiliated  Seller with this Agreement or the  consummation  of the
      transactions contemplated by this Agreement, or if required, such approval
      has been obtained prior to the Closing Date;

                                     III-2
<PAGE>

                                    EXHIBIT A

Unless this  Certificate  is presented by an  authorized  representative  of the
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer,  exchange,  or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized  representative  of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE  REPRESENTS AN
INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
AS THOSE  TERMS ARE  DEFINED,  RESPECTIVELY,  IN  SECTIONS  860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER ASSETS.

Certificate No.                          :         [A-1/M-1-1/M-2-1/B-1-1/B-2-1]
Cut-off Date                             :         July 1, 2002
First Distribution Date                  :         August 25, 2002
Initial Certificate Balance of this
Certificate ("DENOMINATION")             :         A $328,101,000

                                                   M-1 $27,342,000

                                                   M-2 $21,266,000

                                                   B-1 $16,810,000

                                                   B-2 $6,481,000
Initial Certificate Balances of all

Certificates of this Class               :         A $328,101,000

                                                   M-1 $27,342,000

                                                   M-2 $21,266,000

                                                   B-1 $16,810,000

                                                   B-2 $6,481,000

                                      A-1
<PAGE>

CUSIP                                    :         A 12506YAK5

                                                   M-1 12506YAL3

                                                   M-2 12506AM1

                                                   B-1 12506YAN9

                                                   B-2 12506YAP4

                                      A-2
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2002-HE2

               Mortgage Pass-Through Certificates, Series 2002-HE2

             [Class A][Class M-1] [Class M-2][Class B-1][Class B-2]

            evidencing a percentage  interest in the distributions  allocable to
            the Certificates of the above-referenced Class.

            Principal in respect of this Certificate is distributable monthly as
set forth herein.  Accordingly,  the Certificate Balance at any time may be less
than the  Certificate  Balance as set forth herein.  This  Certificate  does not
evidence an  obligation  of, or an  interest  in, and is not  guaranteed  by the
Depositor, the Unaffiliated Seller, any Originator,  the Servicer or the Trustee
referred  to  below  or  any  of  their  respective  affiliates.   Neither  this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

            This  certifies  that  CEDE & CO.  is the  registered  owner  of the
Percentage  Interest  evidenced  by this  Certificate  (obtained by dividing the
denomination of this  Certificate by the aggregate of the  denominations  of all
Certificates of the Class to which this Certificate  belongs) in certain monthly
distributions  pursuant to a Pooling  and  Servicing  Agreement  dated as of the
Cut-off Date specified above (the "AGREEMENT")  among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the "DEPOSITOR"), Ocwen Federal Bank FSB, as servicer (the
"SERVICER"),   CDC  Mortgage   Capital   Inc.,  as   unaffiliated   seller  (the
"UNAFFILIATED SELLER") and Deutsche Bank National Trust Company, as trustee (the
"TRUSTEE").  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.

            Reference  is  hereby  made  to  the  further   provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

            This  Certificate  shall not be entitled  to any  benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      A-3
<PAGE>

            IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate to be
duly executed.

Dated:

                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                           not in its individual capacity, but solely as Trustee

                           By:
                              --------------------------------------------------

Countersigned:

By:
   -------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                      A-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

            This  Certificate is one of a duly authorized  issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2002-HE2  Mortgage   Pass-Through
Certificates,  Series 2002-HE2 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

            The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

            This  Certificate  does not purport to summarize  the  Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

            Pursuant to the terms of the Agreement,  a distribution will be made
on the  25th  day of each  month  or,  if such day is not a  Business  Day,  the
Business Day immediately following (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
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
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution  Date is the Business Date immediately  preceding such Distribution
Date, PROVIDED,  HOWEVER, that for any Definitive Certificates,  the Record Date
shall be the last  Business  Day of the month next  preceding  the month of such
Distribution Date.

            Distributions on this Certificate  shall be made by wire transfer of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  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 offices  designated by the Trustee for such
purposes,  or such other location specified in the notice to  Certificateholders
of such final distribution.

            The Agreement permits, with certain exceptions therein provided, the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer, with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the

                                      A-5
<PAGE>

Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate  and of any  Certificate  issued  upon  the  transfer  hereof  or in
exchange  therefor 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 of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes,  accompanied by a written  instrument of transfer in form satisfactory
to the Trustee and the Certificate  Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing,  and thereupon one or more
new  Certificates of the same Class in authorized  denominations  and evidencing
the same aggregate  Percentage  Interest in the Trust Fund will be issued to the
designated transferee or transferees.

            The  Certificates  are  issuable  only  as  registered  Certificates
without coupons in denominations  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
and  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,  but the Trustee may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

            The Depositor,  the Servicer,  the Unaffiliated  Seller, the Class A
Certificate  Insurer  and the Trustee and any agent of any of them may treat the
Person in whose name this  Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

            On any  Distribution  Date on which the aggregate  Stated  Principal
Balance of the  Mortgage  Loans is less than or equal to 10% of the Maximum Pool
Principal Balance, the Servicer and/or the Class X Certificateholders  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

            Any term used herein that is defined in the Agreement shall have the
meaning  assigned  in  the  Agreement,   and  nothing  herein  shall  be  deemed
inconsistent with that meaning.

                                      A-6
<PAGE>

                                   ASSIGNMENT

            FOR VALUE RECEIVED,  the undersigned  hereby sell(s),  assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

            I (We) further  direct the Trustee to issue a new  Certificate  of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

Dated:

                               -------------------------------------------------
                                     Signature by or on behalf of assignor

                                      A-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

            The  assignee   should   include  the   following  for  purposes  of
distribution:

            Distributions  shall be made,  by wire  transfer  or  otherwise,  in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of______________________________________________________________
account number________________, or, if mailed by check, to _____________________
Applicable statements should be mailed to ______________________________________
________________________________________________________________________________

            This information is provided by ____________________________________
the assignee named above, or ___________________________________________________
as its agent.

                                      A-8
<PAGE>

                                    EXHIBIT B

Unless this  Certificate  is presented by an  authorized  representative  of the
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer,  exchange,  or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized  representative  of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE  REPRESENTS AN
INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
AS THOSE  TERMS ARE  DEFINED,  RESPECTIVELY,  IN  SECTIONS  860G AND 860D OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER ASSETS.

Certificate No.                              :            [A-IO-1]

Cut-off Date                                 :            July 1, 2002

First Distribution Date                      :            August 25, 2002

Initial Notional Balance of this
Certificate ("DENOMINATION")                 :            A-IO $81,012,700

Initial Notional Balances of all
Certificates of this Class                   :            A-IO $81,012,700

CUSIP                                        :            A-IO 12506YAQ2

                                      B-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2002-HE2

               Mortgage Pass-Through Certificates, Series 2002-HE2

                                  [Class A-IO]

            evidencing a percentage  interest in the distributions  allocable to
            the Certificates of the above-referenced Class.

            No  principal  will be paid in  respect  of this  Certificate.  This
Certificate  does not evidence an  obligation  of, or an interest in, and is not
guaranteed by the  Depositor,  the  Unaffiliated  Seller,  any  Originator,  the
Servicer or the Trustee referred to below or any of their respective affiliates.
Neither this Certificate nor the Mortgage Loans are guaranteed or insured by any
governmental agency or instrumentality.

            This  certifies  that  CEDE & CO.  is the  registered  owner  of the
Percentage  Interest  evidenced  by this  Certificate  (obtained by dividing the
denomination of this  Certificate by the aggregate of the  denominations  of all
Certificates of the Class to which this Certificate  belongs) in certain monthly
distributions  pursuant to a Pooling  and  Servicing  Agreement  dated as of the
Cut-off Date specified above (the "AGREEMENT")  among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the "DEPOSITOR"), Ocwen Federal Bank FSB, as servicer (the
"SERVICER"),   CDC  Mortgage   Capital   Inc.,  as   unaffiliated   seller  (the
"UNAFFILIATED SELLER") and Deutsche Bank National Trust Company, as trustee (the
"TRUSTEE").  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.

            Reference  is  hereby  made  to  the  further   provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

            This  Certificate  shall not be entitled  to any  benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      B-2
<PAGE>

            IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate to be
duly executed.

Dated:

                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                           not in its individual capacity, but solely as Trustee

                           By:
                              --------------------------------------------------

Countersigned:

By:
   ---------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                      B-3
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

            This  Certificate is one of a duly authorized  issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2002-HE2  Mortgage   Pass-Through
Certificates,  Series 2002-HE2 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

            The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

            This  Certificate  does not purport to summarize  the  Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

            Pursuant to the terms of the Agreement,  a distribution will be made
on the  25th  day of each  month  or,  if such day is not a  Business  Day,  the
Business Day immediately following (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
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
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution  Date is the Business Date immediately  preceding such Distribution
Date, PROVIDED,  HOWEVER, that for any Definitive Certificates,  the Record Date
shall be the last  Business  Day of the month next  preceding  the month of such
Distribution Date.

            Distributions on this Certificate  shall be made by wire transfer of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  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 offices  designated by the Trustee for such
purposes,  or such other location specified in the notice to  Certificateholders
of such final distribution.

            The Agreement permits, with certain exceptions therein provided, the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer, with the consent of the Holders of Certificates affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the

                                      B-4
<PAGE>

Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate  and of any  Certificate  issued  upon  the  transfer  hereof  or in
exchange  therefor 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 of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes,  accompanied by a written  instrument of transfer in form satisfactory
to the Trustee and the Certificate  Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing,  and thereupon one or more
new  Certificates of the same Class in authorized  denominations  and evidencing
the same aggregate  Percentage  Interest in the Trust Fund will be issued to the
designated transferee or transferees.

            The  Certificates  are  issuable  only  as  registered  Certificates
without coupons in denominations  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
and  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,  but the Trustee may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

            The Depositor,  the Servicer,  the Unaffiliated  Seller, the Class A
Certificate  Insurer  and the Trustee and any agent of any of them may treat the
Person in whose name this  Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

            On any  Distribution  Date on which the aggregate  Stated  Principal
Balance of the  Mortgage  Loans is less than or equal to 10% of the Maximum Pool
Principal Balance, the Servicer and/or the Class X Certificateholders  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

            Any term used herein that is defined in the Agreement shall have the
meaning  assigned  in  the  Agreement,   and  nothing  herein  shall  be  deemed
inconsistent with that meaning.

                                      B-5
<PAGE>

                                   ASSIGNMENT

            FOR VALUE RECEIVED,  the undersigned  hereby sell(s),  assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

            I (We) further  direct the Trustee to issue a new  Certificate  of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

Dated:

                               -------------------------------------------------
                                     Signature by or on behalf of assignor

                                      B-6
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

            The  assignee   should   include  the   following  for  purposes  of
distribution:

            Distributions  shall be made,  by wire  transfer  or  otherwise,  in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of______________________________________________________________
account number________________, or, if mailed by check, to _____________________
Applicable statements should be mailed to ______________________________________
________________________________________________________________________________

            This information is provided by ____________________________________
the assignee named above, or ___________________________________________________
as its agent.

                                      B-7
<PAGE>

                                    EXHIBIT C

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEROR  DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT  H TO THE  AGREEMENT  REFERRED  TO HEREIN  AND  EITHER  (I) THE  TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE  AGREEMENT  REFERRED
TO HEREIN OR (II) THE TRUSTEE  RECEIVES AN OPINION OF COUNSEL,  DELIVERED AT THE
EXPENSE OF THE TRANSFEROR,  THAT SUCH TRANSFER MAY BE MADE WITHOUT  REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION  LETTER TO THE EFFECT
THAT SUCH  TRANSFEREE  IS NOT AN EMPLOYEE  BENEFIT  PLAN  SUBJECT TO THE TITLE I
EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED,  OF A PLAN SUBJECT
TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO  APPLICABLE  FEDERAL,  STATE OR
LOCAL LAW ("SIMILAR  LAW")  MATERIALLY  SIMILAR TO THE  FOREGOING  PROVISIONS OF
ERISA OR THE CODE,  OR A PERSON  INVESTING  ON BEHALF OF OR WITH PLAN  ASSETS OF
SUCH A PLAN, OR A REPRESENTATION OR AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO
THE CONTRARY HEREIN,  ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF
OF AN EMPLOYEE  BENEFIT  PLAN  SUBJECT TO TITLE I OF ERISA,  SECTION 4975 OF THE
CODE OR SIMILAR LAW WITHOUT THE REPRESENTATION  LETTER OR THE OPINION OF COUNSEL
SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.

Certificate No.                              :               1

Cut-off Date                                 :               July 1, 2002

First Distribution Date                      :               August 25, 2002

Percentage Interest of this
Certificate ("DENOMINATION")                 :               100%

Principal Balance                            :               $100.26

CUSIP                                        :               N/A

                                      C-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

                                     Class P

            evidencing a percentage  interest in the distributions  allocable to
            the Certificates of the above-referenced Class.

            Distributions  in  respect  of this  Certificate  are  distributable
monthly as set forth herein.  This  Certificate  does not evidence an obligation
of, or an interest in, and is not guaranteed by the Depositor,  the Unaffiliated
Seller, the Servicer or the Trustee referred to below or any of their respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

            This certifies that  __________________,  is the registered owner of
the Percentage Interest evidenced by this Certificate  (obtained by dividing the
denomination of this  Certificate by the aggregate of the  denominations  of all
Certificates of the Class to which this Certificate  belongs) in certain monthly
distributions  pursuant to a Pooling  and  Servicing  Agreement  dated as of the
Cut-off Date specified above (the "AGREEMENT")  among MORGAN STANLEY ABS CAPITAL
I INC., as depositor (the "DEPOSITOR"), Ocwen Federal Bank FSB, as servicer (the
"SERVICER"),   CDC  Mortgage   Capital   Inc.,  as   unaffiliated   seller  (the
"UNAFFILIATED SELLER") and Deutsche Bank National Trust Company, as trustee (the
"TRUSTEE").  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.

            This  Certificate  does  not  have a  Pass-Through  Rate and will be
entitled  to  distributions  only to the extent set forth in the  Agreement.  In
addition,  any distribution of the proceeds of any remaining assets of the Trust
will be made only upon  presentment  and  surrender of this  Certificate  at the
offices  designated  by the  Trustee for such  purpose,  or the office or agency
maintained by the Trustee.

            No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the  registration  requirements of the Securities Act
of 1933, as amended (the "1933 ACT"),  and any applicable  state securities laws
or is made in  accordance  with the 1933 Act and such laws.  In the event of any
such transfer,  the Trustee shall require the transferor to execute a transferor
certificate  (in  substantially  the form  attached to the Pooling and Servicing
Agreement)  and  deliver  either  (i)  a  Rule  144A  Letter,   in  either  case
substantially  in the form attached to the Agreement,  or (ii) a written Opinion
of  Counsel  to the  Trustee  that  such  transfer  may be made  pursuant  to an
exemption,  describing the applicable exemption and the basis therefor, from the
1933 Act or is being made  pursuant  to the 1933 Act,  which  Opinion of Counsel
shall be an expense of the transferor.

            No transfer of a Certificate  of this Class shall be made unless the
Trustee shall have received a representation  letter from the transferee of such
Certificate, acceptable to and in

                                      C-2
<PAGE>

form  and  substance  satisfactory  to the  Trustee,  to the  effect  that  such
transferee  is not an  employee  benefit  plan  subject to Section 406 of ERISA,
Section  4975 of the Code or  Similar  Law,  or a person  acting on behalf of or
investing plan assets of any such plan, which representation letter shall not be
an expense of the Trustee.

            Reference  is  hereby  made  to  the  further   provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

            This  Certificate  shall not be entitled  to any  benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      C-3
<PAGE>

            IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate to be
duly executed.

Dated:

                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                           not in its individual capacity, but solely as Trustee

                           By:
                              --------------------------------------------------

Countersigned:

By:
   ---------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                      C-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

            This  Certificate is one of a duly authorized  issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2002-HE2  Mortgage   Pass-Through
Certificates,  Series 2002-HE2 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

            The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

            This  Certificate  does not purport to summarize  the  Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

            Pursuant to the terms of the Agreement,  a distribution 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 (the "DISTRIBUTION Date"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
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
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

            Distributions on this Certificate  shall be made by wire transfer of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  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 offices  designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

            The Agreement permits, with certain exceptions therein provided, the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer with the consent of the Holders of Certificates  affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the
Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate and of any Certificate issued upon

                                      C-5
<PAGE>

the  transfer  hereof or in exchange  therefor 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 of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes  or the office or agency  maintained  by the  Trustee in New York,  New
York,  accompanied by a written  instrument of transfer in form  satisfactory to
the Trustee and the Certificate  Registrar duly executed by the holder hereof or
such holder's attorney duly authorized in writing, and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

            The  Certificates  are  issuable  only  as  registered  Certificates
without coupons in denominations  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
and  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,  but the Trustee may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

            The Depositor,  the Servicer,  the Unaffiliated  Seller, the Class A
Certificate  Insurer  and the Trustee and any agent of any of them may treat the
Person in whose name this  Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

            On any  Distribution  Date on which the aggregate  Stated  Principal
Balance of the  Mortgage  Loans is less than or equal to 10% of the Maximum Pool
Principal Balance, the Servicer and/or the Class X Certificateholders  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

            Any term used herein that is defined in the Agreement shall have the
meaning  assigned  in  the  Agreement,   and  nothing  herein  shall  be  deemed
inconsistent with that meaning.

                                      C-6
<PAGE>

                                   ASSIGNMENT

            FOR VALUE RECEIVED,  the undersigned  hereby sell(s),  assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

            I (We) further  direct the Trustee to issue a new  Certificate  of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

Dated:

                               -------------------------------------------------
                                     Signature by or on behalf of assignor

                                      C-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

            The  assignee   should   include  the   following  for  purposes  of
distribution:

            Distributions  shall be made,  by wire  transfer  or  otherwise,  in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of______________________________________________________________
account number________________, or, if mailed by check, to _____________________
Applicable statements should be mailed to ______________________________________
________________________________________________________________________________

            This information is provided by ____________________________________
the assignee named above, or ___________________________________________________
as its agent.

                                      C-8
<PAGE>

                                    EXHIBIT D

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL  ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEREE  DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS (i)
TO A PERMITTED  TRANSFEREE  AND THE TRANSFER IS MADE IN COMPLIANCE  WITH SECTION
5.02(c) OF THE AGREEMENT, AND (ii) THE TRANSFEREE DELIVERS TO THE TRUSTEE EITHER
A  REPRESENTATION  LETTER TO THE EFFECT THAT SUCH  TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN SUBJECT TO THE EMPLOYEE  RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED,  OR A PLAN  SUBJECT  TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT TO
MATERIALLY  SIMILAR  PROVISIONS  OF  APPLICABLE  FEDERAL,  STATE  OR  LOCAL  LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN. IN THE EVENT THAT SUCH REPRESENTATION IS VIOLATED,  OR ANY ATTEMPT IS MADE
TO TRANSFER  TO A PLAN OR  ARRANGEMENT  SUBJECT TO SECTION 406 OF ERISA,  A PLAN
SUBJECT TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT  TO  SIMILAR  LAW,  OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR  ARRANGEMENT  OR USING THE ASSETS OF
ANY SUCH PLAN OR ARRANGEMENT,  SUCH ATTEMPTED  TRANSFER OR ACQUISITION  SHALL BE
VOID AND OF NO EFFECT.

Certificate No.                              :                  1

Cut-off Date                                 :                  July 1, 2002

First Distribution Date                      :                  August 25, 2002

Percentage Interest of this
Certificate ("DENOMINATION")                 :                  100%

CUSIP                                        :                  N/A

                                      D-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

                                     Class R

            evidencing a percentage  interest in the distributions  allocable to
            the Certificates of the above-referenced Class.

            Distributions  in  respect  of  this  Certificate  is  distributable
monthly as set forth herein. This Class R Certificate has no Certificate Balance
and is not entitled to distributions  in respect of principal or interest.  This
Certificate  does not evidence an  obligation  of, or an interest in, and is not
guaranteed  by the  Depositor,  the  Servicer,  the  Unaffiliated  Seller or the
Trustee  referred to below or any of their respective  affiliates.  Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

            This  certifies  that CDC Mortgage  Capital  Inc. is the  registered
owner of the Percentage  Interest  specified above of any monthly  distributions
due to the Class R  Certificates  pursuant to a Pooling and Servicing  Agreement
dated as of the Cut-off  Date  specified  above (the  "AGREEMENT")  among MORGAN
STANLEY ABS CAPITAL I INC., as depositor (the  "DEPOSITOR"),  Ocwen Federal Bank
FSB, as servicer (the  "SERVICER"),  CDC Mortgage  Capital Inc., as unaffiliated
seller (the "UNAFFILIATED  SELLER") and Deutsche Bank National Trust Company, as
trustee (the "TRUSTEE"). 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.

            Any  distribution  of the  proceeds of any  remaining  assets of the
Trust  Fund will be made only upon  presentment  and  surrender  of this Class R
Certificate  at the offices  designated  by the Trustee for such purposes or the
office or agency maintained by the Trustee in California.

            No  transfer  of a Class R  Certificate  shall  be made  unless  the
Trustee shall have received a representation  letter from the transferee of such
Certificate,  acceptable  to and  in  form  and  substance  satisfactory  to the
Trustee,  to the effect that such transferee is not an employee  benefit plan or
arrangement  subject to Section 406 of ERISA, a plan or  arrangement  subject to
Section 4975 of the Code or a plan subject to Similar Law, or a person acting on
behalf of any such plan or arrangement  nor using the assets of any such plan or
arrangement to effect such transfer, which representation letter shall not be an
expense of the Trustee,  the Servicer or the Trust Fund.  In the event that such
representation  is  violated,  or any  attempt is made to  transfer to a plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section 4975 of
the Code or a plan subject to Similar  Law, or a person  acting on behalf of any
such plan or  arrangement  or using the assets of any such plan or  arrangement,
such attempted transfer or acquisition shall be void and of no effect.

            Each  Holder  of this  Class R  Certificate  shall be  deemed by the
acceptance or acquisition  an Ownership  Interest in this Class R Certificate to
have  agreed to be bound by the  following  provisions,  and the  rights of each
Person acquiring any Ownership Interest in this

                                      D-2
<PAGE>

Class R Certificate are expressly subject to the following provisions:  (i) each
Person  holding or acquiring any Ownership  Interest in this Class R Certificate
shall be a Permitted  Transferee  and shall  promptly  notify the Trustee of any
change or  impending  change in its status as a  Permitted  Transferee,  (ii) no
Ownership  Interest in this Class R Certificate may be registered on the Closing
Date or thereafter transferred,  and the Trustee shall not register the Transfer
of this  Certificate  unless,  in  addition to the  certificates  required to be
delivered to the Trustee under  Section  5.02(b) of the  Agreement,  the Trustee
shall have been furnished with a Transfer  Affidavit of the initial owner or the
proposed  transferee in the form attached as Exhibit H to the  Agreement,  (iii)
each  Person  holding  or  acquiring  any  Ownership  Interest  in this  Class R
Certificate shall agree (A) to obtain a Transfer Affidavit from any other Person
to whom such Person  attempts to Transfer its  Ownership  Interest  this Class R
Certificate,  (B) to obtain a Transfer  Affidavit  from any Person for whom such
Person is acting as nominee, trustee or agent in connection with any Transfer of
this Class R Certificate and (C) not to Transfer the Ownership  Interest in this
Class R Certificate  or to cause the Transfer of the Ownership  Interest in this
Class R  Certificate  to any other Person if it has actual  knowledge  that such
Person  is not a  Permitted  Transferee  and (iv)  any  attempted  or  purported
Transfer of the Ownership  Interest in this Class R Certificate  in violation of
the provisions herein shall be absolutely null and void and shall vest no rights
in the purported Transferee.

            Reference  is  hereby  made  to  the  further   provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

            This  Certificate  shall not be entitled  to any  benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      D-3
<PAGE>

            IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate to be
duly executed.

Dated:

                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                           not in its individual capacity, but solely as Trustee

                           By:
                              --------------------------------------------------

Countersigned:

By:
   --------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                      D-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

            This  Certificate is one of a duly authorized  issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2002-HE2  Mortgage   Pass-Through
Certificates,  Series 2002-HE2 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

            The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

            This  Certificate  does not purport to summarize  the  Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

            Pursuant to the terms of the Agreement,  a distribution will be made
on the  25th  day of each  month  or,  if such day is not a  Business  Day,  the
Business Day immediately following (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
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
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

            Distributions on this Certificate  shall be made by wire transfer of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  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 offices  designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

            The Agreement permits, with certain exceptions therein provided, the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer with the consent of the Holders of Certificates  affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the
Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate and of any Certificate issued upon

                                      D-5
<PAGE>

the  transfer  hereof or in exchange  therefor 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 of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes  or the  office or agency  maintained  by the  Trustee  in  California,
accompanied  by a written  instrument  of transfer in form  satisfactory  to the
Trustee and the Certificate Registrar duly executed by the holder hereof or such
holder's  attorney  duly  authorized  in writing,  and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

            The  Certificates  are  issuable  only  as  registered  Certificates
without coupons in denominations  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
and  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,  but the Trustee may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

            The Depositor,  the Servicer,  the Unaffiliated  Seller, the Class A
Certificate  Insurer  and the Trustee and any agent of any of them may treat the
Person in whose name this  Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

            On any  Distribution  Date on which the aggregate  Stated  Principal
Balance of the  Mortgage  Loans is less than or equal to 10% of the Maximum Pool
Principal Balance,  the Servicer and/or the Class X Certificateholder  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

            Any term used herein that is defined in the Agreement shall have the
meaning  assigned  in  the  Agreement,   and  nothing  herein  shall  be  deemed
inconsistent with that meaning.

                                      D-6
<PAGE>

                                   ASSIGNMENT

            FOR VALUE RECEIVED,  the undersigned  hereby sell(s),  assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

            I (We) further  direct the Trustee to issue a new  Certificate  of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

Dated:

                               -------------------------------------------------
                                     Signature by or on behalf of assignor

                                      D-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

            The  assignee   should   include  the   following  for  purposes  of
distribution:

            Distributions  shall be made,  by wire  transfer  or  otherwise,  in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of______________________________________________________________
account number________________, or, if mailed by check, to _____________________
Applicable statements should be mailed to ______________________________________
________________________________________________________________________________

            This information is provided by ____________________________________
the assignee named above, or ___________________________________________________
as its agent.

                                      D-8
<PAGE>

                                    EXHIBIT E

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, AS AMENDED (THE "CODE").

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEROR  DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT  H TO THE  AGREEMENT  REFERRED  TO HEREIN  AND  EITHER  (I) THE  TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE  AGREEMENT  REFERRED
TO HEREIN OR (II) THE TRUSTEE  RECEIVES AN OPINION OF COUNSEL,  DELIVERED AT THE
EXPENSE OF THE TRANSFEROR,  THAT SUCH TRANSFER MAY BE MADE WITHOUT  REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT  AS  PROVIDED  IN THE  POOLING  AND  SERVICING  AGREEMENT,  NEITHER  THIS
CERTIFICATE  NOR ANY INTEREST  HEREIN MAY BE  TRANSFERRED  UNLESS THE TRANSFEREE
DELIVERS  TO THE  TRUSTEE  A  REPRESENTATION  LETTER  TO THE  EFFECT  THAT  SUCH
TRANSFEREE  IS NOT AN EMPLOYEE  BENEFIT PLAN SUBJECT TO THE EMPLOYEE  RETIREMENT
INCOME  SECURITY ACT OF 1974,  AS AMENDED,  OR A PLAN SUBJECT TO SECTION 4975 OF
THE CODE,  OR A PLAN  SUBJECT TO SECTION  4975 OF THE CODE OR A PLAN  SUBJECT TO
MATERIALLY  SIMILAR  PROVISIONS  OF  APPLICABLE  FEDERAL,  STATE  OR  LOCAL  LAW
("SIMILAR LAW") OR A PERSON INVESTING ON BEHALF OF OR WITH PLAN ASSETS OF SUCH A
PLAN.  NOTWITHSTANDING  ANYTHING  ELSE TO THE  CONTRARY  HEREIN,  ANY  PURPORTED
TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT PLAN SUBJECT TO ERISA,  A
PLAN  SUBJECT TO SECTION 4975 OF THE CODE OR A PLAN SUBJECT TO SIMILAR LAW, OR A
PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN IN
VIOLATION OF THE TRANSFER  RESTRICTIONS  SET FORTH IN THE POOLING AND  SERVICING
AGREEMENT SHALL BE VOID AND OF NO EFFECT.

Certificate No.                              :                 1

Cut-off Date                                 :                 July 1, 2002

First Distribution Date                      :                 August 25, 2002

Percentage Interest of this
Certificate ("DENOMINATION")                 :                 100%

CUSIP                                        :                 N/A

                                      E-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

                                     Class X

            evidencing a percentage  interest in the distributions  allocable to
            the Certificates of the above-referenced Class.

            Distributions  in  respect  of this  Certificate  are  distributable
monthly as set forth herein.  This  Certificate  does not evidence an obligation
of, or an interest in, and is not guaranteed by the Depositor, the Servicer, the
Unaffiliated  Seller or the Trustee referred to below or any of their respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

            This certifies that  _____________________,  is the registered owner
of the Percentage  Interest evidenced by this Certificate  (obtained by dividing
the  denomination of this  Certificate by the aggregate of the  denominations of
all  Certificates  of the Class to which this  Certificate  belongs)  in certain
monthly distributions  pursuant to a Pooling and Servicing Agreement dated as of
the Cut-off Date  specified  above (the  "AGREEMENT")  among MORGAN  STANLEY ABS
CAPITAL I INC.,  as  depositor  (the  "DEPOSITOR"),  Ocwen  Federal Bank FSB, as
servicer (the  "SERVICER"),  CDC Mortgage  Capital Inc., as unaffiliated  seller
(the "UNAFFILIATED SELLER") and Deutsche Bank National Trust Company, as trustee
(the "TRUSTEE").  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.

            This Certificate does not have a Certificate Balance or Pass-Through
Rate and will be entitled to  distributions  only to the extent set forth in the
Agreement. In addition, any distribution of the proceeds of any remaining assets
of the  Trust  will  be  made  only  upon  presentment  and  surrender  of  this
Certificate  at the offices  designated  by the Trustee for such purposes or the
office or agency maintained by the Trustee.

            No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the  registration  requirements of the Securities Act
of 1933, as amended (the "1933 ACT"),  and any applicable  state securities laws
or is made in  accordance  with the 1933 Act and such laws.  In the event of any
such transfer,  the Trustee shall require the transferor to execute a transferor
certificate  (in  substantially  the form  attached to the Pooling and Servicing
Agreement)  and  deliver  either  (i)  a  Rule  144A  Letter,   in  either  case
substantially  in the form attached to the Agreement,  or (ii) a written Opinion
of  Counsel  to the  Trustee  that  such  transfer  may be made  pursuant  to an
exemption,  describing the applicable exemption and the basis therefor, from the
1933 Act or is being made  pursuant  to the 1933 Act,  which  Opinion of Counsel
shall be an expense of the transferor.

            No transfer of a Certificate  of this Class shall be made unless the
Trustee  shall  have  received  either  (i) a  representation  letter  from  the
transferee of such Certificate, acceptable

                                      E-2
<PAGE>

to and in form and  substance  satisfactory  to the Trustee,  to the effect that
such transferee is not an employee  benefit plan subject to Section 406 of ERISA
or Section 4975 of the Code or any materially  similar  provisions of applicable
Federal,  state or local law ("SIMILAR  LAW") or a person acting on behalf of or
investing plan assets of any such plan, which representation letter shall not be
an expense of the Trustee, or (ii) if the Certificate has been the subject of an
ERISA-Qualifying  Underwriting,  and the  purchaser is an insurance  company,  a
representation  that the  purchaser is an insurance  company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such  term is  defined  in  Section  V(e) of  Prohibited  Transaction  Class
Exemption  95-60  ("PTCE  95-60"))  and that the  purchase  and  holding of such
Certificates are covered under Sections I and III of PTCE 95-60, or (iii) in the
case of a  Certificate  presented  for  registration  in the name of an employee
benefit plan subject to ERISA, or a plan or arrangement  subject to Section 4975
of the Code (or comparable  provisions of any  subsequent  enactments) or a plan
subject to Similar Law, or a trustee of any such plan or any other person acting
on behalf of any such plan or arrangement or using such plan's or  arrangement's
assets,  an Opinion of Counsel  satisfactory  to the Trustee  and the  Servicer,
which Opinion of Counsel shall not be an expense of the Trustee, the Servicer or
the Trust Fund,  addressed  to the  Trustee,  to the effect that the purchase or
holding  of such  Certificate  will not  result in the  assets of the Trust Fund
being  deemed to be "plan  assets"  and  subject to the  prohibited  transaction
provisions  of  ERISA  and the Code and will  not  subject  the  Trustee  or the
Servicer to any  obligation  in addition to those  expressly  undertaken in this
Agreement or to any liability.

            Reference  is  hereby  made  to  the  further   provisions  of  this
Certificate set forth on the reverse hereof,  which further provisions shall for
all purposes have the same effect as if set forth at this place.

            This  Certificate  shall not be entitled  to any  benefit  under the
Agreement  or be valid  for any  purpose  unless  manually  countersigned  by an
authorized signatory of the Trustee.

                                      * * *

                                      E-3
<PAGE>

            IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate to be
duly executed.

Dated:

                           DEUTSCHE BANK NATIONAL TRUST COMPANY,
                           not in its individual capacity, but solely as Trustee

                           By:
                              --------------------------------------------------

Countersigned:

By:
   --------------------------------------
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                      E-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2002-HE2
               Mortgage Pass-Through Certificates, Series 2002-HE2

            This  Certificate is one of a duly authorized  issue of Certificates
designated  as  CDC  Mortgage  Capital  Trust  2002-HE2  Mortgage   Pass-Through
Certificates,  Series 2002-HE2 (herein  collectively called the "CERTIFICATES"),
and  representing a beneficial  ownership  interest in the Trust Fund created by
the Agreement.

            The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

            This  Certificate  does not purport to summarize  the  Agreement and
reference is made to the Agreement for the interests,  rights and limitations of
rights,  benefits,  obligations and duties  evidenced  thereby,  and the rights,
duties and immunities of the Trustee.

            Pursuant to the terms of the Agreement,  a distribution 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 (the "DISTRIBUTION DATE"),  commencing on the
first  Distribution  Date  specified on the face hereof,  to the Person in whose
name this  Certificate  is registered at the close of business on the applicable
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
Holders of Certificates of the Class to which this  Certificate  belongs on such
Distribution Date pursuant to the Agreement.  The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

            Distributions on this Certificate  shall be made by wire transfer of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  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 offices  designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

            The Agreement permits, with certain exceptions therein provided, the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties  thereto,  and  Financial  Security  Assurance  Inc.,  as Class A
Certificate Insurer with the consent of the Holders of Certificates  affected by
such amendment evidencing the requisite Percentage Interest,  as provided in the
Agreement.  Any  such  consent  by the  Holder  of  this  Certificate  shall  be
conclusive  and  binding  on such  Holder  and upon all  future  Holders of this
Certificate  and of any  Certificate  issued  upon

                                      E-5
<PAGE>

the  transfer  hereof or in exchange  therefor 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 of the Trustee  upon  surrender  of this  Certificate  for
registration  of  transfer  at the  offices  designated  by the Trustee for such
purposes  or the office or agency  maintained  by the  Trustee in New York,  New
York,  accompanied by a written  instrument of transfer in form  satisfactory to
the Trustee and the Certificate  Registrar duly executed by the holder hereof or
such holder's attorney duly authorized in writing, and thereupon one or more new
Certificates  of the same Class in authorized  denominations  and evidencing the
same  aggregate  Percentage  Interest  in the  Trust  Fund will be issued to the
designated transferee or transferees.

            The  Certificates  are  issuable  only  as  registered  Certificates
without coupons in denominations  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
and  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,  but the Trustee may require  payment of a sum  sufficient to cover
any tax or other governmental charge payable in connection therewith.

            The Depositor,  the Servicer,  the Unaffiliated  Seller, the Class A
Certificate  Insurer  and the Trustee and any agent of any of them may treat the
Person in whose name this  Certificate is registered as the owner hereof for all
purposes, and no such party shall be affected by any notice to the contrary.

            On any  Distribution  Date on which the aggregate  Stated  Principal
Balance  of the  Mortgage  Loans is less  than or  equal  to 10% of the  Maximum
Principal Balance, the Servicer and/or the Class X Certificateholders  will have
the option to repurchase,  in whole, from the Trust Fund all remaining  Mortgage
Loans and all property  acquired in respect of the Mortgage  Loans at a purchase
price   determined  as  provided  in  the   Agreement.   The   obligations   and
responsibilities  created by the Agreement will terminate as provided in Section
9.01 of the Agreement.

            Any term used herein that is defined in the Agreement shall have the
meaning  assigned  in  the  Agreement,   and  nothing  herein  shall  be  deemed
inconsistent with that meaning.

                                      E-6
<PAGE>

                                   ASSIGNMENT

            FOR VALUE RECEIVED,  the undersigned  hereby sell(s),  assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please  print  or  typewrite  name and  address  including  postal  zip code of
assignee)

the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

            I (We) further  direct the Trustee to issue a new  Certificate  of a
like  denomination  and Class,  to the above named  assignee  and  deliver  such
Certificate to the following address:

Dated:

                               -------------------------------------------------
                                     Signature by or on behalf of assignor

                                      E-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

            The  assignee   should   include  the   following  for  purposes  of
distribution:

            Distributions  shall be made,  by wire  transfer  or  otherwise,  in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of______________________________________________________________
account number________________, or, if mailed by check, to _____________________
Applicable statements should be mailed to ______________________________________
________________________________________________________________________________

            This information is provided by ____________________________________
the assignee named above, or ___________________________________________________
as its agent.

                                      E-8
<PAGE>

                                    EXHIBIT F

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

_____________________

_____________________

            Re:   Pooling  and  Servicing  Agreement  among  MORGAN  STANLEY ABS
                  CAPITAL I INC.,  as  Depositor,  Ocwen  Federal  Bank FSB,  as
                  Servicer,  CDC Mortgage  Capital Inc., as Unaffiliated  Seller
                  and Deutsche  Bank National  Trust  Company,  as Trustee,  CDC
                  Mortgage Capital Trust Series 2002-HE2

Gentlemen:

            In accordance with Section 2.02 of the  above-captioned  Pooling and
Servicing Agreement (the "POOLING AND SERVICING  AGREEMENT"),  for each Mortgage
Loan listed in the Mortgage Loan  Schedule  (other than any Mortgage Loan listed
in the attached schedule), it has received:

            (i)   the  original  Mortgage  Note,  endorsed  as  provided  in the
      following form: "Pay to the order of ________, without recourse"; and

            (ii)  a duly executed assignment of the Mortgage.

            Based on its review  and  examination  and only as to the  foregoing
documents,  such  documents  appear  regular on their  face and  related to such
Mortgage Loan.

            The Trustee has made no  independent  examination  of any  documents
contained in each Mortgage File beyond the review  specifically  required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents  contained  in  each  Mortgage  File  of  any of  the  Mortgage  Loans
identified  on  the  Mortgage  Loan  Schedule,   or  (ii)  the   collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.

            Capitalized  words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

                                      F-1
<PAGE>

                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                          as Trustee

                                        By:
                                           ----------------------------------
                                           Name:
                                                 ----------------------------
                                           Title:
                                                 ----------------------------

                                      F-2
<PAGE>

                                    EXHIBIT G

                     FORM OF FINAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Servicer]

[Originator]

_____________________

_____________________

            Re:   Pooling  and  Servicing  Agreement  among  MORGAN  STANLEY ABS
                  CAPITAL I INC.,  as  Depositor,  Ocwen  Federal  Bank FSB,  as
                  Servicer,  CDC Mortgage  Capital Inc., as Unaffiliated  Seller
                  and Deutsche  Bank National  Trust  Company,  as Trustee,  CDC
                  Mortgage Capital Trust Series 2002-HE2

Gentlemen:

            In accordance with Section 2.02 of the  above-captioned  Pooling and
Servicing Agreement (the "POOLING AND SERVICING AGREEMENT"), the undersigned, as
Trustee,  hereby  certifies that as to each Mortgage Loan listed in the Mortgage
Loan  Schedule  (other  than any  Mortgage  Loan  paid in full or  listed on the
attached Document Exception Report) it has received:

            (i)   The original  Mortgage Note,  endorsed in the form provided in
      Section 2.01 of the Pooling and Servicing Agreement,  with all intervening
      endorsements  showing a complete chain of endorsement  from the originator
      to the last endorsee.

            (ii)  The original recorded Mortgage.

            (iii) A duly  executed  assignment  of  the  Mortgage  in  the  form
      provided in Section 2.01 of the Pooling and  Servicing  Agreement;  or, if
      the Unaffiliated  Seller has certified or the Trustee otherwise knows that
      the related  Mortgage has not been returned from the applicable  recording
      office, a copy of the assignment of the Mortgage (excluding information to
      be provided by the recording office).

            (iv)  The  original or duplicate  original  recorded  assignment  or
      assignments of the Mortgage  showing a complete  chain of assignment  from
      the originator to the last endorsee.

            (v)   The original or duplicate lender's title policy and all riders
      thereto or, if such original is unavailable,  any one of an original title
      binder, either an original title

                                      G-1
<PAGE>

      binder or an original or copy of the title commitment,  and if copies then
      certified to be true and complete by the title company.

            Based on its review  and  examination  and only as to the  foregoing
documents,  (a) such documents  appear regular on their face and related to such
Mortgage Loan, and (b) the  information  set forth in items (1), (2) and (18) of
the  Mortgage  Loan  Schedule  and  items  (1),  (9) and (17) of the  Data  Tape
Information accurately reflects information set forth in the Custodial File.

            The Trustee has made no  independent  examination  of any  documents
contained  in each  Mortgage  File  beyond  the  review  of the  Custodial  File
specifically required in the Pooling and Servicing Agreement.  The Trustee makes
no   representations   as  to:   (i)  the   validity,   legality,   sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
File of any of the Mortgage Loans  identified on the Mortgage Loan Schedule,  or
(ii) the collectability,  insurability, effectiveness or suitability of any such
Mortgage Loan.  Notwithstanding anything herein to the contrary, the Trustee has
made no  determination  and  makes  no  representations  as to  whether  (i) any
endorsement is sufficient to transfer all right, title and interest of the party
so endorsing, as Noteholder or assignee thereof, in and to that Mortgage Note or
(ii) any assignment is in recordable form or sufficient to effect the assignment
of and  transfer  to the  assignee  thereof,  under  the  Mortgage  to which the
assignment relates.

            Capitalized  words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

                                      DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        as Trustee

                                        By:
                                           ----------------------------------
                                           Name:
                                                 ----------------------------
                                           Title:
                                                 ----------------------------

                                      G-2
<PAGE>

                                    EXHIBIT H

                               TRANSFER AFFIDAVIT

                MORGAN STANLEY ABS CAPITAL I INC. Trust 2002-HE2,
                       Mortgage Pass-Through Certificates,
                                 Series 2002-HE2

STATE OF                            )
                                    ) ss.:
COUNTY OF                           )

            The  undersigned,  being  first  duly  sworn,  deposes  and  says as
follows:

            1.    The  undersigned  is an  officer of  ___________________,  the
proposed  Transferee  of an  Ownership  Interest in a Class R  Certificate  (the
"CERTIFICATE")  issued  pursuant to the Pooling and  Servicing  Agreement,  (the
"AGREEMENT"),  relating  to the  above-referenced  Series,  by and among  MORGAN
STANLEY ABS CAPITAL I INC., as depositor (the  "DEPOSITOR"),  Ocwen Federal Bank
FSB, as  servicer,  CDC  Mortgage  Capital  Inc.,  as  unaffiliated  seller (the
"UNAFFILIATED  SELLER") and Deutsche Bank National  Trust  Company,  as Trustee.
Capitalized  terms used,  but not defined  herein or in Exhibit 1 hereto,  shall
have the meanings  ascribed to such terms in the  Agreement.  The Transferee has
authorized  the  undersigned  to make this affidavit on behalf of the Transferee
for the benefit of the Depositor and the Trustee.

            2.    The Transferee  is, as of the date hereof,  and will be, as of
the date of the Transfer,  a Permitted  Transferee.  The Transferee is acquiring
its Ownership  Interest in the Certificate  for its own account.  The Transferee
has no knowledge that any such affidavit is false.

            3.    The Transferee has been advised of, and understands that (i) a
tax will be imposed on  Transfers  of the  Certificate  to Persons  that are not
Permitted Transferees;  (ii) such tax will be imposed on the transferor,  or, if
such  Transfer  is  through  an agent  (which  includes  a  broker,  nominee  or
middleman) for a Person that is not a Permitted  Transferee,  on the agent;  and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent  Transferee furnished to such Person an affidavit that
such  subsequent  Transferee  is a  Permitted  Transferee  and,  at the  time of
Transfer,  such Person  does not have actual  knowledge  that the  affidavit  is
false.

            4.    The Transferee has been advised of, and understands that a tax
will be imposed on a  "pass-through  entity"  holding the  Certificate if at any
time during the taxable year of the  pass-through  entity a Person that is not a
Permitted  Transferee  is the record  holder of an interest in such entity.  The
Transferee  understands  that such tax will not be imposed  for any period  with
respect to which the  record  holder  furnishes  to the  pass-through  entity an
affidavit that such record holder is a Permitted Transferee and the pass-through
entity does not have actual  knowledge that such  affidavit is false.  (For this
purpose, a "pass-through entity" includes a regulated investment company, a real
estate  investment  trust or common trust fund, a partnership,  trust or estate,
and certain cooperatives and, except as may be provided in Treasury Regulations,
persons  holding  interests  in  pass-through  entities as a nominee for another
Person.)

                                      H-1
<PAGE>

            5.    The Transferee has reviewed the provisions of Section  5.02(c)
of the Agreement and understands the legal consequences of the acquisition of an
Ownership  Interest  in the  Certificate,  including,  without  limitation,  the
restrictions on subsequent  Transfers and the provisions  regarding  voiding the
Transfer and mandatory sales. The Transferee expressly agrees to be bound by and
to  abide  by the  provisions  of  Section  5.02(c)  of the  Agreement  and  the
restrictions  noted on the face of the Certificate.  The Transferee  understands
and agrees that any breach of any of the  representations  included herein shall
render the Transfer to the Transferee contemplated hereby null and void.

            6.    The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to Transfer its Ownership Interest in the
Certificate,  and in  connection  with any  Transfer  by a  Person  for whom the
Transferee is acting as nominee,  trustee or agent,  and the Transferee will not
Transfer  its  Ownership   Interest  or  cause  any  Ownership  Interest  to  be
Transferred  to  any  Person  that  the  Transferee  knows  is  not a  Permitted
Transferee.  In  connection  with  any  such  Transfer  by the  Transferee,  the
Transferee  agrees to deliver to the Trustee a certificate  substantially in the
form set forth as Exhibit H to the Agreement (a "TRANSFEROR CERTIFICATE") to the
effect that such Transferee has no actual knowledge that the Person to which the
Transfer is to be made is not a Permitted Transferee.

            7.    The  Transferee  does not have the  intention  to  impede  the
assessment or collection of any tax legally  required to be paid with respect to
the Certificate.

            8.    The Transferee's taxpayer identification number is __________.

            9.    The  Transferee  is a U.S.  Person as defined in Code  Section
7701(a)(30).

            10.   The  Transferee  is  aware  that  the  Certificate  may  be  a
"noneconomic   residual  interest"  within  the  meaning  of  proposed  Treasury
regulations  promulgated  pursuant  to the Code and  that  the  transferor  of a
noneconomic  residual interest will remain liable for any taxes due with respect
to the income on such residual  interest,  unless no significant  purpose of the
transfer was to impede the assessment or collection of tax.

            11.   (1)[The  Transferee has computed any consideration  paid to it
to acquire the Class  [R][LR]  Certificate  in  accordance  with  proposed  U.S.
Treasury Regulations Sections  1.860E-1(a)(4)(iii) and 1.860E-1(c)(5) (or, after
they have been finalized,  the final  regulations)  by computing  present values
using a discount rate equal to the applicable Federal rate prescribed by Section
1274(d) of the Code, compounded semi-annually.]

            [The Transferee has computed any consideration paid to it to acquire
the  Class  [R][LR]  Certificate  in  accordance  with  proposed  U.S.  Treasury
Regulations Sections 1.860E-1(a)(4)(iii) and 1.860E-1(c)(5) (or, after they have
been  finalized,  the final  regulations)  by computing  present  values using a
discount  rate at least  equal to the rate at  which  the  Transferee  regularly
borrows, in the ordinary course of its trade or business, substantial funds from

----------
(1)   Insert appropriate paragraph, if applicable.

                                      H-2
<PAGE>

unrelated third parties.  The Transferee has provided all information  necessary
to demonstrate to the transferor that it regularly borrows at such rate.]

            [The transfer of the Class R Certificate  complies with Section 6 of
Revenue Procedure 2001-12 (the "REVENUE PROCEDURE"),  2001-3 I.R.B. 335 (January
16,  2001)  (or  comparable   provisions  of  applicable  final  U.S.   Treasury
Regulations) and, accordingly,

            (i)   the  Transferee  is an "eligible  corporation,"  as defined in
                  Section  860L(a)(2) of the Code, as to which income from Class
                  R Certificate will only be taxed in the United States;

            (ii)  at  the  time  of  the  transfer,  and  at  the  close  of the
                  Transferee's  two  fiscal  years  preceding  the  year  of the
                  transfer,  the  Transferee  had  gross  assets  for  financial
                  reporting  purposes  (excluding  any  obligation  of a  person
                  related to the Investor  within the meaning of Section 860L(g)
                  of the  Code) in  excess  of $100  million  and net  assets in
                  excess of $10 million;

            (iii) the Transferee  will transfer the Class R Certificate  only to
                  another   "eligible   corporation,"   as  defined  in  Section
                  860L(a)(2) of the Code, in a  transaction  that  satisfies the
                  requirements of Section 4 of the Revenue Procedure; and

            (iv)  the  Transferee  determined  the  consideration  paid to it to
                  acquire the Class R  Certificate  based on  reasonable  market
                  assumptions  (including,  but not  limited to,  borrowing  and
                  investment rates, prepayment and loss assumptions, expense and
                  reinvestment assumptions, tax rates and other factors specific
                  to the Transferee) that it has determined in good faith.]

            [Reserved]

            12.   The Transferee is not an employee benefit plan that is subject
to  ERISA  or a plan  that is  subject  to  Section  4975 of the  Code,  and the
Transferee is not acting on behalf of or investing plan assets of such a plan.

                                      * * *

                                      H-3
<PAGE>

            IN WITNESS WHEREOF,  the Transferee has caused this instrument to be
executed on its behalf,  pursuant to authority of its Board of Directors, by its
duly  authorized  officer and its corporate  seal to be hereunto  affixed,  duly
attested, this __ day of ________, 20__.

                                         ---------------------------------------
                                         Print Name of Transferee

                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:
[Corporate Seal]

ATTEST:

---------------------------------------
[Assistant] Secretary

            Personally appeared before me the above-named_____,  known or proved
to me to be the same person who executed the foregoing  instrument and to be the
of the Transferee,  and  acknowledged  that he executed the same as his free act
and deed and the free act and deed of the Transferee.

            Subscribed and sworn before me this __ day of ________, 20__.

                                         ---------------------------------------
                                         NOTARY PUBLIC

                                         My Commission expires the __ day
                                         of _________, 20__

                                      H-4
<PAGE>

                                    EXHIBIT I

                         FORM OF TRANSFEROR CERTIFICATE

                                                                 _________, 20__

MORGAN STANLEY ABS CAPITAL I INC.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

            Re:   CDC  Mortgage  Capital  Trust,   Series   2002-HE2,   Mortgage
                  Pass-Through Certificates, Series 2002-HE2, Class ___

Ladies and Gentlemen:

            In connection  with our  disposition  of the above  Certificates  we
certify that (a) we understand  that the  Certificates  have not been registered
under the Securities Act of 1933, as amended (the "ACT"), and are being disposed
by us in a transaction that is exempt from the registration  requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any  Certificates  from, any person,  or otherwise  approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other  action which would result in, a violation of Section 5 of the Act and
(c) to the  extent  we are  disposing  of a  Residual  Certificate,  we  have no
knowledge the Transferee is not a Permitted Transferee.

                                         Very truly yours,

                                         ---------------------------------------
                                         Print Name of Transferor

                                         By:
                                            ------------------------------------
                                                     Authorized Officer

                                      I-1
<PAGE>

                                    EXHIBIT J

                            FORM OF RULE 144A LETTER

                                                                   _______, 20__

MORGAN STANLEY ABS CAPITAL I INC.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

            Re:   CDC Mortgage  Capital Trust 2002,  Series  2002-HE2,  Mortgage
                  Pass-Through Certificates, Series 2002-HE2, Class

Ladies and Gentlemen:

            In connection  with our  acquisition  of the above  Certificates  we
certify that (a) we understand that the  Certificates  are not being  registered
under  the  Securities  Act of  1933,  as  amended  (the  "ACT"),  or any  state
securities laws and are being  transferred to us in a transaction that is exempt
from the  registration  requirements  of the Act and any such laws,  (b) we have
such  knowledge and  experience  in financial  and business  matters that we are
capable of evaluating the merits and risks of  investments in the  Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor  concerning the purchase of the  Certificates and all matters relating
thereto or any  additional  information  deemed  necessary  to our  decision  to
purchase  the  Certificates,  (d) we are not an  employee  benefit  plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan or arrangement that is subject to Section 4975 of the Internal Revenue Code
of 1986, as amended, nor are we acting on behalf of any such plan or arrangement
nor using the assets of any such plan or arrangement to effect such  acquisition
or, with respect to a Class X Certificate, the purchaser is an insurance company
that is  purchasing  this  certificate  with funds  contained  in an  "insurance
company general  account" (as such term is defined in Section V(e) of Prohibited
Transaction  Class  Exemption  95-60  ("PTCE  95-60") and that the  purchase and
holding of such Certificates are covered under Sections I and III of PTCE 95-60,
(e) we have not,  nor has  anyone  acting on our  behalf  offered,  transferred,
pledged,  sold or otherwise  disposed of the  Certificates,  any interest in the
Certificates or any other similar  security to, or solicited any offer to buy or
accept a transfer, pledge or other disposition of the Certificates, any interest
in the Certificates or any other similar security from,

                                      J-1
<PAGE>

or otherwise  approached or  negotiated  with respect to the  Certificates,  any
interest in the  Certificates or any other similar  security with, any person in
any manner, or made any general  solicitation by means of general advertising or
in any  other  manner,  or taken any  other  action,  that  would  constitute  a
distribution of the  Certificates  under the Securities Act or that would render
the  disposition of the  Certificates a violation of Section 5 of the Securities
Act or require  registration  pursuant thereto, nor will act, nor has authorized
or will  authorize  any  person  to act,  in such  manner  with  respect  to the
Certificates,  (f) to the extent that the  Certificate  transferred is a Class X
Certificate,  we are a  bankruptcy-remote  entity  and  (g) we are a  "qualified
institutional  buyer" as that term is defined in Rule 144A under the  Securities
Act and have  completed  either of the  forms of  certification  to that  effect
attached hereto as Annex 1 or Annex 2. We are aware that the sale to us is being
made in reliance on Rule 144A.  We are acquiring  the  Certificates  for our own
account or for resale  pursuant to Rule 144A and further,  understand  that such
Certificates  may be  resold,  pledged  or  transferred  only  (i)  to a  person
reasonably believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that the  resale,  pledge or transfer is being made in reliance on Rule
144A,  or (ii)  pursuant  to  another  exemption  from  registration  under  the
Securities Act.

                                      J-2
<PAGE>

                                                            ANNEX 1 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

          [For Transferees Other Than Registered Investment Companies]

            The  undersigned  (the "BUYER")  hereby  certifies as follows to the
parties  listed  in  the  Rule  144A   Transferee   Certificate  to  which  this
certification relates with respect to the Certificates described therein:

            1.    As indicated  below,  the undersigned is the President,  Chief
Financial  Officer,  Senior Vice  President  or other  executive  officer of the
Buyer.

            2.    In  connection  with  purchases  by the Buyer,  the Buyer is a
"qualified  institutional  buyer" as that term is defined in Rule 144A under the
Securities  Act of 1933, as amended  ("RULE  144A")  because (i) the Buyer owned
and/or  invested on a  discretionary  basis $___ in  securities  (except for the
excluded  securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being  calculated in accordance with Rule 144A and (ii)
the Buyer satisfies the criteria in the category marked below.

            _____ CORPORATION,  ETC.  The Buyer is a  corporation  (other than a
                  bank,  savings and loan  association or similar  institution),
                  Massachusetts  or  similar  business  trust,  partnership,  or
                  charitable  organization described in Section 501(c)(3) of the
                  Internal Revenue Code of 1986, as amended.

            _____ BANK. The Buyer (a) is a national bank or banking  institution
                  organized  under  the  laws  of any  State,  territory  or the
                  District of Columbia,  the business of which is  substantially
                  confined  to  banking  and  is  supervised  by  the  State  or
                  territorial  banking  commission  or similar  official or is a
                  foreign bank or equivalent institution, and (b) has an audited
                  net  worth  of at least  $25,000,000  as  demonstrated  in its
                  latest  annual  financial  statements,  a  copy  of  which  is
                  attached hereto.

            _____ SAVINGS  AND  LOAN.  The  Buyer  (a)  is a  savings  and  loan
                  association, building and loan association,  cooperative bank,
                  homestead   association  or  similar  institution,   which  is
                  supervised and examined by a State or Federal authority having
                  supervision over any such institutions or is a foreign savings
                  and loan association or equivalent  institution and (b) has an
                  audited net worth of at least  $25,000,000 as  demonstrated in
                  its latest  annual  financial  statements,  a copy of which is
                  attached  hereto.

            _____ BROKER-DEALER.  The Buyer is a dealer  registered  pursuant to
                  Section 15 of the Securities Exchange Act of 1934.

                                      J-3
<PAGE>

            _____ INSURANCE  COMPANY.  The Buyer is an insurance  company  whose
                  primary and  predominant  business  activity is the writing of
                  insurance or the reinsuring of risks underwritten by insurance
                  companies and which is subject to supervision by the insurance
                  commissioner  or a  similar  official  or  agency  of a State,
                  territory or the District of Columbia.

            _____ STATE OR LOCAL  PLAN.  The  Buyer  is a plan  established  and
                  maintained  by a State,  its  political  subdivisions,  or any
                  agency  or  instrumentality  of the  State  or  its  political
                  subdivisions, for the benefit of its employees.

            _____ ERISA PLAN.  The Buyer is an employee  benefit plan within the
                  meaning of Title I of the Employee  Retirement Income Security
                  Act of 1974.

            _____ INVESTMENT  ADVISOR.   The  Buyer  is  an  investment  advisor
                  registered under the Investment Advisors Act of 1940.

            _____ SMALL BUSINESS INVESTMENT  COMPANY.  Buyer is a small business
                  investment   company  licensed  by  the  U.S.  Small  Business
                  Administration  under  Section  301(c)  or (d)  of  the  Small
                  Business Investment Act of 1958.

            _____ BUSINESS DEVELOPMENT COMPANY.  Buyer is a business development
                  company as defined in  Section  202(a)(22)  of the  Investment
                  Advisors Act of 1940.

            3.    The term  "SECURITIES"  as used  herein  DOES NOT  INCLUDE (i)
securities of issuers that are affiliated  with the Buyer,  (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a  dealer,   (iii)   securities   issued  or  guaranteed  by  the  U.S.  or  any
instrumentality  thereof,  (iv) bank deposit notes and  certificates of deposit,
(v) loan participations,  (vi) repurchase agreements, (vii) securities owned but
subject  to a  repurchase  agreement  and  (viii)  currency,  interest  rate and
commodity swaps.

            4.    For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary  basis by the Buyer, the Buyer used the
cost of such  securities to the Buyer and did not include any of the  securities
referred to in the preceding  paragraph,  except (i) where the Buyer reports its
securities  holdings in its  financial  statements  on the basis of their market
value,  and  (ii) no  current  information  with  respect  to the  cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market.  Further,  in determining such aggregate
amount,  the Buyer may have included  securities  owned by  subsidiaries  of the
Buyer,  but only if such  subsidiaries  are  consolidated  with the Buyer in its
financial  statements  prepared in accordance with generally accepted accounting
principles  and if the  investments of such  subsidiaries  are managed under the
Buyer's direction.  However, such securities were not included if the Buyer is a
majority-owned,  consolidated  subsidiary of another enterprise and the Buyer is
not itself a reporting  company  under the  Securities  Exchange Act of 1934, as
amended.

                                      J-4
<PAGE>

            5.    The Buyer  acknowledges that it is familiar with Rule 144A and
understands  that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements  made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

            6.    Until the date of  purchase of the Rule 144A  Securities,  the
Buyer will notify each of the parties to which this certification is made of any
changes in the information and conclusions  herein.  Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation of this
certification  as of the date of such purchase.  In addition,  if the Buyer is a
bank or  savings  and loan is  provided  above,  the Buyer  agrees  that it will
furnish to such parties updated annual financial  statements promptly after they
become available.

                                         ---------------------------------------
                                         Print Name of Transferor

                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:

                                         Date:
                                              ----------------------------------

                                      J-5
<PAGE>

                                                            ANNEX 2 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [For Transferees That are Registered Investment Companies]

            The  undersigned  (the "BUYER")  hereby  certifies as follows to the
parties  listed  in  the  Rule  144A   Transferee   Certificate  to  which  this
certification relates with respect to the Certificates described therein:

            1.    As indicated  below,  the undersigned is the President,  Chief
Financial  Officer or Senior Vice  President  of the Buyer or, if the Buyer is a
"qualified  institutional  buyer" as that term is defined in Rule 144A under the
Securities  Act of 1933,  as amended  ("RULE  144A")  because Buyer is part of a
Family of  Investment  Companies (as defined  below),  is such an officer of the
Adviser.

            2.    In  connection  with  purchases  by  Buyer,  the  Buyer  is  a
"qualified  institutional  buyer" as  defined in SEC Rule 144A  because  (i) the
Buyer is an investment  company  registered under the Investment  Company Act of
1940,  as amended  and (ii) as marked  below,  the Buyer  alone,  or the Buyer's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the  excluded  securities  referred  to below) as of the end of the Buyer's
most recent fiscal year.  For purposes of  determining  the amount of securities
owned by the Buyer or the Buyer's  Family of Investment  Companies,  the cost of
such  securities  was used,  except (i) where the Buyer or the Buyer's Family of
Investment Companies reports its securities holdings in its financial statements
on the basis of their market value, and (ii) no current information with respect
to the cost of  those  securities  has been  published.  If  clause  (ii) in the
preceding sentence applies, the securities may be valued at market.

            _____ The Buyer  owned $  ________  in  securities  (other  than the
                  excluded  securities  referred  to below) as of the end of the
                  Buyer's most recent fiscal year (such amount being  calculated
                  in accordance with Rule 144A).

            _____ The Buyer is part of a Family of  Investment  Companies  which
                  owned in the  aggregate $ ________ in  securities  (other than
                  the  excluded  securities  referred to below) as of the end of
                  the  Buyer's  most  recent  fiscal  year  (such  amount  being
                  calculated in accordance with Rule 144A).

            3.    The term "FAMILY OF INVESTMENT COMPANIES" as used herein means
two or more  registered  investment  companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned  subsidiaries  of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

            4.    The term  "SECURITIES"  as used  herein  does not  include (i)
securities  of  issuers  that are  affiliated  with the Buyer or are part of the
Buyer's Family of Investment Companies,  (ii) securities issued or guaranteed by
the  U.S.  or  any  instrumentality   thereof,  (iii)  bank  deposit  notes  and
certificates of deposit,  (iv) loan participations,  (v) repurchase  agreements,

                                      J-6
<PAGE>

(vi) securities owned but subject to a repurchase  agreement and (vii) currency,
interest rate and commodity swaps.

            5.    The Buyer is familiar with Rule 144A and understands  that the
parties  listed  in  the  Rule  144A   Transferee   Certificate  to  which  this
certification  relates are relying and will  continue to rely on the  statements
made  herein  because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.

            6.    Until  the  date  of   purchase  of  the   Certificates,   the
undersigned  will  notify  the  parties  listed  in  the  Rule  144A  Transferee
Certificate  to  which  this  certification   relates  of  any  changes  in  the
information  and  conclusions  herein.  Until such notice is given,  the Buyer's
purchase  of  the   Certificates   will  constitute  a  reaffirmation   of  this
certification by the undersigned as of the date of such purchase.

                                            ------------------------------------
                                            Print Name of Transferor

                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:

                                            IF AN ADVISER:

                                            ------------------------------------
                                            Print Name of Buyer

                                            Date:
                                                 -------------------------------

                                      J-7
<PAGE>

                                    EXHIBIT K

                               REQUEST FOR RELEASE

                                  (for Trustee)

To:   [Address]

            Re:

            In connection with the  administration of the Mortgage Loans held by
you as the Trustee on behalf of the Certificateholders,  we request the release,
and acknowledge  receipt,  of the (Custodial  File/[specify  documents]) for the
Mortgage Loan described below, for the reason indicated.

MORTGAGOR'S NAME, ADDRESS & ZIP CODE:

MORTGAGE LOAN NUMBER:

SEND CUSTODIAL FILE TO:

REASON FOR REQUESTING DOCUMENTS (CHECK ONE)

            _____ 1.    Mortgage  Loan  Paid  in  Full.   (The  Company   hereby
                  certifies  that all amounts  received in connection  therewith
                  have been  credited to the  Collection  Account as provided in
                  the Pooling and Servicing Agreement.)

            _____ 2.    Mortgage Loan Repurchase  Pursuant to Subsection 2.03 of
                  the Pooling  and  Servicing  Agreement.  (The  Company  hereby
                  certifies that the  repurchase  price has been credited to the
                  Collection  Account as provided  in the Pooling and  Servicing
                  Agreement.)

            _____ 3.    Mortgage Loan Liquidated By  ____________.  (The Company
                  hereby certifies that all proceeds of foreclosure,  insurance,
                  condemnation or other  liquidation  have been finally received
                  and credited to the Collection Account pursuant to the Pooling
                  and Servicing Agreement.)

            _____ 4.    Mortgage Loan in Foreclosure.

            _____ 5.    Other (explain).

            If  box 1, 2 or 3  above  is  checked,  and  if all or  part  of the
Custodial File was previously  released to us, please release to us our previous
request  and receipt on file with you, as well as any  additional  documents  in
your possession relating to the specified Mortgage Loan.

                                      K-1
<PAGE>

            If box 4 or 5 above is checked,  upon our return of all of the above
documents to you as the Trustee,  please  acknowledge your receipt by signing in
the space indicated below, and returning this form.

                                         OCWEN FEDERAL BANK FSB

                                         By:
                                            ------------------------------------
                                            Name:
                                            Title:
                                            Date:

                                      K-2
<PAGE>

                                    EXHIBIT L

                      FORM OF SUBSEQUENT TRANSFER AGREEMENT

                       CDC MORTGAGE CAPITAL TRUST 2002-HE2

            Pursuant  to  separate  Mortgage  Loan  Purchase  Agreements,   [BNC
Mortgage, Inc. ("BNC"), IMPAC Funding Corporation ("IFC"),  People's Choice Home
Loan, Inc. ("PEOPLE'S CHOICE"),  Chapel Mortgage Corporation ("CHAPEL MORTGAGE")
and Community Bank of Northern Virginia ("COMMUNITY BANK" and together with BNC,
IFC,  Superior and NC Capital,  the  "ORIGINATORS")]  have agreed to sell to CDC
Mortgage Capital Inc. (the "UNAFFILIATED  SELLER") certain mortgage loans (each,
a "MORTGAGE LOAN"). These Mortgage Loans may in turn be sold by the Unaffiliated
Seller to MORGAN STANLEY ABS CAPITAL I INC. (the  "DEPOSITOR")  and then sold by
the Depositor to the CDC Mortgage Capital Trust 2002-HE2 (the "TRUST FUND"). The
Trust Fund was established pursuant to a Pooling and Servicing Agreement,  dated
as  of  July  1,  2002  (the  "POOLING  AND  SERVICING   AGREEMENT")  among  the
Unaffiliated  Seller,  the  Depositor,  Ocwen Federal Bank FSB, as Servicer (the
"SERVICER")   and  Deutsche  Bank  National  Trust  Company,   as  trustee  (the
"TRUSTEE").  The Pooling and Servicing Agreement permits a pre-funding  feature,
allowing for the  acquisition  by the Trust Fund of  Subsequent  Mortgage  Loans
during the Pre-Funding  Period.  Representations  and warranties with respect to
the  Mortgage  Loans  have been made by the  Originators  pursuant  to  separate
Assignment and Recognition Agreements.

            Capitalized  terms used  herein and not  defined  herein  have their
respective meanings as set forth in the Pooling and Servicing Agreement.

            CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS.

            The  Unaffiliated  Seller does hereby  irrevocably  sell,  transfer,
assign, set over and otherwise convey to the Depositor, without recourse (except
as  otherwise  explicitly  provided  for  herein)  all of its  right,  title and
interest in and to the Subsequent  Mortgage Loans,  exclusive of the obligations
of the  Unaffiliated  Seller or any other Person with respect to the  Subsequent
Mortgage Loans but including  specifically,  without limitation,  the Mortgages,
the  Custodial  Files  and  all  other   documents,   materials  and  properties
appurtenant thereto and the Mortgage Notes, including all interest and principal
collected  by the  Unaffiliated  Seller  on or with  respect  to the  Subsequent
Mortgage Loans after the related Subsequent  Cut-off Date,  together with all of
its  right,  title and  interest  in and to the  proceeds  received  after  such
Subsequent  Cut-off  Date of any  related  insurance  policies  on behalf of the
Depositor.

            The Depositor does hereby  irrevocably sell,  transfer,  assign, set
over and  otherwise  convey to the  Trust  Fund,  without  recourse  (except  as
otherwise  explicitly  provided for herein) all of its right, title and interest
in and to the Subsequent  Mortgage  Loans,  exclusive of the  obligations of the
Depositor or any other Person with respect to the Subsequent  Mortgage Loans but
including specifically,  without limitation,  the Mortgages, the Custodial Files
and all other documents,  materials and properties  appurtenant  thereto and the
Mortgage Notes,  including all interest and principal collected by the Depositor
on or with respect to the Subsequent Mortgage Loans after the related Subsequent
Cut-off Date, together with all of its right, title and

                                      L-1
<PAGE>

interest in and to the proceeds  received after such Subsequent  Cut-off Date of
any related insurance policies on behalf of the Trust Fund.

            The  expenses and costs  relating to the delivery of the  Subsequent
Mortgage Loans specified in this Subsequent  Transfer  Agreement and the Pooling
and Servicing Agreement shall be borne by the Unaffiliated Seller.

            The  Unaffiliated  Seller  hereby  affirms  the  representation  and
warranty  set forth in  Sections  3.01(f) and (h) of the  Unaffiliated  Seller's
Agreement with respect to the  Subsequent  Mortgage Loans as of the date hereof.
The  Unaffiliated  Seller hereby  delivers  notice and confirms that each of the
conditions set forth in Section  2.01(c) of the Pooling and Servicing  Agreement
are satisfied as of the date hereof.

            Additional terms of the sale are attached hereto as Attachment A.

            To the extent permitted by applicable law, this Subsequent  Transfer
Agreement, or a memorandum thereof if permitted under applicable law, is subject
to recordation in all  appropriate  public offices for real property  records in
all  counties  or other  comparable  jurisdictions  in  which  any or all of the
properties  subject to the Mortgages are situated,  and in any other appropriate
public  recording  office or elsewhere,  such  recordation to be effected by the
Servicer at the Unaffiliated  Seller's expense,  but only when accompanied by an
opinion  of  counsel  to  the  effect  that  such  recordation   materially  and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.

            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  giving
effect to the principles of conflicts of laws.

            This  Agreement may be executed in one or more  counterparts  and by
the different  parties hereto on separate  counterparts,  each of which, when so
executed, shall be deemed to be an original; such counterparts,  together, shall
constitute one and the same Agreement.

            All terms and conditions of the Pooling and Servicing  Agreement are
hereby ratified,  confirmed and incorporated herein; PROVIDED, that in the event
of any conflict the  provisions  of this  Subsequent  Transfer  Agreement  shall
control over the conflicting provisions of the Pooling and Servicing Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                      L-2
<PAGE>

                                        CDC MORTGAGE CAPITAL INC.,
                                        as Unaffiliated Seller

                                        By:
                                           -------------------------------------
                                        Name:
                                        Title:

                                        By:
                                           -------------------------------------
                                        Name:
                                        Title:

                                        MORGAN STANLEY ABS CAPITAL I INC.,
                                        as Depositor

                                        By:
                                           -------------------------------------
                                        Name:
                                        Title:

                                        OCWEN FEDERAL BANK FSB,
                                        as Servicer

                                        By:
                                           -------------------------------------
                                        Name:
                                        Title:

                                        DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        as Trustee

                                        By:
                                           -------------------------------------
                                        Name:
                                        Title:

                                        By:
                                           -------------------------------------
                                        Name:
                                        Title:

                                      L-3[EXECUTION VERSION]

                                                                          EX-4.2

                        MORGAN STANLEY ABS CAPITAL I INC.
                                   Depositor,

                                       and

                           CDC MORTGAGE CAPITAL INC.,
                               Unaffiliated Seller

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

                         UNAFFILIATED SELLER'S AGREEMENT

                            Dated as of July 1, 2002

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

                                 ARTICLE I

                                DEFINITIONS

Section 1.01.  Definitions.....................................................1

                                ARTICLE II

               URCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS

Section 2.01.  Agreement to Purchase the Mortgage Loans.......................2
Section 2.02.  Cap Agreement Assignment.......................................3
Section 2.03.  Purchase Price.................................................3
Section 2.04.  Conveyance of Mortgage Loans; Possession of Mortgage Files.....3
Section 2.05.  Examination of Mortgage Files..................................3
Section 2.06.  Books and Records..............................................4
Section 2.07.  Cost of Delivery and Recordation of Documents..................4

                                ARTICLE III

                      REPRESENTATIONS AND WARRANTIES

Section 3.01.  Representations and Warranties as to the Unaffiliated Seller....4
Section 3.02.  Representations and Warranties of the Depositor.................6

                                ARTICLE IV

                          THE UNAFFILIATED SELLER

Section 4.01.  Covenants of the Unaffiliated Seller............................7
Section 4.02.  Merger or Consolidation.........................................7
Section 4.03.  Costs...........................................................7

                                 ARTICLE V

                           CONDITIONS OF CLOSING

Section 5.01.  Conditions of Depositor's Obligations...........................8
Section 5.02.  Conditions of Unaffiliated Seller's Obligations................10
Section 5.03.  Termination of Depositor's Obligations.........................11

                                       i
<PAGE>

                                ARTICLE VI

                               MISCELLANEOUS

Section 6.01.  Notices........................................................11
Section 6.02.  Severability of Provisions.....................................11
Section 6.03.  Agreement of Unaffiliated Seller...............................11
Section 6.04.  Survival.......................................................12
Section 6.05.  Effect of Headings and Table of Contents.......................12
Section 6.06.  Successors and Assigns.........................................12
Section 6.07.  Confirmation of Intent; Grant of Security Interest.............12
Section 6.08.  Miscellaneous..................................................12
Section 6.09.  Amendments.....................................................13
Section 6.10.  Third-Party Beneficiaries......................................13
SECTION 6.11.  GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL...13
Section 6.12.  Execution in Counterparts......................................14
Section 6.13.  Subsequent Mortgage Loans......................................14

Exhibit A - Mortgage Loan Schedule

                                       ii
<PAGE>

                  THIS  UNAFFILIATED  SELLER'S  AGREEMENT,  dated  as of July 1,
2002,  by and among MORGAN  STANLEY ABS CAPITAL I INC., a Delaware  corporation,
its successors and assigns (the  "Depositor"),  and CDC Mortgage Capital Inc., a
New York corporation and its successors (the "Unaffiliated Seller").

                  WHEREAS,  Exhibit A  attached  hereto  and made a part  hereof
lists certain first and second lien mortgage loans (the "Mortgage  Loans") owned
by the Unaffiliated  Seller and the  Unaffiliated  Seller desires to sell to the
Depositor and that the Depositor desires to purchase; and

                  WHEREAS,  it is the intention of the  Unaffiliated  Seller and
the Depositor that simultaneously  with the Unaffiliated  Seller's conveyance of
the Mortgage Loans to the Depositor on the Closing Date, (a) the Depositor shall
deposit  the  Mortgage  Loans in a trust  pursuant  to a Pooling  and  Servicing
Agreement  to  be  dated  as  of  July  1,  2002  (the  "Pooling  and  Servicing
Agreement"),  to be entered into by and among the Depositor, as depositor, Ocwen
Federal  Bank  FSB,  as  servicer  (in  such  capacity,  the  "Servicer"),   the
Unaffiliated  Seller and Deutsche Bank National  Trust  Company  (f/k/a  Bankers
Trust Company of California,  N.A.),  as trustee and  collateral  agent (in each
such  capacity,  as  applicable,  the "Trustee") and (b) the Trustee shall issue
certificates  evidencing  beneficial  ownership interests in the property of the
trust fund formed by the Pooling and Servicing Agreement;

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
mutual agreements hereinafter set forth, the parties hereto agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

                  Section 1.01. DEFINITIONS. Whenever used herein, the following
words and  phrases,  unless  the  context  otherwise  requires,  shall  have the
meanings specified in this Article I:

                  "AGREEMENT" means this  Unaffiliated  Seller's  Agreement,  as
amended or supplemented in accordance with the provisions hereof.

                  "PROSPECTUS"  means the  Prospectus,  dated  November 8, 2001,
relating  to  the  offering  by  the   Depositor   from  time  to  time  of  its
Mortgage-Pass-through  Certificates (Issuable in Series) in the form in which it
was or will be filed  with the  Commission  pursuant  to Rule  424(b)  under the
Securities Act with respect to the offer and sale of the Certificates.

                  "PROSPECTUS SUPPLEMENT" means the Prospectus Supplement, dated
July 23, 2002, relating to the offering of the Certificates in the form in which
it was or will be filed with the  Commission  pursuant to Rule 424(b)  under the
Securities Act with respect to the offer and sale of the Certificates.

                  "REGISTRATION   STATEMENT"  means  that  certain  registration
statement on Form S-3, as amended  (Registration No. 333-65702)  relating to the
offering by the Depositor from time to time of its Mortgage-Backed  Certificates
(Issuable in Series) as heretofore declared effective by the Commission.

                  "TERMINATION  EVENT" means the existence of any one or more of
the following conditions:

                           (a) a stop order suspending the  effectiveness of the
         Registration  Statement shall have been issued or a proceeding for that
         purpose shall have been initiated or threatened by the Commission; or

<PAGE>

                           (b)  subsequent to the execution and delivery of this
         Agreement, a downgrading,  or public notification of a possible change,
         without  indication  of  direction,  shall have  occurred in the rating
         afforded any of the debt  securities  or claims  paying  ability of any
         person  providing  any  form  of  credit  enhancement  for  any  of the
         Certificates,   by  any  "nationally   recognized   statistical  rating
         organization,"  as that term is defined by the  Commission for purposes
         of Rule 436(g)(2) under the Securities Act; or

                           (c)  subsequent to the execution and delivery of this
         Agreement,   there  shall  have  occurred  an  adverse  change  in  the
         condition,   financial  or  otherwise,  earnings,  affairs,  regulatory
         situation or business  prospects of the Unaffiliated  Seller reasonably
         determined by the Depositor to be material; or

                           (d)  subsequent to the date of this  Agreement  there
         shall have occurred any of the following:  (i) a suspension or material
         limitation  in  trading  in  securities  substantially  similar  to the
         Certificates;   (ii)  a  general   moratorium  on  commercial   banking
         activities in the State of New York  declared by either  Federal or New
         York State authorities; or (iii) the engagement by the United States in
         hostilities,  or the escalation of such hostilities, or any calamity or
         crisis,  if the effect of any such event specified in this clause (iii)
         in the judgment of the Depositor makes it  impracticable or inadvisable
         to proceed with the public offering or the delivery of the Certificates
         on  the  terms  and  in  the  manner  contemplated  in  the  Prospectus
         Supplement.

                  "UNAFFILIATED  SELLER" means CDC Mortgage Capital Inc., in its
capacity as Unaffiliated Seller of the Mortgage Loans under this Agreement.

                  Capitalized  terms used herein that are not otherwise  defined
shall have the respective meanings ascribed thereto in the Pooling and Servicing
Agreement.

                                   ARTICLE II

                 PURCHASE, SALE AND CONVEYANCE OF MORTGAGE LOANS

                  Section 2.01. AGREEMENT TO PURCHASE THE MORTGAGE LOANS.

                  (a) Subject to the terms and conditions of this Agreement, the
Unaffiliated  Seller agrees to sell, and the Depositor  agrees to purchase,  the
Mortgage  Loans  having the  Cut-Off  Date  Aggregate  Principal  Balance or, in
accordance  with Section 2.08 hereof,  such other balance as is evidenced by the
actual Cut-Off Date Aggregate  Principal  Balance of the Mortgage Loans accepted
by the Depositor on the Closing Date and listed in the Mortgage Loan Schedule.

                  (b) The Depositor and the Unaffiliated Seller have agreed upon
which of the  Unaffiliated  Seller's  Mortgage  Loans are to be purchased by the
Depositor on the Closing Date pursuant to this Agreement,  and the  Unaffiliated
Seller has prepared a schedule describing the Mortgage Loans (the "MORTGAGE LOAN
SCHEDULE")  setting forth all of the Mortgage  Loans to be purchased  under this
Agreement,  which  schedule is attached  hereto as Exhibit A. The Mortgage  Loan
Schedule  shall  conform to the  definition of "Mortgage  Loan  Schedule" in the
Pooling and Servicing Agreement.

                  (c) The  closing  for the  purchase  and sale of the  Mortgage
Loans shall take place at the offices of Dewey  Ballantine  LLP,  New York,  New
York,  at 10:00  a.m.,  New York time,  on July 31, 2002 or such other place and
time as the  parties  shall  agree  (such time being  herein  referred to as the
"Closing Date").

                                       2
<PAGE>

                  Section 2.02. CAP AGREEMENT ASSIGNMENT.  In furtherance of the
sale  of the  Mortgage  Loans  hereunder,  the  Unaffiliated  Seller  agrees  to
absolutely  assign,  and the Depositor agrees to accept the absolute  assignment
of, the Cap Agreement and all of the rights and benefits thereunder.

                  Section  2.03.   PURCHASE  PRICE.  On  the  Closing  Date,  as
consideration  for the  Unaffiliated  Seller's sale of the Mortgage Loans to the
Depositor,  the Depositor will deliver to the Unaffiliated  Seller (i) an amount
in cash equal to 99.5% of the aggregate principal balance as of the Closing Date
of the Offered Certificates, payable by wire transfer of same day funds and (ii)
the Class X, Class P and Class R Certificates.

                  The consideration  described in this Section 2.03 collectively
represents full consideration for the Unaffiliated Seller's sale of the Mortgage
Loans to the Depositor.

                  Section  2.04.  CONVEYANCE  OF MORTGAGE  LOANS;  POSSESSION OF
MORTGAGE FILES.

                  (a) On the Closing  Date the  Unaffiliated  Seller shall sell,
transfer,  assign,  set over and  convey  or cause to be  assigned,  set over or
conveyed,  to the Depositor,  without  recourse but subject to the terms of this
Agreement and each of the  Assignment  and  Recognition  Agreements,  all right,
title and  interest  in and to the  applicable  Mortgage  Loans,  including  all
principal outstanding as of, and all interest due after, the Cut-Off Date, after
giving effect to scheduled  principal  payments due on the Cut-off Date, whether
or not received  (except for $88,740.18 in interest,  which is being retained by
the Unaffiliated  Seller), the Insurance Policies relating to each such Mortgage
Loan,  all right,  title and interest in and to the  proceeds of such  Insurance
Policies and all of its rights under this Agreement with respect to the Mortgage
Loans from and after the Cut-Off  Date.  Upon payment of the purchase  price for
such  Mortgage  Loans  as  provided  in  Section  2.03  of this  Agreement,  the
Unaffiliated Seller shall have hereby, and shall be deemed to have, or caused to
have sold, transferred, assigned, set over and conveyed such Mortgage Loans, the
Insurance  Policies  relating to each such Mortgage Loan,  all right,  title and
interest in and to the  proceeds  of such  Insurance  Policies  and all of their
rights under this  Agreement  with respect to the Mortgage  Loans from and after
the Cut-Off Date.

                  (b) Upon the sale of such  Mortgage  Loans,  the  ownership of
each  related  Mortgage  Note,  each  related  Mortgage  and the contents of the
related Mortgage File shall  immediately vest in the Depositor and the ownership
of all related records and documents with respect to each Mortgage Loan prepared
by  or  which  come  into  the  possession  of  the  Unaffiliated  Seller  shall
immediately  vest in the  Depositor.  The contents of any  Mortgage  File in the
possession  of the  Unaffiliated  Seller at any time after  such  sale,  and any
principal  and  interest  due on the  Mortgage  Loans after the Cut-Off Date and
received by or on behalf of the  Unaffiliated  Seller  (except for $88,740.18 in
interest,  which is being retained by the Unaffiliated Seller), shall be held in
trust by the  Unaffiliated  Seller for the benefit of the Depositor as the owner
thereof,  and shall be promptly delivered by the Unaffiliated  Seller to or upon
the order of the Depositor.

                  (c)  Pursuant  to the  Pooling and  Servicing  Agreement,  the
Depositor  shall,  on the  Closing  Date,  assign  all of its  right,  title and
interest in and to the applicable Mortgage Loans, the related Insurance Policies
and any  proceeds  thereof  and all of its rights  under this  Agreement  to the
Trust.

                  Section  2.05.  EXAMINATION  OF MORTGAGE  FILES.  Prior to the
Closing Date, the Unaffiliated Seller shall make the Mortgage Files available to
the  Depositor or its  designee for  examination  at the  Unaffiliated  Seller's
offices or at such  other  place as the  Unaffiliated  Seller  shall  reasonably
specify.  Such  examination  may be made by the Depositor or its designee at any
time on or before the Closing Date. If the Depositor or its designee  makes such
examination  prior to the Closing Date and identifies any Mortgage Loans that do
not conform to the requirements of the Depositor as

                                       3
<PAGE>

described  in this  Agreement,  such  Mortgage  Loans shall be deleted  from the
Mortgage  Loan  Schedule  and may be  replaced,  prior to the Closing  Date,  by
substitute Mortgage Loans acceptable to the Depositor. The Depositor may, at its
option and without notice to the  Unaffiliated  Seller,  purchase all or part of
the Mortgage Loans without conducting any partial or complete  examination.  The
fact that the  Depositor  or the Trustee has  conducted or has failed to conduct
any partial or complete  examination  of the Mortgage Files shall not affect the
rights of the  Depositor or the Trustee to demand  repurchase or other relief as
provided in this Agreement.

                  Section  2.06.  BOOKS AND RECORDS.  The sale of each  Mortgage
Loan  shall be  reflected  on the  Unaffiliated  Seller's  accounting  and other
records, balance sheet and other financial statements as a sale of assets by the
Unaffiliated  Seller  to  the  Depositor.   The  Unaffiliated  Seller  shall  be
responsible for  maintaining,  and shall  maintain,  a complete set of books and
records  for each  Mortgage  Loan which  shall be clearly  marked to reflect the
ownership  of  each  Mortgage  Loan  by  the  Trustee  for  the  benefit  of the
Certificateholders and the Class A Certificate Insurer.

                  Section 2.07.  COST OF DELIVERY AND  RECORDATION OF DOCUMENTS.
The costs relating to the delivery and recordation of the documents specified in
this  Article II in  connection  with the  Mortgage  Loans shall be borne by the
Originators.

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

                  Section  3.01.   REPRESENTATIONS  AND  WARRANTIES  AS  TO  THE
UNAFFILIATED  SELLER. The Unaffiliated  Seller hereby represents and warrants to
the Depositor, as of the Closing Date, that:

                  (a) The  Unaffiliated  Seller is a corporation duly organized,
validly  existing and in good  standing  under the laws of the State of New York
and has all licenses  necessary to carry on its business as now being  conducted
and is licensed, qualified and in good standing in each state necessary in order
to conduct  business of the type  conducted  by the  Unaffiliated  Seller and to
perform its obligations as the Unaffiliated  Seller hereunder;  the Unaffiliated
Seller has the full power and authority, corporate and otherwise, to execute and
deliver this Agreement and each of the Assignment and Recognition Agreements and
to perform in accordance  herewith and therewith;  the  execution,  delivery and
performance  of this  Agreement  (including  all  instruments  of transfer to be
delivered pursuant to this Agreement) by the Unaffiliated Seller and each of the
Assignment and Recognition  Agreements and the  consummation of the transactions
contemplated  hereby and  thereby  have been duly and validly  authorized;  this
Agreement and each of the Assignment  and  Recognition  Agreements  evidence the
valid,  binding and enforceable  obligations of the Unaffiliated Seller; and all
requisite  corporate  action has been taken by the  Unaffiliated  Seller to make
this Agreement and each of the Assignment and Recognition  Agreements  valid and
binding upon the Unaffiliated Seller in accordance with their respective terms;

                  (b) No consent, approval,  authorization or order of any court
or  governmental  agency or body is required  for the  execution,  delivery  and
performance  by the  Unaffiliated  Seller of or compliance  by the  Unaffiliated
Seller with this Agreement and each of the Assignment and Recognition Agreements
or the sale of the Mortgage  Loans  pursuant to the terms of this  Agreement and
each of the Assignment and  Recognition  Agreements or the  consummation  of the
transactions  contemplated  by this  Agreement  and each of the  Assignment  and
Recognition Agreements, or if required, such approval has been obtained prior to
the Closing Date;

                  (c) Neither the execution and delivery of this Agreement, each
of the Assignment and Recognition Agreements, the acquisition nor origination of
the Mortgage Loans by the Unaffiliated Seller

                                       4
<PAGE>

nor the transactions  contemplated hereby or thereby,  nor the fulfillment of or
compliance with the terms and conditions of this Agreement, has or will conflict
with or result in a breach of any of the terms,  conditions or provisions of the
Unaffiliated  Seller's  charter  or  by-laws  or any  legal  restriction  or any
agreement or  instrument to which the  Unaffiliated  Seller is now a party or by
which it is bound or to which its property is subject,  or  constitute a default
or  result  in  an  acceleration  under  any  of  the  foregoing,   except  such
unfulfillment,  non-compliance  or  default  or  acceleration  does  not  in the
aggregate have a material adverse effect on the operation,  business,  condition
(business or otherwise) of the Unaffiliated Seller or result in the violation of
any law, rule,  regulation,  order, judgment or decree to which the Unaffiliated
Seller  or its  property  is  subject,  except  such  violation  does not in the
aggregate have a material adverse effect on the operation,  business,  condition
(business or otherwise) of the Unaffiliated  Seller or impair the ability of the
Trustee (or the Servicer as the agent of the Trustee) to realize on the Mortgage
Loans, or impair the value of the Mortgage Loans;

                  (d) There is no  action,  suit,  proceeding  or  investigation
pending nor, to the knowledge of the Unaffiliated  Seller,  threatened  before a
court,  administrative  agency or government  tribunal  against the Unaffiliated
Seller which, either in any one instance or in the aggregate,  may result in any
material  adverse  change  in the  business,  operations,  financial  condition,
properties or assets of the Unaffiliated  Seller, or in any material  impairment
of the right or  ability  of the  Unaffiliated  Seller to carry on its  business
substantially  as now conducted,  or which would draw into question the validity
of this  Agreement and any of the  Assignment and  Recognition  Agreements,  the
Mortgage  Loans,  or of any action taken or to be taken in  connection  with the
obligations of the Unaffiliated  Seller contemplated herein or therein, or which
would impair materially the ability of the Unaffiliated  Seller to perform under
the terms of this Agreement or any of the Assignment and Recognition  Agreements
or that will prohibit its entering into this  Agreement or any of the Assignment
and  Recognition  Agreements  or the  consummation  of  any of the  transactions
contemplated hereby or under any subservicing agreements;

                  (e)  The  Unaffiliated  Seller  is not in  violation  of or in
default with respect to, and the execution and delivery of this Agreement by the
Unaffiliated  Seller and its performance of and compliance with the terms hereof
will not  constitute a violation or default with respect to, any order or decree
of any court or any order, regulation or demand of any federal, state, municipal
or governmental  agency, which violation or default might have consequences that
would  materially  and adversely  affect the  condition  (financial or other) or
operations  of  the  Unaffiliated   Seller  or  its  properties  or  might  have
consequences   that  would  materially  and  adversely  affect  its  performance
hereunder or under any subservicing agreement;

                  (f) Upon the sale of the  Mortgage  Loans by the  Unaffiliated
Seller to the  Depositor  under  this  Agreement,  the  Depositor  will own each
Mortgage Loan and such other items  comprising the corpus of the Trust Fund free
and clear of any lien,  encumbrance,  equity,  participation  interest,  pledge,
charge, claim or security interest (collectively, "LIENS"), other than any Liens
created by the Depositor or any of its assignees;

                  (g) The consummation of the transactions  contemplated by this
Agreement  and each of the  Assignment  and  Recognition  Agreements  are in the
ordinary  course of  business  of the  Unaffiliated  Seller,  and the  transfer,
assignment  and  conveyance  of the  Mortgage  Notes  and the  Mortgages  by the
Unaffiliated  Seller  pursuant to this  Agreement and each of the Assignment and
Recognition  Agreements  are not  subject to the bulk  transfer  or any  similar
statutory provisions in effect in any applicable jurisdiction;

                  (h)  With  respect  to  any  Mortgage  Loan  purchased  by the
Unaffiliated Seller, the Unaffiliated Seller acquired title to the Mortgage Loan
in good faith, without notice of any adverse claim;

                                       5
<PAGE>

                  (i) The Unaffiliated Seller does not believe, nor does it have
any reason or cause to believe,  that it cannot  perform each and every covenant
contained  in  this  Agreement  and  each  of  the  Assignment  and  Recognition
Agreements.  The  Unaffiliated  Seller is solvent  and the sale of the  Mortgage
Loans by the  Unaffiliated  Seller  pursuant to the terms of this  Agreement and
each  of  the  Assignment  and   Recognition   Agreements  will  not  cause  the
Unaffiliated  Seller to become insolvent.  The sale of the Mortgage Loans by the
Unaffiliated  Seller  pursuant  to the terms of this  Agreement  and each of the
Assignment and  Recognition  Agreements  was not  undertaken  with the intent to
hinder, delay or defraud any of the Unaffiliated Seller's creditors;

                  (j) The  Mortgage  Loans are not  intentionally  selected in a
manner  so as to affect  adversely  the  interests  of the  Depositor  or of any
transferee of the Depositor (including the Trust and the Trustee);

                  (k) The Unaffiliated  Seller will treat the disposition of the
Mortgage  Loans  pursuant  to this  Agreement  and  each of the  Assignment  and
Recognition Agreements as a sale for accounting and tax purposes;

                  (l) The  Unaffiliated  Seller has not dealt with any broker or
agent or anyone else that may be entitled to any commission or  compensation  in
connection  with the sale of the Mortgage  Loans to the Depositor  other than to
the Depositor or an affiliate thereof; and

                  (m) The consideration received by the Unaffiliated Seller upon
the sale of the Mortgage  Loans under this  Agreement and each of the Assignment
and  Recognition   Agreements  constitutes  fair  consideration  and  reasonably
equivalent value for the Mortgage Loans.

                  Section 3.02. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.
The Depositor  hereby  represents,  warrants and  covenants to the  Unaffiliated
Seller,  as of the date of execution  of this  Agreement  and the Closing  Date,
that:

                  (a) The Depositor is a  corporation  duly  organized,  validly
existing and in good standing under the laws of the State of Delaware;

                  (b) The  Depositor  has the  corporate  power and authority to
purchase each Mortgage  Loan and to execute,  deliver and perform,  and to enter
into and consummate all the transactions contemplated by this Agreement and each
of the Assignment and Recognition Agreements;

                  (c) This  Agreement  has been  duly  and  validly  authorized,
executed and delivered by the Depositor,  and,  assuming the due  authorization,
execution  and delivery  hereof and thereof by the  Unaffiliated  Seller and the
Originators,  constitutes  the  legal,  valid  and  binding  agreements  of  the
Depositor, enforceable against the Depositor in accordance with their respective
terms,  except as such  enforcement  may be limited by  bankruptcy,  insolvency,
reorganization,  moratorium  or other  similar laws relating to or affecting the
rights of creditors generally,  and by general equity principles  (regardless of
whether such enforcement is considered in a proceeding in equity or at law);

                  (d)  No  consent,  approval,  authorization  or  order  of  or
registration or filing with, or notice to, any  governmental  authority or court
is required for the execution,  delivery and performance of or compliance by the
Depositor  with  this  Agreement  or  any  of  the  Assignment  and  Recognition
Agreements  or the  consummation  by the  Depositor  of any of the  transactions
contemplated hereby or thereby, except such as have been made on or prior to the
Closing Date;

                                       6
<PAGE>

                  (e) The  Depositor has filed or will file the  Prospectus  and
Prospectus  Supplement  with the Commission in accordance with Rule 424(b) under
the Securities Act; and

                  (f) None of the  execution  and delivery of this  Agreement or
any of the Assignment and Recognition  Agreements,  the purchase of the Mortgage
Loans from the Unaffiliated  Seller,  the consummation of the other transactions
contemplated  hereby,  or the  fulfillment  of or compliance  with the terms and
conditions  of  this  Agreement  or  any  of  the  Assignment  and   Recognition
Agreements,  (i)  conflicts or will  conflict  with the charter or bylaws of the
Depositor  or  conflicts  or will  conflict  with or results or will result in a
breach of, or constitutes or will constitute a default or results or will result
in an  acceleration  under,  any term,  condition or provision of any indenture,
deed of trust,  contract or other  agreement  or other  instrument  to which the
Depositor  is a party  or by  which it is bound  and  which is  material  to the
Depositor,  or (ii)  results or will  result in a  violation  of any law,  rule,
regulation,  order,  judgment or decree of any court or  governmental  authority
having jurisdiction over the Depositor.

                                   ARTICLE IV

                             THE UNAFFILIATED SELLER

                  Section  4.01.  COVENANTS  OF  THE  UNAFFILIATED  SELLER.  The
Unaffiliated Seller covenants to the Depositor as follows:

                  (a) The Unaffiliated Seller shall cooperate with the Depositor
and the firm of independent  certified public accountants  retained with respect
to the issuance of the  Certificates  in making  available all  information  and
taking  all steps  reasonably  necessary  to  permit  the  accountants'  letters
required hereunder to be delivered within the times set for delivery herein.

                  (b) The  Unaffiliated  Seller agrees to satisfy or cause to be
satisfied  on or  prior  to the  Closing  Date,  all of  the  conditions  to the
Depositor's  obligations  set forth in Section  5.01  hereof that are within the
Unaffiliated Seller's (or its agents') control.

                  (c) The  Unaffiliated  Seller  hereby  agree  to do all  acts,
transactions,  and things and to execute and deliver all agreements,  documents,
instruments,  and  papers  by and on behalf  of the  Unaffiliated  Seller as the
Depositor  or its  counsel may  reasonably  request in order to  consummate  the
transfer of the Mortgage  Loans to the  Depositor  and the  subsequent  transfer
thereof to the Trustee, and the rating, issuance and sale of the Certificates.

                  Section 4.02. MERGER OR CONSOLIDATION. The Unaffiliated Seller
will keep in full effect its  existence,  rights and franchises as a corporation
and will  obtain and  preserve  its  qualification  to do  business as a foreign
corporation,  in each  jurisdiction  necessary  to perform its duties under this
Agreement.  Any Person into which the  Unaffiliated  Seller or the  Unaffiliated
Seller may be merged or  consolidated,  or any  corporation  resulting  from any
merger,  conversion or consolidation to which the Unaffiliated Seller shall be a
party,  or any Person  succeeding  to the business of the  Unaffiliated  Seller,
shall be approved by the  Depositor  which  approval  shall not be  unreasonably
withheld.  The  Unaffiliated  Seller  shall  send  notice of any such  merger or
consolidation to the Depositor.

                  Section  4.03.  COSTS.  In  connection  with the  transactions
contemplated under this Agreement and the Pooling and Servicing  Agreement,  the
Unaffiliated  Seller  shall  promptly  pay  (or  shall  promptly  reimburse  the
Depositor  to the  extent  that  the  Depositor  shall  have  paid or  otherwise
incurred):   (a)  the  fees  and   disbursements  of  the  Depositor's  and  the
Unaffiliated  Seller's counsel;  (b) the fees of Fitch, S&P and Moody's; (c) any
of the  fees of the  Trustee  and the fees and  disbursements  of the  Trustee's
counsel;  (d) expenses incurred in connection with printing the Prospectus,  the
Prospectus

                                       7
<PAGE>

Supplement,  any amendment or supplement thereto, any preliminary prospectus and
the Certificates; (e) fees and expenses relating to the filing of documents with
the Securities and Exchange  Commission  (including without limitation  periodic
reports under the Exchange Act); (f) the shelf registration  amortization fee of
0.092% of the  Certificate  Balance of the Offered  Certificates  on the Closing
Date, paid in connection with the issuance of Offered Certificates; (g) the fees
and disbursements for the accountants for the Unaffiliated  Seller;  and (h) all
of the initial expenses of the Class A Certificate  Insurer  including,  without
limitation,  legal fees and expenses,  accountant fees and expenses and expenses
in  connection  with due  diligence  conducted  on the  Custodial  Files but not
including the initial premium paid to the Class A Certificate  Insurer.  For the
avoidance of doubt,  the parties hereto  acknowledge that it is the intention of
the  parties  that the  Depositor  shall not pay any of the  Trustee's  fees and
expenses (other than amounts paid from Trust Fund cashflow under Section 4.02 of
the  Pooling  and  Servicing  Agreement)  in  connection  with the  transactions
contemplated  by the  Pooling  and  Servicing  Agreement.  All  other  costs and
expenses in connection  with the  transactions  contemplated  hereunder shall be
borne by the party incurring such expenses.

                                   ARTICLE V

                              CONDITIONS OF CLOSING

                  Section  5.01.  CONDITIONS  OF  DEPOSITOR'S  OBLIGATIONS.  The
obligations  of the Depositor to purchase the Mortgage  Loans will be subject to
the satisfaction on the Closing Date of the following  conditions.  Upon payment
of the purchase price for the Mortgage Loans,  such  conditions  shall be deemed
satisfied or waived.

                  (a) Each of the obligations of the Unaffiliated  Seller and of
the  Originators  required  to be  performed  by it or them on or  prior  to the
Closing  Date  pursuant  to the terms of this  Agreement,  each  Assignment  and
Recognition  Agreement or the Pooling and  Servicing  Agreement  shall have been
duly  performed and complied  with,  the  representations  and warranties of the
Unaffiliated  Seller  under  this  Agreement  and of the  Originators  under the
related Assignment and Recognition Agreement shall be true and correct as of the
Closing Date and no event shall have occurred which,  with notice or the passage
of time,  would  constitute a default  under this  Agreement,  and the Depositor
shall have  received a certificate  to the effect of the foregoing  signed by an
authorized officer of the Unaffiliated Seller and the Originators.

                  (b) The Depositor  shall have received a letter dated the date
of this  Agreement,  in form and  substance  acceptable to the Depositor and its
counsel,  prepared  by  Deloitte  & Touche  LLP,  independent  certified  public
accountants,  regarding the numerical  information  contained in the  Prospectus
Supplement  including,  but not limited to the  information  under the  captions
"Prepayment and Yield Considerations" and "The Mortgage Loan Pool" regarding any
numerical  information in any marketing  materials  relating to the Certificates
and regarding any other information as reasonably requested by the Depositor.

                  (c) The Mortgage Loans will be acceptable to the Depositor, in
its sole reasonable discretion.

                  (d) The Depositor shall have received the following additional
closing  documents,  in  form  and  substance  reasonably  satisfactory  to  the
Depositor and its counsel:

                        (i) the Mortgage Loan Schedule;

                                       8
<PAGE>

                        (ii) this  Agreement,  each  Assignment and  Recognition
            Agreement,  the  Pooling  and  Servicing  Agreement,  the  Insurance
            Agreement,  the  Indemnification   Agreement  and  the  Underwriting
            Agreement  dated as of July __, 2002 between the  Depositor  and the
            Representative and all documents required thereunder,  duly executed
            and  delivered  by  each  of the  parties  thereto  other  than  the
            Depositor;

                        (iii)  officer's  certificates  of  an  officer  of  the
            Unaffiliated  Seller,  dated as of the Closing  Date,  and  attached
            thereto  resolutions  of the  board of  directors  and a copy of the
            Unaffiliated Seller's charter and by-laws;

                        (iv) copies of the Unaffiliated Seller's charter and all
            amendments,  revisions,  and  supplements  thereof,  certified  by a
            secretary of each entity;

                        (v) opinions of the counsel for each of the  Originators
            and the  Unaffiliated  Seller as to various  corporate  matters in a
            form  acceptable  to  the  Depositor,   its  counsel,  the  Class  A
            Certificate  Insurer,  Fitch,  S&P and Moody's (it being agreed that
            each  opinion  shall  expressly  provide  that the Trustee  shall be
            entitled to rely on the opinion);

                        (vi) opinions of counsel for the Unaffiliated Seller, in
            forms  acceptable  to  the  Depositor,  its  counsel,  the  Class  A
            Certificate  Insurer,  Fitch,  S&P and Moody's as to such matters as
            shall be  required  for the  assignment  of a rating  to the Class A
            Certificates  of "AAA" by Fitch,  "AAA" by S&P, and "Aaa" by Moody's
            (it being agreed that such opinions shall expressly provide that the
            Trustee shall be entitled to rely on such opinions);

                        (vii) a letter  from  Moody's to the effect  that it has
            assigned  ratings of "Aaa," "Aaa," "Aa2," "A2," "Baa2" and "Baa3" to
            the Class A, Class A-IO,  Class M-1,  Class M-2, Class B-1 and Class
            B-2 Certificates, respectively;

                        (viii)  a  letter  from  S&P to the  effect  that it has
            assigned ratings of "AAA," "AAA," "AA," "A," "BBB" and "BBB-" to the
            Class A, Class A-IO,  Class M-1,  Class M-2, Class B-1 and Class B-2
            Certificates, respectively;

                        (ix) a  letter  from  Fitch  to the  effect  that it has
            assigned ratings of "AAA," "AAA," "AA," "A," "BBB" and "BBB-" to the
            Class A, Class A-IO,  Class M-1,  Class M-2, Class B-1 and Class B-2
            Certificates, respectively;

                        (x) an opinion of  counsel  for the  Trustee in form and
            substance acceptable to the Depositor,  its counsel, Fitch, Moody's,
            the Class A  Certificate  Insurer and S&P (it being  agreed that the
            opinion shall expressly  provide that the Unaffiliated  Seller shall
            be entitled to rely on the opinion);

                        (xi) an opinion or opinions of counsel for the Servicer,
            in form and substance acceptable to the Depositor,  its counsel, the
            Class A Certificate Insurer, Fitch, Moody's and S&P (it being agreed
            that the  opinion  shall  expressly  provide  that the  Unaffiliated
            Seller shall be entitled to rely on the opinion); and

                        (xii) an opinion or  opinions of counsel for the Class A
            Certificate  Insurer, in each case in form and substance  acceptable
            to the  Depositor,  its  counsel,  Fitch,  Moody's and S&P (it being
            agreed  that  the  opinion   shall   expressly   provide   that  the
            Unaffiliated Seller shall be entitled to rely on the opinion).

                                       9
<PAGE>

                  (e) The Class A Certificate  Insurance  Policy shall have been
duly executed, delivered and issued with respect to the Class A Certificates.

                  (f)  All  proceedings  in  connection  with  the  transactions
contemplated  by this  Agreement  and all  documents  incident  hereto  shall be
satisfactory in form and substance to the Depositor and its counsel.

                  (g) The Unaffiliated Seller shall have furnished the Depositor
with such other  certificates of its officers or others and such other documents
or opinions as the Depositor or its counsel may reasonably request.

                  Section 5.02. CONDITIONS OF UNAFFILIATED SELLER'S OBLIGATIONS.
The obligations of the Unaffiliated Seller under this Agreement shall be subject
to the satisfaction, on the Closing Date, of the following conditions:

                  (a) Each of the  obligations  of the Depositor  required to be
performed  by it at or prior to the Closing  Date  pursuant to the terms of this
Agreement  shall  have  been duly  performed  and  complied  with and all of the
representations  and  warranties  of the Depositor  contained in this  Agreement
shall be true and correct as of the  Closing  Date and the  Unaffiliated  Seller
shall have received a certificate to that effect signed by an authorized officer
of the Depositor.

                  (b) The Unaffiliated  Seller shall have received the following
additional documents:

                        (i) each of the Assignment and  Recognition  Agreements,
            the Pooling and  Servicing  Agreement,  and all  documents  required
            thereunder,  in each case executed by the  Depositor as  applicable;
            and

                        (ii) a copy of a letter from Moody's to the Depositor to
            the effect  that it has  assigned  ratings of "Aaa,"  "Aaa,"  "Aa2,"
            "A2," "Baa2" and "Baa3" to the Class A, Class A-IO, Class M-1, Class
            M-2, Class B-1 and Class B-2 Certificates, respectively; a copy of a
            letter  from  Fitch  to the  Depositor  to the  effect  that  it has
            assigned ratings of "AAA," "AAA," "AA," "A," "BBB" and "BBB-" to the
            Class A, Class A-IO,  Class M-1,  Class M-2, Class B-1 and Class B-2
            Certificates,  respectively;  and a copy of a letter from S&P to the
            Depositor  to the  effect  that it has  assigned  ratings  of "AAA,"
            "AAA," "AA," "A," "BBB" and "BBB-" to the Class A, Class A-IO, Class
            M-1, Class M-2, Class B-1 and Class B-2 Certificates, respectively.

                        (iii) an opinion of counsel  for the Trustee in form and
            substance acceptable to the Unaffiliated Seller and its counsel;

                        (iv) an opinion or  opinions  of counsel for the Class A
            Certificate  Insurer, in each case in form and substance  acceptable
            to the Unaffiliated Seller and its counsel.

                        (v) an opinion of the  counsel for the  Depositor  as to
            securities  and tax matters in form and substance  acceptable to the
            Unaffiliated Seller and its counsel; and

                        (vi) an opinion of the counsel for the  Depositor  as to
            true sale matters in form and  substance  acceptable  to the Class A
            Certificate Insurer and its counsel.

                  (c) All legal opinion letters and accountant's comfort letters
delivered in connection with the transactions contemplated by this Agreement and
the other  agreements  referred to herein shall be

                                       10
<PAGE>

addressed  to the  Unaffiliated  Seller  and  shall  be in  form  and  substance
satisfactory to the Unaffiliated Seller.

                  (d) The Depositor shall have furnished the Unaffiliated Seller
with such other  certificates of its officers or others and such other documents
to evidence  fulfillment  of the  conditions  set forth in this Agreement as the
Unaffiliated Seller may reasonably request.

                  Section 5.03.  TERMINATION  OF  DEPOSITOR'S  OBLIGATIONS.  The
Depositor may terminate its obligations  hereunder by notice to the Unaffiliated
Seller at any time before  delivery of and payment of the purchase price for the
Mortgage  Loans if: (a) any of the  conditions set forth in Section 5.01 are not
satisfied when and as provided therein; (b) there shall have been the entry of a
decree  or  order  by  a  court  or  agency  or  supervisory   authority  having
jurisdiction in the premises for the  appointment of a conservator,  receiver or
liquidator in any insolvency,  readjustment  of debt,  marshalling of assets and
liabilities or similar proceedings of or relating to the Unaffiliated Seller, or
for the winding up or liquidation of the affairs of the Unaffiliated Seller; (c)
there shall have been the consent by the Unaffiliated  Seller 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 the Unaffiliated  Seller or of or relating to  substantially  all of
the  property  of the  Unaffiliated  Seller;  (d) any  purchase  and  assumption
agreement with respect to the  Unaffiliated  Seller or the assets and properties
of the  Unaffiliated  Seller shall have been entered  into; or (e) a Termination
Event  shall have  occurred.  The  termination  of the  Depositor's  obligations
hereunder shall not terminate the Depositor's  rights  hereunder or its right to
exercise any remedy available to it at law or in equity.

                                   ARTICLE VI

                                  MISCELLANEOUS

                  Section 6.01. NOTICES. All demands, notices and communications
hereunder  shall be in  writing  and shall be deemed to have been duly  given if
personally  delivered  to or mailed by  registered  mail,  postage  prepaid,  or
transmitted by telex or telegraph and confirmed by a similar mailed writing, (i)
if to the Depositor,  addressed to the Depositor at Morgan Stanley ABS Capital I
Inc., 1585 Broadway,  New York, New York 10036,  Attention:  Managing Director -
Asset  Backed  Finance  Group,  or to such other  address as the  Depositor  may
designate  in  writing  to the  other  parties,  or (ii) if to the  Unaffiliated
Seller,  addressed to the  Unaffiliated  Seller at CDC Mortgage  Capital Inc., 9
West 57th Street, New York, New York 10009,  Attention:  General Counsel,  or to
such other  address as the  Unaffiliated  Seller may designate in writing to the
other parties.

                  Section 6.02. SEVERABILITY OF PROVISIONS. Any part, provision,
representation,  warranty or covenant of this  Agreement  which is prohibited or
which is held to be void or unenforceable  shall be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions hereof. Any part, provision, representation,  warranty or covenant of
this  Agreement  which is prohibited or  unenforceable  or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction   as  to  any  Mortgage   Loan  shall  not   invalidate  or  render
unenforceable such provision in any other jurisdiction.  To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.

                  Section   6.03.   AGREEMENT  OF   UNAFFILIATED   SELLER.   The
Unaffiliated Seller agrees to execute and deliver such instruments and take such
actions as the Depositor may, from time to time,  reasonably request in order to
effectuate the purpose and to carry out the terms of this Agreement.

                                       11
<PAGE>

                  Section 6.04.  SURVIVAL.  The parties to this Agreement  agree
that the representations,  warranties and agreements made by each of them herein
and in any certificate or other  instrument  delivered  pursuant hereto shall be
deemed  to be  relied  upon  by the  other  party  hereto,  notwithstanding  any
investigation  heretofore or hereafter made by such other party or on such other
party's behalf, and that the representations,  warranties and agreements made by
the  parties  hereto  in this  Agreement  or in any  such  certificate  or other
instrument shall survive the delivery of and payment for the Mortgage Loans.

                  Section  6.05.  EFFECT OF HEADINGS AND TABLE OF CONTENTS.  The
Article  and  Section  headings  herein  and  the  Table  of  Contents  are  for
convenience only and shall not affect the construction hereof.

                  Section 6.06.  SUCCESSORS AND ASSIGNS.  This  Agreement  shall
inure to the  benefit  of and be  binding  upon the  parties  hereto  and  their
respective  successors and permitted assigns.  Except as expressly  permitted by
the terms hereof, this Agreement may not be assigned, pledged or hypothecated by
any party hereto to a third party without the written consent of the other party
to this Agreement.

                  Section  6.07.  CONFIRMATION  OF  INTENT;  GRANT  OF  SECURITY
INTEREST.  It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the  Unaffiliated  Seller to the Depositor as contemplated
by this Agreement and each of the Assignment and Recognition  Agreements be, and
be  treated  for all  purposes  as, a sale of the  Mortgage  Loans  and that the
conveyance of the Mortgage Loans by the Unaffiliated  Seller to the Depositor as
contemplated  by this  Agreement  and  each of the  Assignment  and  Recognition
Agreements be, and be treated for accounting purposes as, a sale of the Mortgage
Loans. It is, further,  not the intention of the parties that such conveyance be
deemed  a  pledge  of the  Mortgage  Loans  by the  Unaffiliated  Seller  to the
Depositor  to  secure a debt or other  obligation  of the  Unaffiliated  Seller.
However,  in the event  that,  notwithstanding  the intent of the  parties,  the
Mortgage  Loans are held to continue to be  property of the  Originators  or the
Unaffiliated  Seller  then (a)  this  Agreement  shall  also be  deemed  to be a
security  agreement  within  the  meaning  of  Articles  8 and 9 of the  Uniform
Commercial  Code; (b) the transfer of the Mortgage Loans provided for herein and
each of the Assignment and Recognition  Agreements shall be deemed to be a grant
by the Originators to the Unaffiliated  Seller and by the Unaffiliated Seller to
the Depositor of a security  interest in all of such parties'  right,  title and
interest in and to the  Mortgage  Loans and all amounts  payable on 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;  (c) the possession by the Depositor of Mortgage Notes and such
other items of property as constitute  instruments,  money, negotiable documents
or chattel  paper shall be deemed to be  "possession  by the secured  party" for
purposes of perfecting  the security  interest  pursuant to Section 9-305 of the
Uniform Commercial Code; and (d) notifications to persons holding such property,
and  acknowledgments,  receipts  or  confirmations  from  persons  holding  such
property,  shall be deemed  notifications  to, or  acknowledgments,  receipts or
confirmations from, financial intermediaries,  bailees or agents (as applicable)
of the  Depositor for the purpose of perfecting  such  security  interest  under
applicable law. Any assignment of the interest of the Depositor  pursuant to any
provision  hereof  shall  also be deemed  to be an  assignment  of any  security
interest created hereby. The Unaffiliated Seller and the Depositor shall, to the
extent consistent with this Agreement,  take such actions as may be necessary to
ensure  that,  if  this  Agreement  or  any of the  Assignment  and  Recognition
Agreements were deemed to create a security interest in the Mortgage Loans, such
security  interest would be deemed to be a perfected  security interest of first
priority under applicable law and will be maintained as such throughout the term
of this Agreement.

                  Section 6.08.  MISCELLANEOUS.  This  Agreement and each of the
Assignment  and  Recognition  Agreements  supersedes  all prior  agreements  and
understandings relating to the subject matter hereof.

                                       12
<PAGE>

                  Section 6.09. AMENDMENTS.

                  (a) This  Agreement  may be  amended  from time to time by the
Unaffiliated Seller and the Depositor by written agreement,  with the consent of
the  Class A  Certificate  Insurer  but  without  notice  to or  consent  of the
Certificateholders,  to  cure  any  ambiguity,  to  correct  or  supplement  any
provisions  herein, to comply with any changes in the Code, or to make any other
provisions  with respect to matters or questions  arising  under this  Agreement
which shall not be inconsistent with the provisions of this Agreement; provided,
however,  that such action shall not, as evidenced by (i) an Opinion of Counsel,
at the expense of the party  requesting the change,  delivered to the Trustee or
(ii) a letter from each Rating Agency  confirming  that such  amendment will not
result in the  reduction,  qualification  or withdrawal of the current rating of
the Certificates,  adversely affect in any material respect the interests of any
Certificateholder;  and  provided,  further,  that no such  amendment  shall (x)
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,  or (y)  change the rights or
obligations of any other party hereto without the consent of such party,  or (z)
cause  the  Unaffiliated  Seller to  conduct  any  activity  not  permitted  for
qualified special purpose entities under the current accounting literature.

                  (b) It shall not be necessary for the consent of Holders under
this Section to approve the particular  form of any proposed  amendment,  but it
shall be sufficient if such consent shall approve the substance thereof.

                  Section  6.10.  THIRD-PARTY  BENEFICIARIES.  The parties agree
that each of the Class A Certificate Insurer,  the Servicer,  and the Trustee is
an intended third-party beneficiary of this Agreement to the extent necessary to
enforce  the rights and to obtain the benefit of the  remedies of the  Depositor
under this  Agreement  which are  assigned to the Trustee for the benefit of the
Certificateholders and the Class A Certificate Insurer,  pursuant to the Pooling
and Servicing  Agreement,  and to the extent  necessary to obtain the benefit of
the  enforcement of the  obligations  and covenants of the  Unaffiliated  Seller
under Section 4.01 of this Agreement.

                  Section 6.11.  GOVERNING LAW; CONSENT TO JURISDICTION;  WAIVER
OF JURY TRIAL.

                  (a) THIS  AGREEMENT  SHALL BE GOVERNED  BY, AND  CONSTRUED  IN
ACCORDANCE  WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS  PROVISIONS)
OF THE STATE OF NEW YORK.

                  (b) THE  DEPOSITOR  AND THE  UNAFFILIATED  SELLER  EACH HEREBY
SUBMIT TO THE NON-EXCLUSIVE  JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES  DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW
YORK CITY, AND EACH WAIVES  PERSONAL  SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE  ADDRESS  SET FORTH IN SECTION  6.01 OF THIS  AGREEMENT  AND SERVICE SO MADE
SHALL BE  DEEMED  TO BE  COMPLETED  FIVE DAYS  AFTER  THE SAME  SHALL  HAVE BEEN
DEPOSITED IN THE U.S. MAIL, POSTAGE PREPAID. THE ORIGINATORS,  THE DEPOSITOR AND
THE  UNAFFILIATED  SELLER EACH HEREBY  WAIVES ANY  OBJECTION  BASED ON FORUM NON
CONVENIENS,  AND ANY OBJECTION TO VENUE OF ANY ACTION  INSTITUTED  HEREUNDER AND
CONSENTS  TO THE  GRANTING  OF SUCH  LEGAL  OR  EQUITABLE  RELIEF  AS IS  DEEMED
APPROPRIATE BY THE COURT.  NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
ORIGINATORS, THE DEPOSITOR AND THE

                                       13
<PAGE>

UNAFFILIATED  SELLER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR AFFECT  ANY SUCH  PARTIES'  RIGHT TO BRING ANY  ACTION OR  PROCEEDING  IN THE
COURTS OF ANY OTHER JURISDICTION.

                  (c) THE  DEPOSITOR  AND THE  UNAFFILIATED  SELLER  EACH HEREBY
WAIVE ANY RIGHT TO HAVE A JURY  PARTICIPATE  IN RESOLVING  ANY DISPUTE,  WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

                  Section 6.12. EXECUTION IN COUNTERPARTS. This Agreement may be
executed  in any  number of  counterparts,  each of which so  executed  shall be
deemed to be an original,  but all such counterparts  shall together  constitute
but one and the same instrument.

                  Section 6.13.  SUBSEQUENT MORTGAGE LOANS.. Sales of Subsequent
Mortgage Loans shall be effectuated by means of Subsequent  Transfer  Agreements
on substantially the form of Exhibit L to the Pooling and Servicing Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                       14
<PAGE>

                  IN WITNESS WHEREOF, the parties to this Unaffiliated  Seller's
Agreement  have  caused  their names to be signed by their  respective  officers
thereunto duly authorized as of the date first above written.

                                          MORGAN STANLEY ABS CAPITAL I INC.

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                          CDC MORTGAGE CAPITAL INC.

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:

             [Signature Page to the Unaffiliated Seller's Agreement]

<PAGE>

                                                                       EXHIBIT A

                             MORTGAGE LOAN SCHEDULE

                                      A-1

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