Document:

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                                                                     Exhibit 4.2

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                       MORGAN STANLEY ABS CAPITAL I, INC.

                                  as Depositor

                                       and

                            WILMINGTON TRUST COMPANY

                                as Owner Trustee

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

                      AMENDED AND RESTATED TRUST AGREEMENT

                            Dated as of July 1, 2000

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

                    MORGAN STANLEY ABS CAPITAL I TRUST 2000-1
                                  (REMIC TRUST)

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                                TABLE OF CONTENTS

ARTICLE I Definitions..................................................1

  SECTION 1.01    Definitions..........................................1
  SECTION 1.02    Other Definitional Provisions........................1

ARTICLE II Organization................................................2

  SECTION 2.01    Name.................................................2
  SECTION 2.02    Office...............................................2
  SECTION 2.03    Purposes and Powers..................................2
  SECTION 2.04    Appointment of Owner Trustee.........................3
  SECTION 2.05    Initial Capital Contribution of Owner Trust Estate...3
  SECTION 2.06    Declaration of Trust.................................3
  SECTION 2.07    [Reserved]...........................................4
  SECTION 2.08    Title to Trust Property..............................4
  SECTION 2.09    Situs of Trust.......................................4
  SECTION 2.10    Representations and Warranties of the Depositor......4
  SECTION 2.11    Investment Company...................................5

ARTICLE III Conveyance of the Mortgage Loans; Certificates.............5

  SECTION 3.01    Conveyance of the Mortgage Loans.....................5
  SECTION 3.02    Initial Ownership....................................5
  SECTION 3.03    The Certificates.....................................5
  SECTION 3.04    Authentication of Certificates.......................6
  SECTION 3.05    Registration of and Limitations on Transfer and
                  Exchange of Certificates.............................6
  SECTION 3.06    Mutilated, Destroyed, Lost or Stolen Certificates....8
  SECTION 3.07    Persons Deemed Certificateholders....................9
  SECTION 3.08    Access to List of Certificateholders' Names and
                  Addresses............................................9
  SECTION 3.09    Maintenance of Office or Agency......................9

ARTICLE IV Authority and Duties of Owner Trustee.......................9

  SECTION 4.01    General Authority....................................9
  SECTION 4.02    General Duties......................................10
  SECTION 4.03    Action upon Instruction.............................10
  SECTION 4.04    No Duties Except as Specified under this Trust
                  Agreement, Transaction Documents or in
                  Instructions........................................10
  SECTION 4.05    Restrictions........................................11
  SECTION 4.06    Prior Notice to Certificateholders with Respect
                  to Certain Matters..................................11
  SECTION 4.07    Action by Certificateholders with Respect to
                  Certain Matters.....................................12
  SECTION 4.08    Action by Certificateholders with Respect to
                  Bankruptcy..........................................13
  SECTION 4.09    Restrictions on Certificateholders' Power...........13
  SECTION 4.10    Majority Control....................................13

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ARTICLE V Application of Trust Funds..................................13

  SECTION 5.01    Distributions.......................................13
  SECTION 5.02    [Reserved]..........................................14
  SECTION 5.03    Tax Returns.........................................14

ARTICLE VI Concerning the Owner Trustee...............................14

  SECTION 6.01    Acceptance of Trusts and Duties.....................14
  SECTION 6.02    Furnishing of Documents.............................15
  SECTION 6.03    Representations and Warranties......................15
  SECTION 6.04    Reliance; Advice of Counsel.........................16
  SECTION 6.05    Not Acting in Individual Capacity...................17
  SECTION 6.06    Owner Trustee Not Liable for Certificates or
                  Related Documents...................................17
  SECTION 6.07    Owner Trustee May Own Certificates and Notes........17
  SECTION 6.08    Payments from Owner Trust Estate....................17
  SECTION 6.09    Doing Business in Other Jurisdictions...............18
  SECTION 6.10    Liability of Certificate Registrar..................18

ARTICLE VII Compensation of Owner Trustee.............................18

  SECTION 7.01    Owner Trustee's Fees and Expenses...................18
  SECTION 7.02    Indemnification.....................................18

ARTICLE VIII Termination of Trust Agreement...........................19

  SECTION 8.01    Termination of Trust Agreement......................19

ARTICLE IX Successor Owner Trustees and Additional Owner Trustees.....20

  SECTION 9.01    Eligibility Requirements for Owner Trustee..........20
  SECTION 9.02    Resignation or Removal of Owner Trustee.............20
  SECTION 9.03    Successor Owner Trustee.............................21
  SECTION 9.04    Merger or Consolidation of Owner Trustee............21
  SECTION 9.05    Appointment of Co-Trustee or Separate Trustee.......21

ARTICLE X Miscellaneous...............................................23

  SECTION 10.01   Amendments..........................................23
  SECTION 10.02   No Legal Title to Owner Trust Estate................24
  SECTION 10.03   Limitations on Rights of Others.....................24
  SECTION 10.04   Notices.............................................24
  SECTION 10.05   Severability........................................25
  SECTION 10.06   Separate Counterparts...............................25
  SECTION 10.07   Successors and Assigns..............................25
  SECTION 10.08   No Petition.........................................25
  SECTION 10.09   No Recourse.........................................25
  SECTION 10.10   Headings............................................25
  SECTION 10.11   GOVERNING LAW.......................................26
  SECTION 10.12   Integration.........................................26

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EXHIBITS

Exhibit A-1 Form of Class R-1 Certificate
Exhibit A-2 Form of Class R-2 Certificate
Exhibit B   Form of Certificate of Trust
Exhibit C   Form of Rule 144A Investment Representation
Exhibit D   Form of Investor Representation Letter
Exhibit E   Form of Depositor Representation Letter
Exhibit F   Form of Certificate of Non-Foreign Status
Exhibit G   Form of ERISA Representation Letter
Exhibit H   form of Certificate Tax Matters Transfer Affidavit

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            This AMENDED AND RESTATED TRUST AGREEMENT dated as of July 1, 2000
(as amended from time to time, this "Trust Agreement"), between Morgan Stanley
ABS Capital I, Inc., as depositor (the "Depositor"), and Wilmington Trust
Company, a Delaware banking corporation, as owner trustee (the "Owner Trustee").

                                WITNESSETH THAT:

            WHEREAS, the Depositor and the Owner Trustee did execute that
certain Trust Agreement (the "Original Trust Agreement") on July 21, 2000;

            WHEREAS;  the  Depositor  and the Owner  Trustee now wish to amend
and restate the Original Trust Agreement;

            NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Depositor and the Owner Trustee agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

            SECTION 1.01 Definitions. For all purposes of this Trust Agreement,
except as otherwise expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall have the meanings
assigned to such terms in the Sale and Servicing Agreement, dated as of July 1,
2000 (the "Sale and Servicing Agreement"), among the Depositor, the Trust,
Morgan Stanley ABS Capital I Trust 2000-1N, Long Beach Mortgage Company, as
master servicer, and Bankers Trust Company Of California, N.A., as indenture
trustee (the "Indenture Trutsee") and if not defined therein, in the Indenture,
dated as of July 1, 2000 (the "Indenture"), between the Trust and the Indenture
Trustee. All other capitalized terms used herein shall have the meanings
specified herein.

            SECTION 1.02 Other Definitional Provisions. (a) All terms
defined in this Trust Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.

            (b) As used in this Trust Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Trust Agreement or in any such certificate or other document,
and accounting terms partly defined in this Trust Agreement or in any such
certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting terms in this Trust
Agreement or in any such certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Trust Agreement or in any such certificate or
other document shall control.

            (c) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Trust Agreement shall refer to this Trust Agreement as
a whole and not to any particular provision of this Trust Agreement; Article,
Section and Exhibit references contained in

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this Trust Agreement are references to Articles, Sections and Exhibits in or to
this Trust Agreement unless otherwise specified; and the term "including" shall
mean "including without limitation".

            (d) The definitions contained in this Trust Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.

            (e) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.

                                   ARTICLE II

                                  ORGANIZATION

            SECTION 2.01 Name. The trust created hereby (the "Trust") shall be
known as "Morgan Stanley ABS Capital I Trust 2000-1", in which name the Owner
Trustee may conduct the business of the Trust, make and execute contracts and
other instruments on behalf of the Trust, and sue and be sued on behalf of the
Trust.

            SECTION 2.02 Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in Delaware
as the Owner Trustee may designate by written notice to the Certificateholders
and the Depositor.

            SECTION 2.03 Purposes and Powers. The purpose of the Trust is to
engage in the following activities:

            (a) to execute, issue and deliver the Class A Notes, the Class M-1
      Notes, the Class M-2 Notes, the Class B-1 Notes, the Class C Notes and the
      Class P Notes (collectively, the "Notes") pursuant to the Indenture, and
      the Class R-1 Certificates and the Class R-2 Certificates (collectively,
      the "Certificates") pursuant to this Trust Agreement;

            (b) to pay the organizational, startup and transactional expenses of
      the Trust;

            (c) to hold, assign, grant, transfer, pledge and convey the Mortgage
      Loans pursuant to the Indenture and to hold, manage and distribute to the
      Certificateholders pursuant to Section 5.01 hereof, any portion of the
      Mortgage Loans released from the Lien of, and remitted to the Trust
      pursuant to, the Indenture and the Sale and Servicing Agreement;

            (d) to purchase and hold the Mortgage Loans and the other trust
      property (the "Owner Trust Estate") pursuant to the Sale and Servicing
      Agreement;

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            (e) to enter into, execute, deliver and perform its obligations
      under the Transaction Documents to which it is to be a party and to enter
      into and to consummate the transactions contemplated thereby;

            (f) if directed in writing by holders of Certificates representing
      more than 50% of the beneficial interests in the Trust, to sell the Owner
      Trust Estate subsequent to the satisfaction and discharge of the
      Indenture, all for the benefit of the holders of the Certificates;

            (g) to make one or more REMIC elections for federal income tax
      purposes with respect to the Owner Trust Estate;

            (h) to engage in those activities, including entering into,
      executing and delivering agreements, that are necessary, suitable or
      convenient to accomplish the foregoing or are incidental thereto or
      connected therewith; and

            (i) subject to compliance with the Transaction Documents, to engage
      in such other activities as may be required in connection with
      conservation of the Owner Trust Estate and the making of distributions to
      the Certificateholders and the Noteholders.

            The Trust is hereby authorized to engage in the foregoing
activities. The Trust shall not engage in any activity other than in connection
with the foregoing to the extent limited, or other than as expressly required or
authorized by the terms of this Trust Agreement or the other Transaction
Documents.

            SECTION 2.04 Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.

            SECTION 2.05 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Trust,
as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges
receipt in trust from the Depositor, as of the date hereof, of the foregoing
contribution, which shall constitute the initial corpus of the Trust.

            SECTION 2.06 Declaration of Trust. The Owner Trustee hereby declares
that it shall hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Transaction Documents. It is
the intention of the parties hereto that the Trust constitute a "business trust"
under the Business Trust Statute and that this Trust Agreement constitute the
governing instrument of such business trust. It is the intention of the parties
hereto that, for federal and state income and state and local franchise tax
purposes, the Trust shall not be treated as (i) an association subject
separately to taxation as a corporation, (ii) a "publicly traded partnership" as
defined in Treasury Regulation Section 1.77041 or (iii) a "taxable mortgage
pool" as defined in Section 7701(i) of the Code but instead shall elect to be
treated as a REMIC, and that the Notes shall be REMIC Regular Interests and the
provisions of this Trust Agreement shall be interpreted to further this
intention. Except as otherwise provided in this Trust Agreement, the rights of
the Certificateholders will be those of holders of a REMIC Residual Interest and

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beneficial owners of the Trust. Effective as of the date hereof, the Owner
Trustee shall have all rights, powers and duties set forth herein and in the
Business Trust Statute with respect to accomplishing the purposes of the Trust.
The Owner Trustee is hereby authorized to file a certificate of trust for the
Trust pursuant to Section 3810 of the Business Trust Statute.

            SECTION 2.07 [Reserved].

            SECTION 2.08 Title to Trust Property. Except with respect to the
Mortgage Loans, which will be assigned of record to the Indenture Trustee
pursuant to the Indenture, legal title to the Owner Trust Estate shall be vested
at all times in the Trust as a separate legal entity except where applicable law
in any jurisdiction requires title to any part of the Owner Trust Estate to be
vested in a trustee or trustees, in which case title shall be deemed to be
vested in the Owner Trustee, a co-trustee and/or a separate trustee, as the case
may be.

            SECTION 2.09 Situs of Trust. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the States of Delaware and
California. The Trust shall not have any employees in any state other than
Delaware; provided, however, that nothing herein shall restrict or prohibit the
Owner Trustee from having employees within or without the State of Delaware or
taking actions outside the State of Delaware. Payments will be received by the
Trust only in the States of Delaware, California or New York, and payments will
be made by the Trust only from the States of Delaware, California or New York.
The only office of the Trust will be at the Corporate Trust Office in the State
of Delaware.

            SECTION 2.10 Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:

            (a) The Depositor is duly organized and validly existing as a
      corporation in good standing under the laws of the State of Delaware, with
      power and authority to own its properties and to conduct its business as
      such properties are currently owned and such business is presently
      conducted.

            (b) The Depositor is duly qualified to do business as a foreign
      corporation in good standing and has obtained all necessary licenses and
      approvals in all jurisdictions in which the ownership or lease of its
      property or the conduct of its business shall require such qualifications
      and in which the failure to so qualify would have a material adverse
      effect on the business, properties, assets or condition (financial or
      other) of the Depositor.

            (c) The Depositor has the power and authority to execute and deliver
      this Trust Agreement and to carry out its terms; the Depositor has full
      power and authority to convey and assign the property to be conveyed and
      assigned to and deposited with the Trust as part of the Owner Trust Estate
      and the Depositor has duly authorized such conveyance and assignment and
      deposit to the Trust by all necessary corporate action; and the execution,
      delivery and performance of this Trust Agreement have been duly authorized
      by the Depositor by all necessary corporate action.

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            (d) The Trust Agreement has been duly executed and delivered by the
      Depositor by all necessary corporate action and the Trust Agreement is
      enforceable against the Depositor in accordance with its terms.

            (e) The consummation of the transactions contemplated by this Trust
      Agreement and the fulfillment of the terms hereof do not conflict with,
      result in any breach of any of the terms and provisions of, or constitute
      (with or without notice or lapse of time) a default under, the articles of
      incorporation or bylaws of the Depositor, or any indenture, agreement or
      other instrument to which the Depositor is a party or by which it is
      bound; nor result in the creation or imposition of any Lien upon any of
      its properties pursuant to the terms of any such indenture, agreement or
      other instrument (other than pursuant to the Transaction Documents); nor
      violate any law or, to the best of the Depositor's knowledge, any order,
      rule or regulation applicable to the Depositor of any court or of any
      federal or state regulatory body, administrative agency or other
      governmental instrumentality having jurisdiction over the Depositor or its
      properties.

            (f) The Trust is not required to register as an investment company
      under the Investment Company Act and is not under the control of a Person
      required to so register.

            SECTION 2.11 Investment Company. Neither the Depositor nor any
holder of a Certificate shall take any action which would cause the Trust to
become an "investment company" which would be required to register under the
Investment Company Act.

                                  ARTICLE III

                 CONVEYANCE OF THE MORTGAGE LOANS; CERTIFICATES

            SECTION 3.01 Conveyance of the Mortgage Loans. Pursuant to the Sale
and Servicing Agreement, on the Closing Date the Depositor will transfer,
without recourse, the Mortgage Loans to the Trust.

            SECTION 3.02 Initial Ownership. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.05 and until the
issuance of the Certificates, the Depositor shall be the sole beneficial owner
of the Trust. Upon the issuance of the Certificates, the Certificateholders
shall be the sole beneficial owners of the Trust.

            SECTION 3.03 The Certificates. The Class R-1 Certificates shall be
issued substantially in the form of Exhibit A-1 hereto and the Class R-2
Certificates shall be issued substantially in the form of Exhibit A-2 hereto.
The Certificates shall be issued in the form of one or more Certificates each
representing not less than a 10% Percentage Interest in such Class. The
Certificates shall initially be registered in the name of the Depositor. The
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee and authenticated in the
manner provided in Section 3.04. Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have
been affixed, authorized to sign on behalf of the Trust, shall be validly issued
and entitled to the benefit of this Trust Agreement, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of authentication and delivery of

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such Certificates. A Person shall become a Certificateholder and shall be
entitled to the rights and subject to the obligations of a Certificateholder
hereunder upon such Person's acceptance of a Certificate duly registered in such
Person's name, pursuant to Section 3.05.

            A transferee of a Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to and upon satisfaction of
the conditions set forth in Section 3.05.

            SECTION 3.04 Authentication of Certificates. The Owner Trustee shall
cause all Certificates issued hereunder to be executed and authenticated in the
name and on behalf of the Trust, authenticated and delivered to or upon the
written order of the Depositor, signed by its chairman of the board, its
president or any vice president, without further corporate action by the
Depositor, in authorized denominations. No Certificate shall entitle its holder
to any benefit under this Trust Agreement or be valid for any purpose unless
there shall appear on such Certificate a certificate of authentication
substantially in the form set forth in Exhibit A-1 or A-2, as the case may be,
executed by the Owner Trustee or the Certificate Registrar by manual signature;
such authentication shall constitute conclusive evidence that such Certificate
shall have been duly authenticated and delivered hereunder. All Certificates
shall be dated the date of their authentication.

            SECTION 3.05 Registration of and Limitations on Transfer and
Exchange of Certificates. The Certificate Registrar shall keep or cause to be
kept, a Certificate Register in which, subject to such reasonable regulations as
it may prescribe, the Certificate Registrar shall provide for the registration
of Certificates and of transfers and exchanges of Certificates as herein
provided. Wilmington Trust Company shall be the initial Certificate Registrar.
If the Certificate Registrar resigns or is removed, the Owner Trustee shall
appoint a successor Certificate Registrar.

            Subject to satisfaction of the conditions set forth below with
respect to the Certificate, upon surrender for registration of transfer of any
Certificate at the office or agency maintained pursuant to Section 3.09, the
Owner Trustee or the Certificate Registrar shall execute, authenticate and
deliver in the name of the designated transferee or transferees, one or more new
Certificates in authorized denominations of a like aggregate amount dated the
date of authentication by the Owner Trustee or the Certificate Registrar. At the
option of a Certificateholder, Certificates may be exchanged for other
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Certificates to be exchanged at the office or agency maintained
pursuant to Section 3.09.

            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 Certificate Registrar duly executed by the
Certificateholder or such Certificateholder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer or exchange
shall be canceled and subsequently disposed of by the Certificate Registrar in
accordance with its customary practice.

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

            Each holder of a Certificate by his acceptance thereof, shall be
deemed for all purposes to have consented to the provisions of this Section
3.05. No transfer, sale, pledge or other disposition of a Certificate shall be
made unless such transfer, sale, pledge or other disposition is exempt from the
registration requirements of the Securities Act and any applicable state
securities laws or is made in accordance with said Act and laws. In the event of
any such transfer, the Certificate Registrar or the Depositor shall prior to
such transfer require the transferee to execute and deliver to the Owner Trustee
and Certificate Registrar, (a) either (i) an investment letter in substantially
the form attached hereto as Exhibit C (or in such form and substance reasonably
satisfactory to the Certificate Registrar and the Depositor), which investment
letter shall not be an expense of the Trust, the Owner Trustee, the Certificate
Registrar, the Master Servicer or the Depositor, and which investment letter
states that, among other things, such transferee (A) is a "qualified
institutional buyer" as defined under Rule 144A, acting for its own account or
the accounts of other "qualified institutional buyers" as defined under Rule
144A and (B) is aware that the proposed Depositor intends to rely on the
exemption from registration requirements under the Securities Act of 1933, as
amended, provided by Rule 144A or (ii) (A) a written Opinion of Counsel
acceptable to and in form and substance satisfactory to the Certificate
Registrar and the Depositor that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor, from said
Act and laws or is being made pursuant to said Act and laws, which Opinion of
Counsel shall not be an expense of the Trust, the Owner Trustee, the Certificate
Registrar or the Depositor and (B) the transferee executes a representation
letter, substantially in the form of Exhibit D hereto, and the Depositor
executes a representation letter, substantially in the form of Exhibit E hereto,
each acceptable to and in form and substance satisfactory to the Certificate
Registrar and the Depositor certifying the facts surrounding such transfer,
which representation letters shall not be an expense of the Trust, the Owner
Trustee, the Certificate Registrar or the Depositor and (b) the Certificate of
Non-Foreign Status (in substantially the form attached hereto as Exhibit F)
acceptable to and in form and substance reasonably satisfactory to the
Certificate Registrar and the Depositor, which certificate shall not be an
expense of the Trust, the Owner Trustee, the Certificate Registrar, the Master
Servicer or the Depositor. If the Certificateholder is unable to provide a
Certificate of Non-Foreign Status, the Certificateholder must provide an Opinion
of Counsel as described above in this paragraph. The Certificateholder desiring
to effect such transfer shall, and does hereby agree to, indemnify the Trust,
the Owner Trustee, in its individual capacity, the Certificate Registrar and the
Depositor against any liability that may result if the transfer is not so exempt
or is not made in accordance with such federal and state laws or otherwise is
not made in accordance with this Trust Agreement.

            No transfer of a Certificate or any interest therein shall be made
to any employee benefit plan or certain other retirement plans and arrangements,
including, without limitation, individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA, or Section 4975 of the Code (collectively, "Plan"),
any Person acting, directly or indirectly on behalf of any such Plan or any
Person

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acquiring such Certificates with assets of a Plan ("Plan Assets"). Any
transferee of Certificates must provide a certification in the form of Exhibit G
to this Trust Agreement, which the Owner Trustee, the Certificate Registrar and
the Depositor may rely upon without further inquiry or investigation. No
certification will be required in connection with the initial transfer or pledge
of any such Certificate by the Depositor to an affiliate of the Depositor (in
which case, the Depositor or any affiliate thereof shall have deemed to have
represented that such affiliate is not a Plan or a Person investing Plan Assets
of any Plan) and the Owner Trustee shall be entitled to rely conclusively upon a
written representation from the Depositor of the status of such transferee as an
affiliate of the Depositor.

            No sale or other transfer of record or beneficial ownership of a
Certificate (whether pursuant to a purchase, a transfer resulting from a default
under a secured lending agreement or otherwise) shall be made to a Disqualified
Organization or an agent of a Disqualified Organization or to a non-U.S. Person.
The transfer, sale or other disposition of a Certificate (whether pursuant to a
purchase, a transfer resulting from a default under a secured lending agreement
or otherwise) to a Disqualified Organization shall be deemed to be of no legal
force or effect whatsoever and such transferee shall not be deemed to be a
Certificateholder for any purpose hereunder, including, but not limited to, the
receipt of distributions on such Certificate. Furthermore, in no event shall the
Owner Trustee accept surrender for transfer, registration of transfer, or
register the transfer, of any Certificate nor authenticate and make available
any new Certificate unless the Owner Trustee has received affidavits from the
proposed transferee in the forms attached hereto as Exhibits F and I. Each
holder of a Certificate by his acceptance thereof, shall be deemed for all
purposes to have consented to the provisions of this Section 3.05.

            Notwithstanding anything contained herein to the contrary, the Owner
Trustee shall not be responsible for ascertaining whether any transfer complies
with the registration requirements from the Securities Act of 1934, as amended,
applicable state securities law or the Investment Company Act; provided,
however, that if a certificate is specifically required to be delivered to the
Owner Trustee by the transferor or the transferee of a Certificate, the Owner
Trustee shall be required to examine the same to determine whether it conforms
to the requirements on this Trust Agreement and shall promptly notify the party
delivering the same if such certificate does not so conform. The Owner Trustee
will not permit the transfer of any Certificate unless it shall have received
the deliveries contemplated by this Trust Agreement.

            SECTION 3.06 Mutilated, Destroyed, Lost or Stolen Certificates. If
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and there shall be delivered to
the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice to the Certificate Registrar or the Owner Trustee that such Certificate
has been acquired by a bona fide purchaser, the Owner Trustee shall execute in
the name and on behalf of the Trust and the Owner Trustee or the Certificate
Registrar, shall authenticate and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section 3.06, the Owner Trustee or the Certificate Registrar may
require the payment of a sum sufficient to cover any expenses of the Owner
Trustee or the Certificate

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Registrar (including fees and expenses of counsel) and any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this Section 3.06 shall constitute conclusive
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.

            SECTION 3.07 Persons Deemed Certificateholders. Prior to due
presentation of a Certificate for registration of transfer, the Trust, the Owner
Trustee or the Certificate Registrar shall treat the Person in whose name any
Certificate is registered in the Certificate Register as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 5.02
and for all other purposes whatsoever, and none of the Trust, the Owner Trustee,
the Certificate Registrar or any Note Paying Agent shall be bound by any notice
to the contrary.

            SECTION 3.08 Access to List of Certificateholders' Names and
Addresses. The Certificate Registrar shall furnish or cause to be furnished to
the Depositor or the Owner Trustee, within 15 days after receipt by the
Certificate Registrar of a written request therefor from the Depositor or the
Owner Trustee, a list, in such form as the Depositor or the Owner Trustee, as
the case may be, may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. Each Certificateholder, by
receiving and holding a Certificate, shall be deemed to have agreed not to hold
any of the Trust, the Depositor, the Certificate Registrar or the Owner Trustee
in its individual capacity accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.

            SECTION 3.09 Maintenance of Office or Agency. The Owner Trustee on
behalf of the Trust, shall maintain in Wilmington, Delaware, an office or
offices or agency or agencies where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Certificates and the Transaction Documents
may be served. The Owner Trustee initially designates the Corporate Trust Office
as its office for such purposes. The Owner Trustee shall give prompt written
notice to the Depositor and the Certificateholders of any change in the location
of the Certificate Register or any such office or agency.

                                   ARTICLE IV

                      AUTHORITY AND DUTIES OF OWNER TRUSTEE

            SECTION 4.01 General Authority. The Owner Trustee is authorized,
empowered and directed to execute and deliver, on behalf of the Trust, each of
the Transaction Documents to which the Trust is or is to be a party and each
certificate or other document attached as an exhibit to or contemplated by the
Transaction Documents to which the Trust is or is to be a party and any
amendment or other agreement or instrument described herein, as evidenced
conclusively by the Owner Trustee's execution thereof. In addition to the
foregoing, the Owner Trustee, in the name and on behalf of the Trust, shall have
the power and authority, and hereby is authorized and empowered, but shall not
be obligated, except as otherwise provided in this Trust Agreement, to take all
actions required of the Trust pursuant to the Transaction Documents.

                                       9
<PAGE>

            SECTION 4.02 General Duties. (a) It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged) all of the responsibilities
expressly required to be performed by it pursuant to the terms of this Trust
Agreement, subject to the Transaction Documents and in accordance with the
provisions of this Trust Agreement.

            (b) If an Authorized Officer of the Owner Trustee shall have actual
knowledge of the occurrence of a Master Servicer Event of Default under the Sale
and Servicing Agreement or an Event of Default under the Indenture, the Owner
Trustee shall promptly notify the Indenture Trustee and the Rating Agencies
thereof in accordance with Section 11.05 of the Sale and Servicing Agreement.

            SECTION 4.03 Action upon Instruction. Subject to this Article IV and
in accordance with the terms of the Transaction Documents, the
Certificateholders may by written instruction direct the Owner Trustee in the
management of the Trust. Such direction may be exercised at any time by written
instruction of the Certificateholders pursuant to this Article IV.

            Notwithstanding the foregoing, the Owner Trustee shall not be
required to take any action hereunder or under any Transaction Document if the
Owner Trustee shall have reasonably determined, or shall have been advised by
counsel, that such action is likely to result in liability on the part of the
Owner Trustee is contrary to the terms hereof or of any Transaction Document
shall cause the Trust to fail to continue to qualify as a REMIC or is otherwise
contrary to law.

            Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Trust Agreement or
under any Transaction Document, or in the event that the Owner Trustee is unsure
as to the application of any provision of this Trust Agreement or any
Transaction Document or any such provision is ambiguous as to its application,
or is, or appears to be, in conflict with any other applicable provision, or in
the event that this Trust Agreement permits any determination by the Owner
Trustee or is silent or is incomplete as to the course of action that the Owner
Trustee is required to take with respect to a particular set of facts, the Owner
Trustee shall promptly give notice (in such form as shall be appropriate under
the circumstances) to the Certificateholders requesting instruction as to the
course of action to be adopted, and to the extent the Owner Trustee acts in good
faith in accordance with any written instruction of the Certificateholders, the
Owner Trustee shall not be liable on account of such action to any Person. If
the Owner Trustee shall not have received appropriate instruction within 10 days
of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Trust Agreement or the Transaction Documents, as it shall
deem to be in the best interests of the Certificateholders and the Noteholders,
and the Owner Trustee shall have no liability to any Person for such action or
inaction.

            SECTION 4.04 No Duties Except as Specified under this Trust
Agreement, Transaction Documents or in Instructions. Notwithstanding any other
provision herein or elsewhere, the Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, this

                                       10
<PAGE>

Trust Agreement or any document contemplated hereby to which the Trust or the
Owner Trustee is a party, except as expressly provided (a) in this Trust
Agreement, (b) in the Transaction Documents and (c) in any document or
instruction delivered to the Owner Trustee pursuant to Section 4.03; and no
implied duties or obligations shall be read into this Trust Agreement or any
Transaction Document against the Owner Trustee. The Owner Trustee shall have no
responsibility (i) to file any financing or continuation statement in any public
office at any time, (ii) to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder, (iii) to record this Trust
Agreement or any Transaction Document or (iv) to prepare or file any Securities
and Exchange Commission filing for the Trust. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate.

            SECTION 4.05 Restrictions. The Owner Trustee or the Depositor (or an
Affiliate thereof) shall not take any action (i) that is inconsistent with the
purposes of the Trust set forth in Section 2.03 or (ii) that, to the actual
knowledge of the Owner Trustee based on an Opinion of Counsel rendered by a law
firm generally recognized to be qualified to opine concerning the tax aspects of
asset securitization, would result in the Trust failing to continue to be
treated as a REMIC for federal income tax purposes. The Certificateholders shall
not direct the Owner Trustee to take action that would violate the provisions of
this Section 4.05.

            The Owner Trustee shall not convey or transfer any of the Trust's
properties or assets, including those included in the Trust Estate, to any
person unless (i) it shall have received an Opinion of Counsel rendered by a law
firm generally recognized to be qualified to opine concerning the tax aspects of
asset securitization to the effect that such transaction will not cause the
Trust to fail to continue to qualify as a REMIC and (ii) such conveyance or
transfer shall not violate the provisions of Section 3.16(b) of the Indenture.

            The Trust shall not commingle its assets with those of any other
entity. The Trust shall maintain its financial and accounting books and records
separate from those of any other entity. Except as expressly set forth herein,
the Trust shall pay its indebtedness, operating expenses and liabilities from
its own funds, and the Trust shall not pay the indebtedness, operating expenses
and liabilities of any other entity. The Trust shall maintain appropriate
minutes or other records of all appropriate actions and shall maintain its
office separate from the offices of the Depositor.

            SECTION 4.06 Prior Notice to Certificateholders with Respect to
Certain Matters. With respect to the following matters, the Owner Trustee shall
not take action unless at least 30 days before the taking of such action, the
Owner Trustee shall have notified the Certificateholders in writing of the
proposed action and the Certificateholders shall not have notified the Owner
Trustee in writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:

            (a) the initiation of any claim or lawsuit by the Trust (except
      claims or lawsuits brought in connection with the collection of cash
      distributions due and owing under the Mortgage Loans) and the compromise
      of any action, claim or lawsuit brought

                                       11
<PAGE>

      by or against the Trust (except with respect to the aforementioned
      claims or lawsuits for collection of cash distributions due and owing
      under the Mortgage Loans);

            (b) the election by the Trust to file an amendment to the
      Certificate of Trust (unless such amendment is required to be filed under
      the Business Trust Statute);

            (c) the amendment or other change to this Trust Agreement or any
      Transaction Document in circumstances where such amendment materially
      adversely affects the interest of the Certificateholders;

            (d) the appointment pursuant to the Indenture of a successor Note
      Registrar, Note Paying Agent, Indenture Trustee or, pursuant to this Trust
      Agreement, of a successor Certificate Registrar or the consent to the
      assignment by the Note Registrar, Note Paying Agent, Indenture Trustee or
      Certificate Registrar of its obligations under the Indenture or this Trust
      Agreement, as applicable;

            (e) the consent to the calling or waiver of any default under any
      Transaction Document;

            (f) the consent to the assignment by the Indenture Trustee or Master
      Servicer of their respective obligations under any Transaction Document;

            (g) except as provided in Article VIII hereof, dissolve, terminate
      or liquidate the Trust in whole or in part;

            (h) merge or consolidate the Trust with or into any other entity, or
      convey or transfer all or substantially all of the Trust's assets to any
      other entity;

            (i) cause the Trust to incur, assume or guaranty any indebtedness
      other than as set forth in this Trust Agreement;

            (j) perform any act that conflicts with any other Transaction
      Document;

            (k) perform any act which would make it impossible to carry on the
      ordinary business of the Trust as described in Section 2.03 hereof;

            (l) confess a judgment against the Trust;

            (m) possess Trust assets or assign the Trust's right to property for
      other than a Trust purpose;

            (n) cause the Trust to lend any funds to any entity; or

            (o) change the Trust's purpose and powers from those enumerated in
      this Trust Agreement.

            SECTION 4.07 Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders,

                                       12
<PAGE>

(a) to remove or replace the Master Servicer under the Sale and Servicing
Agreement pursuant to Section 5.02 thereof or to remove or replace the Indenture
Trustee under the Indenture pursuant to Section 6.08 thereof, (b) except as
expressly provided in the Transaction Documents, sell the Mortgage Loans after
the termination of the Indenture, (c) institute proceedings to have the Trust
declared or adjudicated to be bankrupt or insolvent, (d) consent to the
institution of bankruptcy or insolvency proceedings against the Trust, (e) file
a petition or consent to a petition seeking reorganization or relief on behalf
of the Trust under any applicable federal or state law relating to bankruptcy,
(f) consent to the appointment of a receiver, liquidate, assignee, trustee,
sequestrate (or any similar official) of the Trust or a substantial portion of
the property of the Trust, (g) make any assignment for the benefit of the
Trust's creditors, (h) cause the Trust to admit in writing its inability to pay
its debts generally as they become due, (i) take any action or cause the Trust
to take any action, in furtherance of any of the foregoing clauses (c) through
(i) (any of such clauses, a "Bankruptcy Action"). So long as the Indenture
remains in effect, no Certificateholder shall have the power to take, and shall
not take, any Bankruptcy Action with respect to the Trust or the Depositor or
direct the Owner Trustee to take any Bankruptcy Action with respect to the Trust
or the Depositor. The Owner Trustee shall take the actions referred to in the
preceding sentence only upon written instructions signed by the
Certificateholders.

            SECTION 4.08 Action by Certificateholders with Respect to
Bankruptcy. The Owner Trustee shall not have the power to commence a voluntary
proceeding in bankruptcy relating to the Trust without the unanimous prior
approval of all Certificateholders and the consent of the Noteholders and the
Owner Trustee and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent. This paragraph shall survive
for one year and one day following termination of this Trust Agreement.

            SECTION 4.09 Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or to refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Trust Agreement or any of the
Transaction Documents or would be contrary to Section 2.03, nor shall the Owner
Trustee be obligated to follow any such direction, if given.

            SECTION 4.10 Majority Control. Except as expressly provided herein,
any action that may be taken by the Certificateholders under this Trust
Agreement may be taken by the holders of Certificates evidencing not less than a
majority of the outstanding Certificate Percentage Interests of the
Certificates. Except as expressly provided herein, any written notice of the
Certificateholders delivered pursuant to this Trust Agreement shall be effective
if signed by holders of Certificates evidencing not less than a majority of the
outstanding Certificate Percentage Interests at the time of the delivery of such
notice.

                                   ARTICLE V

                           APPLICATION OF TRUST FUNDS

            SECTION 5.01 Distributions. Distributions to the Certificateholders
will be made as provided in the Sale and Servicing Agreement.

                                       13
<PAGE>

            SECTION 5.02 [Reserved].

            SECTION 5.03 Tax Returns. Pursuant to the Sale and Servicing
Agreement, the Indenture Trustee shall (a) maintain (or cause to be maintained)
the books of the Trust on a calendar year basis using the accrual method of
accounting, (b) deliver (or cause to be delivered) to each Certificateholder as
may be required by the Code and applicable Treasury Regulations, such
information as may be required to enable each Certificateholder to prepare its
federal and state income tax returns, (c) prepare and file or cause to be
prepared and filed such tax returns relating to the Trust as may be required by
the Code and applicable Treasury Regulations (including timely making one or
more elections to treat the Trust as a REMIC for federal income tax purposes and
any other such elections as may from time to time be required or appropriate
under any applicable state or federal statutes, rules or regulations) and the
Indenture Trustee shall collect or cause to be collected any withholding tax as
described in and in accordance with Section 5.01 of this Trust Agreement with
respect to income or distributions to Certificateholders and prepare or cause to
be prepared the appropriate forms relating thereto.

                                   ARTICLE VI

                          CONCERNING THE OWNER TRUSTEE

            SECTION 6.01 Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Trust Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Transaction
Documents and this Trust Agreement. The Owner Trustee in its individual capacity
shall not personally be answerable or accountable hereunder or under any
Transaction Document under any circumstances, except to the Trust or the
Certificateholders (i) for its own willful misconduct, gross negligence or bad
faith or grossly negligent failure to act or (ii) in the case of the inaccuracy
of any representation or warranty contained in Section 6.03 expressly made by
the Owner Trustee. In particular, but not by way of limitation (and subject to
the exceptions set forth in the preceding sentence):

            (a) the Owner Trustee shall not be liable with respect to any action
      taken or omitted to be taken by it in accordance with the instructions of
      the Certificateholders permitted under this Trust Agreement;

            (b) no provision of this Trust Agreement or any Transaction Document
      shall require the Owner Trustee to expend or risk funds or otherwise incur
      in its individual capacity any financial liability in the performance of
      any of its rights, duties or powers hereunder or under any Transaction
      Document if the Owner Trustee shall have reasonable grounds for believing
      that repayment of such funds or adequate indemnity against such risk or
      liability is not reasonably assured or provided to it in its individual
      capacity;

            (c) under no circumstances shall the Owner Trustee be liable for
      indebtedness evidenced by or arising under any of the Transaction
      Documents, including the principal of and interest on the Notes;

                                       14
<PAGE>

            (d) the Owner Trustee shall not be responsible for or in respect of
      the validity or sufficiency of this Trust Agreement or for the due
      execution hereof by the Depositor or for the form, character, genuineness,
      sufficiency, value or validity of any of the Owner Trust Estate, or for or
      in respect of the validity or sufficiency of the Transaction Documents,
      the Notes, the Certificates, other than the certificate of authentication
      on the Certificates, if executed by the Owner Trustee, and the Owner
      Trustee shall in no event assume or incur any liability, duty, or
      obligation to any Noteholder or to any Certificateholder, other than as
      expressly provided for herein or expressly agreed to in the Transaction
      Documents;

            (e) the Owner Trustee shall not be liable for the default or
      misconduct of the Indenture Trustee, Certificate Registrar, the Depositor,
      the Master Servicer or any other party under any of the Transaction
      Documents or otherwise and the Owner Trustee shall have no obligation or
      liability to perform the obligations of the Trust under this Trust
      Agreement or the Transaction Documents that are required to be performed
      by the Indenture Trustee under the Indenture, the Depositor under this
      Trust Agreement or the Master Servicer under the Sale and Servicing
      Agreement; and

            (f) the Owner Trustee shall be under no obligation to exercise any
      of the rights or powers vested in it or duties imposed by this Trust
      Agreement, or to institute, conduct or defend any litigation under this
      Trust Agreement or otherwise or in relation to this Trust Agreement or any
      Transaction Document, at the request, order or direction of any of the
      Certificateholders, unless such Certificateholders have offered to the
      Owner Trustee security or indemnity satisfactory to it against the costs,
      expenses and liabilities that may be incurred by the Owner Trustee therein
      or thereby. The right of the Owner Trustee to perform any discretionary
      act enumerated in this Trust Agreement or in any Transaction Document
      shall not be construed as a duty.

            SECTION 6.02 Furnishing of Documents. The Owner Trustee shall
furnish to the Certificateholders promptly upon receipt of a written reasonable
request therefor, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and any other instruments furnished
to the Owner Trustee under the Transaction Documents.

            SECTION 6.03 Representations and Warranties. The Owner Trustee, in
its individual capacity, hereby represents and warrants to the Depositor, for
the benefit of it and the Certificateholders that:

            (a) It is a banking corporation duly organized and validly existing
      in good standing under the laws of the State of Delaware. It has all
      requisite corporate power and authority to execute, deliver and perform
      its obligations under this Trust Agreement;

            (b) It has taken all corporate action necessary to authorize the
      execution and delivery by it of this Trust Agreement, and this Trust
      Agreement will be executed and delivered by one of its officers who is
      duly authorized to execute and deliver this Trust Agreement on its behalf;

                                       15
<PAGE>

            (c) The execution, delivery, authentication and performance by it of
      this Trust Agreement will not require the authorization, consent or
      approval of, the giving of notice to, the filing or registration with, or
      the taking of any other action with respect to, any governmental authority
      or agency, other than the filing of the certificate of trust with the
      Office of the Secretary of State of the State of Delaware;

            (d) Neither the execution nor the delivery by it of this Trust
      Agreement, nor the consummation by it of the transactions contemplated
      hereby nor compliance by it with any of the terms or provisions hereof
      will contravene any Delaware or federal law, governmental rule or
      regulation governing the banking or trust powers of the Owner Trustee or
      any judgment or order binding on it, or constitute any default under its
      charter documents or bylaws or any indenture, mortgage, contract,
      agreement or instrument to which it is a party or by which any of its
      properties may be bound;

            (e) This Trust Agreement, assuming due authorization, execution and
      delivery by the Depositor, constitutes a valid, legal and binding
      obligation of the Owner Trustee, enforceable against it in accordance with
      the terms hereof subject to applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws affecting the enforcement of
      creditors' rights generally and to general principles of equity,
      regardless of whether such enforcement is considered in a proceeding in
      equity or at law;

            (f) The Owner Trustee 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, which default might have
      consequences that would materially and adversely affect the condition
      (financial or other) or operations of the Owner Trustee or its properties
      or might have consequences that would materially adversely affect its
      performance hereunder; and

            (g) No litigation is pending or, to the best of the Owner Trustee's
      knowledge, threatened against the Owner Trustee which would prohibit its
      entering into this Trust Agreement or performing its obligations under
      this Trust Agreement.

            SECTION 6.04 Reliance; Advice of Counsel. The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, Note, or
other document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a certified
copy of a resolution of the board of directors or other governing body of any
corporate party as conclusive evidence that such resolution has been duly
adopted by such body and that the same is in full force and effect. As to any
fact or matter the method of determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a
certificate, signed by the president or any vice president or by the treasurer
or other authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Owner Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.

            In the exercise or administration of the Trust hereunder and in the
performance of its duties and obligations under this Trust Agreement or the
Transaction Documents, the Owner

                                       16
<PAGE>

Trustee may act directly or through its agents, attorneys, custodians or
nominees (including persons acting under a power of attorney) pursuant to
agreements entered into with any of them, and the Owner Trustee shall not be
liable for the conduct or misconduct of such agents, attorneys, custodians or
nominees (including persons acting under a power of attorney) if such persons
have been selected by the Owner Trustee with reasonable care and may consult
with counsel, accountants and other skilled persons to be selected with
reasonable care and employed by it. The Owner Trustee shall not be liable in its
individual capacity for anything done, suffered or omitted in good faith by it
in accordance with the written opinion or advice of any such counsel,
accountants or other such Persons and not contrary to this Trust Agreement or
any Transaction Document.

            SECTION 6.05 Not Acting in Individual Capacity. Except as provided
in this Article VI, in accepting the trusts hereby created Wilmington Trust
Company acts solely as Owner Trustee hereunder and not in its individual
capacity, and all Persons having any claim against the Owner Trustee by reason
of the transactions contemplated by this Trust Agreement or any Transaction
Document shall look only to the Owner Trust Estate for payment or satisfaction
thereof.

            SECTION 6.06 Owner Trustee Not Liable for Certificates or Related
Documents. The recitals contained herein and in the Certificates (other than the
signatures of the Owner Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Trust Agreement, of any Transaction Document or
of the Certificates (other than the signatures of the Owner Trustee on the
Certificates) or the Notes, or of any other Transaction Documents. The Owner
Trustee shall at no time have any responsibility or liability with respect to
the sufficiency of the Owner Trust Estate or its ability to generate the
payments to be distributed to Certificateholders under this Trust Agreement or
the Noteholders under the Indenture, including compliance by the Depositor or
the Originator with any warranty or representation made under any Transaction
Document or in any related document or the accuracy of any such warranty or
representation, or any action of the Certificate Registrar or the Indenture
Trustee taken in the name of the Owner Trustee.

            SECTION 6.07 Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may, subject to Section 3.05,
become the owner or pledge of Certificates or Notes and may deal with the
Depositor, the Certificate Registrar, the Master Servicer and the Indenture
Trustee in transactions with the same rights as it would have if it were not
Owner Trustee.

            SECTION 6.08 Payments from Owner Trust Estate. All payments to be
made by the Owner Trustee under this Trust Agreement or any of the Transaction
Documents to which the Owner Trustee is a party shall be made only from the
income and proceeds of the Owner Trust Estate or from other amounts required to
be provided by the Certificateholders and only to the extent that the Owner
Trustee shall have received income or proceeds from the Owner Trust Estate or
the Certificateholders to make such payments in accordance with the terms
hereof. Wilmington Trust Company, in its individual capacity, shall not be
liable for any amounts payable under this Trust Agreement or any of the
Transaction Documents to which the Owner Trustee is a party.

                                       17
<PAGE>

            SECTION 6.09 Doing Business in Other Jurisdictions. Notwithstanding
anything contained herein to the contrary, neither Wilmington Trust Company nor
the Owner Trustee shall be required to take any action in any jurisdiction other
than in the State of Delaware if the taking of such action will, even after the
appointment of a co-trustee or separate trustee in accordance with Section 9.05
hereof, (i) require the consent or approval or authorization or order of or the
giving of notice to, or the registration with or the taking of any other action
in respect of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware; (ii) result in any fee, tax or
other governmental charge under the laws of the State of Delaware becoming
payable by Wilmington Trust Company; or (iii) subject Wilmington Trust Company
to personal jurisdiction in any jurisdiction other than the State of Delaware
for causes of action arising from acts unrelated to the consummation of the
transactions by Wilmington Trust Company or the Owner Trustee, as the case may
be, contemplated hereby.

            SECTION 6.10 Liability of Certificate Registrar. All provisions
affording protection to or limiting the liability of the Owner Trustee shall
inure as well to the Certificate Registrar.

                                  ARTICLE VII

                          COMPENSATION OF OWNER TRUSTEE

            SECTION 7.01 Owner Trustee's Fees and Expenses. The Owner Trustee
shall receive as compensation for its services hereunder the Owner Trustee's
Fees and reimbursement for its reasonable expenses hereunder and under the
Transaction Documents, pursuant to the Sale and Servicing Agreement.

            SECTION 7.02 Indemnification. The Depositor shall indemnify, defend
and hold harmless Wilmington Trust Company and its successors, assigns, agents
officers, employees, directors, and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Trust Agreement,
the Transaction Documents, the Owner Trust Estate, the administration of the
Owner Trust Estate or the action or inaction of the Owner Trustee hereunder;
provided, that:

            (a) the Depositor shall not be liable for or required to indemnify
      an Indemnified Party from and against Expenses arising or resulting from
      the Owner Trustee's willful misconduct, gross negligence or bad faith or
      as a result of the inaccuracy of a representation or warranty contained in
      Section 6.03 expressly made by the Owner Trustee;

            (b) with respect to any such claim, the Indemnified Party shall have
      given the Depositor written notice thereof promptly after the Indemnified
      Party shall have actual knowledge thereof;

                                       18
<PAGE>

            (c) while maintaining control over its own defense, the Depositor
      shall consult with the Indemnified Party in preparing such defense; and

            (d) notwithstanding anything in this Trust Agreement to the
      contrary, the Depositor shall not be liable for settlement of any claim by
      an Indemnified Party entered into without the prior consent of the
      Depositor which consent shall not be unreasonably withheld.

            The indemnities contained in this Section 7.02 shall survive the
resignation or removal of the Owner Trustee or the termination of this Trust
Agreement. In the event of any claim, action or proceeding for which indemnity
will be sought pursuant to this Section 7.02, the Owner Trustee's choice of
legal counsel, if other than the legal counsel retained by the Owner Trustee in
connection with the execution and delivery of this Trust Agreement, shall be
subject to the approval of the Depositor, which approval shall not be
unreasonably withheld. In addition, upon written notice to the Owner Trustee and
with the consent of the Owner Trustee which consent shall not be unreasonably
withheld, the Depositor has the right to assume the defense of any claim, action
or proceeding against the Owner Trustee.

                                  ARTICLE VIII

                         TERMINATION OF TRUST AGREEMENT

            SECTION 8.01 Termination of Trust Agreement. (a) This Trust
Agreement (other than Article VII) and the Trust shall terminate and be of no
further force or effect, and the Owner Trustee at the written director of the
Certificateholder shall cause the Trust to execute and file a certificate of
cancellation upon the earliest of the final distribution of all moneys or other
property or proceeds of the Owner Trust Estate in accordance with the terms of
the Indenture and this Trust Agreement or the distribution of all of the assets
of the Owner Trust Estate, in accordance with written instructions provided to
the Owner Trustee by holders of a majority of the Certificates, following the
optional redemption of the Notes by the Issuer pursuant to Section 10.01 of the
Indenture; provided, in each case that all amounts owing to the Noteholders to
the extent payable from the Owner Trust Estate or proceeds thereof have been
paid in full and that all obligations under the Indenture have been discharged;
and provided, further, that the Owner Trustee shall have obtained an opinion of
counsel to the effect that the termination is a "qualified liquidation" under
Section 860F of the Internal Revenue Code of 1986. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder shall not (x) operate
to terminate this Trust Agreement or the Trust or (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or the Owner Trust Estate or (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.

            (b) Except as provided in Section 8.01(a), neither the Depositor nor
any Certificateholder shall be entitled to revoke or terminate this Trust
Agreement or the Trust.

            (c) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the

                                       19
<PAGE>

Secretary of State in accordance with the provisions of Section 3810(d) of the
Business Trust Statute.

                                   ARTICLE IX

            SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

            SECTION 9.01 Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation reasonably acceptable to the
Depositor satisfying the provisions of Section 3807(a) of the Business Trust
Statute; authorized to exercise corporate trust powers; having a combined
capital and surplus of at least $50,000,000 and subject to supervision or
examination by federal or state authorities; and having (or having a parent that
has) a rating of at least "Baa3" or "BBB-" or is otherwise acceptable to Moody's
and Fitch. If such corporation shall publish reports of condition at least
annually pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section 9.01, the combined
capital and surplus of such corporation 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 Owner Trustee shall cease to be eligible in
accordance with the provisions of this Section 9.01, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section 9.02.

            SECTION 9.02 Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving 30 days prior written notice thereof to the Depositor. Upon receiving
such notice of resignation, the Depositor shall promptly appoint a successor
Owner Trustee with the consent of the Depositor which will not be unreasonably
withheld, by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Owner Trustee and one copy to the successor
Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee reasonably
acceptable to the Certificateholders.

            If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 9.01 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Owner Trustee
shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor may remove the Owner Trustee.

            Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section 9.02
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 9.03 and payment of all fees and expenses owed
to the outgoing Owner Trustee. The Master Servicer shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.

                                       20
<PAGE>

            SECTION 9.03 Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 9.02 shall execute, acknowledge and deliver to the
Indenture Trustee and to its predecessor Owner Trustee an instrument accepting
such appointment under this Trust Agreement, and thereupon the resignation or
removal of the predecessor Owner Trustee shall become effective, and such
successor Owner Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor under this Trust Agreement, with like effect as if originally named
as Owner Trustee. Upon the written request of such successor Owner Trustee, the
predecessor Owner Trustee shall upon payment of its fees and expenses, deliver
to the successor Owner Trustee all documents and statements and monies held by
it under this Trust Agreement; and the predecessor Owner Trustee shall execute
and deliver such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the successor Owner
Trustee all such rights, powers, duties and obligations.

            No successor Owner Trustee shall accept appointment as provided in
this Section 9.03 unless at the time of such acceptance such successor Owner
Trustee shall be eligible pursuant to Section 9.01.

            Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section 9.03, the Owner Trustee shall mail notice thereof to all
Certificateholders, the Noteholders and the Rating Agencies.

            Any successor Owner Trustee appointed hereunder shall promptly file
a Certificate of Amendment with the Delaware Secretary of State identifying the
name and principal place of business of such successor Owner Trustee in the
State of Delaware.

            SECTION 9.04 Merger or Consolidation of Owner Trustee. Any Person
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding;
provided, that such Person shall be eligible pursuant to Section 9.01 and,
provided, further, that the Owner Trustee shall provide written notice of such
merger or consolidation to the Rating Agencies.

            SECTION 9.05 Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Trust Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate may at the time be located, the Owner Trustee
shall have the power and authority to execute and deliver all instruments to
appoint one or more Persons to act as co-trustee, jointly with the Owner
Trustee, or as separate trustee or trustees, of all or any part of the Owner
Trust Estate, and to vest in such Person, in such capacity, such title to the
Trust or any part thereof and, subject to the other provisions of this Section,
such powers, duties, obligations, rights and trusts as the Owner Trustee may
consider necessary or desirable. No co-trustee or separate trustee under this
Trust Agreement shall be required to meet the terms of eligibility as a
successor Owner Trustee pursuant to Section 9.01 and no notice of the
appointment of any co-trustee or separate trustee

                                       21
<PAGE>

shall be required pursuant to Section 9.03, except that notice to, and the
consent of, the Depositor shall be required for appointment of a co-trustee.

            Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:

            (a) all rights, powers, duties and obligations conferred or imposed
      upon the Owner Trustee shall be conferred upon and exercised or performed
      by the Owner 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 Owner 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, the Owner 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 Owner Trust Estate 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 Owner Trustee;

            (b) no trustee under this Trust Agreement shall be personally liable
      by reason of any act or omission of any other trustee under this Trust
      Agreement; and

            (c) the Owner Trustee may at any time accept the resignation of or
      remove any separate trustee or co-trustee.

            Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Trust
Agreement and the conditions of this Article IX. 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 Owner Trustee or separately, as may be provided therein,
subject to all the provisions of this Trust Agreement, specifically including
every provision of this Trust Agreement relating to the conduct of, affecting
the liability of, or affording protection to, the Owner Trustee. Each such
instrument shall be filed with the Owner Trustee.

            Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as 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
Trust 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 Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.

                                       22
<PAGE>

                                   ARTICLE X

                                  MISCELLANEOUS

            SECTION 10.01 Amendments. (a) This Trust Agreement may be amended
from time to time by the parties hereto (with prior notice to the Rating
Agencies) as specified in this Section 10.01; provided, that any amendment,
except as provided in subparagraph (e) below, shall be accompanied by an Opinion
of Counsel addressed to the Owner Trustee and obtained by the Master Servicer to
the effect that such amendment complies with the provisions of this Section and
would not cause the Trust to fail to qualify as a REMIC.

            (b) If the purpose of the amendment (as detailed therein) is to
correct any mistake, eliminate any inconsistency, cure any ambiguity or deal
with any matter not covered (i.e. to give effect to the intent of the parties
and, if applicable, to the expectations of the Certificateholders), it shall not
be necessary to obtain the consent of any Certificateholder, but the Owner
Trustee shall be furnished with (i) a letter from each of the Rating Agencies
that the amendment will not result in the downgrading or withdrawal of the
rating then assigned to any Note or (ii) an Opinion of Counsel obtained by the
Depositor to the effect that such action will not adversely affect in any
material respect the interests of any Certificateholders.

            (c) If the purpose of the amendment is to prevent the imposition of
any federal or state taxes at any time that any Security is outstanding, it
shall not be necessary to obtain the consent of any Certificateholder, but the
Owner Trustee shall be furnished with an Opinion of Counsel obtained by the
Depositor that such amendment is necessary or helpful to prevent the imposition
of such taxes and is not materially adverse to any Certificateholder.

            (d) If the purpose of the amendment is to add or eliminate or change
any provision of the Trust Agreement other than as contemplated in (b) and (c)
above, the amendment shall require (i) an Opinion of Counsel obtained by the
Depositor to the effect that such action will not adversely affect in any
material respect the interests of any Certificateholders and (ii) either (A) a
letter from each of the Rating Agencies that the amendment will not result in
the downgrading or withdrawal of the rating then assigned to any Note or (B) the
consent of holders of Certificates evidencing a majority of the Certificate
Percentage Interest; provided, however, that no such amendment shall (1) reduce
in any manner the amount of, or delay the timing of, payments received that are
required to be distributed on any Certificate without the consent of the related
Certificateholder, or (2) reduce the aforesaid percentage 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.

            (e) If the purpose of the amendment is to provide for the holding of
any of the Certificates in book-entry form, it shall require the consent of
holders of all such Certificates then outstanding; provided, that the Opinion of
Counsel specified in subparagraph (a) above shall not be required.

            (f) Promptly after the execution of any such amendment or consent,
the Depositor shall furnish written notification of the substance of such
amendment or consent to each Certificateholder and each of the Rating Agencies.
It shall not be necessary for the consent

                                       23
<PAGE>

of Certificateholders pursuant to this Section 10.01 to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Trust Agreement or in any other Transaction Document) and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Owner Trustee may prescribe.

            (g) In connection with the execution of any amendment to any
agreement to which the Trust is a party, other than this Trust Agreement, the
Owner Trustee shall be entitled to receive and conclusively rely upon an Opinion
of Counsel to the effect that such amendment is authorized or permitted by the
documents subject to such amendment and that all conditions precedent in the
Transaction Documents for the execution and delivery thereof by the Trust or the
Owner Trustee, as the case may be, have been satisfied.

            (h) Promptly after the execution of any amendment to the Certificate
of Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State of the State of Delaware.

            (i) The Owner Trustee may, but shall not be required to, execute any
amendment which adversely affects its rights, duties and immunities under this
Trust Agreement.

            SECTION 10.02 No Legal Title to Owner Trust Estate. The
Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided beneficial interests therein only in accordance with
Articles V and VIII. No transfer, by operation of law or otherwise, of any
right, title or interest of the Certificateholders to and in their beneficial
ownership interest in the Owner Trust Estate shall operate to terminate this
Trust Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate

            SECTION 10.03 Limitations on Rights of Others. Except for Section
2.07, the provisions of this Trust Agreement are solely for the benefit of the
Owner Trustee, the Indemnified Parties, the Depositor, the Certificateholders,
and, to the extent expressly provided herein, the Indenture Trustee and the
Noteholders, and nothing in this Trust Agreement (other than Section 2.07),
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in the Owner Trust Estate or under or
in respect of this Trust Agreement or any covenants, conditions or provisions
contained herein.

            SECTION 10.04 Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices and other communications shall be in
writing and shall be deemed given upon receipt, to the Owner Trustee at:
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration; to
the Depositor at: Morgan Stanley ABS Capital I, Inc. 1585 Broadway, New York,
New York 10036, Attention: General Counsel, to the Indenture Trustee at Bankers
Trust Company of California, N.A., 1761 East St. Andrew Place, Santa Ana,
California 92705, Attention: Corporate Trust Department; to Moody's at: 99
Church Street, New

                                       24
<PAGE>

York, New York 10007, Attention: Residential Mortgage Monitoring Unit; to Fitch
at One State Street Plaza, New York, New York 10007 or, as to each party, at
such other address as shall be designated by such party in a written notice to
each other party.

            Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Trust Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.

            A copy of any notice delivered to the Owner Trustee or the Trust
shall also be delivered to the Depositor.

            SECTION 10.05 Severability. Any provision of this Trust Agreement
that is prohibited 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 shall not invalidate or
render unenforceable such provision in any other jurisdiction.

            SECTION 10.06 Separate Counterparts. This Trust Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.

            SECTION 10.07 Successors and Assigns. All representations,
warranties, covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, each of the Depositor and the Owner Trustee and its
successors and each Certificateholder and its successors and permitted assigns,
all as herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by a Certificateholder shall bind the successors and
assigns of such Certificateholder.

            SECTION 10.08 No Petition. The Owner Trustee, by entering into this
Trust Agreement and each Certificateholder, by accepting a Certificate, hereby
covenant and agree that they will not at any time institute against the
Depositor or the Trust, or join in any institution against the Depositor or the
Trust of, any bankruptcy proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations to the
Certificates, the Notes, this Trust Agreement or any of the Transaction
Documents. This Section shall survive for one year following the termination of
this Trust Agreement.

            SECTION 10.09 No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Master Servicer, the Owner Trustee, the
Indenture Trustee or any Affiliate thereof and no recourse may be had against
such parties or their assets, except as may be expressly set forth or
contemplated in this Trust Agreement, the Certificates or the Transaction
Documents.

            SECTION 10.10 Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.

                                       25
<PAGE>

            SECTION 10.11 GOVERNING LAW. THIS TRUST AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

            SECTION 10.12 Integration. This Trust Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements and understanding pertaining thereto.

                 [Remainder of Page Intentionally Left Blank]

                                       26
<PAGE>

            IN WITNESS WHEREOF, the Depositor and the Owner Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.

                                   WILMINGTON TRUST COMPANY, as Owner Trustee

                                   By: /S/
                                      ---------------------------------
                                       Name:   Patricia A. Evans
                                       Title:  Senior Financial Services Officer

                                   MORGAN STANLEY ABS CAPITAL I, INC., as
                                       Depositor

                                   By: /S/
                                      ---------------------------------------
                                       Name:   Peter A. Fadel
                                       Title:  Vice President

Acknowledged and Agreed:

WILMINGTON TRUST COMPANY,
    as Certificate Registrar

By: /S/
   ---------------------------------
    Name:   Patricia A. Evans
    Title:  Senior Financial Services Officer

                      [Signature Page for Trust Agreement]

<PAGE>

                                                                   EXHIBIT A-1
                          FORM OF CLASS R-1 CERTIFICATE

                              CLASS R-1 CERTIFICATE

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 3.05 OF THE TRUST AGREEMENT REFERRED TO HEREIN.

NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFICATE REGISTRAR
SHALL HAVE RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR A PERSON ACTING ON
BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN.

SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST
IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.

TRANSFER OF THIS CERTIFICATE IS RESTRICTED AS SET FORTH IN THE TRUST AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS
DEFINED IN SECTION 860E(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"). SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER
THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF
THIS CERTIFICATE WILL BE REGISTERED BY THE OWNER TRUSTEE UNLESS THE PROPOSED
TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE
PROPOSED TRANSFEREE IS NOT A

                                     A-1-1
<PAGE>

DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE CERTIFICATE FOR THE ACCOUNT
OF A DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH
PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE INDENTURE TRUSTEE.

A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO A
SUBSTANTIAL TAX UPON THE DEPOSITOR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CERTIFICATE AND THAT
HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY TAXABLE YEAR GENERALLY
WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF (A) THE
AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS CERTIFICATE
OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED ORGANIZATION AND (B)
THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR PURPOSES OF THE
PRECEDING SENTENCE, THE TERM "PASS-THRU" ENTITY INCLUDES REGULATED INVESTMENT
COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST FUNDS, PARTNERSHIPS,
TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER T OF THE CODE
APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.

NO  TRANSFER  OF  THIS  CERTIFICATE  SHALL  BE  MADE  UNLESS  THE  CERTIFICATE
REGISTRAR  SHALL HAVE RECEIVED A CERTIFICATE OF NONFOREIGN  STATUS  CERTIFYING
AS TO THE TRANSFEREE'S STATUS AS A U.S. PERSON OR CORPORATION UNDER U.S. LAW.

THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER,
THE DEPOSITOR, THE MASTER SERVICER, THE INDENTURE TRUSTEE, OR THE OWNER TRUSTEE
OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN THE TRUST
AGREEMENT OR THE TRANSACTION DOCUMENTS.

                                     A-1-2
<PAGE>

                  MORGAN STANLEY ABS CAPITAL I TRUST 2000-1

              MORTGAGE LOAN ASSET-BACKED CERTIFICATES, CLASS R-1

Certificate No.  R-1-__                         Percentage Interest:  _______%

            Evidencing a fractional undivided equity interest in the Lower-Tier
REMIC portion of the Owner Trust Estate, the property of which consists
primarily of the Mortgage Loans in Morgan Stanley ABS Capital I Trust 2000-1
(the "Trust"), a Delaware business trust formed by Morgan Stanley ABS Capital I,
Inc., as depositor (the "Depositor"), pursuant to the Trust Agreement referred
to below.

            This certifies that ____________________ is the registered owner of
the Percentage Interest represented hereby and referred to above.

            The Trust was created pursuant to a Trust Agreement, dated as of
July 1, 2000, (as amended and supplemented by the Amended and Restated Trust
Agreement, dated as of July 1, 2000, the "Trust Agreement"), between the
Depositor and Wilmington Trust Company, as owner trustee (the "Owner Trustee",
which term includes any successor owner trustee appointed pursuant to the Trust
Agreement), a summary of certain of the pertinent provisions of which is set
forth hereinafter. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
holder of this Certificate by virtue of the acceptance hereof assents and by
which such holder is bound.

            This Certificate is one of a duly authorized issue of Morgan Stanley
ABS Capital I Trust 2000-1, Mortgage Loan Asset-Backed Certificates (herein
called the "Certificates") issued under the Trust Agreement to which reference
is hereby made for a statement of the respective rights thereunder of the Owner
Trustee and the holders of the Certificates and the terms upon which the
Certificates are executed and delivered. All terms used in this Certificate
which are defined in the Trust Agreement shall have the meanings assigned to
them in the Trust Agreement. The Owner Trust Estate consists of the Mortgage
Loans in the Trust, and the other assets referred to in Sections 2.05 and 3.01
of the Trust Agreement. The rights of the holders of the Certificates are
subordinated to the rights of the holders of the Notes, as set forth in the
Indenture.

            There will be distributed on the 25th day of each month or, if such
25th day is not a Business Day, the next Business Day (each, a "Payment Date"),
commencing in August 2000, to the Person in whose name this Certificate is
registered on the Certificate Register (i) with respect to the first Payment
Date, on the Closing Date and (ii) with respect to every other Payment Date, at
the close of business on the last Business Day of the month preceding the month
of such Payment Date (the "Record Date"), such Certificateholder's Certificate
Percentage Interest in the amount to be distributed to Class R-1
Certificateholders on such Payment Date.

            The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Payment Account that
have been released from the Lien of the Indenture for payment hereunder and that
neither the Owner Trustee in its individual or trust capacity nor the Depositor
is personally liable to the Certificateholders for any amount payable

                                     A-1-3
<PAGE>

under this Certificate or the Trust Agreement or, except as expressly provided
in the Trust Agreement, subject to any liability under the Trust Agreement.

            The Holder of this Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Certificate are subordinated
to the rights of the Noteholders as described in the Indenture, dated as of July
1, 2000 (the "Indenture"), between the Trust, and Bankers Trust Company of
California, N.A. as indenture trustee (the "Indenture Trustee"), and the Sale
and Servicing Agreement, dated as of July 1, 2000 (the "Sale and Servicing
Agreement"), among the Trust, Morgan Stanley ABS Capital I Trust 2000-1N, the
Depositor, Long Beach Mortgage Company, as master servicer, and the Indenture
Trustee.

            Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Depositor, or join in any institution against the Depositor or the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Notes, the Trust Agreement or any of the Transaction
Documents.

            Distributions on this Certificate will be made as provided in the
Sale and Servicing Agreement.

            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.

            Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, or an authenticating
agent by manual signature, this Certificate shall not entitle the holder hereof
to any benefit under the Trust Agreement or be valid for any purpose.

            THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                     A-1-4
<PAGE>

            IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Certificate to be duly executed.

                                    MORGAN STANLEY ABS CAPITAL I TRUST 2000-1

                                    By: WILMINGTON TRUST COMPANY, not in its
                                        individual capacity but solely as
                                        Owner Trustee.

                                    By:
                                       ---------------------------------------
                                        Name:
                                        Title:

Dated: ______, 2000

                          CERTIFICATE OF AUTHENTICATION

            This is one of the Certificates referred to in the within mentioned
Trust Agreement.

                                    WILMINGTON TRUST COMPANY, not in its
                                        individual capacity but solely as
                                        Owner Trustee

                                    By:
                                       ---------------------------------------
                                        Name:
                                        Title:

                                     A-1-5
<PAGE>

                           [REVERSE OF CERTIFICATE]

            The Certificates do not represent an obligation of, or an interest
in, the Depositor, the Seller, the Master Servicer, the Indenture Trustee, the
Owner Trustee or any Affiliates of any of them and no recourse may be had
against such parties or their assets, except as expressly set forth or
contemplated herein or in the Trust Agreement or the Transaction Documents. In
addition, this Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Mortgage Loans, all as more specifically set
forth herein and in the Trust Agreement. A copy of the Trust Agreement may be
examined by any Certificateholder upon written request during normal business
hours at the principal office of the Depositor and at such other places, if any,
designated by the Depositor.

            The Trust Agreement permits the amendment thereof as specified
below; provided, that any amendment be accompanied by an Opinion of Counsel to
the Owner Trustee to the effect that such amendment complies with the provisions
of the Trust Agreement. If the purpose of the amendment is to correct any
mistake, eliminate any inconsistency, cure any ambiguity or deal with any matter
not covered, it shall not be necessary to obtain the consent of any
Certificateholder, but the Owner Trustee shall be furnished with (A) a letter
from each of the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to any Note or (B) an
Opinion of Counsel to the effect that such action will not adversely affect in
any material respect the interests of any Certificateholders. If the purpose of
the amendment is to prevent the imposition of any federal or state taxes at any
time that any Security is outstanding, it shall not be necessary to obtain the
consent of the any Certificateholder, but the Owner Trustee shall be furnished
with an Opinion of Counsel that such amendment is necessary or helpful to
prevent the imposition of such taxes and is not materially adverse to any
Certificateholder. If the purpose of the amendment is to add or eliminate or
change any provision of the Trust Agreement, other than as specified in the
preceding two sentences, the amendment shall require (A) an Opinion of Counsel
to the effect that such action will not adversely affect in any material respect
the interests of any Certificateholders and either (a) a letter from each of the
Rating Agencies that the amendment will not result in the downgrading or
withdrawal of the rating then assigned to any Note or (b) the consent of the
holders of the Certificates evidencing a majority of the Certificate Percentage
Interests; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments received that are
required to be distributed on any Certificate without the consent of the related
Certificateholder or (ii) reduce the aforesaid percentage 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.

            As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registerable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Trust, accompanied by a written instrument of transfer in form
satisfactory to 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 authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee.

                                     A-1-6
<PAGE>

The initial Certificate Registrar appointed under the Trust Agreement is
Wilmington Trust Company.

            Except as provided in the Trust Agreement, the Certificates are
issuable only in a minimum Certificate Percentage Interest of 10%. As provided
in the Trust Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same aggregate denomination, as requested by the
Certificateholder surrendering the same. No service charge will be made for any
such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.

            The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none of
the Owner Trustee, the Certificate Registrar or any such agent shall be affected
by any notice to the contrary.

            The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate as and when provided in accordance
with the terms of the Trust Agreement.

                                     A-1-7
<PAGE>

                                   ASSIGNMENT

            FOR VALUE  RECEIVED  the  undersigned  hereby  sells,  assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE

--------------------------------------------------------------------------------
    (Please print or type name and address, including postal zip code, of
                                  assignee)

the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing

to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.

Dated:
                                                            */
                              ------------------------------
                                    Signature Guaranteed:

                                                            */
                              ------------------------------

-----------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.

                                     A-1-8
<PAGE>

                                                                   EXHIBIT A-2
                          FORM OF CLASS R-2 CERTIFICATE

                              CLASS R-2 CERTIFICATE

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 3.05 OF THE TRUST AGREEMENT REFERRED TO HEREIN.

NO TRANSFER OF THIS CERTIFICATE SHALL BE MADE UNLESS THE CERTIFICATE REGISTRAR
SHALL HAVE RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE OF THIS
CERTIFICATE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR A PERSON ACTING ON
BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF ANY SUCH PLAN.

SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST
IN THE ONLY "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTION 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
WITH THE REMIC PROVISIONS OF THE CODE.

TRANSFER OF THIS CERTIFICATE IS RESTRICTED AS SET FORTH IN THE TRUST AGREEMENT.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO A "DISQUALIFIED ORGANIZATION" AS
DEFINED IN SECTION 860E(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"). SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL
SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY
AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR
PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER
THAN A FARMERS' COOPERATIVE) THAT IS EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF
THIS CERTIFICATE WILL BE REGISTERED BY THE OWNER TRUSTEE UNLESS THE PROPOSED
TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE
PROPOSED TRANSFEREE IS NOT A

                                     A-2-1
<PAGE>

DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE CERTIFICATE FOR THE ACCOUNT
OF A DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH
PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE INDENTURE TRUSTEE.

A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO A
SUBSTANTIAL TAX UPON THE DEPOSITOR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THROUGH ENTITY THAT HOLDS THIS CERTIFICATE AND THAT
HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY TAXABLE YEAR GENERALLY
WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF (A) THE
AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS CERTIFICATE
OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED ORGANIZATION AND (B)
THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR PURPOSES OF THE
PRECEDING SENTENCE, THE TERM "PASS-THRU" ENTITY INCLUDES REGULATED INVESTMENT
COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST FUNDS, PARTNERSHIPS,
TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER T OF THE CODE
APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES.

NO  TRANSFER  OF  THIS  CERTIFICATE  SHALL  BE  MADE  UNLESS  THE  CERTIFICATE
REGISTRAR  SHALL HAVE RECEIVED A CERTIFICATE OF NONFOREIGN  STATUS  CERTIFYING
AS TO THE TRANSFEREE'S STATUS AS A U.S. PERSON OR CORPORATION UNDER U.S. LAW.

THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE SELLER,
THE DEPOSITOR, THE MASTER SERVICER, THE INDENTURE TRUSTEE, OR THE OWNER TRUSTEE
OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS EXPRESSLY PROVIDED IN THE TRUST
AGREEMENT OR THE TRANSACTION DOCUMENTS.

                                     A-2-2
<PAGE>

                  MORGAN STANLEY ABS CAPITAL I TRUST 2000-1

              MORTGAGE LOAN ASSET-BACKED CERTIFICATES, CLASS R-2

Certificate No.  R-2-__                         Percentage Interest:  _______%

            Evidencing a fractional undivided equity interest in the Upper-Tier
REMIC portion of the Owner Trust Estate, the property of which consists
primarily of the Regular Interests in the Lower-Tier REMIC in Morgan Stanley ABS
Capital I Trust 2000-1 (the "Trust"), a Delaware business trust formed by Morgan
Stanley ABS Capital I, Inc., as depositor (the "Depositor"), pursuant to the
Trust Agreement referred to below.

            This certifies that ____________________ is the registered owner of
the Percentage Interest represented hereby and referred to above.

            The Trust was created pursuant to a Trust Agreement, dated as of
July 1, 2000, (as amended and supplemented by the Amended and Restated Trust
Agreement, dated as of July 1, 2000, the "Trust Agreement"), between the
Depositor and Wilmington Trust Company, as owner trustee (the "Owner Trustee",
which term includes any successor owner trustee appointed pursuant to the Trust
Agreement), a summary of certain of the pertinent provisions of which is set
forth hereinafter. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
holder of this Certificate by virtue of the acceptance hereof assents and by
which such holder is bound.

            This Certificate is one of a duly authorized issue of Morgan Stanley
ABS Capital I Trust 2000-1, Mortgage Loan Asset-Backed Certificates (herein
called the "Certificates") issued under the Trust Agreement to which reference
is hereby made for a statement of the respective rights thereunder of the Owner
Trustee and the holders of the Certificates and the terms upon which the
Certificates are executed and delivered. All terms used in this Certificate
which are defined in the Trust Agreement shall have the meanings assigned to
them in the Trust Agreement. The Owner Trust Estate consists of the Mortgage
Loans in the Trust, and the other assets referred to in Sections 2.05 and 3.01
of the Trust Agreement. The rights of the holders of the Certificates are
subordinated to the rights of the holders of the Notes, as set forth in the
Indenture.

            There will be distributed on the 25th day of each month or, if such
25th day is not a Business Day, the next Business Day (each, a "Payment Date"),
commencing in August 2000, to the Person in whose name this Certificate is
registered on the Certificate Register (i) with respect to the first Payment
Date, on the Closing Date and (ii) with respect to every other Payment Date, at
the close of business on the last Business Day of the month preceding the month
of such Payment Date (the "Record Date"), such Certificateholder's Certificate
Percentage Interest in the amount to be distributed to Class R-2
Certificateholders on such Payment Date.

            The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Payment Account that
have been released from the Lien of the Indenture for payment hereunder and that
neither the Owner Trustee in its individual or trust capacity nor the Depositor
is personally liable to the Certificateholders for any amount payable

                                     A-2-3
<PAGE>

under this Certificate or the Trust Agreement or, except as expressly provided
in the Trust Agreement, subject to any liability under the Trust Agreement.

            The Holder of this Certificate acknowledges and agrees that its
rights to receive distributions in respect of this Certificate are subordinated
to the rights of the Noteholders as described in the Indenture, dated as of July
1, 2000 (the "Indenture"), between the Trust, and Bankers Trust Company of
California, N.A. as indenture trustee (the "Indenture Trustee"), and the Sale
and Servicing Agreement, dated as of July 1, 2000 (the "Sale and Servicing
Agreement"), among the Trust, Morgan Stanley ABS Capital I Trust 2000-1N, the
Depositor, Long Beach Mortgage Company, as master servicer, and the Indenture
Trustee.

            Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Depositor, or join in any institution against the Depositor or the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Notes, the Trust Agreement or any of the Transaction
Documents.

            Distributions on this Certificate will be made as provided in the
Sale and Servicing Agreement.

            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.

            Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, or an authenticating
agent by manual signature, this Certificate shall not entitle the holder hereof
to any benefit under the Trust Agreement or be valid for any purpose.

            THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                     A-2-4
<PAGE>

            IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Certificate to be duly executed.

                                    MORGAN STANLEY ABS CAPITAL I TRUST 2000-1

                                    By: WILMINGTON TRUST COMPANY, not in its
                                        individual capacity but solely as
                                        Owner Trustee.

                                    By:
                                       ---------------------------------------
                                        Name:
                                        Title:

Dated: ______, 2000

                          CERTIFICATE OF AUTHENTICATION

            This is one of the Certificates referred to in the within mentioned
Trust Agreement.

                                    WILMINGTON TRUST COMPANY, not in its
                                        individual capacity but solely as
                                        Owner Trustee

                                    By:
                                       ---------------------------------------
                                        Name:
                                        Title:

                                     A-2-5
<PAGE>

                           [REVERSE OF CERTIFICATE]

            The Certificates do not represent an obligation of, or an interest
in, the Depositor, the Seller, the Master Servicer, the Indenture Trustee, the
Owner Trustee or any Affiliates of any of them and no recourse may be had
against such parties or their assets, except as expressly set forth or
contemplated herein or in the Trust Agreement or the Transaction Documents. In
addition, this Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Mortgage Loans, all as more specifically set
forth herein and in the Trust Agreement. A copy of the Trust Agreement may be
examined by any Certificateholder upon written request during normal business
hours at the principal office of the Depositor and at such other places, if any,
designated by the Depositor.

            The Trust Agreement permits the amendment thereof as specified
below; provided, that any amendment be accompanied by an Opinion of Counsel to
the Owner Trustee to the effect that such amendment complies with the provisions
of the Trust Agreement. If the purpose of the amendment is to correct any
mistake, eliminate any inconsistency, cure any ambiguity or deal with any matter
not covered, it shall not be necessary to obtain the consent of any
Certificateholder, but the Owner Trustee shall be furnished with (A) a letter
from each of the Rating Agencies that the amendment will not result in the
downgrading or withdrawal of the rating then assigned to any Note or (B) an
Opinion of Counsel to the effect that such action will not adversely affect in
any material respect the interests of any Certificateholders. If the purpose of
the amendment is to prevent the imposition of any federal or state taxes at any
time that any Security is outstanding, it shall not be necessary to obtain the
consent of the any Certificateholder, but the Owner Trustee shall be furnished
with an Opinion of Counsel that such amendment is necessary or helpful to
prevent the imposition of such taxes and is not materially adverse to any
Certificateholder. If the purpose of the amendment is to add or eliminate or
change any provision of the Trust Agreement, other than as specified in the
preceding two sentences, the amendment shall require (A) an Opinion of Counsel
to the effect that such action will not adversely affect in any material respect
the interests of any Certificateholders and either (a) a letter from each of the
Rating Agencies that the amendment will not result in the downgrading or
withdrawal of the rating then assigned to any Note or (b) the consent of the
holders of the Certificates evidencing a majority of the Certificate Percentage
Interests; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments received that are
required to be distributed on any Certificate without the consent of the related
Certificateholder or (ii) reduce the aforesaid percentage 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.

            As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registerable
in the Certificate Register upon surrender of this Certificate for registration
of transfer at the offices or agencies of the Certificate Registrar maintained
by the Trust, accompanied by a written instrument of transfer in form
satisfactory to 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 authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee.

                                     A-2-6
<PAGE>

The initial Certificate Registrar appointed under the Trust Agreement is
Wilmington Trust Company.

            Except as provided in the Trust Agreement, the Certificates are
issuable only in a minimum Certificate Percentage Interest of 10%. As provided
in the Trust Agreement and subject to certain limitations therein set forth,
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same aggregate denomination, as requested by the
Certificateholder surrendering the same. No service charge will be made for any
such registration of transfer or exchange, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge payable in connection therewith.

            The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none of
the Owner Trustee, the Certificate Registrar or any such agent shall be affected
by any notice to the contrary.

            The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate as and when provided in accordance
with the terms of the Trust Agreement.

                                     A-2-7
<PAGE>

                                   ASSIGNMENT

            FOR VALUE  RECEIVED  the  undersigned  hereby  sells,  assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE

--------------------------------------------------------------------------------
    (Please print or type name and address, including postal zip code, of
                                  assignee)

the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing

to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.

Dated:
                                                            */
                              ------------------------------
                                    Signature Guaranteed:

                                                            */
                              ------------------------------

-----------------
*/ NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.

                                     A-2-8
<PAGE>

                                                                       EXHIBIT B

                          FORM OF CERTIFICATE OF TRUST

                              CERTIFICATE OF TRUST

                  MORGAN STANLEY ABS CAPITAL I TRUST 2000-1

            This Certificate of Trust of Morgan Stanley ABS Capital I Trust
2000-1 (the "Trust"), dated July __, 2000, is being duly executed and filed by
Wilmington Trust Company, a Delaware banking corporation, as trustee, to form a
business trust under the Delaware Business Trust Act (12 Del. Code, ss. 3801 et
seq.).

            1. Name. The name of the business trust formed hereby is Morgan
      Stanley ABS Capital I Trust 2000-1.

            2. Delaware Trustee. The name and business address of the trustee of
      the Trust in the State of Delaware is Wilmington Trust Company, One Rodney
      Square North, 1100 N. Market Street, Wilmington, Delaware, 19801,
      Attention: ____________________.

            IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.

                                    WILMINGTON TRUST COMPANY, not in its
                                        individual capacity but solely as owner
                                        trustee under a Trust Agreement dated as
                                        of July 1, 2000

                                    By:
                                       ---------------------------------------
                                        Name:
                                        Title:

                                      B-1
<PAGE>

                                                                       EXHIBIT C

                 FORM OF RULE 144A INVESTMENT REPRESENTATION

Description of Rule 144A Securities, including numbers:

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

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

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

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

            The undersigned seller, as registered holder (the "Seller"), intends
to transfer the Rule 144A Securities described above to the undersigned buyer
(the "Buyer").

            1. In connection with such transfer and in accordance with the
      agreements pursuant to which the Rule 144A Securities were issued, the
      Seller hereby certifies the following facts: Neither the Seller nor anyone
      acting on its behalf has offered, transferred, pledged, sold or otherwise
      disposed of the Rule 144A Securities, any interest in the Rule 144A
      Securities or any other similar security to, or solicited any offer to buy
      or accept a transfer, pledge or other disposition of the Rule 144A
      Securities, any interest in the Rule 144A Securities or any other similar
      security from, or otherwise approached or negotiated with respect to the
      Rule 144A Securities, any interest in the Rule 144A Securities 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 Rule
      144A Securities under the Securities Act of 1933, as amended (the "1933
      Act"), or that would render the disposition of the Rule 144A Securities a
      violation of Section 5 of the 1933 Act or require registration pursuant
      thereto, and that the Seller has not offered the Rule 144A Securities to
      any person other than the Buyer or another "qualified institutional buyer"
      as defined in Rule 144A under the 1933 Act.

            2. The Buyer warrants and represents to, and covenants with, the
      Owner Trustee and the Depositor (each as defined in the Amended and
      Restated Trust Agreement, dated as of July 1, 2000 (the "Agreement"),
      between Morgan Stanley ABS Capital I, Inc., as Depositor and Wilmington
      Trust Company, as Owner Trustee) pursuant to Section 3.05 of the Agreement
      and Bankers Trust Company of California, N.A. as indenture trustee, as
      follows:

                  a. The Buyer understands that the Rule 144A Securities have
            not been registered under the 1933 Act or the securities laws of any
            state.

                  b. The Buyer considers itself a substantial, sophisticated
            institutional investor having such knowledge and experience in
            financial and business matters that it is capable of evaluating the
            merits and risks of investment in the Rule 144A Securities.

                                      C-1
<PAGE>

                  c. The Buyer has been furnished with all information regarding
            the Rule 144A Securities that it has requested from the Seller, the
            Owner Trustee or the Master Servicer.

                  d. Neither the Buyer nor anyone acting on its behalf has
            offered, transferred, pledged, sold or otherwise disposed of the
            Rule 144A Securities, any interest in the Rule 144A Securities or
            any other similar security to, or solicited any offer to buy or
            accept a transfer, pledge or other disposition of the Rule 144A
            Securities, any interest in the Rule 144A Securities or any other
            similar security from, or otherwise approached or negotiated with
            respect to the Rule 144A Securities, any interest in the Rule 144A
            Securities 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 Rule 144A Securities under
            the 1933 Act or that would render the disposition of the Rule 144A
            Securities a violation of Section 5 of the 1933 Act or require
            registration pursuant thereto, nor will it act, nor has it
            authorized or will it authorize any person to act, in such manner
            with respect to the Rule 144A Securities.

                  e. The Buyer is a "qualified institutional buyer" as that term
            is defined in Rule 144A under the 1933 Act and has completed either
            of the forms of certification to that effect attached hereto as
            Annex 1 or Annex 2. The Buyer is aware that the sale to it is being
            made in reliance on Rule 144A. The Buyer is acquiring the Rule 144A
            Securities for its own account or the accounts of other qualified
            institutional buyers, understands that such Rule 144A Securities may
            be resold, pledged or transferred only (i) to a person reasonably
            believed to be a qualified institutional buyer that purchases for
            its own account or for the account of a qualified institutional
            buyer to whom notice is given that the resale, pledge or transfer is
            being made in reliance on Rule 144A, or (ii) pursuant to another
            exemption from registration under the 1933 Act.

            3. The Buyer warrants and represents to, and covenants with, the
      Seller, the Indenture Trustee, Owner Trustee, the Depositor and the Master
      Servicer that the Buyer is (A) not an employee benefit plan (within the
      meaning of Section 3(3) of the Employee Retirement Income Security Act of
      1974, as amended ("ERISA")), or a plan (within the meaning of Section
      4975(e)(1) of the Internal Revenue Code of 1986 ("Code")), which (in
      either case) is subject to ERISA or Section 4975 of the Code (both a
      "Plan"), and (B) is not directly or indirectly purchasing the Rule 144A
      Securities on behalf of, as investment manager of, as named fiduciary of,
      as trustee of, or with "plan assets" of a Plan.

            4. This document 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 document.

                                      C-2
<PAGE>

            Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Agreement.

            IN WITNESS WHEREOF, each of the parties has executed this document
as of the date set forth below.

------------------------------        ------------------------------
Print Name of Seller                  Print Name of Buyer
By:                                   By:
Name:                                 Name:
Title:                                Title:
Taxpayer Identification:              Taxpayer Identification:
No.                                   No.
Date:                                 Date:

                                      C-3
<PAGE>

                                                          ANNEX 1 TO EXHIBIT C

           QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Buyers
           Other Than Registered Investment Companies]

            The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:

            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 ("Rule 144A") because (i) the Buyer owned
      and/or invested on a discretionary basis $______________________(1) in
      securities (except for the excluded securities referred to below) as of
      the end of the Buyer's most recent fiscal year (such amount being
      calculated in accordance with Rule 144A) and (ii) the Buyer satisfies the
      criteria in the category marked below.

      ___   Corporation, etc. The Buyer is a corporation (other than a bank,
            savings and loan association or similar institution), Massachusetts
            or similar business trust, partnership, or charitable organization
            described in Section 501(c)(3) of the Internal Revenue Code.

      ___   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.

      ___   Broker-Dealer. The Buyer is a dealer registered pursuant to Section
            15 of the Securities Exchange Act of 1934.

--------
(1) Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.

                                      C-4
<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 or 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 Adviser. The Buyer is an investment adviser registered
            under the Investment Advisers Act of 1940.

      ___   SBIC. The 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. The Buyer is a business development
            company as defined in Section 202(a)(22) of the Investment Advisers
            Act of 1940.

      ___   Trust Fund. The Buyer is a trust fund whose trustee is a bank or
            trust company and whose participants are exclusively (a) plans
            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, or (b) employee
            benefit plans within the meaning of Title I of the Employee
            Retirement Income Security Act of 1974, but is not a trust fund that
            includes as participants individual retirement accounts or H.R. 10
            plans.

            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) bank deposit notes and certificates of
      deposit, (iv) loan participations, (v) repurchase agreements, (vi)
      securities owned but subject to a repurchase agreement and (vii) currency,
      interest rate and commodity swaps.

            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. 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

                                      C-5
<PAGE>

      and the Buyer is not itself a reporting company under the Securities
      Exchange Act of 1934.

            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.

                  ---    ---          Will the Buyer be purchasing the Rule 144A
                  Yes    No           Securities only for the Buyer's own
                                      account?

            6. If the answer to the foregoing question is "no", the Buyer agrees
      that, in connection with any purchase of securities sold to the Buyer for
      the account of a third party (including any separate account) in reliance
      on Rule 144A, the Buyer will only purchase for the account of a third
      party that at the time is a "qualified institutional buyer" within the
      meaning of Rule 144A. In addition, the Buyer agrees that the Buyer will
      not purchase securities for a third party unless the Buyer has obtained a
      current representation letter from such third party or taken other
      appropriate steps contemplated by Rule 144A to conclude that such third
      party independently meets the definition of "qualified institutional
      buyer" set forth in Rule 144A.

            7. The 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 Rule 144A
      Securities will constitute a reaffirmation of this certification as of the
      date of such purchase.

                                    ------------------------------------
                                    Print Name of Buyer

                                    By:
                                        --------------------------------
                                        Name:
                                        Title:

                                        Date:
                                             ---------------------

                                      C-6
<PAGE>

                                                          ANNEX 2 TO EXHIBIT C

           QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A [For Buyers
            That Are Registered Investment Companies]

            The undersigned hereby certifies as follows in connection with the
Rule 144A Investment Representation to which this Certification is attached:

            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 ("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,
      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.

      ____  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) bank deposit notes and
      certificates of deposit, (iii) loan participations, (iv) repurchase
      agreements, (v) securities owned but subject to a repurchase agreement and
      (vi) currency, interest rate and commodity swaps.

            5. The Buyer is familiar with Rule 144A and understands that each of
      the parties to which this certification is made are relying and will
      continue to rely on the

                                      C-7
<PAGE>

      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. The undersigned will notify each of the parties to which this
      certification is made of any changes in the information and conclusions
      herein. Until such notice, the Buyer's purchase of Rule 144A Securities
      will constitute a reaffirmation of this certification by the undersigned
      as of the date of such purchase.

                                    ------------------------------------
                                    Print Name of Buyer

                                    By:
                                        --------------------------
                                        Name:
                                        Title:

                                    IF AN ADVISER:

                                    ------------------------------------
                                    Print Name of Buyer

                                      Date:

                                      C-8
<PAGE>

                                                                       EXHIBIT D

                     FORM OF INVESTOR REPRESENTATION LETTER

                                                _____________, 20__

Morgan Stanley ABS Capital I, Inc.
1585 Broadway
New York, New York  10036
Attention:  Mortgage Finance Group

      Re:   Morgan Stanley ABS Capital I Trust 2000-1
            Mortgage Loan Asset-Backed Certificates (the "Certificates")
            ------------------------------------------------------------

Ladies and Gentlemen:

            ___________________ (the "Purchaser") intends to purchase from
_____________________ (the "Seller") $___________ of the above captioned
Certificates, issued pursuant to the Amended and Restated Trust Agreement, dated
as of July 1, 2000 (the "Trust Agreement"), between Morgan Stanley ABS Capital
I, Inc., as depositor (the "Depositor") and Wilmington Trust Company, as owner
trustee (the "Owner Trustee"). All terms used herein and not otherwise defined
shall have the meanings set forth in the Trust Agreement. The Purchaser hereby
certifies, represents and warrants to, and covenants with, the Company and that:

            1. The Purchaser understands that (a) the Certificates have not been
      and will not be registered or qualified under the Securities Act of 1933,
      as amended (the "Act") or any state securities law, (b) the Depositor is
      not required to so register or qualify the Certificates, (c) the
      Certificates may be resold only if registered and qualified pursuant to
      the provisions of the Act or any state securities law, or if an exemption
      from such registration and qualification is available, (d) the Trust
      Agreement contains restrictions regarding the transfer of the Certificates
      and (e) the Certificates will bear a legend to the foregoing effect.

            2. The Purchaser is acquiring the Certificates for its own account
      for investment only and not with a view to or for sale in connection with
      any distribution thereof in any manner that would violate the Act or any
      applicable state securities laws.

            3. The Purchaser is (a) a substantial, sophisticated institutional
      investor having such knowledge and experience in financial and business
      matters, and, in particular, in such matters related to securities similar
      to the Certificates, such that it is capable of evaluating the merits and
      risks of investment in the Certificates, (b) able to bear the economic
      risks of such an investment and (c) an "accredited investor" within the
      meaning of Rule 501(a) promulgated pursuant to the Act.

                                      D-1
<PAGE>

            4. The Purchaser has been furnished with, and has had an opportunity
      to review (a) a copy of the Trust Agreement and (b) such other information
      concerning the Certificates, the Mortgage Loans and the Depositor as has
      been requested by the Purchaser from the Depositor or the Seller and is
      relevant to the Purchaser's decision to purchase the Certificates. The
      Purchaser has had any questions arising from such review answered by the
      Depositor or the Seller to the satisfaction of the Purchaser.

            5. The Purchaser has not and will not nor has it authorized or will
      it authorize any person to (a) offer, pledge, sell, dispose of or
      otherwise transfer any Certificate, any interest in any Certificate or any
      other similar security to any person in any manner, (b) solicit any offer
      to buy or to accept a pledge, disposition of other transfer of any
      Certificate, any interest in any Certificate or any other similar security
      from any person in any manner, (c) otherwise approach or negotiate with
      respect to any Certificate, any interest in any Certificate or any other
      similar security with any person in any manner, (d) make any general
      solicitation by means of general advertising or in any other manner or (e)
      take any other action, that (as to any of (a) through (e) above) would
      constitute a distribution of any Certificate under the Act, that would
      render the disposition of any Certificate a violation of Section 5 of the
      Act or any state securities law, or that would require registration or
      qualification pursuant thereto. The Purchaser will not sell or otherwise
      transfer any of the Certificates, except in compliance with the provisions
      of the Trust Agreement.

            6.    The Purchaser represents:

                  (i) The Purchaser is not any employee benefit plan subject to
            the Employee Retirement Income Security Act of 1974, as amended
            ("ERISA"), or the Internal Revenue Code of 1986 (the "Code"), a
            Person acting, directly or indirectly, on behalf of any such plan or
            any Person acquiring such Certificates with "plan assets" of a Plan
            within the meaning of the Department of Labor regulation promulgated
            at 29 C.F.R. ss.2510.3101; and

                  (ii) the Purchaser is familiar with the prohibited transaction
            restrictions and fiduciary responsibility requirements of Sections
            406 and 407 of ERISA and Section 4975 of the Code and understands
            that each of the parties to which this certification is made is
            relying and will continue to rely on the statements made in this
            paragraph 6.

            7.    The Purchaser is not a non-United States person.

                                    Very truly yours,

                                    By:
                                        --------------------
                                        Name:
                                        Title:

                                      D-2
<PAGE>

                                                                       EXHIBIT E

                   FORM OF DEPOSITOR REPRESENTATION LETTER

                                    ______________, 20___

Morgan Stanley ABS Capital I, Inc.
1585 Broadway
New York, New York  10036
Attention:  Mortgage Finance Group

            Re:   Morgan Stanley ABS Capital I Trust 2000-1
                  Mortgage Loan Asset-Backed Certificates (the "Certificates")
                  ------------------------------------------------------------

Ladies and Gentlemen:

            ________________________________ (the "Purchaser") intends to
purchase from ______________________(the "Seller") a ___% Certificate Percentage
Interest of Morgan Stanley ABS Capital I Trust 2000-1 Mortgage Loan Asset-Backed
Certificates (the "Certificates"), issued pursuant to the Amended and Restated
Trust Agreement, dated as of July 1, 2000 (the "Trust Agreement"), between
Morgan Stanley ABS Capital I, Inc., as depositor (the "Depositor") and
Wilmington Trust Company, as owner trustee (the "Owner Trustee"). All terms used
herein and not otherwise defined shall have the meanings set forth in the Trust
Agreement. The Seller hereby certifies, represents and warrants to, and
covenants with, the Depositor that:

            Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of any Certificate a violation of
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Seller will not act, in any
manner set forth in the foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Trust Agreement.

                                      E-1
<PAGE>

                                    Very truly yours,

                                    ------------------------------------
                                        (Seller)

                                    By:
                                       ---------------------------------
                                        Name:
                                        Title:

                                      E-2
<PAGE>

                                                                       EXHIBIT F

                   FORM OF CERTIFICATE OF NONFOREIGN STATUS

            This Certificate of Non-Foreign Status ("certificate") is delivered
pursuant to Section 3.05 of the Amended and Restated Trust Agreement, dated as
of July 1, 2000 (the "Trust Agreement"), between Morgan Stanley ABS Capital I,
Inc., as depositor (the "Depositor") and Wilmington Trust Company, as Owner
Trustee, in connection with the acquisition of, transfer to or possession by the
undersigned, whether as beneficial owner (the "Beneficial Owner"), or nominee on
behalf of the Beneficial Owner of the Morgan Stanley ABS Capital I Trust 2000-1,
Mortgage Loan Asset-Backed Certificates (the "Certificate"). Capitalized terms
used but not defined in this certificate have the respective meanings given them
in the Trust Agreement.

            Each holder must complete Part I, Part II (if the holder is a
nominee), and in all cases sign and otherwise complete Part III.

            In addition, each holder shall submit with the Certificate an IRS
Form W9 relating to such holder.

            To confirm to the Trust that the provisions of Sections 871, 881 or
1446 of the Internal Revenue Code (relating to withholding tax on foreign
partners) do not apply in respect of the Certificate held by the undersigned,
the undersigned hereby certifies:

Part I            Complete Either A or B.

            A.    Individual as Beneficial Owner

                  1. I am (The Beneficial Owner is ) not a nonresident alien for
            purposes of U.S. income taxation;

                  2. My (The Beneficial Owner's) name and home address are:

                  ______________________________

                  ______________________________; and

                  3. My (The Beneficial Owner's) U.S. taxpayer identification
            number (Social Security Number) is

            B.    Corporate, Partnership or Other Entity as Beneficial Owner

                  1.    __________________  (Name of the Beneficial  Owner) is
            not a foreign corporation,  foreign partnership,  foreign trust or
            foreign  estate  (as  those  terms  are  defined  in the  Code and
            Treasury Regulations;

                                      F-1
<PAGE>

                  2.    The  Beneficial  Owner's  office  address and place of
            incorporation (if applicable) is

                  ______________________________

                  ______________________________; and

                  3.    The Beneficial  Owner's U.S.  employer  identification
            number is ________________.

Part II           Nominees.

            If the undersigned is the nominee for the Beneficial Owner, the
undersigned certifies that this certificate has been made in reliance upon
information contained in:

      ____ an IRS Form W9

      ____ a form such as this or substantially similar

provided to the undersigned by an appropriate person and (i) the undersigned
agrees to notify the Trust at least thirty (30) days prior to the date that the
form relied upon becomes obsolete, and (ii) in connection with change in
Beneficial Owners, the undersigned agrees to submit a new Certificate of
Non-Foreign Status to the Trust promptly after such change.

Part III    Declaration

            The undersigned, as the Beneficial Owner or a nominee thereof,
agrees to notify the Trust within sixty (60) days of the date that the
Beneficial Owner becomes a foreign person. The undersigned understands that this
certificate may be disclosed to the Internal Revenue Service by the Trust and
any false statement contained therein could be punishable by fines, imprisonment
or both.

            Under penalties of perjury, I declare that I have examined this
certificate and to the best of my knowledge and belief it is true, correct and
complete and will further declare that I will inform the Trust of any change in
the information provided above, and, if applicable, I further declare that I
have the authority* to sign this document.

                                      F-2
<PAGE>

                                        ---------------------------------------
                                        Name:
                                        Title:   (if applicable)

                                        ---------------------------------------
                                        Signature and Date

            *NOTE:  If signed  pursuant to a power of  attorney,  the power of
attorney must accompany this certificate.

                                      F-3
<PAGE>

                                                                       EXHIBIT G

                       FORM OF ERISA REPRESENTATION LETTER

                                          _____________, 2000__

Morgan Stanley ABS Capital I, Inc.
1585 Broadway
New York, New York  10036
Attention:  Mortgage Finance Group

Wilmington Trust Company, as Owner Trustee
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890-0001
Attn: Corporate Trust Administration

            Re:   Morgan Stanley ABS Capital I Trust 2000-1
                  Mortgage Loan Asset-Backed Certificates

Dear Sirs:

            __________________________________ (the "Transferee") intends to
acquire from _____________________ (the "Depositor") a ____% Certificate
Percentage Interest of Morgan Stanley ABS Capital I Trust 2000-1, Mortgage Loan
Asset-Backed Certificates (the "Certificates"), issued pursuant to a Amended and
Restated Trust Agreement, dated as of July 1, 2000 (the "Trust Agreement"),
between Morgan Stanley ABS Capital I, Inc., as depositor (the "Depositor") and
Wilmington Trust Company, as owner trustee (the "Owner Trustee"). Capitalized
terms used herein and not otherwise defined shall have the meanings assigned
thereto in the Trust Agreement.

            The Transferee hereby certifies, represents and warrants to, and
covenants with, the Company, the Owner Trustee and the Master Servicer that:

            (1) The Certificates (i) are not being acquired by, and will not be
      transferred to, any employee benefit plan within the meaning of section
      3(3) of the Employee Retirement Income Security Act of 1974, as amended
      ("ERISA") or other retirement arrangement, including, without limitation,
      individual retirement accounts and annuities, Keogh plans and bank
      collective investment funds and insurance company general or separate
      accounts in which such plans, accounts or arrangements are invested, that
      is subject to Section 406 of ERISA or Section 4975 of the Internal Revenue
      Code of 1986 (the "Code") (any of the foregoing, a "Plan"), (ii) are not
      being acquired with or on behalf of assets of a Plan, and (iii) will not
      be transferred to any entity that is deemed to be investing in, or acting
      on behalf of, plan assets; and

                                      G-1
<PAGE>

            (2) The Transferee is familiar with the prohibited transaction
      restrictions and fiduciary responsibility requirements of Sections 406 and
      407 of ERISA and Section 4975 of the Code and understands that each of the
      parties to which this certification is made is relying and will continue
      to rely on the statements made herein.

                                    Very truly yours,

                                    By:
                                       ---------------------------------------
                                        Name:
                                        Title:

                                      G-1
<PAGE>

                                                                       EXHIBIT H

              FORM OF CERTIFICATE TAX MATTERS TRANSFER AFFIDAVIT

                                                 AFFIDAVIT PURSUANT TO SECTION
                                               860E(e) OF THE INTERNAL REVENUE
                                                      CODE OF 1986, AS AMENDED

STATE OF _____________________)
                              ) ss.
COUNTY OF ____________________)

            [NAME OF OFFICER], being first duly sworn, deposes and says:

            1. That he/she is [Title of Officer] of [Name of Investor] (the
      "Investor"), a [savings institution] [corporation] duly organized and
      existing under the laws of [the State of _________] [the United States],
      on behalf of which he/she makes this affidavit.

            2. That (i) the Investor is not a "disqualified organization" and
      will not be a "disqualified organization" as of [date of transfer]. (For
      this purpose, a "disqualified organization" means the United States, any
      state or political subdivision thereof, any foreign government, any
      international organization, any agency or instrumentality of any of the
      forgoing (other than certain taxable instrumentalities), any cooperative
      organization furnishing electric energy or providing telephone service to
      persons in rural areas, or any organization (other than a farmers'
      cooperative) that is exempt from federal income tax unless such
      organization is subject to the tax on unrelated business income); (ii) it
      is not acquiring the Certificate for the account of disqualified
      organization; (iii) it consents to any amendment of the Sale and Servicing
      Agreement that shall be deemed necessary by the Owner Trustee (upon advice
      of counsel) to constitute a reasonable arrangement to ensure that the
      Certificate will not be owned directly or indirectly by a disqualified
      organization; and (iv) it will not transfer any such Certificate unless
      (a) it has received from the transferee an affidavit in substantially the
      same form as this affidavit containing these same four representations and
      (b) as of the time of the transfer, it does not have actual knowledge that
      such affidavit is false.

                                      H-1
<PAGE>

            IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] and its Corporate seal to be hereunto attached, attested by
its [Assistant] Secretary, this ___ day of __________________.

                                    [NAME OF INVESTOR]

                                    By:
                                       ---------------------------------------
                                        [Name of Officer]
                                        [Title of Officer]

[Corporate Seal]
Attest:

--------------------------------
[Assistant] Secretary

Personally appeared before me the above-named [Name of Officer], known or proved
to be the same person who executed the foregoing instrument and to be the [Title
of Officer] of the Investor, and acknowledged to me that he executed the same as
his free act and deed and the free act and deed of the Investor.

Subscribed and sworn before me this _____ day of ______________.

--------------------------------
NOTARY PUBLIC
COUNTY OF
          ----------------------
STATE OF
         -----------------------

            My commission expires the ____ day of _________________.

                                      H-2<PAGE>

                                                                     Exhibit 4.3

<PAGE>

                          SALE AND SERVICING AGREEMENT

                                      among

                       MORGAN STANLEY ABS CAPITAL I, INC.,
                                  as Depositor,

                   MORGAN STANLEY ABS CAPITAL I TRUST 2000-1,
                                 as REMIC Trust

                   MORGAN STANLEY ABS CAPITAL I TRUST 2000-1N,
                                 as NIMS Trust,

                          LONG BEACH MORTGAGE COMPANY,
                      as Originator and as Master Servicer,

                                       and

                       BANKERS TRUST OF CALIFORNIA, N.A.,
                              as Indenture Trustee

                            Dated as of July 1, 2000

<PAGE>

                                TABLE OF CONTENTS

ARTICLE I DEFINITIONS..................................................2

  SECTION 1.01    Defined Terms........................................2
  SECTION 1.02    Allocation of Certain Interest Shortfalls...........39

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF NOTES...39

  SECTION 2.01    Conveyance of Mortgage Loans........................39
  SECTION 2.02    Acceptance of REMIC Trust and NIMS Trust by the
                  Indenture Trustee...................................41
  SECTION 2.03    Representations, Warranties and Covenants of the
                  Originator Regarding the Mortgage Loans.............42
  SECTION 2.04    Repurchase or Substitution of Mortgage Loans by
                  the Seller or the Depositor; Payment of
                  Prepayment Charges in the event of breach...........43
  SECTION 2.05    Representations and Warranties of the Depositor.....46
  SECTION 2.06    Representations, Warranties and Covenants of the
                  Master Servicer.....................................47
  SECTION 2.07    Issuance of REMIC Trust Interests...................49
  SECTION 2.08    Conveyance of Class S Notes and Class P Notes;
                  Acceptance of the NIMS Trust by the Indenture
                  Trustee.............................................50
  SECTION 2.09    Issuance of Class N Notes and NIMS Certificates.....50
  SECTION 2.10    Miscellaneous REMIC Provisions......................50
  SECTION 2.11    Supplemental Interest Trust.........................52

ARTICLE III ADMINISTRATION AND SERVICING  OF THE MORTGAGE LOANS.......53

  SECTION 3.01    Master Servicer to Act as Master Servicer...........53
  SECTION 3.02    Sub-Servicing Agreements Between the Master
                  Servicer and Sub-Servicers..........................55
  SECTION 3.03    Successor Sub-Servicers.............................56
  SECTION 3.04    Liability of the Master Servicer....................56
  SECTION 3.05    No Contractual Relationship Between Sub-Servicers
                  and Indenture Trustee or Noteholders................57
  SECTION 3.06    Assumption or Termination of Sub-Servicing
                  Agreements by Indenture Trustee.....................57
  SECTION 3.07    Collection of Certain Mortgage Loan Payments........58
  SECTION 3.08    Sub-Servicing Accounts..............................58
  SECTION 3.09    Collection of Taxes, Assessments and Similar
                  Items; Servicing Accounts...........................59
  SECTION 3.10    Collection Account, Payment Account, Supplemental
                  Interest Account and NIMS Payment Account...........59
  SECTION 3.11    Withdrawals from the Collection Account and
                  Payment Account.....................................62

                                       i
<PAGE>

  SECTION 3.12    Investment of Funds in the Collection Account and
                  the Payment Account.................................64
  SECTION 3.13    Maintenance of Hazard Insurance and Errors and
                  Omissions and Fidelity Coverage.....................66
  SECTION 3.14    Enforcement of Due-On-Sale Clauses; Assumption
                  Agreements..........................................67
  SECTION 3.15    Realization Upon Defaulted Mortgage Loans...........68
  SECTION 3.16    Indenture Trustee to Cooperate; Release of
                  Mortgage Files......................................70
  SECTION 3.17    Servicing Compensation..............................72
  SECTION 3.18    Reports to the Indenture Trustee; Collection
                  Account Statements..................................72
  SECTION 3.19    Statement as to Compliance..........................73
  SECTION 3.20    Independent Public Accountants' Servicing Report....73
  SECTION 3.21    Access to Certain Documentation.....................74
  SECTION 3.22    Title, Management and Disposition of REO Property...74
  SECTION 3.23    Obligations of the Master Servicer in Respect of
                  Prepayment Interest Shortfalls......................77
  SECTION 3.24    Obligations of the Master Servicer in Respect of
                  Mortgage Rates and Monthly Payments.................78
  SECTION 3.25    Advance Facility....................................78

ARTICLE IV PAYMENTS TO NOTEHOLDERS....................................79

  SECTION 4.01    Payments............................................79
  SECTION 4.02    Statements to Holders...............................84
  SECTION 4.03    Remittance Reports; P&I Advances....................88
  SECTION 4.04    Allocation of Realized Losses.......................90
  SECTION 4.05    Compliance with Withholding Requirements............91
  SECTION 4.06    Commission Reporting................................91

ARTICLE V THE DEPOSITOR AND THE MASTER SERVICER.......................91

  SECTION 5.01    Liability of the Depositor and the Master Servicer..91
  SECTION 5.02    Merger or Consolidation of the Depositor or the
                  Master Servicer.....................................92
  SECTION 5.03    Limitation on Liability of the Depositor, the
                  Master Servicer and Others..........................92
  SECTION 5.04    Limitation on Resignation of the Master Servicer....93
  SECTION 5.05    Rights of the Depositor in Respect of the Master
                  Servicer............................................94

ARTICLE VI DEFAULT....................................................94

  SECTION 6.01    Master Servicer Events of Default...................94
  SECTION 6.02    Indenture Trustee to Act; Appointment of Successor..97
  SECTION 6.03    Notification to Holders.............................99
  SECTION 6.04    Waiver of Master Servicer Events of Default.........99

                                       ii
<PAGE>

ARTICLE VII CONCERNING THE INDENTURE TRUSTEE..........................99

  SECTION 7.01    Duties of Indenture Trustee.........................99
  SECTION 7.02    Certain Matters Affecting the Indenture Trustee....100
  SECTION 7.03    Indenture Trustee Not Liable for Notes or
                  Mortgage Loans.....................................102
  SECTION 7.04    Indenture Trustee May Own Securities...............102
  SECTION 7.05    Indenture Trustee's and Owner Trustee's Fees and
                  Expenses...........................................102
  SECTION 7.06    Eligibility Requirements for Indenture Trustee.....104
  SECTION 7.07    Resignation and Removal of the Indenture Trustee...104
  SECTION 7.08    Successor Indenture Trustee........................105
  SECTION 7.09    Merger or Consolidation of Indenture Trustee.......106
  SECTION 7.10    Appointment of Co-Indenture Trustee or Separate
                  Indenture Trustee..................................106
  SECTION 7.11    Appointment of Custodians..........................107
  SECTION 7.12    Appointment of Office or Agency....................108
  SECTION 7.13    Representations and Warranties of the Indenture
                  Trustee............................................108

ARTICLE VIII TERMINATION.............................................109

  SECTION 8.01    Termination Upon Repurchase or Liquidation of All
                  Mortgage Loans or Repurchase of Mortgages from
                  REMIC Trust........................................109
  SECTION 8.02    Additional Termination Requirements................111

ARTICLE IX PROVISIONS REGARDING THE TRUSTS...........................112

  SECTION 9.01    Administration of the Trusts.......................112
  SECTION 9.02    REMIC Administration...............................112
  SECTION 9.03    Prohibited Transactions and Activities.............115
  SECTION 9.04    Master Servicer and Indenture Trustee
                  Indemnification....................................115

ARTICLE X MISCELLANEOUS PROVISIONS...................................116

  SECTION 10.01   Amendment..........................................116
  SECTION 10.02   Recordation of Agreement; Counterparts.............117
  SECTION 10.03   Limitation on Rights of Holders....................117
  SECTION 10.04   Governing Law......................................118
  SECTION 10.05   Notices............................................118
  SECTION 10.06   Severability of Provisions.........................119
  SECTION 10.07   Notice to Rating Agencies..........................119
  SECTION 10.08   Article and Section References.....................120
  SECTION 10.09   Grant of Security Interest.........................120
  SECTION 10.10   Limitation of Liability of the Owner Trustee.......120
  SECTION 10.11   Third Party Beneficiary............................121

                                      iii
<PAGE>

                             EXHIBITS AND SCHEDULES

EXHIBIT A     Representations and Warranties Regarding Individual Mortgage
              Loans
EXHIBIT B-1   Form of Initial Certification of Indenture Trustee
EXHIBIT B-2   Form of Final Certification of Indenture Trustee
EXHIBIT C     Form of Request for Release

Schedule 1    Mortgage Loan and Prepayment Charge Schedule

                                       iv
<PAGE>

            SALE AND SERVICING AGREEMENT, dated as of July 1, 2000 (this
"Agreement"), among MORGAN STANLEY ABS CAPITAL I, INC., a Delaware corporation,
as depositor (the "Depositor"), MORGAN STANLEY ABS CAPITAL I TRUST 2000-1, a
Delaware business trust (the "REMIC Trust"), MORGAN STANLEY ABS CAPITAL I TRUST
2000-1N, a Delaware business trust (the "NIMS Trust"), LONG BEACH MORTGAGE
COMPANY, a Delaware corporation, as originator (in such capacity, the
"Originator") and as master servicer (in such capacity, the "Master Servicer"),
and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a national banking association,
as indenture trustee (the "Indenture Trustee").

                            PRELIMINARY STATEMENT:

            WHEREAS, the Originator originated a pool of one- to four-family,
fixed- and adjustable-rate, first-lien residential mortgage loans (the "Mortgage
Loans") and sold the same to Morgan Stanley Dean Witter Mortgage Capital, Inc.
(the "Seller") pursuant to the terms of a Mortgage Loan Purchase Agreement,
dated as of April 1, 2000 (the "Mortgage Loan Purchase Agreement"), between the
Originator and the Seller; and

            WHEREAS, the Seller has transferred, sold and conveyed the Mortgage
Loans to the Depositor pursuant to a Assignment and Bill of Sale, dated as of
July 1, 2000 (the "Bill of Sale"), made by the Seller in favor of the Depositor;
and

            WHEREAS, the Depositor desires to sell, convey and transfer the
Mortgage Loans to the REMIC Trust, and the REMIC Trust desires to purchase and
accept the Mortgage Loans from the Depositor;

            WHEREAS, the Master Servicer has agreed to service the Mortgage
Loans which shall constitute the principal assets of the REMIC Trust; and

            WHEREAS, pursuant to the Indenture, dated as of July 1, 2000 (the
"REMIC Indenture"), between the REMIC Trust and the Indenture Trustee, the REMIC
Trust is issuing its Mortgage Loan Asset-Backed Notes, Series 2000-1, Class A,
Class M-1, Class M-2, Class B-1, Class C, and Class P (collectively, the
"Notes"); and

            WHEREAS, the Class C Notes shall be deposited with the Indenture
Trustee, on behalf of the Supplemental Interest Trust (as defined herein), which
will issue the Class S Notes; and

            WHEREAS, the Depositor desires to sell, convey and transfer the
Class S Notes and the Class P Notes to the NIMS Trust, and the NIMS Trust
desires to purchase and accept the Class S Notes and the Class P Notes from the
Depositor; and

            WHEREAS, pursuant to the Indenture, dated as of July 1, 2000 (the
"NIMS Indenture"), between the NIMS Trust and the Indenture Trustee, the NIMS
Trust is issuing its Asset-Backed Notes, Series 2000-1N, Class N (the "Class N
Notes").

            NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein, and for other good and valuable consideration, the
receipt

                                       1
<PAGE>

and sufficiency of which is hereby acknowledged, the Depositor, the REMIC Trust,
the NIMS Trust, the Master Servicer and Indenture Trustee each hereby agree as
follows:

                                   ARTICLE I

                                   DEFINITIONS

            SECTION 1.01 Defined Terms. Whenever used in this Agreement,
including, without limitation, in the Preliminary Statement hereto, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article I. Unless otherwise specified, all
calculations described herein shall be made on the basis of a 360-day year
consisting of twelve 30-day months.

            "Accrued Note Interest": With respect to any of the Class A Notes,
the Mezzanine Notes, the Class C Notes, or the Class N Notes, and any Payment
Date, interest accrued during the related Interest Accrual Period at the
Interest Rate for such Note for such Payment Date on the Note Principal Balance
of such Note immediately prior to such Payment Date. The Class P Notes are not
entitled to payments in respect of interest and, accordingly will not accrue
interest. All payments of interest on the Class A Notes and the Mezzanine Notes
shall be calculated on the basis of a 360-day year and the actual number of days
in the applicable Interest Accrual Period. Accrued Note Interest with respect to
each Payment Date, as to any Class A Note, any Mezzanine Note or any Class C
Note shall be reduced by an amount equal to the portion allocable to such Note
pursuant to Section 1.02 hereof equal to the sum of (a) the aggregate Prepayment
Interest Shortfall, if any, for such Payment Date to the extent not covered by
payments pursuant to Section 3.23, and (b) the aggregate amount of any Relief
Act Interest Shortfall, for such Payment Date. In addition, Accrued Note
Interest with respect to each Payment Date, as to any Class C Note, shall be
reduced by an amount equal to the portion allocable to such Class C Note of
Realized Losses, if any, pursuant to Section 4.04 hereof. All payments of
interest on the Class N Notes shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.

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

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

            "Advancing Person":  As defined in Section 3.25 hereof.

            "Affiliate": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or

                                       2
<PAGE>

indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

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

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

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

            "Available Funds Cap Carry-Forward Amount": With respect to any
Class of Class A Notes or Mezzanine Notes and any Payment Date, the sum of (i)
the positive excess, if any, of (x) the aggregate, cumulative amount of REMIC
Available Funds Cap Shortfall Amounts for such Class on all prior Payment Dates
over (y) the aggregate, cumulative amount of Supplemental Interest Payments
actually paid to the Holders of that Class on all prior Payment Dates pursuant
to those clauses of Section 4.01 which relate to payments to that Class, plus
(ii) interest on the amount described in clause (i) at a rate equal to the
related Formula Rate for such Class and Payment Date.

            "Available Funds Cap Rate": With respect to any Payment Date, an
amount expressed as a per annum rate, and calculated on the basis of a 360-day
year and the actual number of days elapsed in the related Interest Accrual
Period, equal to (a) the sum of (i) the aggregate amount of interest accrued and
collected, or advanced, at the Mortgage Rates on all of the Mortgage Loans for
the related Due Period minus (ii) the aggregate of the Servicing Fee, the
Indenture Trustee Fee and the Owner Trustee Fee for such Payment Date, divided
by (b) the aggregate Stated Principal Balance of the Mortgage Loans as of the
beginning of the related Due Period.

            "Available Funds Cap Shortfall Amount": With respect to any Payment
Date and any Class of Class A Notes or Mezzanine Notes, the excess, if any, of
(x) the Accrued Note Interest due on such Class calculated for this purpose only
using the Formula Rate applicable to such Class (less any Prepayment Interest
Shortfalls and Relief Act Shortfalls allocable to that Class) over (y) the
Accrued Note Interest due on such

                                       3
<PAGE>

Class, calculated using the Interest Rate applicable to such Class (less any
Prepayment Interest Shortfalls and Relief Act Shortfalls allocable to that
Class).

            "Available Payment Amount": With respect to any Payment, an amount
equal to (1) the sum of (a) the aggregate of the amounts on deposit in the
Collection Account and Payment Account as of the close of business on the
related Determination Date, and (b) the aggregate of any amounts received in
respect of an REO Property withdrawn from any REO Account and deposited in the
Payment Account for such REO Account by the Master Servicer in respect of
Prepayment Interest Shortfalls for such Payment Date pursuant to Section 3.22,
and (c) the aggregate of any P&I Advances made by the Master Servicer for such
Payment Date pursuant to Section 4.03, and (d) the aggregate of any advances
made by the Indenture Trustee, as successor Master Servicer, for such Payment
Date pursuant to Section 6.02(b), reduced (to not less than zero) by (2) the sum
of (x) the portion of the amount described in clause (1)(a) above that
represents (i) Monthly Payments on the Mortgage Loans received from a Mortgagor
on or prior to the Determination Date but due during any Due Period subsequent
to the related Due Period, (ii) Principal Prepayments on the Mortgage Loans
received after the related Prepayment Period (together with any interest
payments received with such Principal Prepayments to the extent they represent
the payment of interest accrued on the Mortgage Loans during a period subsequent
to the related Prepayment Period, (iii) Liquidation Proceeds and Insurance
Proceeds received in respect of the Mortgage Loans after the related Prepayment
Period, (iv) amounts reimbursable or payable to the Depositor, the Master
Servicer, the Indenture Trustee, as Indenture Trustee and as successor Master
Servicer, the Owner Trustee, the Seller or any Sub-Servicer pursuant to Section
3.11 or Section 3.12 or otherwise payable in respect of Extraordinary REMIC
Trust Expenses, (v) Stayed Funds, (vi) the Indenture Trustee Fee payable from
the Payment Account pursuant to Section 7.05, (vii) the Owner Trustee Fee
payable from the Payment Account pursuant to Section 7.05, (viii) amounts
deposited in the Collection Account or the Payment Account in error and (ix) the
amount of any Prepayment Charges collected by the Master Servicer in connection
with the voluntary Principal Prepayment in full of any of the Mortgage Loans or
any Master Servicer Prepayment Charge Payment Amount, and (y) amounts
reimbursable to the Indenture Trustee, as successor Master Servicer, for an
advance made pursuant to Section 6.02(b) which advance the Indenture Trustee, as
successor Master Servicer, has determined to be nonrecoverable from the Stayed
Funds in respect of which it was made.

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

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

            "Bankruptcy Loss": With respect to any Mortgage Loan, a Realized
Loss resulting from a Deficient Valuation (i.e., "principal cramdown") or Debt
Service Reduction (i.e., "interest cramdown").

            "Bill of Sale": Has the meaning specified in the Preliminary
Statements.

                                       4
<PAGE>

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

            "Certificates": Any one of the REMIC Certificates or the NIMS
Certificates.

            "Class": Any class of the Class A, Class M-1, Class M-2, Class B-1,
Class C, Class S, Class P or Class N Notes or Class R-1, Class R-2 or NIMS
Certificates.

            "Class A Interest Rate": With respect to any Payment Date, the
lesser of (x) the sum of (1) One-Month LIBOR for such Payment Date plus (2) the
Note Margin for the Class A Notes applicable to such Payment Date and (y) the
Available Funds Cap Rate for such Payment Date.

            "Class A Note": Any one of the Notes designated on the face thereof
as a Class A Note, executed by the Owner Trustee, on behalf of the REMIC Trust,
and authenticated and delivered by the Indenture Trustee, in the form attached
as an exhibit to the REMIC Indenture, and evidencing a Regular Interest in the
REMIC Trust for purposes of the REMIC Provisions.

            "Class A Principal Payment Amount": With respect to any Payment
Date, the excess of (x) the Note Principal Balance of the Class A Notes (after
taking into account the payment of the Class A Principal Payment Amount on such
Payment Date) over (y) the lesser of (A) the product of (i) 58.00% and (ii) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period and (B) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period minus $1,800,538.

            "Class B-1 Interest Payment Amount": With respect to any Payment
Date, the lesser of (1) the Accrued Note Interest with respect to the Class B-1
Notes for such Payment Date and (2) the excess of (x) the Interest Amount for
that Payment Date less (y) the sum of (i) the Senior Interest Payment Amount,
(ii) the Class M-1 Interest Payment Amount and (iii) the Class M-2 Interest
Payment Amount.

            "Class B-1 Note": Any one of the Notes designated on the face
thereof as a Class B-1 Note, executed by the Owner Trustee, on behalf of the
REMIC Trust, and authenticated and delivered by the Indenture Trustee, in the
form attached as an exhibit to the REMIC Indenture, and evidencing a Regular
Interest in the REMIC Trust for purposes of the REMIC Provisions.

            "Class B-1 Interest Rate": With respect to any Payment Date, the
lesser of (x) the sum of (1) One-Month LIBOR for such Payment Date plus (2) the
Note Margin for the Class B-1 Notes applicable to such Payment Date and (y) the
Available Funds Cap Rate for such Payment Date.

                                       5
<PAGE>

            "Class B-1 Principal Payment Amount": With respect to any Payment
Date, the excess of (x) the sum of (i) the Note Principal Balance of the Class A
Notes (after taking into account the payment of the Class A Principal Payment
Amount on such Payment Date), (ii) the Note Principal Balance of the Class M-1
Notes (after taking into account the payment of the Class M-1 Principal Payment
Amount on such Payment Date), (iii) the Note Principal Balance of the Class M-2
Notes (after taking into account the payment of the Class M-2 Principal Payment
Amount on such Payment Date) and (iv) the Note Principal Balance of the Class
B-1 Notes immediately prior to such Payment Date over (y) the lesser of (A) the
product of (i) 95.30% and (ii) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $1,800,538.

            "Class C Payment Amount": With respect to any Payment Date, the
amount payable to the Holders of the Class C Notes pursuant to footnotes 4 and 5
of Section 2.10(b).

            "Class C Interest Rate": With respect to any Payment Date, the
interest payable at the Expense Adjusted Mortgage Rate on the Mortgage Loans in
excess of the interest payable on the Class A Notes and the Mezzanine Notes,
expressed as a per annum rate on the aggregate Stated Principal Balance of the
Mortgage Loans.

            "Class C Note": Any one of Notes designated on the face thereof as a
Class C Note, executed by the Owner Trustee, on behalf of the REMIC Trust, and
authenticated and delivered by the Indenture Trustee, in the form attached as an
exhibit to the REMIC Indenture, and evidencing a Regular Interest in the REMIC
Trust for purposes of the REMIC Provisions.

            "Class M-1 Interest Payment Amount": With respect to any Payment
Date, the lesser of (1) the Accrued Note Interest with respect to the Class M-1
Notes for such Payment Date and (2) the excess of (x) the Interest Amount for
such Payment Date over the Senior Interest Payment Amount for such Payment Date.

            "Class M-1 Interest Rate": With respect to any Payment Date, the
lesser of (x) the sum of (1) One-Month LIBOR for such Payment Date plus (2) the
Note Margin of the Class M-1 Notes applicable to such Payment Date and (y) the
Available Funds Cap Rate for such Payment Date.

            "Class M-1 Note": Any one of the Notes designated on the face
thereof as a Class M-1 Note, executed by the Owner Trustee, on behalf of the
REMIC Trust, and authenticated and delivered by the Indenture Trustee, in the
form attached as an exhibit to the REMIC Indenture, and evidencing a Regular
Interest in the REMIC Trust for purposes of the REMIC Provisions.

            "Class M-1 Principal Payment Amount": With respect to any Payment
Date, the excess of (x) the sum of (i) the Note Principal Balance of the Class A
Notes (after taking into account the payment of the Class A Principal Payment
Amount on such

                                       6
<PAGE>

Payment Date) and (ii) the Note Principal Balance of the Class M-1 Notes
immediately prior to such Payment Date over (y) the lesser of (A) the product of
(i) 72.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period and (B) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period minus $1,800,538.

            "Class M-2 Interest Payment Amount": With respect to any Payment
Date, the lesser of (1) the Accrued Note Interest with respect to the Class M-2
Notes for such Payment Date and (2) the excess of (x) the Interest Amount for
such Payment Date over the sum of (i) the Senior Interest Payment Amount and
(ii) the Class M-1 Interest Payment Amount.

            "Class M-2 Interest Rate": With respect to any Payment Date, the
lesser of (x) the sum of (1) One-Month LIBOR for such Payment Date plus (2) the
Note Margin for the Class M-2 Notes applicable to such Payment Date and (y) the
Available Funds Cap Rate for such Payment Date.

            "Class M-2 Note": Any one of the Notes designated on the face
thereof as a Class M-2 Note, executed by the Owner Trustee, on behalf of the
REMIC Trust, and authenticated and delivered by the Indenture Trustee, in the
form attached as an exhibit to the REMIC Indenture, and evidencing a Regular
Interest in the REMIC Trust for purposes of the REMIC Provisions.

            "Class M-2 Principal Payment Amount": With respect to any Payment
Date, the excess of (x) the sum of (i) the Note Principal Balance of the Class A
Notes (after taking into account the payment of the Class A Principal Payment
Amount on such Payment Date), (ii) the Note Principal Balance of the Class M-1
Notes (after taking into account the payment of the Class M-1 Principal Payment
Amount on such Payment Date) and (iii) the Note Principal Balance of the Class
M-2 Notes immediately prior to such Payment Date over (y) the lesser of (A) the
product of (i) 84.50% and (ii) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $1,800,538.

            "Class N Note": Any one of the Notes designated on the face thereof
as a Class N Note, executed by the Owner Trustee, on behalf of the NIMS Trust,
and authenticated and delivered by the Indenture Trustee, in the form attached
as an exhibit to the NIMS Indenture.

            "Class N  Interest  Rate":  13.75%  per annum,  calculated  on the
basis of a 360-day year consisting of twelve 30-day months.

            "Class P Note": Any one of the Notes designated on the face thereof
as a Class P Note, executed by the Owner Trustee, on behalf of the REMIC Trust,
and authenticated and delivered by the Indenture Trustee, in the form attached
as an exhibit to the REMIC Indenture, and evidencing a Regular Interest in the
REMIC Trust for purposes of the REMIC Provisions.

                                       7
<PAGE>

            "Class R-1 Certificate": Any one of the Class R-1 Certificates
issued and executed by the Owner Trustee, on behalf of the REMIC Trust, and
authenticated and delivered by the Owner Trustee, in the form attached as an
exhibit to the REMIC Trust Agreement, and evidencing a Residual Interest in the
Lower-Tier REMIC for purposes of the REMIC Provisions.

            "Class R-2 Certificate": Any one of the Class R-2 Certificates
issued and executed by the Owner Trustee, on behalf of the REMIC Trust, and
authenticated and delivered by the Owner Trustee, in the form attached as an
exhibit to the REMIC Trust Agreement, and evidencing a Residual Interest in the
Upper-Tier REMIC for purposes of the REMIC Provisions.

            "Class S Note": Any one of the Class S Notes issued and executed by
the Indenture Trustee, on behalf of the Supplement Interest Trust, and
authenticated and delivered by the Indenture Trustee, in the form attached as an
exhibit to the REMIC Indenture

            "Clean-up Call Date": The Payment Date following the month in which
the aggregate Stated Principal Balance of the Mortgage Loans has declined to 10%
or less of the Original Scheduled Principal Balance.

            "Closing Date": July 25, 2000.

            "Code":  The Internal Revenue Code of 1986.

            "Collection Account": The account or accounts created and maintained
by the Master Servicer pursuant to Section 3.10(a), which shall be entitled
"Long Beach Mortgage Company, as Master Servicer for Bankers Trust Company of
California, N.A., as Indenture Trustee, in trust for the registered holders of
Morgan Stanley ABS Capital I, Inc. Mortgage Loan Asset-Backed Notes, Series
2000-1." The Collection Account must be an Eligible Account.

            "Commission": The Securities and Exchange Commission.

            "Corporate Trust Office": The principal corporate trust office of
the Indenture Trustee at which at any particular time its corporate trust
business in connection with this Agreement shall be administered, which office
at the date of the execution of this instrument is located at 1761 East St.
Andrew Place, Santa Ana, California 92705, or at such other address as the
Indenture Trustee may designate from time to time by notice to the Noteholders,
the Depositor and the Master Servicer.

            "Credit Enhancement Percentage": For any Payment Date, the
percentage equivalent of a fraction, the numerator of which is the sum of the
aggregate Note Principal Balances of the Mezzanine Notes and the
Overcollateralization Amount, and the denominator of which is the aggregate
Stated Principal Balance of the Mortgage Loans, calculated after taking into
account payments of principal on the Mortgage Loans and payment of the Principal
Payment Amount to the Notes then entitled to payment of principal on such
Payment Date.

                                       8
<PAGE>

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

            "Cut-off Date": With respect to each Original Mortgage Loan, the
opening of business on July 1, 2000. With respect to all Qualified Substitute
Mortgage Loans, their respective dates of substitution. References herein to the
"Cut-off Date," when used with respect to more than one Mortgage Loan, shall be
to the respective Cut-off Dates for such Mortgage Loans.

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

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

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

            "Delinquency Percentage": As of the last day of the related Due
Period, the percentage equivalent of a fraction, the numerator of which is the
aggregate Stated Principal Balance of all Mortgage Loans that, as of the last
day of the previous calendar month, are 60 or more days Delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the last day of
the previous calendar month.

            "Delinquent": A Mortgage Loan is "delinquent" if any payment due
thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has
not been received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31-day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.

            "Depositor": Morgan Stanley ABS Capital I, Inc., a Delaware
corporation, or its successors in interest.

            "Depository Institution": Any depository institution or trust
company, including the Indenture Trustee, that (a) is incorporated under the
laws of the United States of America or any State thereof, (b) is subject to
supervision and examination by federal or state banking authorities and (c) has
outstanding unsecured commercial paper

                                       9
<PAGE>

or other short-term unsecured debt obligations that are rated F1+ (if rated by
Fitch), and A-1+ by S&P or P-1 by Moody's.

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

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

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

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

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

                                       10
<PAGE>

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

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

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

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

            "Expense Adjusted Mortgage Rate": With respect to any Mortgage Loan
or REO Property, the then-applicable Mortgage Rate thereon minus the sum of (i)
the Indenture Trustee's Fee Rate, (ii) the Owner Trustee's Fee Rate and (iii)
the Servicing Fee Rate.

            "Extraordinary REMIC Trust Expense": Any amounts reimbursable to the
Indenture Trustee, or any director, officer, employee or agent of the Indenture
Trustee, from the REMIC Trust pursuant to Section 7.05, and any amounts payable
from the Payment Account in respect of taxes pursuant to Section 9.02(g)(iii).

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

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

            "Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased pursuant to or as contemplated by Section 2.04, Section 3.15(c) or
Section 8.01), a determination made by the Master Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the Master
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Master Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.

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

            "Formula Rate": For any Payment Date and the Class A Notes and the
Mezzanine Notes, One-Month LIBOR plus the related Note Margin for such Class.

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

                                       11
<PAGE>

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

            "Holder": The beneficial owner of a Security.

            "Indenture": Individually and collectively, the REMIC Indenture or
the NIMS Indenture.

            "Indenture Trustee": Bankers Trust Company of California, N.A., a
national banking association, or its successor in interest, or any successor
Indenture Trustee appointed as herein provided.

            "Indenture Trustee Fee": The amount payable to the Indenture Trustee
on each Payment Date pursuant to Section 7.05 as compensation for all services
rendered by it in connection with the exercise and performance of any of the
powers and duties of the Indenture Trustee hereunder or under the Indentures,
which amount shall equal one twelfth of the product of (i) the sum of the
Indenture Trustee's REMIC Fee Rate and the Indenture Trustee's NIMS Fee Rate,
multiplied by (ii) the aggregate Scheduled Principal Balance of the Mortgage
Loans and any REO Properties as of the second preceding Due Date (or, in the
case of the initial Payment Date, as of the Cut-off Date).

            "Indenture Trustee's REMIC Fee Rate": 0.008% per annum.

            "Indenture Trustee's NIMS Fee Rate": 0.001% per annum.

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

            "Independent Contractor": Either (i) any Person other than the
Master Servicer that would be an "independent contractor" with respect to REMIC
provisions within the meaning of Section 856(d)(3) of the Code if the REMIC
Trust were a real estate investment trust (except that the ownership tests set
forth in that section shall be considered to be met by any Person that owns,
directly or indirectly, 35% or more of any Class of Notes), so long as the REMIC
Trust does not receive or derive any income from such Person and provided that
the relationship between such Person and the REMIC Trust is at arm's length, all
within the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any
other Person (including the Master Servicer) if the Indenture Trustee has
received an Opinion of Counsel to the effect that the taking of any action in
respect of

                                       12
<PAGE>

any REO Property by such Person, subject to any conditions therein specified,
that is otherwise herein contemplated to be taken by an Independent Contractor
will not cause such REO Property to cease to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code (determined without regard
to the exception applicable for purposes of Section 860D(a) of the Code), or
cause any income realized in respect of such REO Property to fail to qualify as
Rents from Real Property.

            "Index": With respect to each Adjustable-Rate Mortgage Loan and each
related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in The
Wall Street Journal and as most recently available as of a date as specified in
the related Mortgage Note.

            "Initial Note Principal Balance": The initial Note Principal Balance
of the Class A Notes, the Mezzanine Notes and the Class N Notes, as set forth
below. The Class C Notes, the Class S Notes, the Class P Notes do not have an
Initial Note Principal Balance.

                                  Initial Note
                     Class      Principal Balance
                     -----      -----------------
                       A          $284,485,000
                      M-1          $25,207,000
                      M-2          $22,507,000
                      B-1          $18,906,000
                       N           $16,500,000

            "Initial Purchaser":  Morgan Stanley & Co. Incorporated.

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

            "Interest Accrual Period": With respect to any Payment Date, and for
all Classes of Notes, other than the Class N Notes, the period commencing on the
Payment Date of the month immediately preceding the month in which such Payment
Date occurs (or, in the case of the first Payment Date, commencing on the
Closing Date) and ending on the day preceding such Payment Date. With respect to
any Payment Date and the Class N Notes, the period consisting of the calendar
month preceding the calendar month in which such Payment Date occurs.

            "Interest Amount": With respect to any Payment Date, that portion of
the Available Payment Amount for such Payment Date allocable to interest.

            "Interest Carry Forward Amount": With respect to any Payment Date
and any Class of Class A Notes or Mezzanine Notes, the sum of (i) the amount, if
any, by

                                       13
<PAGE>

which (a) the Accrued Note Interest for such Class of Notes on the immediately
preceding Payment Date exceeded (b) the actual amount paid on such Class of
Notes in respect of interest on such immediately preceding Payment Date; and
(ii) the amount of any Interest Carry Forward Amount for such Class of Notes
remaining unpaid from the previous Payment Date, plus accrued interest on such
sum calculated at the related Formula Interest Rate for the most recently ended
Interest Accrual Period such amount remained outstanding.

            "Interest Determination Date": With respect to the Class A Notes and
the Mezzanine Notes, and any Interest Accrual Period therefor, the second London
Business Day preceding the commencement of such Interest Accrual Period.

            "Interest Rate": With respect to the Class A Notes, the Class A
Interest Rate; with respect to the Class M-1 Notes, the Class M-1 Interest Rate;
with respect to the Class M-2 Notes, the Class M-2 Interest Rate; with respect
to the Class B-1 Notes, the Class B-1 Interest Rate; with respect to the Class C
Notes, the Class C Interest Rate, and with respect to the Class N Notes, the
Class N Interest Rate.

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

            "Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from the REMIC Trust, by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.04, Section 3.15(c) or Section 8.01.
With respect to any REO Property, either of the following events: (x) a Final
Recovery Determination is made as to such REO Property; or (y) such REO Property
is removed from the REMIC Trust by reason of its being purchased pursuant to
Section 3.22 or Section 8.01.

            "Liquidation Proceeds": The amount (other than Insurance Proceeds or
amounts received in respect of the rental of any REO Property prior to REO
Disposition) received by the Master Servicer in connection with (i) the taking
of all or a part of a Mortgaged Property by exercise of the power of eminent
domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan
through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.04, Section 3.15(c), Section 3.22 or Section
8.01.

            "Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related

                                       14
<PAGE>

Mortgage Loan at such date and the denominator of which is the Value of the
related Mortgaged Property.

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

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

            "Lower-Tier Balance": As to each Class of Lower-Tier Interests and
any Distribution Date, the Initial Lower-Tier Balance as set forth in Section
2.10(b) minus all amounts distributed as principal of such Class on previous
Payment Dates.

            "Lower-Tier Interest 1": The interest of that name established
pursuant to Section 2.10(b) hereof.

            "Lower-Tier Interest 2": The interest of that name established
pursuant to Section 2.10 (b) hereof.

            "Lower-Tier Interest 3": The interest of that name established
pursuant to Section 2.10 (b) hereof.

            "Lower-Tier Interest 4": The interest of that name established
pursuant to Section 2.10 (b) hereof.

            "Lower-Tier Interest 5": The interest of that name established
pursuant to Section 2.10 (b) hereof.

            "Lower-Tier Interest 6": The interest of that name established
pursuant to Section 2.10 (b) hereof.

            "Lower-Tier Rate": As to each of the respective Lower-Tier
Interests, the applicable "Lower-Tier Rate" set forth in Section 2.10 (b)
hereof.

            "Lower-Tier REMIC Interests": As defined in Section 2.10 (b) hereof.

            "Lower-Tier REMIC Regular Interests": As defined in Section 2.10(b)
hereof.

            "Lower-Tier REMIC": The segregated pool of assets consisting of the
Mortgage Loans, the Accounts (other than the Non-REMIC Accounts), any REO
Property and any proceeds of the foregoing.

            "Majority Noteholders": With respect to any particular Class of
Notes, any single Holder or group of Holders of the Notes of such Class
representing a greater

                                       15
<PAGE>

than 50% Percentage Interest in such Class. With respect to the Class A Notes,
the Mezzanine Notes, the Class C Notes, the Class S Notes and the Class P Notes
as a whole, any single Holder or group of Holders representing a greater than
50% Percentage Interest in all such Notes.

            "Master  Servicer  Event of  Default":  One or more of the  events
described in Section 6.01.

            "Master Servicer Prepayment Charge Payment Amount": The amounts
payable by the Master Servicer in respect of any waived Prepayment Charges
pursuant to Section 2.06.

            "Master Servicer Remittance Date": With respect to any Payment Date,
3:00 p.m. New York time on the 18th day of the calendar month in which such
Payment Date occurs or, if such 18th day is not a Business Day, the Business Day
immediately preceding such 18th day; provided, however, that if such immediately
preceding Business Day is the Determination Date, the Master Servicer Remittance
Date shall be the next succeeding Business Day.

            "Master Servicer Termination Test": With respect to any Payment
Date, the Master Servicer Termination Test will be failed with respect to the
Master Servicer if the Cumulative Loss Percentage exceeds 6.125%.

            "Master Servicer": Long Beach Mortgage Company, a Delaware
corporation, or any successor master servicer appointed as herein provided, in
its capacity as Master Servicer hereunder.

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

            "Mezzanine Notes": Individually and collectively, the Class M-1
Notes, the Class M-2 Note and the Class B-1 Notes.

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

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

                                       16
<PAGE>

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

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

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

            "Mortgage Loan": Each mortgage loan transferred and assigned to the
Indenture Trustee pursuant to Section 2.01 or Section 2.04(d) of this Agreement,
as held from time to time as a part of the REMIC Trust, the Mortgage Loans so
held being identified in the Mortgage Loan Schedule, including each REO Property
unless the context otherwise requires.

            "Mortgage Loan Purchase Agreement": Has the meaning specified in the
Preliminary Statements.

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

            (i)     the Master Servicer's Mortgage Loan identifying number;

            (ii)    the Mortgagor's name;

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

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

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

            (vi)    the original months to maturity;

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

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

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

            (x)     the stated maturity date;

                                       17
<PAGE>

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

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

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

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

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

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

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

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

            (xix)   the Mortgage Rate at origination;

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

            (xxi)   a code indicating the documentation program;

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

            (xxiii) the risk grade;

            (xxiv)  the Value of the Mortgaged Property; and

            (xxv)   the sale price of the Mortgaged Property, if applicable.

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

                                       18
<PAGE>

the related Cut-off Date for such Mortgage Loan, determined in accordance with
the definition of Cut-off Date herein.

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

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

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

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

            "Mortgagor":  The obligor on a Mortgage Note.

            "Net Interest Margin": With respect to any Payment Date, the net sum
of (i) the Interest Amount minus (ii) Interest Amounts allocable to the Class A
Notes and the Mezzanine Notes.

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

                                       19
<PAGE>

            "Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.

            "Net WAC Rate": With respect to the Notes and any Payment Date, a
weighted average coupon ("WAC") rate per annum equal to the weighted average of
the Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans,
weighted based on their Scheduled Principal Balances as of the first day of the
calendar month preceding the month in which the Payment Date occurs multiplied
by a fraction, the numerator of which is 30 and the denominator of which is the
actual number of days elapsed in the related Interest Accrual Period.

            "New Lease": Any lease of REO Property entered into on behalf of
Morgan Stanley ABS Capital I Trust 2000-1, including any lease renewed or
extended on behalf of thereof, if Morgan Stanley ABS Capital I Trust 2000-1 has
the right to renegotiate the terms of such lease.

            "NIMS Certificate": Any one of the trust certificates representing a
beneficial ownership interest in the NIMS Trust.

            "NIMS Indenture": Has the meaning specified in the Preliminary
Statements.

            "NIMS Payment Account": Has the meaning specified in Section 3.10(g)
hereof.

            "NIMS Trust Agreement": The Trust Agreement, dated as of July 1,
2000, between the Depositor and the Owner Trustee, relating to the NIMS Trust.

            "NIMS Trust Estate": The segregated pool of assets subject hereto
constituting the primary NIMS Trust and consisting of all of the right to
receive the payments on the Class P Notes and the Class S Notes pursuant to
Sections 4.01(a) and (e) hereof and pledged in trust to the Indenture Trustee
for the benefit of the Holders of the Securities issued by the NIMS Trust.

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

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

                                       20
<PAGE>

            "Non-REMIC Accounts": The Supplemental Interest Account, the NIMS
Payment Account and the Special Reserve Account.

            "Non-U.S. Person": A Person other than a citizen or resident of the
United States, a corporation, partnership or other entity treated as a
corporation or partnership for federal income tax purposes, created or organised
in or under the laws of the united State, any state thereof of the District of
Columbia or an estate that is subject to U.S. federal income tax (regardless of
the source of its income) or a trust if (a) a court within the United States is
able to exercise primary supervision over the administration of the trust and
(b) one or more United States trustees have authority to control all substantial
decisions of the trust.

            "Note": Any one of the Mortgage Loan Asset-Backed Notes, Series
2000-1, Class A Notes, Class M-1 Notes, Class M-2 Notes, Class B-1 Notes, Class
C Notes, Class S Notes and Class P Notes, and the Assets-Backed Notes, Series
2000-1N, Class N Notes.

            "Note Factor": With respect to any Class of Notes as of any Payment
Date, a fraction, expressed as a decimal carried to six places, the numerator of
which is the aggregate Note Principal Balance of such Class of Notes on such
Payment Date (after giving effect to any payments of principal and allocations
of Realized Losses in reduction of the Note Principal Balance of such Class of
Notes to be made on such Payment Date), and the denominator of which is the
initial aggregate Note Principal Balance of such Class of Notes as of the
Closing Date.

            "Noteholder": Any Holder of a Note.

            "Note Margin": With respect to the Class A, Class M-1, Class M-2 and
Class B-1 Notes on each Payment Date, the applicable percentage set forth below:

                          On or Prior to the    After the Clean-up
              Class       Clean-up Call Date         Call Date
              -----       ------------------    ------------------
                A               0.30%                 0.600%
               M-1              0.65%                 0.975%
               M-2              1.05%                 1.575%
               B-1              2.25%                 3.375%

            "Note Principal Balance": The amount of any Note outstanding as of
any date of determination. As of the Closing Date, the Note Principal Balance of
each Note shall equal its Initial Note Principal Balance. On each Payment Date,
the Note Principal Balance of each Note shall be reduced by all payments of
principal made on such Note, as applicable, on such Payment Date pursuant to
Section 4.01 and, if and to the extent necessary and appropriate, shall be
further reduced on such Payment Date by Realized Losses as provided in Section
4.04. The Note Principal Balance of each Note shall never be less than zero.

                                       21
<PAGE>

            "Notional Amount": With respect to Class C Notes and any Payment
Date, the Note Principal Balance of the Class A Notes and the Mezzanine Notes
for that Payment Date.

            "Officers' Certificate": With respect to the Depositor and the
Seller, a Certificate signed by the Chairman of the Board, the Vice Chairman of
the Board, the President, a vice president (however denominated) or an
authorized agent, and by the Treasurer, the Secretary, or one of the assistant
treasurers or assistant secretaries of the Depositor or Seller, as applicable.
With respect to the Master Servicer, any officer who is authorized to act for
the Master Servicer in matters relating to this Agreement, and whose action is
binding upon the Master Servicer, initially including those individuals whose
names appear on the list of authorized officers delivered at the closing.

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

            "Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be salaried counsel for the Depositor or the Master Servicer
acceptable to the Indenture Trustee (which acceptance shall not be unreasonably
withheld), except that any opinion of counsel relating to (a) the qualification
of the REMIC Trust as a REMIC or (b) compliance with the REMIC Provisions must
be an opinion of Independent counsel.

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

                                       22
<PAGE>

            "Original Scheduled Principal Balance": The aggregate Scheduled
Principal Balance of the Original Mortgage Loans as of the Cut-off Date, such
amount being $359,959,159.49.

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

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

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

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

            "Owner Trustee": Wilmington Trust Company, a Delaware banking
corporation, acting not in its individual capacity, but solely as Owner Trustee
under the REMIC Trust Agreement and the NIMS Trust Agreement, as the case may
be, or its successor in interest, or any successor Owner Trustee appointed as
provided in the Trust Agreement.

            "Owner Trustee Fee": The amount payable to the Owner Trustee on each
Payment Date pursuant to Section 7.05 as compensation for all services rendered
by it as Owner Trustee of each of the REMIC Trust and of the NIMS Trust, which
amount shall equal $5,000 per annum ($2,500 per Trust), payable monthly.

            "Owner Trustee's Fee Rate": With respect to any Payment Date equals
the percentage equivalent of the fraction, the numerator of which is one-twelfth
of $5,000 and the denominator of which the aggregate Stated Principal Balance of
the Mortgage Loans as of such Payment Date.

                                       23
<PAGE>

            "Payment Account": The trust account or accounts created and
maintained by the Indenture Trustee pursuant to Section 3.10(b) which shall be
entitled "Bankers Trust Company of California, N.A., as Indenture Trustee, in
trust for the registered holders of Morgan Stanley ABS Capital I, Inc. Mortgage
Loan Asset-Backed Notes, Series 2000-1." The Payment Account shall be an
Eligible Account.

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

            "Percentage Interest": With respect to any Class A Notes, Mezzanine
Notes or Class N Notes, the undivided percentage ownership in such Class
evidenced by such Note, expressed as a percentage, the numerator of which is the
initial Note Principal Balance represented by such Note and the denominator of
which is the aggregate initial Note Principal Balance of all of the Notes of
such Class. Such Notes are issuable only in minimum Percentage Interests
corresponding to minimum initial Note Principal Balances of $10,000 and integral
multiples of $1.00 in excess thereof.

            With respect to any Class P Note, Class C Note, Class S Note, Class
R-1 Certificate, Class R-2 Certificate or NIMS Certificate, the undivided
percentage ownership in such Class evidenced by such Security, as set forth on
the face of such Security.

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

            "Permitted Investments": Any one or more of the following
obligations or securities acquired at a purchase price of not greater than par,
regardless of whether issued by the Depositor, the Master Servicer, the
Indenture 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, that 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 Depository Institution;

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

                                       24
<PAGE>

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

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

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

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

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.

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

            "P&I Advance": As to any Mortgage Loan or REO Property, any advance
made by the Master Servicer in respect of any Payment Date representing the
aggregate of all payments of principal and interest, net of the Servicing Fee,
that were due during the related Due Period on the Mortgage Loans and that were
delinquent 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 4.03.

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

                                       25
<PAGE>

            "Prepayment Charge": With respect to any Prepayment Period, any
prepayment premium, penalty or charge collected by the Master Servicer from a
Mortgagor in connection with any voluntary Principal Prepayment in full pursuant
to the terms of the related Mortgage Note and held from time to time as a part
of the REMIC Trust.

            "Prepayment Charge Schedule": As of any date, the list of Prepayment
Charges included in the REMIC Trust on such date, attached hereto as Schedule 1
(including the prepayment charge summary attached thereto). The Prepayment
Charge Schedule may be part of the Mortgage Loan Schedule, and shall set forth
the following information with respect to each related Mortgage Loan:

            (i)   the Master Servicer's Mortgage Loan identifying number;

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

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

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

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

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

            The Prepayment Charge Schedule shall be amended from time to time by
the Depositor in accordance with the provisions of this Agreement.

            "Prepayment Interest Shortfall": With respect to any Payment Date,
for each Mortgage Loan that was during the related Prepayment Period the subject
of a Principal Prepayment in full or in part that was applied by the Master
Servicer to reduce the outstanding principal balance of such loan on a date
preceding the Due Date in the succeeding Prepayment Period, an amount equal to
interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment for the number of days commencing on the date on which the prepayment
is applied and ending on the last day of the related Prepayment Period. The
obligations of the Master Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.23.

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

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

            (a)   the excess of the Available  Payment  Amount over the amount
      payable  on the  Class A  Notes  and the  Mezzanine  Notes  pursuant  to
      Section 4.01(b); and

                                       26
<PAGE>

            (b)   the sum of:

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

                  (ii) the Stated Principal Balance of any Mortgage Loan that
            was purchased during the related Prepayment Period pursuant to or as
            contemplated by Section 2.04, Section 3.15(c) or Section 8.01 and
            the amount of any shortfall deposited in the Collection Account in
            connection with the substitution of a Deleted Mortgage Loan pursuant
            to Section 2.04 during the related Prepayment Period;

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

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

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

            minus

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

            "Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest (without regard to
any Prepayment Charge that may have been collected by the Master Servicer in
connection with such payment of principal) representing the full amount of
scheduled interest due on any Due Date in any month or months subsequent to the
month of prepayment.

            "Purchase Agreement": The Purchase Agreement, dated July 14, 2000,
between the Depositor and the Initial Purchaser, relating to the Mezzanine Notes
and the Class N Notes.

            "Purchase Price": With respect to any Mortgage Loan or REO Property
to be purchased pursuant to or as contemplated by Section 2.04, Section 3.15(c)
or Section 8.01, and as confirmed by an Officers' Certificate from the Master
Servicer to the Indenture Trustee, an amount equal to the sum of (i) 100% of the
Stated Principal Balance thereof as of the date of purchase (or such other price
as provided in Section 7.01), (ii) in the case of (x) a Mortgage Loan, accrued
interest on such Stated Principal

                                       27
<PAGE>

Balance at the applicable Net Mortgage Rate in effect from time to time from the
Due Date as to which interest was last covered by a payment by the Mortgagor or
an advance by the Master Servicer, which payment or advance had as of the date
of purchase been distributed pursuant to Section 4.01, through the end of the
calendar month in which the purchase is to be effected and (y) an REO Property,
the sum of (1) accrued interest on such Stated Principal Balance at the
applicable Net Mortgage Rate in effect from time to time from the Due Date as to
which interest was last covered by a payment by the Mortgagor or an advance by
the Master Servicer through the end of the calendar month immediately preceding
the calendar month in which such REO Property was acquired, plus (2) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such purchase is to be effected, net of the total of all
net rental income, Insurance Proceeds, Liquidation Proceeds and P&I Advances
that as of the date of purchase had been distributed as or to cover REO Imputed
Interest pursuant to Section 4.01, (iii) any unreimbursed Servicing Advances and
P&I Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or
REO Property, (iv) any amounts previously withdrawn from the Collection Account
in respect of such Mortgage Loan or REO Property pursuant to Section 3.11(a)(ix)
and Section 3.15(b), and (v) in the case of a Mortgage Loan required to be
purchased pursuant to Section 2.04, expenses reasonably incurred or to be
incurred by the Master Servicer or the Indenture Trustee in respect of the
breach or defect giving rise to the purchase obligation.

            "Qualified Substitute Mortgage Loan": A mortgage loan substituted
for a Deleted Mortgage Loan pursuant to the terms of this Agreement which must,
on the date of such substitution, (i) have an outstanding principal balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Scheduled Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Rate not less than
(and not more than one percentage point in excess of) the Mortgage Rate of the
Deleted Mortgage Loan, (iii) with respect to each Adjustable Rate Mortgage Loan
have a Maximum Mortgage Rate not less than the Maximum Mortgage Rate on the
Deleted Mortgage Loan, (iv) with respect to each Adjustable Rate Mortgage Loan
have a Minimum Mortgage Rate not less than the Minimum Mortgage Rate of the
Deleted Mortgage Loan, (v) with respect to each Adjustable Rate Mortgage Loan
have a Gross Margin equal to the Gross Margin of the Deleted Mortgage Loan, (vi)
with respect to each Adjustable Rate Mortgage Loan have a next Adjustment Date
not more than two months later than the next Adjustment Date on the Deleted
Mortgage Loan, (vii) have a remaining term to maturity not greater than (and not
more than one year less than) that of the Deleted Mortgage Loan, (viii) have the
same Due Date as the Due Date on the Deleted Mortgage Loan, (ix) have a
Loan-to-Value Ratio as of the date of substitution equal to or lower than the
Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (x) have a
risk grading determined by the Master Servicer at least equal to the risk
grading assigned on the Deleted Mortgage Loan, (xi) have a Prepayment Charge
which is not materially different from the Deleted Mortgage Loan, and (xii)
conform to each representation and warranty set forth in Exhibit A hereto. In
the event that one or more mortgage loans are substituted for one or more
Deleted Mortgage Loans, the amounts described in clause (i) hereof shall be
determined on the basis of

                                       28
<PAGE>

aggregate principal balances, the Mortgage Rates described in clause (ii) hereof
shall be determined on the basis of weighted average Mortgage Rates, the terms
described in clause (vii) hereof shall be determined on the basis of weighted
average remaining term to maturity, the Loan-to-Value Ratios described in clause
(ix) hereof shall be satisfied as to each such Mortgage Loan, the risk gradings
described in clause (x) hereof shall be satisfied as to each such Mortgage Loan
and, except to the extent otherwise provided in this sentence, the
representations and warranties described in clause (xi) hereof must be satisfied
as to each Qualified Substitute Mortgage Loan or in the aggregate, as the case
may be.

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

            "Realized Loss": With respect to each Mortgage Loan as to which a
Final Recovery Determination has been made, an amount (not less than zero) equal
to (i) the unpaid principal balance of such Mortgage Loan as of the commencement
of the calendar month in which the Final Recovery Determination was made, plus
(ii) accrued interest from the Due Date as to which interest was last paid by
the Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Payment Date during such calendar month, plus (iii) any amounts previously
withdrawn from the Collection Account in respect of such Mortgage Loan pursuant
to Section 3.11(a)(ix) and Section 3.15(b), minus (iv) the proceeds, if any,
received in respect of such Mortgage Loan during the calendar month in which
such Final Recovery Determination was made, net of amounts that are payable
therefrom to the Master Servicer with respect to such Mortgage Loan pursuant to
Section 3.11(a)(iii).

            With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of the REMIC Trust, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to

                                       29
<PAGE>

Section 3.11(a)(ix) and Section 3.15(b), minus (v) the aggregate of all P&I
Advances made by the Master Servicer in respect of such REO Property or the
related Mortgage Loan for which the Master Servicer has been or, in connection
with such Final Recovery Determination, will be reimbursed pursuant to Section
3.22 out of rental income, Insurance Proceeds and Liquidation Proceeds received
in respect of such REO Property, minus (vi) the total of all net rental income,
Insurance Proceeds and Liquidation Proceeds received in respect of such REO
Property that has been, or in connection with such Final Recovery Determination,
will be transferred to the Payment Account pursuant to Section 3.22.

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

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

            "Record Date": With respect to each Payment Date and any Book-Entry
Note other than the Class N Notes, the Business Day immediately preceding such
Payment Date. With respect to each Payment Date and any other Notes, including
any Definitive Notes (as defined in the Indentures), the last Business Day of
the month immediately preceding the month in which such Payment Date occurs.

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

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

            "Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code. The Class A Notes, Class M-1 Notes,
Class M-2 Notes, Class B-1 Notes, the Class C Notes and the Class P Notes shall
be the sole classes of "Regular Interests" in the Upper-Tier REMIC for purposes
of REMIC election and the REMIC Provisions for federal income tax purposes

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

                                       30
<PAGE>

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

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

            "REMIC Certificate": Individually and collectively, the Class R-1
Certificates or the Class R-2 Certificates.

            "REMIC Indenture": Has the meaning specified in the Preliminary
Statements.

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

            "REMIC Trust Agreement": The Amended and Restated Trust Agreement,
dated as of July 1, 2000, between the Depositor and the Owner Trustee, relating
to the REMIC Trust.

            "REMIC Trust Estate": The segregated pool of Mortgage Loan assets
subject hereto, constituting the primary REMIC Trust created hereby and to be
administered hereunder, with respect to which a REMIC election for federal tax
purposes shall be made, consisting of: (i) such Mortgage Loans and Prepayment
Charges as from time to time are subject to this Agreement, together with the
Mortgage Files relating thereto, and together with all collections and proceeds
thereof, and (ii) any REO Property, together with all collections and proceeds
therefrom, and (iii) the REMIC Trust's rights with respect to the Mortgage Loans
under all insurance policies required to be maintained pursuant to this
Agreement and any proceeds thereof, and (iv) the Depositor's rights under each
Mortgage Loan Purchase Agreement (including any security interest created
thereby) to the extent conveyed pursuant to Section 2.01, and (v) the Collection
Account (other than any amounts representing any Master Servicer Prepayment
Charge Payment Amount), and (vi) the Payment Account (other than any amounts
representing any Master Servicer Prepayment Charge Payment Amount), and (vii)
any REO Account and such assets that are deposited therein from time to time,
and (viii) any investments thereof, together with any and all income, proceeds
and payments with respect thereto. Notwithstanding the foregoing however, the
REMIC Trust specifically excludes (i) all payments and other collections of
principal and interest due on the Mortgage Loans on or before the Cut-off Date
and all Prepayment Charges payable in connection with Principal Prepayments made
on or before the Cut-off Date, (ii) the segregated pool of assets which
constitutes the NIMS Trust and (iii) the Non-REMIC Accounts.

                                       31
<PAGE>

            "REMIC Trust Interests": Collectively, the Class A Notes, the Class
M-1 Notes, the Class M-2 Notes, the Class B-1 Notes, the Class C Notes, the
Class P Notes, the Class R-1 Certificates and the Class R-2 Certificates.

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

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

            "REO Account": Each of the accounts maintained, or caused to be
maintained, by the Master Servicer in respect of an REO Property pursuant to
Section 3.22.

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

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

            "REO Principal Amortization": With respect to any REO Property, for
any calendar month, the excess, if any, of (a) the aggregate of all amounts
received in respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without limitation, that
portion of the Termination Price paid in connection with a purchase of all of
the Mortgage Loans and REO Properties pursuant to Section 8.01 that is allocable
to such REO Property) or otherwise, net of any portion of such amounts (i)
payable pursuant to Section 3.22(c) in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Master Servicer pursuant to Section 3.23(d) for unpaid Servicing Fees in
respect of the related Mortgage Loan and unreimbursed Servicing Advances and P&I
Advances in respect of such REO Property or the related Mortgage Loan, over (b)
the REO Imputed Interest in respect of such REO Property for such calendar
month.

            "REO Property": A Mortgaged Property acquired by the Master Servicer
on behalf of the REMIC Trust through foreclosure or deed-in-lieu of foreclosure,
as described in Section 3.22.

            "Representative": Morgan Stanley & Co. Incorporated, as
representative of the Underwriters.

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<PAGE>

            "Request for Release": A release signed by a Servicing Officer, or
in a mutually agreeable electronic format which will, in lieu of a signature on
its face, originate from a Servicing Officer, in the form of Exhibit C attached
hereto.

            "Required Overcollateralized Amount": With respect to any Payment
Date (i) prior to the Stepdown Date, $9,002,788, (ii) on or after the Stepdown
Date provided a Trigger Event is not in effect, the greater of (x) 4.70% of the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period and (y) $1,800,538 and (iii) on or after the Stepdown
Date and if a Trigger Event is in effect, the Required Overcollateralized Amount
for the immediately preceding Payment Date.

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

            "Residential Dwelling": Any one of the following: (i) an attached or
detached one-family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a condominium project or (iv) a detached
one-family dwelling in a planned unit development, none of which is a
co-operative, mobile or manufactured home (unless such mobile or manufactured
home is treated as real property under applicable state law).

            "Residual Certificate": Individually and collectively, the Class R-1
Certificates and the Class R-2 Certificates.

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

            "Responsible Officer": When used with respect to the Indenture
Trustee, the president, any vice president, any assistant vice president, the
secretary, any assistant secretary, the Treasurer, any assistant treasurer, any
trust officer or assistant trust officer, the controller and any assistant
controller or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers
and, with respect to a particular matter, to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.

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

            "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

                                       33
<PAGE>

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 Realized Loss incurred
with respect thereto as a result of a Deficient Valuation occurring before such
Due Date, but only to the extent such Realized Loss represents a reduction in
the portion of principal of such Mortgage Loan not yet due (without regard to
any acceleration of payments under the related Mortgage and Mortgage Note) as of
the date of such Deficient Valuation; and (c) as of any Due Date subsequent to
the occurrence of a Liquidation Event with respect to such Mortgage Loan, zero.
With respect to any REO Property: (a) as of any Due Date subsequent to the date
of its acquisition on behalf of the REMIC Trust up to and including the Due Date
in the calendar month in which a Liquidation Event occurs with respect to such
REO Property, an amount (not less than zero) equal to the Scheduled Principal
Balance of the related Mortgage Loan as of the Due Date in the calendar month in
which such REO Property was acquired, minus the aggregate amount of REO
Principal Amortization, if any, in respect of such REO Property for all
previously ended calendar months; and (b) as of any Due Date subsequent to the
occurrence of a Liquidation Event with respect to such REO Property, zero.

            "Securities": Collectively, the Notes and the Certificates.

            "Seller": Morgan Stanley Dean Witter Mortgage Capital, Inc., a New
York corporation, or its successor in interest, in its capacity as seller under
the Mortgage Loan Purchase Agreement.

            "Senior Interest Payment Amount": With respect to any Payment Date,
an amount equal to the lesser of (x) the Interest Amount for such Payment Date
and (y) the sum of (i) the Interest Payment Amount for such Payment Date for the
Class A Notes and (ii) the Interest Carry Forward Amount with respect to the
Class A Notes.

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

            "Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in 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, in respect of a particular
Mortgage Loan, (iii) the management (including reasonable fees in

                                       34
<PAGE>

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,
Section 3.15 and Section 3.22. The Master Servicer shall not be required to make
any Nonrecoverable Servicing Advances.

            "Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to 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 applicable Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.

            "Servicing Fee Rate": 0.50% per annum of the principal balance of
each Mortgage Loan.

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

            "Special Reserve Account": Has the meaning specified in Section
7.05(d).

            "Startup Day": With respect to each REMIC created hereby, the day
designated as such pursuant to Section 9.02(b) hereof.

            "Stated Principal Balance": With respect to any Mortgage Loan: (a)
as of any date of determination up to but not including the Payment Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be paid, the Scheduled Principal Balance of such Mortgage Loan as of
the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the sum of (i)
the principal portion of each Monthly Payment due on a Due Date subsequent to
the Cut-off Date, to the extent received from the Mortgagor or advanced by the
Master Servicer and paid pursuant to Section 4.01 on or before such date of
determination, (ii) all Principal Prepayments received after the Cut-off Date,
to the extent paid pursuant to Section 4.01 on or before such date of
determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied by
the Master Servicer as recoveries of principal in accordance with the provisions
of Section 3.15, to the extent paid pursuant to Section 4.01 on or before such
date of determination and (iv) any Realized Loss incurred with respect thereto
as a result of a Deficient Valuation made during or prior to the Prepayment
Period for the most recent Payment Date coinciding with or preceding such date
of determination; and (b) as of any date of determination coinciding with or
subsequent to the Payment Date on which the proceeds, if any, of a Liquidation
Event with respect to such Mortgage Loan would be paid, zero. With respect to
any REO Property: (a) as of any date of determination up to but not including
the Payment Date on which the proceeds, if any, of a Liquidation Event with
respect to such REO Property would be paid, an amount (not less than zero) equal
to

                                       35
<PAGE>

the Stated Principal Balance of the related Mortgage Loan as of the date on
which such REO Property was acquired on behalf of the REMIC Trust, minus the sum
of (i) if such REO Property was acquired before the Payment Date in any calendar
month, the principal portion of the Monthly Payment due on the Due Date in the
calendar month of acquisition, to the extent advanced by the Master Servicer and
paid pursuant to Section 4.01 on or before such date of determination, and (ii)
the aggregate amount of REO Principal Amortization in respect of such REO
Property for all previously ended calendar months, to the extent paid pursuant
to Section 4.01 on or before such date of determination; and (b) as of any date
of determination coinciding with or subsequent to the Payment Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be paid, zero.

            "Stayed Funds": If the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of a Remittance (as
defined in Section 6.02(b)) is prohibited by Section 362 of the federal
Bankruptcy Code, funds that are in the custody of the Master Servicer, a
Indenture Trustee in bankruptcy or a federal bankruptcy court and should have
been the subject of such Remittance absent such prohibition.

            "Stepdown Date": The earlier to occur of (x) the Payment Date on
which the Note Principal Balance of the Class A Notes is reduced to zero and (y)
the later to occur of (i) the Payment Date occurring in August, 2003 and (ii)
the first Payment Date on which the aggregate Scheduled Principal Balance of the
Mortgage Loans are less than or equal to 50.00% of the Original Scheduled
Principal Balance.

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

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

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

            "Substitution Shortfall Amount": As defined in Section 2.04(d).

            "Supplemental Interest Account": The reserve fund established and
maintained pursuant to Section 3.10(f).

            "Supplemental Interest Amount": With respect to any Class A Notes or
Mezzanine Notes and any Payment Date, the sum of (x) the Available Funds Cap
Shortfall Amount for such Class of Notes and such Payment Date and (y) the
Available Funds Cap Carry-Forward Amount for such Note Class and Payment Date.

            "Supplemental Interest Payment": With respect to any Payment Date:

                                       36
<PAGE>

            (i) for the Class A Notes, the lesser of (x) the Supplemental
      Interest Amount due for the Class A Notes and (y) the Total Supplemental
      Interest Payment Amount Available for that Payment Date;

            (ii) for the Class M-1 Notes, the lesser of (x) the Supplemental
      Interest Amount due for the Class M-1 Notes and (y) any portion of the
      Total Supplemental Interest Payment Amount Available not applied to the
      payment of the Supplemental Interest Payment for the Class A Notes on that
      Payment Date;

            (iii) for the Class M-2 Notes, the lesser of (x) the Supplemental
      Interest Amount due for the Class M-2 Notes and (y) any portion of the
      Total Supplemental Interest Payment Amount Available not applied to the
      payment of the Supplemental Interest Payment for the Class A Notes and the
      Class M-1 Notes on that Payment Date; and

            (iv) for the Class B-1 Notes, the lesser of (x) the Supplemental
      Interest Amount due for the Class B-1 Notes and (y) any portion of the
      Total Supplemental Interest Payment Amount Available not applied to the
      payment of the Supplemental Interest Payment for the Class A Notes, the
      Class M-1 Notes and the Class M-2 Notes on that Payment Date.

            "Supplemental Interest Trust": The Morgan Stanley Supplemental
Interest Trust 2000-1 created pursuant to Section 2.11 hereof.

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

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

            "Termination Price": As defined in Section 8.01(a).

            "Terminator": As defined in Section 8.01(b).

            "Total Supplemental Interest Payment Amount Available": With respect
to any Payment Date, the amount deposited to the Supplemental Interest Account.

            "Transaction Documents": This Agreement, the REMIC Indenture, the
NIMS Indenture, the REMIC Trust Agreement, the NIMS Trust Agreement, the Bill of
Sale, the Underwriting Agreement and the Purchase Agreement.

                                       37
<PAGE>

            "Trigger Event": A Trigger Event has occurred with respect to a
Payment Date if the Delinquency Percentage exceeds the lesser of (i) 16.80% and
(ii) 40.00% of the Credit Enhancement Percentage.

            "Trust": The REMIC Trust or the NIMS Trust.

            "Underwriters": Morgan Stanley & Co. Incorporated, CIBC Worldmarkets
plc and Unibank a/s.

            "Underwriting Agreement": The Underwriting Agreement, dated July 14,
2000, between the Depositor and the Representative, relating to the Class A
Notes.

            "Uninsured Cause": Any cause of damage to a Mortgaged Property such
that the complete restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to Section 3.13.

            "Unpaid Interest Shortfall Amount": With respect to any Payment Date
after the first Payment Date, the sum of (a) the Unpaid Interest Shortfall
Amount for that Class as of the prior Payment Date, (b) the excess of the amount
of the Accrued Note Interest due with respect to that Class on the prior Payment
Date over the amount actually distributed to the Holders of that Class on
account of Accrued Note Interest on the prior Payment Date and (c) interest on
the sum of (a) and (b) to the extent permitted by law, at the Formula Rate for
such Class for the related Accrual Period.

            "Upper-Tier REMIC": The REMIC established pursuant to Section 2.10
hereof. The assets of the Upper-Tier REMIC shall be the Lower-Tier REMIC Regular
Interests.

            "Value": With respect to any Mortgaged Property, the lesser of (i)
the value thereof as determined by an appraisal made for the originator of the
Mortgage Loan at the time of origination of the Mortgage Loan by an appraiser
who met the minimum requirements of Fannie Mae, and (ii) the purchase price paid
for the related Mortgaged Property by the Mortgagor with the proceeds of the
Mortgage Loan; provided, however, in the case of a Refinanced Mortgage Loan,
such value of the Mortgaged Property is based solely upon the value determined
by an appraisal made for the originator of such Refinanced Mortgage Loan at the
time of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of Fannie Mae.

            "Voting Rights": With respect to either Trust, the portion of the
voting rights of all of the Securities which is allocated to any Security. With
respect to the REMIC Trust and any date of determination, 98% of all Voting
Rights will be allocated among the Holders of the Class A Notes and the
Mezzanine Notes in proportion to the then outstanding Note Principal Balances of
their respective Notes, and 1/2 of 1% of all Voting Rights will be allocated
among the Holders of the Class C Notes, the Class P Notes and each Class of
REMIC Certificates. With respect to the NIMS Trust as any date of determination,
99% of all Voting Rights will be allocated among the Holders of the Class N
Notes and 1% of the Voting Rights will be allocated among the Holders of the
NIMS Certificates. The Voting Rights allocated to each Class of Note shall be

                                       38
<PAGE>

allocated among Holders of each such Class in accordance with their respective
Percentage Interests as of the most recent Record Date.

            SECTION 1.02 Allocation of Certain Interest Shortfalls. For purposes
of calculating the amount of Accrued Note Interest and the amount of the
Interest Payment Amount for the Class A Notes, the Mezzanine Notes and the Class
C Notes for any Payment Date, (1) the aggregate amount of any Prepayment
Interest Shortfalls (to the extent not covered by payments by the Master
Servicer pursuant to Section 3.23) and any Relief Act Interest Shortfall
incurred in respect of the Mortgage Loans for any Payment Date shall be
allocated first, among the Class C Notes on a pro rata basis based on, and to
the extent of, one month's interest at the then-applicable Interest Rate on the
Notional Amount of the Class C Note and thereafter, among the Class A Notes and
the Mezzanine Notes on a pro rata basis based on, and to the extent of, one
month's interest at the then applicable respective Interest Rate on the
respective Note Principal Balance of each such Note and (2) the aggregate amount
of any Realized Losses incurred for any Payment Date shall be allocated among
the Class C Notes on a pro rata basis based on, and to the extent of, one
month's interest at the then-applicable Interest Rate on the Notional Amount of
the Class C Note.

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                           ORIGINAL ISSUANCE OF NOTES

            SECTION 2.01 Conveyance of Mortgage Loans. The Depositor,
concurrently with the execution and delivery hereof, does hereby transfer,
assign, set over and otherwise convey to the REMIC Trust all the right, title
and interest of the Depositor, including any security interest therein for the
benefit of the Depositor, in and to the Mortgage Loans identified on the
Mortgage Loan Schedule, the rights of the Depositor under the Bill of Sale and
the Mortgage Loan Purchase Agreement, and all other assets and related documents
included or to be included in the REMIC Trust. Such assignment includes all
interest and principal received by the Depositor or the Master Servicer on or
with respect to the Mortgage Loans (other than payments of principal and
interest due on such Mortgage Loans on or before the Cut-off Date).

            In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, the REMIC Trust (who directs the Depositor
to deliver to, and deposit with, the Indenture Trustee, as pledgee of the REMIC
Trust under the REMIC Indenture), the following documents or instruments with
respect to each Mortgage Loan so transferred and assigned (each, a "Mortgage
File"):

            (a) the original Mortgage Note, endorsed in blank or in the
      following form: "Pay to the order of Bankers Trust Company of California,
      N.A., as Indenture Trustee under the applicable agreement, without
      recourse," with all prior and intervening endorsements showing a complete
      chain of endorsement from the originator to the Person so endorsing to the
      Indenture Trustee;

                                       39
<PAGE>

            (b) the original Mortgage with evidence of recording thereon;

            (c) an original Assignment of the Mortgage in blank;

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

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

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

            The Master Servicer, in its capacity as Originator, shall promptly
(and in no event later than thirty (30) Business Days, subject to extension upon
a mutual agreement between the Master Servicer and the Indenture Trustee,
following the later of the Closing Date and the date of receipt by the Master
Servicer of the recording information for a Mortgage) submit or cause to be
submitted for recording, at no expense to the REMIC Trust, the Indenture Trustee
or the Depositor, in the appropriate public office for real property records,
each Assignment referred to in Sections 2.01(c) and (d) above. In the event that
any such Assignment is lost or returned unrecorded because of a defect therein,
the Master Servicer, in its capacity as Originator, shall promptly prepare or
cause to be prepared a substitute Assignment or cure or cause to be cured such
defect, as the case may be, and thereafter cause each such Assignment to be duly
recorded. Notwithstanding the foregoing, however, for administrative convenience
and facilitation of servicing and to reduce closing costs, the Assignments shall
not be required to be completed and submitted for recording with respect to any
Mortgage Loan if the Indenture Trustee and each Rating Agency has received an
opinion of counsel, satisfactory in form and substance to the Indenture Trustee
and each Rating Agency, to the effect that the recordation of such Assignments
in any specific jurisdiction is not necessary to protect the Indenture Trustee's
interest in the related Mortgage Note; provided, further, however,
notwithstanding the delivery of any opinion of counsel, each Assignment of
Mortgage shall be submitted for recording by the Originator in the manner
described above, at no expense to the REMIC Trust or Indenture Trustee, upon the
earliest to occur of: (i) reasonable direction by Holders of Notes entitled to
at least 25% of the Voting Rights, (ii) failure of the Master Servicer
Termination Test, (iii) the occurrence of a bankruptcy, insolvency or
foreclosure relating to the Originator, (iv) the occurrence of a servicing
transfer as described in Section 6.02 hereof and (iv) if the Originator is not
the Master Servicer and with respect to any one assignment of

                                       40
<PAGE>

Mortgage, the occurrence of a bankruptcy, insolvency or foreclosure relating to
the Mortgagor under the related Mortgage.

            If any of the documents referred to in Sections 2.01(b), (c) or (d)
above has as of the Closing Date been submitted for recording but either (x) has
not been returned from the applicable public recording office or (y) has been
lost or such public recording office has retained the original of such document,
the obligations of the Depositor to deliver such documents shall be deemed to be
satisfied upon (1) delivery to the Indenture Trustee of a copy of each such
document certified by the Originator in the case of (x) above or the applicable
public recording office in the case of (y) above to be a true and complete copy
of the original that was submitted for recording and (2) if such copy is
certified by the Originator, delivery to the Indenture Trustee promptly upon
receipt thereof of either the original or a copy of such document certified by
the applicable public recording office to be a true and complete copy of the
original. If the original lender's title insurance policy was not delivered
pursuant to Section 2.01(f) above, the Depositor shall deliver or cause to be
delivered to the Indenture Trustee promptly after receipt thereof, the original
lender's title insurance policy. The Depositor shall deliver or cause to be
delivered to the Indenture Trustee promptly upon receipt thereof any other
original documents constituting a part of a Mortgage File received with respect
to any Mortgage Loan, including, but not limited to, any original documents
evidencing an assumption or modification of any Mortgage Loan.

            All original documents relating to the Mortgage Loans that are not
delivered to the Indenture Trustee are and shall be held by or on behalf of the
Seller, the Depositor or the Master Servicer, as the case may be, in trust for
the benefit of the Indenture Trustee on behalf of the Noteholders. In the event
that any such original document is required pursuant to the terms of this
Section 2.01 to be a part of a Mortgage File, such document shall be delivered
promptly to the Indenture Trustee. Any such original document delivered to or
held by the Depositor that is not required pursuant to the terms of this Section
2.01 to be a part of a Mortgage File, shall be delivered promptly to the Master
Servicer.

            SECTION 2.02 Acceptance of REMIC Trust and NIMS Trust by the
Indenture Trustee. Subject to the provisions of Section 2.01 and subject to any
exceptions noted on the exception report described in the next paragraph below,
the REMIC Trust acknowledges receipt of the documents referred to in Section
2.01 (other than such documents described in Section 2.01(e)) above and all
other assets included in the definition of the REMIC Trust and NIMS Trust under
clauses (i), (iii), (iv) and (v) (to the extent of amounts deposited into the
Payment Account) and declares that it holds and will hold such documents and the
other documents delivered to it constituting the Mortgage File, and that it
holds or will hold all such assets and such other assets included in the
definition of the REMIC Trust and NIMS Trust in trust for the exclusive use and
benefit of all present and future Noteholders.

            The Indenture Trustee agrees, for the benefit of the REMIC
Noteholders, to review each Mortgage File on or before the Closing Date and to
certify in substantially the form attached hereto as Exhibit B-1 that, as to
each Mortgage Loan listed in the

                                       41
<PAGE>

Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in the exception report annexed thereto as
not being covered by such certification), (i) all documents constituting part of
such Mortgage File (other than such documents described in Section 2.01(e))
required to be delivered to it pursuant to this Agreement are in its possession,
(ii) such documents have been reviewed by it and are not mutilated, torn or
defaced unless initialed by the related borrower and relate to such Mortgage
Loan and (iii) based on its examination and only as to the foregoing, the
information set forth in the Mortgage Loan Schedule that corresponds to items
(i) through (iii), (ix), (x), (xiii) and (xv) of the definition of "Mortgage
Loan Schedule" accurately reflects information set forth in the Mortgage File.
It is herein acknowledged that, in conducting such review, the Indenture Trustee
was under no duty or obligation (i) to inspect, review or examine any such
documents, instruments, certificates or other papers to determine whether they
are genuine, enforceable, or appropriate for the represented purpose (including
with respect to Section 2.01(f), whether such title insurance policy insures the
priority of the Mortgage as a first lien) or whether they have actually been
recorded or that they are other than what they purport to be on their face or
(ii) to determine whether any Mortgage File should include any of the documents
specified in Section 2.01(e).

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

            If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the
Indenture Trustee finds any document or documents constituting a part of a
Mortgage File to be missing or defective in any material respect, at the
conclusion of its review the Indenture Trustee shall so notify the Depositor and
the Master Servicer. In addition, upon the discovery by the Depositor, the
Master Servicer or the Indenture Trustee of a breach of any of the
representations and warranties made by the Originator in the Section 2.03 in
respect of any Mortgage Loan which materially adversely affects such Mortgage
Loan or the interests of the related Noteholders in such Mortgage Loan, the
party discovering such breach shall give prompt written notice to the other
parties.

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

            SECTION 2.03 Representations, Warranties and Covenants of the
Originator Regarding the Mortgage Loans. (a) The Originator hereby
represents, warrants and covenants to the Indenture Trustee, for the benefit of
each of the Indenture Trustee, the Noteholders and the Depositor that as to each
Mortgage Loan as of the Closing Date or as of such date specifically provided
herein, each of the representations, warranties and covenants set forth on
Exhibit A hereto are true and correct in all material respects.

                                       42
<PAGE>

            (b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Indenture Trustee and shall inure to the benefit of the Noteholders
notwithstanding any restrictive or qualified endorsement or assignment. Upon
discovery by any of the Depositor, the Master Servicer or the Indenture Trustee
of a breach of any of the foregoing representations and warranties which
materially and adversely affects the value of any Mortgage Loan, Prepayment
Charge or the interests therein of the Noteholders, the party discovering such
breach shall give prompt written notice to the other parties, and in no event
later than two (2) Business Days from the date of such discovery. It is
understood and agreed that the obligations of the Originator set forth in
Section 2.04(a) to cure, substitute for or repurchase a Mortgage Loan constitute
the sole remedies available to the Depositor, the Noteholders or to the
Indenture Trustee on their behalf respecting a breach of the representations and
warranties contained in this Section 2.03.

            SECTION 2.04 Repurchase or Substitution of Mortgage Loans by the
Originator; Payment of Prepayment Charges in the Event of Breach. (a) Upon
discovery or receipt of notice of any materially defective document in, or that
a document is missing from, the Mortgage File or of the breach by the Originator
of any representation, warranty or covenant set forth in Section 2.03 in respect
of any Mortgage Loan which materially and adversely affects the value of such
Mortgage Loan or the interest therein of the Noteholders (in the case of any
such representation or warranty made to the knowledge or the best of knowledge
of the Originator, as to which the Originator has no knowledge, without regard
to the Originator's lack of knowledge with respect to the substance of such
representation or warranty being inaccurate at the time it was made), the
Indenture Trustee shall promptly notify the Originator and the Master Servicer
of such defect, missing document or breach and request that the Originator
deliver such missing document or cure such defect or breach within 90 days from
the date the Originator was notified of such missing document, defect or breach,
and if the Originator does not deliver such missing document or cure such defect
or breach in all material respects during such period, the Master Servicer shall
require the Originator to repurchase such Mortgage Loan from the REMIC Trust at
the Purchase Price within 90 days after the date on which the Originator was
notified (subject to Section 2.04(d)) of such missing document, defect or
breach; provided, that, in the event that such defect, missing document or
breach is a result of any action of the Depositor or the Seller occurring
subsequent to the purchase of the Mortgage Loans from the Originator pursuant to
the Mortgage Loan Purchase Agreement, the Depositor shall have the obligation to
cure such defect or breach or repurchase such Mortgage Loan. The Purchase Price
for the repurchased Mortgage Loan shall be deposited in the Collection Account,
and the Indenture Trustee, upon receipt of written certification from the Master
Servicer of such deposit, shall release to the Originator the related Mortgage
File and shall execute and deliver such instruments of transfer or assignment,
in each case without recourse, as the Originator shall furnish to it and as
shall be necessary to vest in the Originator any Mortgage Loan released pursuant
hereto, and the Indenture Trustee shall have no further responsibility with
regard to such Mortgage File. In lieu of repurchasing any such Mortgage Loan as
provided above, the Originator may cause such Mortgage Loan to be removed from
the REMIC Trust (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans in the manner and

                                       43
<PAGE>

subject to the limitations set forth in Section 2.04(d). It is understood and
agreed that the obligation of the Originator to cure or to repurchase (or to
substitute for) any Mortgage Loan as to which a document is missing, a material
defect in a constituent document exists or as to which such a breach has
occurred and is continuing shall constitute the sole remedy respecting such
omission, defect or breach available to the Indenture Trustee on behalf of the
Noteholders.

            (b) As promptly as practicable (and no later than 90 days) after the
earlier of discovery by the Master Servicer or receipt of notice by the Master
Servicer of the breach of any representation, warranty or covenant of the Master
Servicer set forth in Section 2.06 which materially and adversely affects the
interests of the Noteholders in any Mortgage Loan, the Master Servicer shall
cure such breach in all material respects.

            (c) Within 90 days of the earlier of discovery by the Master
Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the Master Servicer set forth in Section
2.06 which materially and adversely affects the interests of the Holders of the
Class P Notes to any Prepayment Charge, the Master Servicer shall cure such
breach in all material respects. If the representation made by the Master
Servicer in Section 2.06(g) is breached, the Master Servicer shall pay into the
Collection Account the amount of the scheduled Prepayment Charge, less any
amount previously collected and paid by the Master Servicer into the Collection
Account; and if the covenant made by the Master Servicer in Section 2.06(h) is
breached, the Master Servicer shall pay into the Collection Account the amount
of the waived Prepayment Charge.

            (d) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.04(a) must be effected prior
to the date which is two (2) years after the Startup Day for the REMIC Trust.

            As to any Deleted Mortgage Loan for which the Originator substitutes
a Qualified Substitute Mortgage Loan or Loans, such substitution shall be
effected by the Originator delivering to the Indenture Trustee, for such
Qualified Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage,
the Assignment to the Indenture Trustee, and such other documents and
agreements, with all necessary endorsements thereon, as are required by Section
2.01, together with an Officers' Certificate providing that each such Qualified
Substitute Mortgage Loan satisfies the definition thereof and specifying the
Substitution Shortfall Amount (as described below), if any, in connection with
such substitution. The Indenture Trustee shall acknowledge receipt of such
Qualified Substitute Mortgage Loan or Loans and, within ten (10) Business Days
thereafter, review such documents as specified in Section 2.02 and deliver to
the Depositor and the Master Servicer, with respect to such Qualified Substitute
Mortgage Loan or Loans, a certification substantially in the form attached
hereto as Exhibit B-1, with any applicable exceptions noted thereon. Within one
year of the date of substitution, the Indenture Trustee shall deliver to the
Depositor and the Master Servicer a certification substantially in the form of
Exhibit B-2 hereto with respect to such Qualified Substitute Mortgage Loan or
Loans, with any applicable exceptions noted thereon. Monthly Payments due with
respect to Qualified Substitute Mortgage Loans in the month of

                                       44
<PAGE>

substitution are not part of the REMIC Trust and will be retained by the
Depositor or the Originator, as the case may be. For the month of substitution,
distributions to Noteholders will reflect the Monthly Payment due on such
Deleted Mortgage Loan on or before the Due Date in the month of substitution,
and the Originator shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Mortgage Loan. The Originator
shall give or cause to be given written notice to the Noteholders that such
substitution has taken place, shall amend the Mortgage Loan Schedule to reflect
the removal of such Deleted Mortgage Loan from the terms of this Agreement and
the substitution of the Qualified Substitute Mortgage Loan or Loans and shall
deliver a copy of such amended Mortgage Loan Schedule to the Indenture Trustee.
Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall
constitute part of the Mortgage Pool and shall be subject in all respects to the
terms of this Agreement and, in the case of a substitution effected by the
Originator, all applicable representations and warranties thereof set forth in
Section 2.03, as of the date of substitution.

            For any month in which the Originator substitutes one or more
Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Master Servicer will determine the amount (the "Substitution Shortfall Amount"),
if any, by which the aggregate Purchase Price of all such Deleted Mortgage Loans
exceeds the aggregate of, as to each such Qualified Substitute Mortgage Loan,
the Scheduled Principal Balance thereof as of the date of substitution, together
with one month's interest on such Scheduled Principal Balance at the applicable
Net Mortgage Rate, plus all outstanding P&I Advances and Servicing Advances. On
the date of such substitution, the Originator will deliver or cause to be
delivered to the Master Servicer for deposit in the Collection Account an amount
equal to the Substitution Shortfall Amount, if any, and the Indenture Trustee,
upon receipt of the related Qualified Substitute Mortgage Loan or Loans and
certification by the Master Servicer of such deposit, shall release to the
Originator the related Mortgage File or Files and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Originator shall deliver to it and as shall be necessary to vest therein any
Deleted Mortgage Loan released pursuant hereto.

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

            (e) Upon discovery by the Depositor, the Originator, the Master
Servicer or the Indenture Trustee that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the
party discovering such fact shall within two (2) Business Days give written
notice thereof to the other parties. In connection therewith, the Originator or,
subject to Section 2.04(a), the Depositor, shall repurchase or, subject to the
limitations set forth in Section 2.04(d), substitute one or more Qualified
Substitute Mortgage Loans for the affected Mortgage Loan within 90 days of the
earlier of discovery or receipt of such notice with respect to

                                       45
<PAGE>

such affected Mortgage Loan. Any such repurchase or substitution shall be made
in the same manner as set forth in Section 2.04(a). The Indenture Trustee shall
reconvey to the Originator the Mortgage Loan to be released pursuant hereto in
the same manner, and on the same terms and conditions, as it would a Mortgage
Loan repurchased for breach of a representation or warranty.

            SECTION 2.05 Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants to the Indenture Trustee, for
the benefit of the Noteholders, the Owner Trustee and the Master Servicer that
as of the Closing Date or as of such other date specifically provided herein:

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

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

            (iii) 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);

            (iv) 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;

            (v) 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

                                       46
<PAGE>

      Loans or any documents or instruments evidencing or securing the Mortgage
      Loans;

            (vi) 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; and

            (vii) 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.

            (b) It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.05 shall survive delivery of the
Mortgage Files to the Indenture Trustee, and shall inure to the benefit of the
Indenture Trustee, for the benefit of the Noteholders.

            SECTION 2.06 Representations, Warranties and Covenants of the Master
Servicer. The Master Servicer hereby represents, warrants and covenants to the
Indenture Trustee, for the benefit of each of the Indenture Trustee, the Owner
Trustee, the Noteholders and the Depositor that as of the Closing Date or as of
such date specifically provided herein:

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

            (b) The Master 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 Agreement and has
      duly authorized by all necessary action on the part of the Master Servicer
      the execution, delivery and performance of this Agreement; and this
      Agreement, assuming the due authorization, execution and delivery thereof
      by the Depositor, the REMIC Trust, the NIMS Trust and the Indenture
      Trustee, constitutes a legal, valid and binding obligation of the Master
      Servicer, enforceable against the Master Servicer in accordance with its
      terms, except to the extent that (a) the enforceability thereof may be
      limited by bankruptcy, insolvency, moratorium,

                                       47
<PAGE>

      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;

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

            (d) The Master 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;

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

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

            (g) The information set forth in the Prepayment Charge Schedule is
      complete, true and correct in all material respects at the date or dates
      respecting which such information is furnished and each Prepayment Charge
      is permissible and enforceable in accordance with its terms under
      applicable law upon the Mortgagor's full and voluntary principal
      prepayment (except to the extent that:

                                       48
<PAGE>

      (1) the enforceability thereof may be limited by bankruptcy, insolvency,
      moratorium, receivership and other similar laws relating to creditors'
      rights generally; (2) the collectability thereof may be limited due to
      acceleration in connection with a foreclosure or other involuntary
      prepayment; or (3) subsequent changes in applicable law may limit or
      prohibit enforceability thereof);

            (h) The Master Servicer will not waive any Prepayment Charge or part
      of a Prepayment Charge unless such waiver would maximize recovery of total
      proceeds taking into account the value of such Prepayment Charge and
      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 it 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; and

            (i) The Master Servicer covenants that its computer and other
      systems used in servicing the Mortgage Loans operate in a manner such that
      the Master Servicer can service the Mortgage Loans in accordance with the
      terms of this Agreement.

            It is understood and agreed that the representations, warranties and
covenants set forth in this Section 2.06 shall survive delivery of the Mortgage
Files to the Indenture Trustee, and shall inure to the benefit of the Indenture
Trustee, the REMIC Trust, the Depositor and the Noteholders. Upon discovery by
any of the Depositor, the Master Servicer or the Indenture Trustee of a breach
of any of the foregoing representations, warranties and covenants which
materially and adversely affects the value of any Mortgage Loan, Prepayment
Charge or the interests therein of the Noteholders, the party discovering such
breach shall give prompt written notice (but in no event later than two (2)
Business Days following such discovery) to the Indenture Trustee. The obligation
of the Master Servicer set forth in Section 2.04(c) to cure breaches shall
constitute the sole remedy against the Master Servicer available to the
Noteholders, the Depositor or the Indenture Trustee on behalf of the Noteholders
respecting a breach of the representations, warranties and covenants contained
in this Section 2.06. The preceding sentence shall not, however, limit any
remedies available to the Noteholders, the Depositor or the Indenture Trustee on
behalf of the Noteholders, pursuant to the Mortgage Loan Purchase Agreement
signed by the Master Servicer in its capacity as Originator, respecting a breach
of the representations, warranties and covenants of the Master Servicer in its
capacity as Originator contained in the Mortgage Loan Purchase Agreement or
pursuant to Section 2.03 hereof.

            SECTION 2.07 Issuance of REMIC Trust Interests. The REMIC Trust
acknowledges the assignment to it of the Mortgage Loans and the delivery to it
of the Mortgage Files, subject to the provisions of Section 2.01 and Section
2.02, together with the assignment to it of all other assets included in the
REMIC Trust, receipt of which is hereby acknowledged. Concurrently with such
assignment and delivery and in exchange therefor, the Owner Trustee on behalf of
the REMIC Trust, pursuant to the written

                                       49
<PAGE>

request of the Depositor executed by an officer of the Depositor, has executed,
authenticated and delivered to or upon the order of the Depositor, the REMIC
Trust Interests.

            SECTION 2.08 Conveyance of Class S Notes and Class P Notes;
Acceptance of the NIMS Trust by the Indenture Trustee. The Depositor,
concurrently with the execution and delivery hereof, does hereby transfer,
assign, set over and otherwise convey to the NIMS Trust without recourse all the
right, title and interest of the Depositor in and to the Class S and Class P
Notes, for the benefit of the Holders of the Class N Notes. The Indenture
Trustee, on behalf of the NIMS Trust, acknowledges receipt of the Class S and
Class P Notes and declares that it holds and will hold the same in trust for the
exclusive use and benefit of all present and future Holders of the Class N
Notes.

            SECTION 2.09 Issuance of Class N Notes and NIMS Certificates. The
NIMS Trust acknowledges the assignment to it of the Class S and Class P Notes
and, concurrently therewith and in exchange therefor, pursuant to the written
request of the Depositor executed by an officer of the Depositor, the Owner
Trustee on behalf of the NIMS Trust has executed, authenticated and delivered to
or upon the order of the Depositor, the Class N Notes and NIMS Certificates in
authorized denominations.

            SECTION 2.10 Miscellaneous REMIC Provisions. (a) The Indenture
Trustee, as agent of the REMIC Trust, shall elect that each of the Lower-Tier
REMIC and the Upper-Tier REMIC shall be treated as a REMIC under Section 860D of
the Code. Any inconsistencies or ambiguities in this Agreement or in the
administration of this Agreement shall be resolved in a manner that preserves
the validity of such REMIC elections. The assets of the Lower-Tier REMIC shall
include the Mortgage Loans, the Accounts (other than the Non-REMIC Accounts),
any REO Property, and any proceeds of the foregoing. The Lower-Tier REMIC
Regular Interests (as defined below) shall constitute the assets of the
Upper-Tier REMIC.

            (b) The Lower-Tier REMIC will be evidenced by (x) Lower-Tier
Interest 1, Lower-Tier Interest 2, Lower-Tier Interest 3, Lower-Tier Interest 4,
Lower-Tier Interest 5, and Lower-Tier Interest 6 (the "Lower-Tier REMIC Regular
Interests"), which will be uncertificated and non-transferable and are hereby
designated as the "regular interests" in the Lower-Tier REMIC and (y) the Class
R-1 Certificate, which is hereby designated as the single "residual interest" in
the Lower-Tier REMIC (the Lower-Tier REMIC Regular Interests, together with the
Class R-1 Certificate, the "Lower-Tier REMIC Interests"). The Lower-Tier REMIC
Regular Interests shall be recorded on the records of the Lower-Tier REMIC as
being issued to and held by the Indenture Trustee on behalf of the Upper-Tier
REMIC.

            Lower-Tier Interest 1 shall have an initial principal balance equal
to one percent of the sum of the initial principal balances of the Class A Notes
and the Mezzanine Notes (that is, $3,511,050.00). Lower-Tier Interest 2 shall
have an initial principal balance equal to one percent of the original principal
balance of the Mortgage Pool (that is, $3,511,050.00). Lower-Tier Interest 3
shall have an initial principal balance

                                       50
<PAGE>

equal to the excess of (i) original principal balance of the Mortgage Pool over
(ii) the sum of the initial principal balances of Lower-Tier Interest 1 and
Lower-Tier Interest 2 (that is, $344,082,900.00). On each Payment Date,
principal payments on the Mortgage Loans shall be allocated 99% to Lower-Tier
Interest 2 and Lower-Tier Interest 3 and 1% to Lower-Tier Interest 1 until paid
in full.

            Any Overcollateralization Increase Amount will not be paid as
interest to the Lower-Tier REMIC Regular Interests, but instead to the extent
available, a portion of the interest payable with respect to Lower-Tier Interest
3 which equals 1% of the Overcollateralization Increase Amount will be payable
as a reduction of the principal balance of Lower-Tier Interest 1 in the same
manner in which the Overcollateralization Increase Amount is allocated among the
Class A Notes and the Mezzanine Notes, respectively (and will be accrued and
added to principal on Lower-Tier Interest 3 in the same proportion as interest
payable on such Interest is used to reduce principal on the other Interest as
just described).

            Notwithstanding the above, principal payments on the Mortgage Loans
that are attributable to the Overcollateralization Reduction Amount shall be
allocated to Lower-Tier Interest 2 and Lower-Tier Interest 3 (allocated first to
Lower-Tier Interest 3 until such certificates are paid in full, and second to
Lower-Tier Interest 2).

            Realized Losses shall be applied such that after all distributions
have been made on such Payment Date the principal balance of Lower-Tier Interest
1 is 1% of the principal balance of the Class A Notes and the Mezzanine Notes
and the aggregate principal balance of Lower-Tier Interest 2 and Lower-Tier
Interest 3 is equal to the sum of the principal balances of the Mortgage Loans
less an amount equal to the principal balance of Lower-Tier Interest 1.

            Lower-Tier Interest 1, Lower-Tier Interest 2 and Lower-Tier Interest
3 shall each have Interest Rates equal to the Net WAC Rate. Lower-Tier Interest
4 shall have no principal balance and no Interest Rate and shall be entitled
only to any Prepayment Charges. The Class R-1 Certificate shall have no
principal balance and no Interest Rate and shall be entitled to only those
distributable assets, if any, remaining in the Lower-Tier REMIC on each Payment
Date after all amounts required to be distributed to Lower-Tier Interest 1,
Lower-Tier Interest 2, Lower-Tier Interest 3 and Lower-Tier Interest 4 and
applicable Trust expenses have been paid.

            The Lower-Tier REMIC Interests will have the following designations
and Interest Rates, and distributions of principal and interest thereon shall be
allocated to the Notes and the Certificates in the following manner:

                                       51
<PAGE>

  Lower-Tier       Initial                    Allocation of   Allocation
REMIC Interests    Balance     Interest Rate    Principal     of Interest
---------------    -------     -------------    ---------     -----------
       1         $3,511,050         (1)            (3)            (4)
       2         $3,511,050         (1)            (3)            (4)
       3        $344,082,900        (1)            (3)            (4)
       4             (2)            (2)            (2)            (2)
   Class R-1         (5)            (5)            (5)            (5)
  Certificate

------------------------
(1)   The Interest Rate on these Lower-Tier REMIC Regular Interests shall at any
      time of determination equal the Net WAC Rate.

(2)   This Lower-Tier REMIC Regular Interest is entitled only to any Prepayment
      Charges.

(3)   Principal will be allocated to and apportioned among the Class A Notes and
      the Mezzanine Notes in the same proportion as principal from the Mortgage
      Loans is payable with respect to such Notes, except that a portion of such
      principal in an amount equal to the Overcollateralization Reduction Amount
      shall first be allocated as a payment of interest to the Class C Notes,
      and all principal will be allocated as a payment of interest to the Class
      C Notes after the principal balances of the Class A Notes and the
      Mezzanine Notes have been reduced to zero.

(4)   Except as provided in the next sentence, interest will be allocated among
      the Class A Notes and the Mezzanine Notes in the same proportion as
      interest is payable on such Notes.

      Any interest with respect to each Lower-Tier REMIC Regular Interest in
      excess of the product of (i) 100 times the weighted average coupon of
      Lower-Tier Interest 1, Lower-Tier Interest 2 and Lower-Tier Interest 3,
      where Lower-Tier Interest 1 is first subject to a cap and floor equal to
      the weighted average of the Class A, Class M-1, Class M-2 and Class B-1
      Interest Rates, and Lower-Tier Interest 2 and Lower-Tier Interest 3 are
      each subject to a cap equal to 0%, and (ii) the principal balance of each
      such Lower-Tier Interest, shall not be allocated to the Class A Notes and
      Mezzanine Notes but will be allocated to the Class C Notes. However, the
      Class C Notes shall be subordinated to the extent provided in Section 4.01
      hereof.

(5)   On each Payment Date, available funds, if any, remaining in the Lower-Tier
      REMIC after payments of interest and principal, as designated above, will
      be distributed to the Class R-1 Certificate. It is expected that there
      shall not be any distributions on the Class R-1 Certificate.

            (c) The Class A-1, Class M-1, Class M-2, Class B-1, Class C and
Class P Notes are hereby designated as "regular interests" with respect to the
Upper-Tier REMIC (the "Upper-Tier REMIC Regular Interests") and the Class R-2
Certificate is hereby designated as the single "residual interest" with respect
to the Upper-Tier REMIC. On each Distribution Date, available funds, if any,
remaining in the Upper-Tier REMIC after payments of interest and principal as
designated herein shall be distributed to the Class R-2 Certificates.

            (d) For federal income tax purposes, the "latest possible maturity
date" for each of the Lower-Tier REMIC Regular Interests and Upper-Tier REMIC
Regular Interests is hereby set to be the Payment Date occurring in August,
2030.

            SECTION 2.11 Supplemental Interest Trust. (a) The REMIC Trust
does hereby create and establish a trust, the "Morgan Stanley Supplemental
Interest Trust 2000-1" (the "Supplemental Interest Trust"). The Supplement
Interest Trust shall hold the Supplemental Interest Account established pursuant
to Section 3.10(f) hereof. None of the assets of the Supplemental Interest Trust
shall be considered assets of the REMIC Trust, and any amounts transferred from
the REMIC Trust to the Supplemental Interest Rust shall be treated as
distributions with respect to the Class C Notes.

                                       52
<PAGE>

            (b) The amount on deposit in the Supplement Interest Account on any
Payment Date is the "Total Supplemental Interest Payment Amount Available" on
such Payment Date.

            (c) On each Payment Date, the Indenture Trustee shall withdraw funds
from the Supplemental Interest Account and make the payments required by Section
4.01(e) hereof.

            (d) The Indenture Trustee, on behalf of the Supplemental Interest
Trust, shall comply with all requirements of the Code and applicable state and
local law with respect to the withholding from any distributions made by it to
any Person entitled thereto of any applicable withholding taxes imposed thereon
and with respect to any applicable reporting requirements in connection
therewith..

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

            SECTION 3.01 Master Servicer to Act as Master Servicer. The Master
Servicer shall service and administer the Mortgage Loans on behalf of the
Indenture Trustee and in the best interests of and for the benefit of the
Noteholders of the REMIC Trust (as determined by the Master Servicer in its
reasonable judgment) in accordance with the terms of this Agreement and the
respective Mortgage Loans and, to the extent consistent with such terms, in the
same manner in which it services and administers similar mortgage loans for its
own portfolio, giving due consideration to customary and usual standards of
practice of mortgage lenders and loan servicers administering similar mortgage
loans but without regard to:

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

            (b) the ownership or non-ownership of any Security by the Master
      Servicer or any Affiliate of the Master Servicer;

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

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

            To the extent consistent with the foregoing, the Master Servicer
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 Master Servicer shall have full

                                       53
<PAGE>

power and authority, acting alone or through Sub-Servicers as provided in
Section 3.02, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
Without limiting the generality of the foregoing, the Master Servicer in its own
name or in the name of a Sub-Servicer is hereby authorized and empowered by the
Indenture Trustee when the Master Servicer believes it appropriate in its best
judgment in accordance with the servicing standards set forth above, to execute
and deliver, on behalf of the Noteholders of the REMIC Trust and the Indenture
Trustee, and upon notice to the Indenture Trustee, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Mortgage Loans and the
Mortgaged Properties and to institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure so as to convert the ownership of such properties,
and to hold or cause to be held title to such properties, on behalf of the
Indenture Trustee and Noteholders of the REMIC Trust. The Master Servicer shall
service and administer the Mortgage Loans in accordance with applicable state
and federal law and shall provide to the Mortgagors any reports required to be
provided to them thereby. The Master Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.16, the
Indenture Trustee shall execute, at the written request of the Master Servicer,
and furnish to the Master Servicer and any Sub-Servicer such documents as are
necessary or appropriate to enable the Master Servicer or any Sub-Servicer to
carry out their servicing and administrative duties hereunder, and the Indenture
Trustee hereby grants to the Master Servicer 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 Indenture Trustee and the Noteholders of the
REMIC Trust. The Indenture Trustee shall execute a separate power of attorney in
favor of the Master Servicer for the purposes described herein to the extent
necessary or desirable to enable the Master Servicer to perform its duties
hereunder. The Indenture Trustee shall not be liable for the actions of the
Master Servicer or any Sub-Servicers under such powers of attorney.

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

            Notwithstanding anything in this Agreement to the contrary, the
Master Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.03) and the Master Servicer shall not (i)
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance (except for reductions
resulting from actual payments of principal) or change the final maturity date
on such Mortgage Loan (unless, as provided

                                       54
<PAGE>

in Section 3.07, the Mortgagor is in default with respect to the Mortgage Loan
or such default is, in the judgment of the Master Servicer, reasonably
foreseeable) or (ii) permit any modification, waiver or amendment of any term of
any Mortgage Loan that would both (A) effect an exchange or reissuance of such
Mortgage Loan under Section 1001 of the Code (or final, temporary or proposed
Treasury regulations promulgated thereunder) and (B) cause any REMIC created
hereby 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.

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

            SECTION 3.02 Sub-Servicing Agreements Between the Master Servicer
and Sub-Servicers. (a) The Master Servicer may enter into Sub-Servicing
Agreements (provided, that such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the ratings on any Class of Notes, as
evidenced by a letter to that effect delivered by each Rating Agency to the
Depositor and the Indenture Trustee) with Sub-Servicers, for the servicing and
administration of the Mortgage Loans. The Indenture Trustee is hereby authorized
to acknowledge, at the request of the Master Servicer, any Sub-Servicing
Agreement that meets the requirements applicable to Sub-Servicing Agreements set
forth in this Agreement and that is otherwise permitted under this Agreement.

            Each Sub-Servicer shall be (i) authorized to transact business in
the state or states in which the related Mortgaged Properties it is to service
are situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts in which
are insured by the FDIC and (iii) a Freddie Mac or Fannie Mae approved mortgage
servicer. Each Sub-Servicing Agreement must impose on the Sub-Servicer
requirements conforming to the provisions set forth in Section 3.08 and provide
for servicing of the Mortgage Loans consistent with the terms of this Agreement.
The Master Servicer will examine each Sub-Servicing Agreement and will be
familiar with the terms thereof. The terms of any Sub-Servicing Agreement will
not be inconsistent with any of the provisions of this Agreement. The Master
Servicer and the Sub-Servicers may enter into and make amendments to the
Sub-Servicing Agreements or enter into different forms of Sub-Servicing
Agreements; provided, however, that any such amendments or different forms shall
be consistent with and not violate the provisions of this Agreement, and that no
such amendment or different form shall be made or entered into which could be
reasonably expected to be materially adverse to the interests of the Noteholders
of the REMIC Trust, without the consent of the Noteholders of the REMIC Trust
entitled to at least 66% of the Voting Rights of the REMIC Trust. Any variation
without the consent of the Holders of Notes of the REMIC Trust entitled to at
least 66% of the Voting Rights of the REMIC Trust from the provisions set forth
in Section 3.08 relating to insurance or priority requirements of Sub-Servicing
Accounts, or credits and charges to the Sub-Servicing Accounts or the timing

                                       55
<PAGE>

and amount of remittances by the Sub-Servicers to the Master Servicer, are
conclusively deemed to be inconsistent with this Agreement and therefore
prohibited. The Master Servicer shall deliver to the Indenture Trustee copies of
all Sub-Servicing Agreements, and any amendments or modifications thereof,
promptly upon the Master Servicer's execution and delivery of such instruments.

            (b) As part of its servicing activities hereunder, the Master
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Indenture Trustee and the Noteholders of the REMIC Trust,
shall enforce the obligations of each Sub-Servicer under the related
Sub-Servicing Agreement and of the Originator under the Mortgage Loan Purchase
Agreement, including, without limitation, any obligation to make advances in
respect of delinquent payments as required by a Sub-Servicing Agreement, or to
purchase a Mortgage Loan on account of missing or defective documentation or on
account of a breach of a representation, warranty or covenant, as described in
Section 2.04(a). Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Sub-Servicing Agreements, and the pursuit
of other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Master Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense, and
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement, to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loans or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed. Enforcement of the Mortgage Loan Purchase Agreement
against the Originator shall be effected by the Master Servicer to the extent it
is not the Originator, and otherwise by the Indenture Trustee, in accordance
with the foregoing provisions of this paragraph.

            SECTION 3.03 Successor Sub-Servicers. The Master Servicer shall be
entitled to terminate any Sub-Servicing Agreement and the rights and obligations
of any Sub-Servicer pursuant to any Sub-Servicing Agreement in accordance with
the terms and conditions of such Sub-Servicing Agreement. In the event of
termination of any Sub-Servicer, all servicing obligations of such Sub-Servicer
shall be assumed simultaneously by the Master Servicer without any act or deed
on the part of such Sub-Servicer or the Master Servicer, and the Master Servicer
either shall service directly the related Mortgage Loans or shall enter into a
Sub-Servicing Agreement with a successor Sub-Servicer which qualifies under
Section 3.02.

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

            SECTION 3.04 Liability of the Master Servicer. Notwithstanding any
Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a Sub-Servicer or
reference to actions

                                       56
<PAGE>

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

            SECTION 3.05 No Contractual Relationship Between Sub-Servicers and
Indenture Trustee or Noteholders. Any Sub-Servicing Agreement that may be
entered into and any transactions or services relating to the Mortgage Loans
involving a Sub-Servicer in its capacity as such shall be deemed to be between
the Sub-Servicer and the Master Servicer alone, and the Indenture Trustee and
Noteholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Sub-Servicer
except as set forth in Section 3.06. The Master Servicer shall be solely liable
for all fees owed by it to any Sub-Servicer, irrespective of whether the Master
Servicer's compensation pursuant to this Agreement is sufficient to pay such
fees.

            SECTION 3.06 Assumption or Termination of Sub-Servicing Agreements
by Indenture Trustee. In the event the Master Servicer shall for any reason no
longer be the master servicer (including by reason of the occurrence of a Master
Servicer Event of Default), the Indenture Trustee or its designee shall
thereupon assume all of the rights and obligations of the Master Servicer under
each Sub-Servicing Agreement that the Master Servicer may have entered into,
unless the Indenture Trustee elects to terminate any Sub-Servicing Agreement in
accordance with its terms as provided in Section 3.03.

            Upon such assumption, the Indenture Trustee, its designee or the
successor servicer for the Indenture Trustee appointed pursuant to Section 6.02
shall be deemed, subject to Section 3.03, to have assumed all of the Master
Servicer's interest therein and to have replaced the Master Servicer as a party
to each Sub-Servicing Agreement to the same extent as if each Sub-Servicing
Agreement had been assigned to the assuming party, except that (i) the Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement that arose before it ceased to be the Master Servicer
and (ii) none of the Indenture Trustee, its designee or any successor Master
Servicer shall be deemed to have assumed any liability or obligation of the
Master Servicer that arose before it ceased to be the Master Servicer.

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

                                       57
<PAGE>

effect the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party.

            SECTION 3.07 Collection of Certain Mortgage Loan Payments. The
Master Servicer shall make reasonable efforts to collect all payments called for
under the terms and provisions of the Mortgage Loans, and shall, to the extent
such procedures shall be consistent with this Agreement and the terms and
provisions of any applicable insurance policies, follow such collection
procedures as it would follow with respect to mortgage loans comparable to the
Mortgage Loans and held for its own account. Consistent with the foregoing, the
Master Servicer may in its discretion (i) waive any late payment charge or, if
applicable, any penalty interest, or (ii) extend the due dates for the Monthly
Payments due on a Mortgage Note for a period of not greater than 180 days;
provided, that any extension pursuant to clause (ii) above shall not affect the
amortization schedule of any Mortgage Loan for purposes of any computation
hereunder, except as provided below. In the event of any such arrangement
pursuant to clause (ii) above, the Master Servicer shall make timely advances on
such Mortgage Loan during such extension pursuant to Section 4.03 and in
accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements, subject to Section 4.03(d)
pursuant to which the Master Servicer shall not be required to make any such
advances that are Nonrecoverable P&I Advances. Notwithstanding the foregoing, in
the event that any Mortgage Loan is in default or, in the judgment of the Master
Servicer, such default is reasonably foreseeable, the Master Servicer,
consistent with the standards set forth in Section 3.01, may also waive, modify
or vary any term of such Mortgage Loan (including modifications that would
change the Mortgage Rate, forgive the payment of principal or interest or extend
the final maturity date of such Mortgage Loan), accept payment from the related
Mortgagor of an amount less than the Stated Principal Balance in final
satisfaction of such Mortgage Loan (such payment, a "Short Pay-off") or consent
to the postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor.

            SECTION 3.08 Sub-Servicing Accounts. In those cases where a
Sub-Servicer is servicing a Mortgage Loan pursuant to a Sub-Servicing Agreement,
the Sub-Servicer will be required to establish and maintain one or more accounts
(collectively, the "Sub-Servicing Account"). The Sub-Servicing Account shall be
an Eligible Account. The Sub-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 Sub-Servicer's receipt thereof, all proceeds of Mortgage Loans
received by the Sub-Servicer less its servicing compensation to the extent
permitted by the Sub-Servicing Agreement, and shall thereafter deposit such
amounts in the Sub-Servicing Account, in no event more than two Business Days
after the deposit of such funds into the clearing account. The Sub-Servicer
shall thereafter deposit such proceeds in the Collection Account or remit such
proceeds to the Master Servicer for deposit in the Collection Account not later
than two Business Days after the deposit of such amounts in the Sub-Servicing
Account. For purposes of this Agreement, the Master Servicer shall be deemed to
have received payments on the Mortgage Loans when the Sub-Servicer receives such
payments.

                                       58
<PAGE>

            SECTION 3.09 Collection of Taxes, Assessments and Similar Items;
Servicing Accounts. The Master Servicer shall establish and maintain, or cause
to be established and maintained, one or more accounts (the "Servicing
Accounts"). Servicing Accounts shall be Eligible Accounts. The Master 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 Master Servicer's
receipt thereof, all collections from the Mortgagors (or related advances from
Sub-Servicers) for the payment of taxes, assessments, hazard insurance premiums
and comparable items for the account of the Mortgagors ("Escrow Payments")
collected on account of the Mortgage Loans and shall thereafter deposit such
Escrow Payments in the Servicing Accounts, in no event more than two Business
Days after the 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 a Servicing Account may be made only to
(i) effect payment of taxes, assessments, hazard insurance premiums, and
comparable items; (ii) reimburse the Master Servicer (or a Sub-Servicer to the
extent provided in the related Sub-Servicing Agreement) out of related
collections for any advances made pursuant to Section 3.01 (with respect to
taxes and assessments) and Section 3.13 (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 Servicing Account; (v) clear and terminate the Servicing Account at the
termination of the Master Servicer's obligations and responsibilities in respect
of the Mortgage Loans under this Agreement in accordance with Article VI or (vi)
recover amounts deposited in error. As part of its servicing duties, the Master
Servicer or Sub-Servicers shall pay to the Mortgagors interest on funds in
Servicing Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Servicing Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement therefor. To the
extent that a Mortgage does not provide for Escrow Payments, the Master 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 Master 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, Payment Account, Supplemental
Interest Account and NIMS Payment Account. (a) On behalf of the REMIC Trust,
the Master Servicer shall establish and maintain, or cause to be established and
maintained, one or more Eligible Accounts (such account or accounts, the
"Collection Account"), held in trust for the benefit of the Indenture Trustee
and the Noteholders of the REMIC Trust. On behalf of the REMIC Trust, the Master
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 Master Servicer's receipt thereof, and shall thereafter deposit

                                       59
<PAGE>

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 Cut-off Date (other than in respect of principal or
interest on the related Mortgage Loans due on or before the Cut-off Date), or
payments (other than Principal Prepayments) received by it on or prior to the
Cut-off Date but allocable to a Due Period subsequent thereto:

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

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

            (iii) all Insurance Proceeds and Liquidation Proceeds (other than
      proceeds collected in respect of any particular REO Property and amounts
      paid by the Master Servicer in connection with a purchase of Mortgage
      Loans and REO Properties pursuant to Section 8.01);

            (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 Master 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 Section 2.04 or Section 8.01;

            (vii) all Substitution Shortfall Amounts; and

            (viii) all Prepayment Charges collected by the Master Servicer.

            For purposes of the immediately preceding sentence, the Cut-off Date
with respect to any Qualified Substitute Mortgage Loan shall be deemed to be the
date of substitution.

            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 Master Servicer in the Collection Account and shall,
upon collection, belong to the Master Servicer as additional compensation for
its servicing activities. In the event the Master Servicer shall deposit in the
Collection Account any amount not required to be deposited therein, it may at
any time withdraw such amount from the Collection Account, any provision herein
to the contrary notwithstanding.

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<PAGE>

            (b) On behalf of the REMIC Trust, the Indenture Trustee shall
establish and maintain one or more Eligible Accounts (such account or accounts,
the "Payment Account"), held in trust for the benefit of the Noteholders of the
REMIC Trust. On behalf of the REMIC Trust, the Master Servicer shall deliver to
the Indenture Trustee in immediately available funds for deposit in the Payment
Account on or before 3:00 p.m. New York time (i) on the Master Servicer
Remittance Date, that portion of the Available Payment Amount (calculated
without regard to the references in clause (2) of the definition thereof to
amounts that may be withdrawn from the Payment Account) for the related Payment
Date then on deposit in the Collection Account, the amount of all Prepayment
Charges on the Prepayment Charge Schedule collected by the Master Servicer in
connection with the voluntary Principal Prepayment in full of any of the
Mortgage Loans then on deposit in the Collection Account (other than any such
Prepayment Charges received after the related Prepayment Period) and the amount
of any funds reimbursable to an Advancing Person pursuant to Section 3.25, and
(ii) on each Business Day as of the commencement of which the balance on deposit
in the Collection Account exceeds $75,000 following any withdrawals pursuant to
the next succeeding sentence, the amount of such excess, but only if the
Collection Account constitutes an Eligible Account solely pursuant to clause
(ii) of the definition of "Eligible Account." If the balance on deposit in the
Collection Account exceeds $75,000 as of the commencement of business on any
Business Day and the Collection Account constitutes an Eligible Account solely
pursuant to clause (ii) of the definition of "Eligible Account," the Master
Servicer shall, on or before 3:00 p.m. New York time on such Business Day,
withdraw from the Collection Account any and all amounts payable or reimbursable
to the Depositor, the Master Servicer, the Indenture Trustee, the Owner Trustee,
the Seller or any Sub-Servicer pursuant to Section 3.11 and shall pay such
amounts to the Persons entitled thereto.

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

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

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<PAGE>

            (i) any P&I Advances, as required pursuant to Section 4.03, unless
      delivered directly to the Indenture Trustee by an Advancing Person;

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

            (iii) any amounts to be paid by the Master Servicer in connection
      with a purchase of Mortgage Loans and REO Properties pursuant to Section
      8.01;

            (iv) any amounts required to be deposited pursuant to Section 3.23
      in connection with any Prepayment Interest Shortfalls; and

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

            (e) Promptly upon receipt of any Stayed Funds, whether from the
Master Servicer, a trustee in bankruptcy, federal bankruptcy court or other
source, the Indenture Trustee shall deposit such funds in the Payment Account,
subject to withdrawal thereof pursuant to Section 6.02(b) or as otherwise
permitted hereunder.

            (f) On behalf of the Holders of the Class A Notes and the Mezzanine
Notes, the Indenture Trustee shall establish and maintain one or more Eligible
Accounts (such account or accounts, the "Supplemental Interest Account") held in
trust for the benefit of such Noteholders. The Supplemental Interest Account
shall be an Eligible Account, owned by the REMIC Trust but shall not be part of
any REMIC held by the REMIC Trust. The Indenture Trustee shall deposit to the
Supplemental Interest Account all payments made with respect to the Class C
Notes. Amounts on deposit in the Supplemental Interest Account shall be invested
in Permitted Investments, and any income on such investments shall be paid to
the Holder of the Class S Note.

            (g) On behalf of the Holders of the Class N Notes and the NIMS
Certificates, the Indenture Trustee shall establish and maintain one or more
Eligible Accounts (the "NIMS Payment Account") held in trust for the benefit of
the Holders of Class N Notes and the NIMS Certificates. The Indenture Trustee
shall deposit to the NIMS Payment Account all payments made with the respect to
the Class P Notes and the Class S Notes pursuant to Section 4.01(a) and (e)
hereof.

            SECTION 3.11 Withdrawals from the Collection Account and Payment
Account. (a) The Master Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 3.03:

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

            (ii) subject to Section 3.15(d), to reimburse the Master Servicer
      for P&I Advances, but only to the extent of amounts received which
      represent Late Collections (net of the related Servicing Fees) of Monthly
      Payments on Mortgage

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      Loans with respect to which such P&I Advances were made in accordance with
      the provisions of Section 4.03;

            (iii) subject to Section 3.15(d), to pay the Master Servicer or any
      Sub-Servicer (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 Master Servicer from a
      Mortgagor, or otherwise received with respect to such Mortgage Loan;

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

            (v) to pay to the Master Servicer, the Depositor or the Seller, as
      the case may be, with respect to each Mortgage Loan that has previously
      been purchased or replaced pursuant to Section 2.04 or Section 3.15(c) all
      amounts received thereon subsequent to the date of purchase or
      substitution, as the case may be;

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

            (vii) to reimburse the Master Servicer or the Depositor for expenses
      incurred by or reimbursable to the Master Servicer or the Depositor, as
      the case may be, pursuant to Section 5.03;

            (viii)to reimburse the Master Servicer or the Indenture 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 2.04 of
      this Agreement that were included in the Purchase Price of the Mortgage
      Loan, including any expenses arising out of the enforcement of the
      purchase obligation;

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

            (x) to clear and terminate the Collection Account pursuant to
      Section 8.01.

            The Master Servicer shall keep and maintain separate accounting, on
a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (v), (vi), (viii) and (ix) above. The
Master Servicer shall provide written notification to the Indenture Trustee, on
or prior to the next succeeding Master

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Servicer Remittance Date, upon making any withdrawals from the Collection
Account pursuant to subclause (vii) above.

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

            (i) to make payments to the Noteholders of the REMIC Trust in
      accordance with Section 4.01;

            (ii) to pay to itself amounts to which it is entitled (including the
      Indenture Trustee's Fee) pursuant to Section 7.05;

            (iii) to pay to the Owner Trustee the Owner Trustee's Fee pursuant
      to Section 7.05;

            (iv) to pay itself and to the Depositor any interest income earned
      on funds deposited in the Payment Account pursuant to Section 3.12(c);

            (v) to reimburse itself pursuant to Section 6.02 or pursuant to
      Section 6.01 to the extent such amounts in Section 6.01 were not
      reimbursed by the Master Servicer;

            (vi) to pay any amounts in respect of taxes pursuant to Section
      9.02(g)(iii);

            (vii) to remit to the Master Servicer any amount deposited in the
      Payment Account by the Master Servicer but not required to be deposited
      therein in accordance with Section 3.10(d);

            (viii) to pay to an Advancing Person reimbursements for P&I Advances
      and/or Servicing Advances pursuant to Section 3.25; and

            (ix) to clear and terminate the Payment Account pursuant to Section
      8.01.

            SECTION 3.12 Investment of Funds in the Collection Account and the
Payment Account. (a) The Master Servicer may direct any depository
institution maintaining the Collection Account (for purposes of this Section
3.12 an "Investment Account"), and the Depositor may direct any depository
institution maintaining the Payment Account (for purposes of this Section 3.12,
also an "Investment Account"), to invest the funds in such Investment Account in
one or more Permitted Investments bearing interest or sold at a discount, and
maturing, unless payable on demand, (i) no later than the Business Day
immediately preceding the date on which such funds are required to be withdrawn
from such account pursuant to this Agreement, if a Person other than the
Indenture Trustee is the obligor thereon and (ii) no later than the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Indenture Trustee is the obligor thereon. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds in an Investment

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Account shall be made in the name of the Indenture Trustee (in its capacity as
such) or in the name of a nominee of the Indenture Trustee. The Indenture
Trustee shall be entitled to sole possession (except with respect to investment
direction of funds held in the Collection 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
Indenture Trustee or its agent, together with any document of transfer necessary
to transfer title to such investment to the Indenture Trustee or its nominee. In
the event amounts on deposit in an Investment Account are at any time invested
in a Permitted Investment payable on demand, the Indenture Trustee shall:

            (i) 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

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

            (b) All income and gain realized from the investment of funds
deposited in the Collection Account and any REO Account held by or on behalf of
the Master Servicer, shall be for the benefit of the Master Servicer and shall
be subject to its withdrawal in accordance with Section 3.11 or Section 3.22, as
applicable or withdrawal by the Indenture Trustee in accordance with Section
3.11. The Master Servicer shall deposit in the Collection Account or any REO
Account, as applicable, the amount of any loss of principal incurred in respect
of any such Permitted Investment made with funds in such accounts immediately
upon realization of such loss from its own funds without reimbursement thereof.

            (c) All income and gain realized from the investment of funds
deposited in the Payment Account held by or on behalf of the Indenture Trustee,
shall be for the benefit of the Indenture Trustee and of the Depositor and shall
be subject to its withdrawal on each Payment Date; 2/7ths of such investment
earnings shall be paid to the Indenture Trustee, and 5/7ths shall be paid to the
Depositor. The Indenture Trustee shall deposit in the Payment Account, 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 from its own funds without reimbursement thereof.

            (d) 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 Indenture Trustee may and, subject to Section 9.01 and Section
7.02(v), upon the request of the Holders of Notes representing more than 50% of
the Voting Rights allocated to any Class of Notes, shall take such action as may
be appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings.

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            SECTION 3.13 Maintenance of Hazard Insurance and Errors and
Omissions and Fidelity Coverage. (a) The Master Servicer shall cause to be
maintained for each Mortgage Loan fire insurance with extended coverage on the
related Mortgaged Property in an amount which is at least equal to the 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 Master Servicer shall also cause to be maintained fire insurance
with extended coverage on each REO Property in an amount which is at least equal
to the lesser of (i) the maximum insurable value of the improvements which are a
part of such property and (ii) the outstanding principal balance of the related
Mortgage Loan at the time it became an REO Property, plus accrued interest at
the Mortgage Rate and related Servicing Advances. The Master Servicer will
comply in the performance of this Agreement with all reasonable rules and
requirements of each insurer under any such hazard policies. Any amounts to be
collected by the Master Servicer under any such policies (other than amounts to
be applied to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with the
procedures that the Master Servicer would follow in servicing loans held for its
own account, subject to the terms and conditions of the related Mortgage and
Mortgage Note) shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3.11, if received in respect of a Mortgage Loan,
or in the REO Account, subject to withdrawal pursuant to Section 3.22, if
received in respect of an REO Property. Any cost incurred by the Master Servicer
in maintaining any such insurance shall not, for the purpose of calculating
payments to Noteholders of the REMIC Trust, be added to the unpaid principal
balance of the related Mortgage Loan, notwithstanding that the terms of such
Mortgage Loan so permit. It is understood and agreed that no earthquake or other
additional insurance is to be required of any Mortgagor other than pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance. If the Mortgaged Property or REO
Property is at any time in an area identified in the Federal Register by the
Federal Emergency Management Agency as having special flood hazards and flood
insurance has been made available, the Master Servicer will cause to be
maintained a flood insurance policy in respect thereof. Such flood insurance
shall be in an amount equal to the lesser of (i) the unpaid principal balance of
the related Mortgage Loan and (ii) the maximum amount of such insurance
available for the related Mortgaged Property under the national flood insurance
program (assuming that the area in which such Mortgaged Property is located is
participating in such program).

            In the event that the Master Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's Key Rating Guide (or such other rating that is comparable to such
rating) insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.13, it being understood and agreed that
such policy may contain a deductible clause, in which case the Master Servicer
shall, in the event that there shall not have been maintained on the

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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 Master Servicer agrees to
prepare and present, on behalf of itself, the Indenture Trustee and Noteholders
of the REMIC Trust, claims under any such blanket policy in a timely fashion in
accordance with the terms of such policy.

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

            SECTION 3.14 Enforcement of Due-On-Sale Clauses; Assumption
Agreements. The Master Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Master Servicer shall not be required to take such action if in its
sole business judgment the Master Servicer believes it is not in the best
interests of the REMIC Trust and shall not exercise any such rights if
prohibited by law from doing so. If the Master Servicer reasonably believes it
is unable under applicable law to enforce such "due-on-sale" clause, or if any
of the other conditions set forth in the proviso to the preceding sentence
apply, the Master Servicer will enter into an assumption and modification
agreement from or with the person to whom such property has been conveyed or is
proposed to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, to the extent permitted by applicable state law, the
Mortgagor remains liable thereon. The Master Servicer is also authorized to
enter into a substitution of liability agreement with such person, pursuant to
which the original Mortgagor is released from liability and such person is
substituted as the

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Mortgagor and becomes liable under the Mortgage Note; provided, that no such
substitution shall be effective unless such person satisfies the underwriting
criteria of the Master Servicer and has a credit risk rating at least equal to
that of the original Mortgagor. In connection with any assumption, modification
or substitution, the Master Servicer shall apply such underwriting standards and
follow such practices and procedures as shall be normal and usual in its general
mortgage servicing activities and as it applies to other mortgage loans owned
solely by it. The Master Servicer shall not take or enter into any assumption
and modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy, or a new policy meeting
the requirements of this Section 3.14 is obtained. Any fee collected by the
Master Servicer in respect of an assumption or substitution of liability
agreement will be retained by the Master Servicer as additional servicing
compensation. In connection with any such assumption, no material term of the
Mortgage Note (including but not limited to the related Mortgage Rate and the
amount of the Monthly Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Master Servicer shall notify the
Indenture Trustee that any such substitution, modification or assumption
agreement has been completed by forwarding to the Indenture 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 Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any assumption
of a Mortgage Loan by operation of law or by the terms of the Mortgage Note or
any assumption which the Master Servicer may be restricted by law from
preventing, for any reason whatever. For purposes of this Section 3.14, 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.

            SECTION 3.15 Realization Upon Defaulted Mortgage Loans. (a) The
Master Servicer shall use its best efforts consistent with the servicing
standard set forth in Section 3.01, to foreclose upon or otherwise comparably
convert the ownership of properties securing such of the Mortgage Loans
(including selling any such Mortgage Loan rather than converting the ownership
of the related properties if such sale would maximize the timely and complete
recovery of principal and interest on the related Mortgage Note in accordance
with the servicing standard set forth in Section 3.01) as come into and continue
in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The Master Servicer
shall be responsible for all costs and expenses incurred by it in any such
proceedings; provided, however, that such costs and expenses will be recoverable
as Servicing Advances by the Master Servicer as contemplated in Section 3.11 and
Section 3.22. The foregoing is subject to the provision that, in any case in
which Mortgaged Property shall have suffered damage from an Uninsured Cause, the
Master Servicer shall not be required to expend its own funds toward the
restoration of such

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property unless it shall determine in its sole and absolute discretion that such
restoration will increase the proceeds of liquidation of the related Mortgage
Loan after reimbursement to itself for such expenses.

            (b) Notwithstanding the foregoing provisions of this Section 3.15 or
any other provision of this Agreement, with respect to any Mortgage Loan as to
which the Master Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Master Servicer shall not, on behalf of the Indenture Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged Property, if, as a result of any
such action, the Indenture Trustee, the REMIC Trust or the Noteholders of the
REMIC Trust would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Master Servicer has also previously
determined, based on its reasonable judgment and a report prepared by a Person
who regularly conducts environmental audits using customary industry standards,
that:

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

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

            The cost of the environmental audit report contemplated by this
Section 3.15 shall be advanced by the Master Servicer, subject to the Master
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(a)(ix), such right of reimbursement being prior to the
rights of Noteholders of the REMIC Trust to receive any amount in the Collection
Account received in respect of the affected Mortgage Loan or other Mortgage
Loans. It is understood by the parties hereto that any such advance will be
deemed a Servicing Advance.

            If the Master Servicer determines, as described above, that it is in
the best economic interest of the REMIC Trust to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting

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<PAGE>

any such Mortgaged Property, then the Master Servicer shall take such action as
it deems to be in the best economic interest of the REMIC Trust. The cost of any
such compliance, containment, cleanup or remediation shall be advanced by the
Master Servicer, subject to the Master Servicer's right to be reimbursed
therefor from the Collection Account as provided in Section 3.11(a)(ix), such
right of reimbursement being prior to the rights of Noteholders of the REMIC
Trust to receive any amount in the Collection Account received in respect of the
affected Mortgage Loan or other Mortgage Loans. It is understood by the parties
hereto that any such advance will be deemed a Servicing Advance.

            (c) The Master Servicer may at its option purchase from the REMIC
Trust any Mortgage Loan or related REO Property that is 90 days or more
delinquent, which the Master Servicer determines in good faith will otherwise
become subject to foreclosure proceedings (evidence of such determination to be
delivered in writing to the Indenture Trustee prior to purchase), at a price
equal to the Purchase Price; provided, however, that the Master Servicer shall
purchase any such Mortgage Loans or related REO Properties on the basis of
delinquency, purchasing the most delinquent Mortgage Loans or related REO
Properties first. The Purchase Price for any Mortgage Loan or related REO
Property purchased hereunder shall be deposited in the Collection Account, and
the Indenture Trustee, upon receipt of written certification from the Master
Servicer of such deposit, shall release or cause to be released to the Master
Servicer the related Mortgage File and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Master Servicer shall furnish and as shall be necessary to vest in the Master
Servicer title to any Mortgage Loan or related REO Property released pursuant
hereto.

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

            SECTION 3.16 Indenture Trustee to Cooperate; Release of Mortgage
Files. (a) Upon the payment in full of any Mortgage Loan, or the receipt by
the Master Servicer of a notification that payment in full shall be escrowed in
a manner customary for such purposes, the Master Servicer will immediately
notify the Indenture Trustee by a certification in the form of Exhibit C (which
certification shall include a statement to the

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effect that all amounts received or to be received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 3.10 have been or will be so deposited) of a Servicing Officer and shall
request delivery to it of the Mortgage File. Upon receipt of such certification
and request, the Indenture Trustee shall promptly release the related Mortgage
File to the Master Servicer. No expenses incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to the
Collection Account or the Payment 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 Indenture Trustee
shall, upon request of the Master Servicer and delivery to the Indenture Trustee
of a Request for Release in the form of Exhibit C, release the related Mortgage
File to the Master Servicer, and the Indenture Trustee shall, at the direction
of the Master Servicer, execute such documents as shall be necessary to the
prosecution of any such proceedings and the Master Servicer shall retain such
Mortgage File in trust for the benefit of the Noteholders of the REMIC Trust.
Such Request for Release shall obligate the Master Servicer to return each and
every document previously requested from the Mortgage File to the Indenture
Trustee when the need therefor by the Master 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 Master Servicer has
delivered to the Indenture 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
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 shall be released by the
Indenture Trustee to the Master Servicer or its designee.

            (c) Upon written certification of a Servicing Officer, the Indenture
Trustee shall execute and deliver to the Master 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 Master Servicer a power of
attorney sufficient to authorize the Master Servicer to execute such documents
on its behalf; provided, that the Indenture Trustee shall be obligated to
execute the documents identified above if necessary to enable the Master
Servicer to perform its duties hereunder. Each such certification shall include
a request that such pleadings or documents be executed by the Indenture Trustee
and a statement as to the reason such documents or pleadings are required and
that the execution and delivery

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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 Servicing Compensation. As compensation for the
activities of the Master Servicer hereunder, the Master Servicer shall be
entitled to the Servicing Fee with respect to each Mortgage Loan payable solely
from payments of interest in respect of such Mortgage Loan, subject to Section
3.23. In addition, the Master Servicer shall be entitled to recover unpaid
Servicing Fees out of Late Collections, Insurance Proceeds or Liquidation
Proceeds to the extent permitted by Section 3.11(a)(iii) and out of amounts
derived from the operation and sale of an REO Property to the extent permitted
by Section 3.22. The right to receive the Servicing Fee may not be transferred
in whole or in part except in connection with the transfer of all of the Master
Servicer's responsibilities and obligations under this Agreement; provided,
however, that the Master Servicer may pay from the Servicing Fee any amounts due
to a Sub-Servicer pursuant to a Sub-Servicing Agreement entered into under
Section 3.02.

            Additional servicing compensation in the form of assumption or
modification fees, late payment charges, NSF fees, reconveyance fees and other
similar fees and charges (other than Prepayment Charges) shall be retained by
the Master Servicer (subject to Section 3.23) only to the extent such fees or
charges are received by the Master Servicer. The Master Servicer shall also be
entitled pursuant to Section 3.11(a)(iv) to withdraw from the Collection
Account, and pursuant to Section 3.22(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.12 and Section 3.23. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including premiums for the insurance required by Section
3.13, to the extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, it being understood however, that payment of such premiums by the
Master Servicer shall constitute Servicing Advances and servicing compensation
of each Sub-Servicer, and to the extent provided herein in Section 7.05, the
fees and expenses of the Indenture Trustee) and shall not be entitled to
reimbursement therefor except as specifically provided herein.

            SECTION 3.18 Reports to the Indenture Trustee; Collection Account
Statements. Not later than fifteen days after each Payment Date, the Master
Servicer shall forward to the Indenture Trustee and the Depositor a statement
prepared by the Master Servicer setting forth the status of the Collection
Account as of the close of business on such Payment Date and showing, for the
period covered by such statement, the aggregate amount of deposits into and
withdrawals from the Collection Account of each category of deposit specified in
Section 3.10(a) and each category of withdrawal specified in Section 3.11. Such
statement may be in the form of the then current Fannie Mae Monthly Accounting
Report for its Guaranteed Mortgage Pass-Through Program with appropriate
additions and changes, and shall also include information as to the aggregate of
the outstanding principal balances of all of the Mortgage Loans as of the last
day of the calendar month immediately preceding such Payment Date. Copies of
such statement shall be provided by the Indenture Trustee to any Holder of a
Security, and to

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any Person identified to the Indenture Trustee as a prospective transferee of a
Security, upon request at the expense of the requesting party; provided, such
statement is delivered by the Master Servicer to the Indenture Trustee.

            SECTION 3.19 Statement as to Compliance. The Master Servicer will
deliver to the Indenture Trustee, the Depositor and each Rating Agency on or
before April 15 of each calendar year commencing in 2001, an Officers'
Certificate stating, as to each signatory thereof, that (i) a review of the
activities of the Master Servicer during the preceding year and of performance
under this Agreement has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Master Servicer
has fulfilled all of its obligations under this Agreement throughout such year,
or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. Copies of any such statement shall be provided by the Indenture Trustee
to any Holder of a Security, and to any Person identified to the Indenture
Trustee as a prospective transferee of a Note, upon the request and at the
expense of the requesting party; provided, that such statement is delivered by
the Master Servicer to the Indenture Trustee.

            SECTION 3.20 Independent Public Accountants' Servicing Report. Not
later than April 15 of each calendar year commencing in 2001, the Master
Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Master Servicer a
report stating that (i) it has obtained a letter of representation regarding
certain matters from the management of the Master Servicer which includes an
assertion that the Master Servicer has complied with certain minimum residential
mortgage loan servicing standards, identified in the Uniform Single Attestation
Program for Mortgage Bankers established by the Mortgage Bankers Association of
America, with respect to the servicing of residential mortgage loans during the
most recently completed fiscal year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that may be appropriate. In rendering its report such firm may rely, as to
matters relating to the direct servicing of residential mortgage loans by
Sub-Servicers, upon comparable reports of firms of independent certified public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Sub-Servicers. Immediately upon receipt of such report, the Master
Servicer shall furnish a copy of such report to the Indenture Trustee and each
Rating Agency. Copies of such statement shall be provided by the Indenture
Trustee to any Holder of a Security upon request at the Master Servicer's
expense; provided, that such statement is delivered by the Master Servicer to
the Indenture Trustee. In the event such firm of independent certified public
accountants requires the Indenture Trustee to agree to the procedures performed
by such firm, the Master Servicer shall direct the Indenture Trustee in writing
to so agree; it being understood and agreed that the Indenture Trustee will
deliver such letter of agreement in conclusive reliance upon the direction of
the Master Servicer, and the Indenture Trustee has not made any independent
inquiry or

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investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.

            SECTION 3.21 Access to Certain Documentation. The Master Servicer
shall provide to the Office of Thrift Supervision, the FDIC, and any other
federal or state banking or insurance regulatory authority that may exercise
authority over any Holder of a Security, access to the documentation regarding
the Mortgage Loans serviced by the Master Servicer under this Agreement, as may
be required by applicable laws and regulations. Such access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the offices of the Master Servicer designated by it. In addition,
access to the documentation regarding the Mortgage Loans serviced by the Master
Servicer under this Agreement will be provided to any Noteholder, the Indenture
Trustee and to any Person identified to the Master Servicer as a prospective
transferee of a Holder of a Security, upon reasonable request during normal
business hours at the offices of the Master Servicer designated by it at the
expense of the Person requesting such access.

            SECTION 3.22 Title, Management and Disposition of REO Property.
(a) The deed of sale of any REO Property shall be taken in the name of the
Indenture Trustee, or its nominee, in trust for the benefit of the Noteholders
of the REMIC Trust. The Master Servicer, on behalf of the REMIC Trust (and on
behalf of the Indenture Trustee for the benefit of the Noteholders), shall
either sell any REO Property before the close of the third taxable year after
the year the REMIC Trust acquires ownership of such REO Property for purposes of
Section 860G(a)(8) of the Code or request from the Internal Revenue Service, no
later than 60 days before the day on which the three-year grace period would
otherwise expire, an extension of the three-year grace period, unless the Master
Servicer shall have delivered to the Indenture Trustee and the Depositor an
Opinion of Counsel, addressed to the Indenture Trustee and the Depositor, to the
effect that the holding by the REMIC Trust of such REO Property subsequent to
three years after its acquisition will not result in the imposition on the REMIC
Trust of taxes on "prohibited transactions" thereof, as defined in Section 860F
of the Code, or cause any REMIC to fail to qualify as a REMIC under Federal law
at any time that any Notes are outstanding. The Master Servicer shall manage,
conserve, protect and operate each REO Property for the Noteholders of the REMIC
Trust solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by any REMIC of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code, or any "net income from
foreclosure property" which is subject to taxation under the REMIC Provisions.

            (b) The Master Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and general assets and shall establish and maintain, or
cause to be established and maintained, with respect to REO Properties an
account held in trust for the Indenture Trustee for the benefit of the
Noteholders of the REMIC Trust (the "REO Account"), which shall be an Eligible
Account. The Master Servicer shall be permitted to allow the Collection Account
to serve as the REO Account, subject to separate ledgers

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for each REO Property. The Master Servicer shall be entitled to retain or
withdraw any interest income paid on funds deposited in the REO Account.

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

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

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

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

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

            Notwithstanding the foregoing, neither the Master Servicer nor the
Indenture Trustee shall:

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

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

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

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

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

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

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

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

            (3)   none of the provisions of this Section 3.22(c) relating to any
                  such contract or to actions taken through any such Independent
                  Contractor shall be deemed to relieve the Master Servicer of
                  any of its duties and obligations to the Indenture Trustee on
                  behalf of the Noteholders of the REMIC Trust with respect to
                  the operation and management of any such REO Property; and

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

            The Master Servicer shall be entitled to enter into any agreement
with any Independent Contractor performing services for it related to its duties
and obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification.

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The Master Servicer shall be solely liable for all fees owed by it to any such
Independent Contractor, irrespective of whether the Master Servicer's
compensation pursuant to Section 3.17 is sufficient to pay such fees; provided,
however, that to the extent that any payments made by such Independent
Contractor would constitute Servicing Advances if made by the Master Servicer,
such amounts shall be reimbursable as Servicing Advances made by the Master
Servicer.

            (d) In addition to the withdrawals permitted under Section 3.22(c),
the Master Servicer may from time to time make withdrawals from the REO Account
for any REO Property: (i) to pay itself or any Sub-Servicer unpaid Servicing
Fees in respect of the related Mortgage Loan; and (ii) to reimburse itself or
any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances made in
respect of such REO Property or the related Mortgage Loan. On the Master
Servicer Remittance Date, the Master Servicer shall withdraw from each REO
Account maintained by it and deposit into the Payment Account in accordance with
Section 3.10(d)(ii), for distribution on the related Payment Date in accordance
with Section 4.01, the income from the related REO Property received during the
prior calendar month, net of any withdrawals made pursuant to Section 3.22(c) or
this Section 3.22(d).

            (e) Subject to the time constraints set forth in Section 3.22(a),
each REO Disposition shall be carried out by the Master Servicer at such price
and upon such terms and conditions as the Master Servicer shall deem necessary
or advisable, as shall be normal and usual in its general servicing activities
for similar properties.

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

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

            SECTION 3.23 Obligations of the Master Servicer in Respect of
Prepayment Interest Shortfalls. The Master Servicer shall deliver to the
Indenture Trustee for deposit into the Payment Account on or before 3:00 p.m.
New York time on the Master Servicer Remittance Date from its own funds an
amount equal to the lesser of (i) the aggregate of the Prepayment Interest
Shortfalls for the related Payment Date

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resulting solely from Principal Prepayments during the related Prepayment Period
and (ii) the amount of its aggregate Servicing Fee for the most recently ended
calendar month.

            SECTION 3.24 Obligations of the Master Servicer in Respect of
Mortgage Rates and Monthly Payments. In the event that a shortfall in any
collection on or liability with respect to any Mortgage Loan results from or is
attributable to adjustments to Mortgage Rates, Monthly Payments or Stated
Principal Balances that were made by the Master Servicer in a manner not
consistent with the terms of the related Mortgage Note and this Agreement, the
Master Servicer, upon discovery or receipt of notice thereof, immediately shall
deliver to the Indenture Trustee for deposit in the Payment Account from its own
funds the amount of any such shortfall and shall indemnify and hold harmless the
REMIC Trust, the Indenture Trustee, the Depositor and any successor master
servicer in respect of any such liability. Such indemnities shall survive the
termination or discharge of this Agreement. Notwithstanding the foregoing, this
Section 3.24 shall not limit the ability of the Master Servicer to seek recovery
of any such amounts from the related Mortgagor under the terms of the related
Mortgage Note, as permitted by law.

            SECTION 3.25 Advance Facility. (a) The Master Servicer is hereby
authorized to enter into a facility with any Person which provides that such
Person (an "Advancing Person") may fund P&I Advances and/or Servicing Advances
under this Agreement, although no such facility shall reduce or otherwise affect
the Master Servicer's obligation to fund such P&I Advances and/or Servicing
Advances. To the extent that an Advancing Person funds any P&I Advance or any
Servicing Advance and provides the Indenture Trustee with notice acknowledged by
the Master Servicer that such Advancing Person is entitled to reimbursement,
such Advancing Person shall be entitled to receive reimbursement pursuant to
this Agreement for such amount to the extent provided in Section 3.25(b). Such
notice from the Advancing Person must specify the amount of the reimbursement
and must specify which Section of this Agreement permits the applicable P&I
Advance or Servicing Advance to be reimbursed. The Indenture Trustee shall have
no duty or liability with respect to any calculation of any reimbursement to be
paid to an Advancing Person and shall be entitled to rely without independent
investigation on the Advancing Person's notice provided pursuant to this Section
3.25. An Advancing Person whose obligations hereunder are limited to the funding
of P&I Advances and/or Servicing Advances shall not be required to meet the
qualifications of a Sub-Servicer pursuant to Section 3.02 hereof.

            (b) If an Advancing Person is entitled to reimbursement for any
particular P&I Advance or Servicing Advance, then the Master Servicer shall not
be permitted to reimburse itself therefor under Section 3.11(a)(ii), Section
3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix), but instead the Master
Servicer shall include such amounts in the applicable remittance to the
Indenture Trustee made pursuant to Section 3.10(b) to the extent of amounts on
deposit in the Collection Account on the related Master Servicer Remittance
Date. The Indenture Trustee is hereby authorized to pay to an Advancing Person,
reimbursements for P&I Advances and Servicing Advances from the Payment Account
to the same extent the Master Servicer would have been permitted to reimburse
itself for such P&I Advances and/or Servicing Advances in

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accordance with Section 3.11(a)(ii), Section 3.11(a)(iii), Section 3.11(a)(vi)
or Section 3.11(a)(ix), as the case may be, had the Master Servicer made such
P&I Advance or Servicing Advance.

                                   ARTICLE IV

                             PAYMENTS TO NOTEHOLDERS

            SECTION 4.01 Payments. (a) On each Payment Date, the Indenture
Trustee shall withdraw from the Payment Account and pay to the Holder of the
Class P Notes, all Prepayment Charges collected during the prior Prepayment
Period.

            (b) On each Payment Date, the Indenture Trustee shall withdraw from
the Payment Account an amount equal to the Interest Amount and pay to the REMIC
Noteholders the following amounts, in the following order of priority:

            (i) to the Holders of the Class A Notes, an amount equal to the
      Senior Interest Payment Amount;

            (ii) to the extent of the Interest Amount remaining after payment of
      the Senior Interest Payment Amount, to the Holders of the Class M-1 Notes,
      an amount equal to the Interest Payment Amount allocable to the Class M-1
      Notes;

            (iii) to the extent of the Interest Amount remaining after payment
      of the Senior Interest Payment Amount and the Interest Payment Amount
      allocable to the Class M-1 Notes, to the Holders of the Class M-2 Notes,
      an amount equal to the Interest Payment Amount allocable to the Class M-2
      Notes;

            (iv) to the extent of the Interest Amount remaining after payment of
      the Senior Interest Payment Amount and the Interest Payment Amounts
      allocable to the Class M-1 Notes and the Class M-2 Notes, to the Holders
      of the Class B-1 Notes, an amount equal to the Interest Payment Amount for
      allocable Class B-1 Notes; and

            (v) the Interest Amount remaining after payment of the Senior
      Interest Payment Amount and the Interest Payment Amounts for the Class M-1
      Notes, the Class M-2 Notes, and the Class B-1 Notes, shall be treated as a
      component of the Net Monthly Excess Cashflow and applied as provided in
      Section 4.01(d).

            (c) On each Payment Date, the Indenture Trustee shall withdraw from
the Payment Account an amount equal to the Principal Payment Amount and pay to
the Noteholders the following amounts, in the following order of priority:

            (i) On each Payment Date (a) prior to the Stepdown Date or (b) on
      which a Trigger Event has occurred and is continuing, the Principal
      Payment Amount shall be paid in the following order of priority;

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

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

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

                  fourth, to the Holders of the Class B-1 Notes, until the Note
            Principal Balance of such Class has been reduced to zero.

            (ii)  On each Payment Date (a) on or after the Stepdown Date and (b)
      on which a Trigger Event has not occurred and is not continuing, the
      Principal Payment Amount shall be paid in the following order of priority:

                  first, the lesser of (x) the Principal Payment Amount and (y)
            the Class A Principal Payment Amount shall be paid to the Holders of
            the Class A Notes, until the Note Principal Balance of such Class
            has been reduced to zero;

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

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

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

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

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

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

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

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

            (v) to the Holders of the Class B-1 Notes, in an amount equal to the
      Interest Carry Forward Amount allocable to such Class of Notes;

            (vi) to the Holders of the Class A Notes, in an amount equal to the
      aggregate of any Prepayment Interest Shortfalls (to the extent not covered
      by payments pursuant to Section 3.23) and any Relief Act Interest
      Shortfall allocated to such Notes;

            (vii) to the Holders of the Class M-1 Notes, in an amount equal to
      the aggregate of any Prepayment Interest Shortfalls (to the extent not
      covered by payments pursuant to Section 3.23) and any Relief Act Interest
      Shortfall allocated to such Notes;

            (viii) to the Holders of the Class M-2 Notes, in an amount equal to
      the aggregate of any Prepayment Interest Shortfalls (to the extent not
      covered by payments pursuant to Section 3.23) and any Relief Act Interest
      Shortfall allocated to such Notes;

            (ix) to the Holders of the Class B-1 Notes, in an amount equal to
      the aggregate of any Prepayment Interest Shortfalls (to the extent not
      covered by payments pursuant to Section 3.23) and any Relief Act Interest
      Shortfall allocated to such Notes;

            (x) to reimburse the Indenture Trustee, the Owner Trustee and/or the
      Master Servicer for any expenses not previously reimbursed, including
      Servicing Advances and Nonrecoverable Advances;

            (xi) to the Supplemental Interest Account, the Class C Payment
      Amount, such transfer to be deemed a distribution on the Class C Notes.

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            (xii) any remaining amount, to the Holders of the Class R-1
      Certificates.

            (e) On each Payment Date, the Indenture Trustee shall apply the
Total Supplement Interest Payment Amount Available to the following amounts in
the following order of priority:

            (i) first, the Supplemental Interest Amount due with respect to the
      Class A Notes;

            (ii) second, the Supplemental Interest Amount due with respect to
      the Class M-1 Notes;

            (iii) third, the Supplemental Interest Amount due with respect to
      the Class M-2 Notes;

            (iv) fourth, the Supplemental Interest Amount due with respect to
      the Class B-1 Notes;

            (v) fifth, to the Holder of the Class S Note.

            (f) On each Payment Date, the Indenture Trustee shall cause the
following amounts, in the following order of priority, to be paid by the NIMS
Trust on account of the Class N Notes and NIMS Certificates, from the amount
than on deposit in the NIMS Payment Account.

            (i) to the Holders of the Class N Notes, the Interest Payment Amount
      for the Class N Notes;

            (ii) to the Holders of Class N Notes, in an amount equal to the
      remainder of the lesser of (x) the amount remaining on deposit in the NIMS
      Payment Amount Account after paying the amount described in clause (f)(i)
      above and (y) the amount necessary to reduce the Note Principal Balance of
      the Class N Notes to zero; and

            (iii) all remaining amounts, to the Holders of the NIMS
      Certificates.

            (g) All payments made with respect to each Class of Securities on
each Payment Date shall be allocated pro rata among the outstanding Notes in
such Class based on their respective Percentage Interests. Payments in respect
of each Class of Securities on each Payment Date will be made to the Holders of
the respective Class of record on the related Record Date (except as otherwise
provided in Section 4.01(e) or Section 8.01 respecting the final payment on such
Class), based on the aggregate Percentage Interest represented by their
respective Securities, and shall be made by wire transfer of immediately
available funds to the account of any such Holder at a bank or other entity
having appropriate facilities therefor, if such Holder shall have so notified
the Indenture Trustee in writing at least five Business Days prior to the Record
Date immediately prior to such Payment Date and is the registered owner of
Securities having an initial aggregate Note Principal Balance that is in excess
of the lesser of (i) $5,000,000

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or (ii) two-thirds of the initial Note Principal Balance of such Class of Notes,
or otherwise by check mailed by first class mail to the address of such Holder
appearing in the Register, except that payment to any Holder of a Certificate
will be made by wire transfer of such Holder holds Certificates of the related
Class evidences 25% or more in Percentage Interests with respect to such Class.
The final payment on each Security will be made in like manner, but only upon
presentment and surrender of such Security at the Corporate Trust Office or such
other location specified in the notice to Holders of such final Payment.

            Each payment with respect to a Book-Entry Note shall be paid to the
Depository, as Holder thereof, and the Depository shall be responsible for
crediting the amount of such payment to the accounts of its Depository
Participants in accordance with its normal procedures.

            Each Depository Participant shall be responsible for disbursing such
Payment to the Note Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Note Owners that it represents. None of the Indenture Trustee, the
Depositor or the Master Servicer shall have any responsibility therefor except
as otherwise provided by this Agreement or applicable law.

            (h) The rights of the Noteholders to receive payments in respect of
the Notes, and all interests of the Noteholders in such payments, shall be as
set forth in this Agreement. None of the Holders of any Class of Notes, the
Indenture Trustee or the Master Servicer shall in any way be responsible or
liable to the Holders of any other Class of Notes in respect of amounts properly
previously paid on the Notes.

            (i) Except as otherwise provided in Section 8.01, whenever the
Indenture Trustee expects that the final payment with respect to any Class of
Notes will be made on the next Payment Date, the Indenture Trustee shall, no
later than five (5) days after the related Determination Date, mail to each
Holder on such date of such Class of Notes a notice to the effect that:

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

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

            Any funds not paid to any Holder or Holders of Securities of such
Class on such Payment Date because of the failure of such Holder or Holders to
tender their Securities shall, on such date, be set aside and held in trust by
the Indenture Trustee and credited to the account of the appropriate
non-tendering Holder or Holders. If any Securities as to which notice has been
given pursuant to this Section 4.01(e) shall not

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have been surrendered for cancellation within six months after the time
specified in such notice, the Indenture Trustee shall mail a second notice to
the remaining non-tendering Holders to surrender their Securities for
cancellation in order to receive the final Payment with respect thereto. If
within one year after the second notice all such Securities shall not have been
surrendered for cancellation, the Indenture Trustee shall, directly or through
an agent, mail a final notice to remaining non-tendering Holders concerning
surrender of their Securities but shall continue to hold any remaining funds for
the benefit of non-tendering Holders. The costs and expenses of maintaining the
funds in trust and of contacting such Holders shall be paid out of the assets
remaining in such REMIC Trust. If within one year after the final notice any
such Securities shall not have been surrendered for cancellation, the Indenture
Trustee shall pay to the Depositor all such amounts, and all rights of
non-tendering Holders in or to such amounts shall thereupon cease. No interest
shall accrue or be payable to any Holder on any amount held in trust by the
Indenture Trustee as a result of such Holder's failure to surrender its
Securities for final payment thereof in accordance with this Section 4.01(e).

            (j) Notwithstanding anything to the contrary herein, in no event
shall the Note Principal Balance of a Class A Note or a Mezzanine Note be
reduced more than once in respect of any particular amount both (x) allocated to
such Note in respect of Realized Losses pursuant to Section 4.04 and (y)
distributed to the Holder of such Note in reduction of the Note Principal
Balance thereof pursuant to this Section 4.01 from Net Monthly Excess Cashflow.

            SECTION 4.02 Statements to Holders. (a) On each Payment Date,
the Indenture Trustee shall prepare and forward by mail to each Holder of the
Notes (other than the Class N Notes), a statement as to the payments made on
such Payment Date setting forth:

            (i) the amount of the payment made on such Payment Date to the
      Holders of the Notes of each Class allocable to principal, and the amount
      of payment made on such Payment Date to the Holders of the Class P Notes
      allocable to Prepayment Charges;

            (ii) the amount of the payment made on such Payment Date to the
      Holders of the Notes of each Class allocable to interest;

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

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

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

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            (vi) the number, aggregate principal balance, weighted average
      remaining term to maturity and weighted average Mortgage Rate of the
      Mortgage Loans as of the related Due Date;

            (vii) the number and aggregate unpaid principal balance of Mortgage
      Loans (a) delinquent 30-59 days, (b) delinquent 60-89 days, (c) delinquent
      90 or more days in each case, as of the last day of the preceding calendar
      month, (d) as to which foreclosure proceedings have been commenced and (e)
      with respect to which the related Mortgagor has filed for protection under
      applicable bankruptcy laws, with respect to whom bankruptcy proceedings
      are pending or with respect to whom bankruptcy protection is in force;

            (viii)with respect to any Mortgage Loan that became an REO Property
      during the preceding calendar month, the loan number of such Mortgage
      Loan, the unpaid principal balance and the Stated Principal Balance of
      such Mortgage Loan as of the date it became an REO Property;

            (ix) the book value and the Stated Principal Balance of any REO
      Property as of the close of business on the last Business Day of the
      calendar month preceding the Payment Date;

            (x) the aggregate amount of Principal Prepayments made during the
      related Prepayment Period;

            (xi) the aggregate amount of Realized Losses incurred during the
      related Prepayment Period (or, in the case of Bankruptcy Losses allocable
      to interest, during the related Due Period), separately identifying
      whether such Realized Losses constituted Bankruptcy Losses and the
      aggregate amount of Realized Losses incurred since the Closing Date;

            (xii) the aggregate amount of Extraordinary REMIC Trust Expenses
      withdrawn from the Collection Account or the Payment Account for such
      Payment Date;

            (xiii)the aggregate Note Principal Balance of the each Class of
      Notes, after giving effect to the Payments, and allocations of Realized
      Losses, made on such Payment Date, separately identifying any reduction
      thereof due to allocations of Realized Losses;

            (xiv) the Note Factor for each such Class of Notes applicable to
      such Payment Date;

            (xv) the Interest Payment Amount in respect of each Class of Notes
      separately identifying any reduction thereof due to allocations of
      Realized Losses, Prepayment Interest Shortfalls and Relief Act Interest
      Shortfalls;

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            (xvi) the aggregate amount of any Prepayment Interest Shortfall for
      such Payment Date, to the extent not covered by payments by the Master
      Servicer pursuant to Section 3.23;

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

            (xviii) the Overcollateralized Amounts, the Required
      Overcollateralized Amount and the Credit Enhancement Percentage Amount for
      such Payment Date;

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

            (xx) the Overcollateralization Reduction Amount, if any, for such
      Payment Date;

            (xxi) with respect to any Mortgage Loan as to which foreclosure
      proceedings have been concluded, the loan number and unpaid principal
      balance of such Mortgage Loan as of the date of such conclusion of
      foreclosure proceedings;

            (xxii)with respect to Mortgage Loans as to which a Final Liquidation
      has occurred, the number of Mortgage Loans, the unpaid principal balance
      of such Mortgage Loans as of the date of such Final Liquidation and the
      amount of proceeds (including Liquidation Proceeds and Insurance Proceeds)
      collected in respect of such Mortgage Loans;

            (xxiii) the respective Interest Rates applicable to the Class A
      Notes and the Mezzanine Notes, for such Payment Date and the Interest Rate
      applicable to the Class A Notes and the Mezzanine Notes, for the
      immediately succeeding Payment Date;

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

            (xxv) the Aggregate Loss Severity Percentage

            The Indenture Trustee will make such statement (and, at its option,
any additional files containing the same information in an alternative format)
available each month to the Holders, the Master Servicer and Rating Agencies via
the Trustee's internet website and its fax-on-demand service.

            In the case of information furnished pursuant to subclauses (i)
through (iii) above, the amounts shall be expressed as a dollar amount per
single Security of the relevant Class.

            Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall furnish to each Person who at any time during
the calendar year

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was a Holder of a Security a statement containing the information set forth in
subclauses (i) through (iii) above, aggregated for such calendar year or
applicable portion thereof during which such person was a Noteholder.

            Such obligation of the Indenture Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Indenture Trustee pursuant to any requirements of the Code as
from time to time are in force.

            On each Payment Date the Indenture Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") CUSIP level factors for each class of
Notes as of such Payment Date, using a format and media mutually acceptable to
the Indenture Trustee and Bloomberg.

            (b) On each Payment Date, the Indenture Trustee shall prepare and
forward by mail to each Holder of the Class N Notes, a statement as to the
payments made on such Payment Date setting forth:

            (i) the amount of the payment made on such Payment Date to the
      Holders of the Class N Notes allocable to principal;

            (ii) the amount of the payment made on such Payment Date to the
      Holders of the Class N Notes allocable to interest;

            (iii) the aggregate payments received in respect of the Class S
      Notes and the Class P Notes.

            In the case of information furnished pursuant to subclauses (i) and
(ii) above, the amounts shall be expressed as a dollar amount per single Class N
Note.

            Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Class N Note a statement containing the
information set forth in subclauses (i) and (ii) above, aggregated for such
calendar year or applicable portion thereof during which such person was a
Noteholder.

            Such obligation of the Indenture Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Indenture Trustee pursuant to any requirements of the Code as
from time to time are in force.

            (c) On each Payment Date, the Indenture Trustee shall forward to the
Depositor, each Holder of a Certificate and the Master Servicer, a copy of the
reports forwarded to the Noteholders on such Payment Date and a statement
setting forth the amounts, if any, actually distributed with respect to the
Certificate, on such Payment Date.

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            Within a reasonable period of time after the end of each calendar
year, the Indenture Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Certificate a statement setting forth the
amount, if any, actually distributed with respect to the Certificates of the
related Class, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder. Such
obligation of the Indenture Trustee shall be deemed to have been satisfied to
the extent that substantially comparable information shall be prepared by the
Indenture Trustee and furnished to such Holders pursuant to the rules and
regulations of the Code as are in force from time to time.

            The Indenture Trustee shall, upon request, furnish to each Holder of
Securities, during the term of this Agreement, such periodic, special, or other
reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Holder, or otherwise with respect to the purposes
of this Agreement, all such reports or information to be provided at the expense
of the Holder in accordance with such reasonable and explicit instructions and
directions as the Holder may provide. For purposes of this Section 4.02, the
Indenture Trustee's duties are limited to the extent that the Indenture Trustee
receives timely reports as required from the Master Servicer.

            SECTION 4.03 Remittance Reports; P&I Advances. (a) On the Master
Servicer Remittance Date, the Master Servicer shall deliver to the Indenture
Trustee by telecopy (or by such other means as the Master Servicer and the
Indenture Trustee may agree from time to time) a Remittance Report with respect
to the related Payment Date. Such Remittance Report will include (i) the amount
of P&I Advances to be made by the Master Servicer in respect of the related
Payment Date, the aggregate amount of P&I Advances outstanding after giving
effect to such P&I Advances, and the aggregate amount of Nonrecoverable P&I
Advances in respect of such Payment Date and (ii) such other information with
respect to the Mortgage Loans as the Indenture Trustee may reasonably require to
perform the calculations necessary to make the payments contemplated by Section
4.01 and to prepare the statements to Holders contemplated by Section 4.02. The
Indenture Trustee shall not be responsible to recompute, recalculate or verify
any information provided to it by the Master Servicer.

            (b) The amount of P&I Advances to be made by the Master Servicer for
any Payment Date shall equal, subject to Section 4.03(d), the sum of (i) the
aggregate amount of Monthly Payments (with each interest portion thereof net of
the related Servicing Fee), due on the related Due Date in respect of the
Mortgage Loans (other than with respect to any Balloon Loan with a delinquent
Balloon Payment as described in clause (iii) below), which Monthly Payments were
delinquent as of the close of business on the related Determination Date, plus
(ii) with respect to each REO Property (other than with respect to any REO
Property relating to a Balloon Loan with a delinquent Balloon Payment as
described in clause (iv) below), 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 Monthly 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

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Payment Account pursuant to Section 3.22 for payment on such Payment Date, plus
(iii) with respect to each Balloon Loan with a delinquent Balloon Payment, an
amount equal to the assumed monthly principal and interest payment (with each
interest portion thereof net of the related Servicing Fee) that would have been
due on the related Due Date based on the original principal amortization
schedule for such Balloon Loan assuming such Mortgage Loan was not a Balloon
Loan, plus (iv) with respect to each REO Property relating to a Balloon Loan
with a delinquent Balloon Payment, which REO Property was acquired during or
prior to the related Prepayment Period and as to which REO Property an REO
Disposition did not occur during the related Prepayment Period, an amount equal
to the excess, if any, of the assumed monthly principal and interest payment
(with each interest portion thereof net of the related Servicing Fee) that would
have been due on the related Due Date based on the original principal
amortization schedule for the related Balloon Loan assuming such Mortgage Loan
was not a Balloon Loan, over the net income from such REO Property transferred
to the Payment Account pursuant to Section 3.22 for payment on such Payment
Date.

            On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Indenture Trustee for deposit in the Payment Account an amount equal to
the aggregate amount of P&I Advances, if any, to be made in respect of the
Mortgage Loans and REO Properties for the related Payment Date either (i) from
its own funds or (ii) from the Collection Account, to the extent of funds held
therein for future payment (in which case, it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future payment have been, as permitted by this Section 4.03, used by the Master
Servicer in discharge of any such P&I Advance) or (iii) in the form of any
combination of (i) and (ii) aggregating the total amount of P&I Advances to be
made by the Master Servicer with respect to the Mortgage Loans and REO
Properties. Any amounts held for future payment and so used shall be
appropriately reflected in the Master Servicer's records and replaced by the
Master Servicer by deposit in the Collection Account on or before any future
Master Servicer Remittance Date to the extent that the Available Payment Amount
for the related Payment Date (determined without regard to P&I Advances to be
made on the Master Servicer Remittance Date) shall be less than the total amount
that would be distributed to the Classes of Noteholders pursuant to Section 3.01
on such Payment Date if such amounts held for future payment had not been so
used to make P&I Advances. The Indenture Trustee will provide notice to the
Master Servicer by telecopy by the close of business on any Master Servicer
Remittance Date in the event that the amount remitted by the Master Servicer to
the Indenture Trustee on such date is less than the P&I Advances required to be
made by the Master Servicer for the related Payment Date.

            (c) The obligation of the Master Servicer to make such P&I Advances
is mandatory, notwithstanding any other provision of this Agreement but subject
to (d) below, and, with respect to any Mortgage Loan or REO Property, shall
continue until a Final Recovery Determination in connection therewith or the
removal thereof from any REMIC created hereby pursuant to any applicable
provision of this Agreement, except as otherwise provided in this Section.

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

            SECTION 4.04 Allocation of Realized Losses. (a) Prior to each
Determination Date, the Master Servicer shall determine as to each Mortgage Loan
and REO Property: (i) the total amount of Realized Losses, if any, incurred in
connection with any Final Recovery Determinations made during the related
Prepayment Period; (ii) whether and the extent to which such Realized Losses
constituted Bankruptcy Losses and (iii) the respective portions of such Realized
Losses allocable to interest and allocable to principal. Prior to each
Determination Date, the Master Servicer shall also determine as to each Mortgage
Loan: (A) the total amount of Realized Losses, if any, incurred in connection
with any Deficient Valuations made during the related Prepayment Period and (B)
the total amount of Realized Losses, if any, incurred in connection with Debt
Service Reductions in respect of Monthly Payments due during the related Due
Period. The information described in the two preceding sentences that is to be
supplied by the Master Servicer shall be evidenced by an Officers' Certificate
delivered to the Indenture Trustee by the Master Servicer prior to the
Determination Date immediately following the end of (x) in the case of
Bankruptcy Losses allocable to interest, the Due Period during which any such
Realized Loss was incurred, and (y) in the case of all other Realized Losses,
the Prepayment Period during which any such Realized Loss was incurred.

            (b) All Realized Losses on the Mortgage Loans allocated shall be
allocated by the Indenture Trustee on each Payment Date as follows: first, to
Net Monthly Excess Cashflow; second, to amounts otherwise payable to the Class C
Notes; third, to the Class B-1 Notes, until the Note Principal Balance thereof
has been reduced to zero; fourth, to the Class M-2 Notes, until the Note
Principal Balance thereof has been reduced to zero; and fifth, to the Class M-1
Notes, until the Note Principal Balance thereof has been reduced to zero. All
Realized Losses to be allocated to the Note Principal Balances of all Classes on
any Payment Date shall be so allocated after the actual payments to be made on
such date as provided above. All references above to the Note Principal Balance
of any Class of Notes shall be to the Note Principal Balance of such Class
immediately prior to the relevant Payment Date, before reduction thereof by any
Realized Losses, in each case to be allocated to such Class of Notes, on such
Payment Date.

            Any allocation of Realized Losses to a Mezzanine Note on any Payment
Date shall be made by reducing the Note Principal Balance thereof by the amount
so allocated, or in the case of a Class C Note, by reducing the amount otherwise
payable in respect thereof pursuant to Section 4.01(d)(x). No allocations of any
Realized Losses shall be made to the Note Principal Balances of the Class A
Notes or the Class P Notes.

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            As used herein, an allocation of a Realized Loss on a "pro rata
basis" among two or more specified Classes of Notes means an allocation on a pro
rata basis, among the various Classes so specified, to each such Class of Notes
on the basis of their then outstanding Note Principal Balances prior to giving
effect to payments to be made on such Payment Date. All Realized Losses and all
other losses allocated to a Class of Notes hereunder will be allocated among the
Notes of such Class in proportion to the Percentage Interests evidenced thereby.

            SECTION 4.05 Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the Indenture Trustee
shall comply with all federal withholding requirements respecting payments to
Noteholders of interest or original issue discount that the Indenture Trustee
reasonably believes are applicable under the Code. The consent of Noteholders
shall not be required for such withholding. In the event the Indenture Trustee
does withhold any amount from interest or original issue discount payments or
advances thereof to any Noteholder pursuant to federal withholding requirements,
the Indenture Trustee shall indicate the amount withheld to such Noteholders.

            SECTION 4.06 Commission Reporting. Within 15 days after each Payment
Date, the Indenture Trustee shall, in accordance with industry standards, file
with the Commission via the Electronic Data Gathering and Retrieval System, a
Form 8-K with a copy of the statement to Noteholders for such Payment Date as an
exhibit thereto. Prior to January 30, 2001, the Indenture Trustee shall in
accordance with industry standards file a Form 1 Suspension Notification with
respect to the REMIC Trust, if applicable. Prior to March 30, 2001, the
Indenture Trustee shall file a Form 10-K, in substance conforming to industry
standards, with respect to the REMIC Trust. The Depositor hereby grants to the
Indenture Trustee a limited power of attorney to execute and file each such
document on behalf of the Depositor. Such power of attorney shall continue until
the earlier of (i) receipt by the Indenture Trustee from the Depositor of
written termination of such power of attorney and (ii) the termination of the
REMIC Trust. The Depositor agrees to promptly furnish to the Indenture Trustee,
from time to time upon request, such further information, reports and financial
statements within its control related to this Agreement and the Mortgage Loans
as the Indenture Trustee reasonably deems appropriate to prepare and file all
necessary reports with the Commission. The Indenture Trustee shall have no
responsibility to file any items other than those specified in this Section.

                                   ARTICLE V

                      THE DEPOSITOR AND THE MASTER SERVICER

            SECTION 5.01 Liability of the Depositor and the Master ServicerThe
Depositor and the Master Servicer each shall be liable in accordance herewith
only to the extent of the obligations specifically imposed by this Agreement and
undertaken hereunder by the Depositor and the Master Servicer herein.

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            SECTION 5.02 Merger or Consolidation of the Depositor or the Master
Servicer. Subject to the following paragraph, the Depositor will keep in full
effect its existence, rights and franchises as a corporation under the laws of
the jurisdiction of its incorporation. Subject to the following paragraph, the
Master Servicer will keep in full effect its existence, rights and franchises as
a corporation under the laws of the jurisdiction of its incorporation and its
qualification as an approved conventional seller/servicer for Fannie Mae or
Freddie Mac in good standing. The Depositor and the Master Servicer each will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement, the Notes or any of
the Mortgage Loans and to perform its respective duties under this Agreement.

            The Depositor or the Master Servicer may be merged or consolidated
with or into any Person, or transfer all or substantially all of its assets to
any Person, in which case any Person resulting from any merger or consolidation
to which the Depositor or the Master Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Master Servicer, shall be the
successor of the Depositor or the Master Servicer, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
Fannie Mae or Freddie Mac; and provided, further, that the Rating Agencies'
ratings of the Class A Notes and the Mezzanine Notes in effect immediately prior
to such merger or consolidation will not be qualified, reduced or withdrawn as a
result thereof (as evidenced by a letter to such effect from the Rating
Agencies).

            SECTION 5.03 Limitation on Liability of the Depositor, the Master
Servicer and Others. None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to either Trust or the Holders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Master Servicer or any such person against
any breach of warranties, representations or covenants made herein, or against
any specific liability imposed on the Master Servicer pursuant hereto, or
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of duties or by reason
of reckless disregard of obligations and duties hereunder. The Depositor, the
Master Servicer and any director, officer, employee or agent of the Depositor or
the Master Servicer may rely in good faith on any document of any kind which,
prima facie, is properly executed and submitted by any Person respecting any
matters arising hereunder. The Depositor, the Master Servicer and any director,
officer, employee or agent of the Depositor or the Master Servicer shall be
indemnified and held harmless by the REMIC Trust against any loss, liability or
expense incurred in connection with any legal action relating to this Agreement
or the Securities, other than any loss, liability or expense relating to any
specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) or any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the

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performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Neither the Depositor nor the Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
unless such action is related to its respective duties under this Agreement and,
in its opinion, does not involve it in any expense or liability; provided,
however, that each of the Depositor and the Master Servicer may in its
discretion undertake any such action which it may deem necessary or desirable
with respect to this Agreement and the rights and duties of the parties hereto
and the interests of the Holders hereunder. In such event, unless the Depositor
or the Master Servicer acts without the consent of Holders of Notes issued by
the REMIC Trust entitled to at least 51% of the Voting Rights (which consent
shall not be necessary in the case of litigation or other legal action by either
to enforce their respective rights or defend themselves hereunder), the legal
expenses and costs of such action and any liability resulting therefrom (except
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder) shall be expenses, costs
and liabilities of the REMIC Trust, and the Depositor and the Master Servicer
shall be entitled to be reimbursed therefor from the Collection Account as and
to the extent provided in Section 3.11, any such right of reimbursement being
prior to the rights of the Noteholders to receive any amount in the Collection
Account.

            SECTION 5.04 Limitation on Resignation of the Master Servicer. The
Master Servicer shall not resign from the obligations and duties hereby imposed
on it except (i) upon determination that its duties hereunder are no longer
permissible under applicable law or (ii) with the written consent of the
Indenture Trustee and written confirmation from each Rating Agency (which
confirmation shall be furnished to the Depositor and the Indenture Trustee) that
such resignation will not cause such Rating Agency to reduce the then current
rating of the Class A Notes or the Mezzanine Notes. Any such determination
pursuant to clause (i) of the preceding sentence permitting the resignation of
the Master Servicer shall be evidenced by an Opinion of Counsel to such effect
obtained at the expense of the Master Servicer and delivered to the Indenture
Trustee. No resignation of the Master Servicer shall become effective until the
Indenture Trustee or a successor servicer shall have assumed the Master
Servicer's responsibilities, duties, liabilities (other than those liabilities
arising prior to the appointment of such successor) and obligations under this
Agreement.

            Except as expressly provided herein, the Master Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, nor delegate to or subcontract with, nor authorize or appoint any
other Person to perform any of the duties, covenants or obligations to be
performed by the Master Servicer hereunder. The foregoing prohibition on
assignment shall not prohibit the Master Servicer from designating a
Sub-servicer as payee of any indemnification amount payable to the Master
Servicer hereunder; provided, however, that as provided in Section 3.06 hereof,
no Sub-Servicer shall be a third-party beneficiary hereunder and the parties
hereto shall not be required to recognize any Subservicer as an indemnitee under
this Agreement. If, pursuant to any provision hereof, the duties of the Master
Servicer are transferred to a successor master servicer, the entire amount of
the Servicing Fee and other compensation

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payable to the Master Servicer pursuant hereto shall thereafter be payable to
such successor master servicer.

            SECTION 5.05 Rights of the Depositor in Respect of the Master
Servicer. The Master Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Depositor and the
Indenture Trustee, upon reasonable notice, during normal business hours, access
to all records maintained by the Master Servicer (and any such Sub-Servicer) in
respect of the Master Servicer's rights and obligations hereunder and access to
officers of the Master Servicer (and those of any such Sub-Servicer) responsible
for such obligations. Upon request, the Master Servicer shall furnish to the
Depositor and the Indenture Trustee its (and any such Sub-Servicer's) most
recent financial statements and such other information relating to the Master
Servicer's capacity to perform its obligations under this Agreement that it
possesses. To the extent such information is not otherwise available to the
public, the Depositor and the Indenture Trustee shall not disseminate any
information obtained pursuant to the preceding two sentences without the Master
Servicer's (or any such Sub-Servicer's) written consent, except as required
pursuant to this Agreement or to the extent that it is necessary to do so (i) in
working with legal counsel, auditors, taxing authorities or other governmental
agencies, rating agencies or reinsurers or (ii) pursuant to any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor, the Indenture
Trustee or the REMIC Trust, and in either case, the Depositor or the Indenture
Trustee, as the case may be, shall use its best efforts to assure the
confidentiality of any such disseminated non-public information. The Depositor
may, but is not obligated to, enforce the obligations of the Master Servicer
under this Agreement and may, but is not obligated to, perform, or cause a
designee to perform, any defaulted obligation of the Master Servicer under this
Agreement or exercise the rights of the Master Servicer under this Agreement;
provided, that the Master Servicer shall not be relieved of any of its
obligations under this Agreement by virtue of such performance by the Depositor
or its designee. The Depositor shall not have any responsibility or liability
for any action or failure to act by the Master Servicer and is not obligated to
supervise the performance of the Master Servicer under this Agreement or
otherwise.

                                   ARTICLE VI

                                     DEFAULT

            SECTION 6.01 Master Servicer Events of Default. "Master Servicer
Event of Default", wherever used herein, means any one of the following events:

            (i) any failure by the Master Servicer to remit to the Indenture
      Trustee for distribution to the Noteholders any payment (other than a P&I
      Advance required to be made from its own funds on any Master Servicer
      Remittance Date pursuant to Section 4.03) required to be made under the
      terms of the Notes and this Agreement which continues unremedied for a
      period of one Business Day after the date upon which written notice of
      such failure, requiring the same to be

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      remedied, shall have been given to the Master Servicer by the Depositor or
      the Indenture Trustee (in which case notice shall be provided by
      telecopy), or to the Master Servicer, the Depositor and the Indenture
      Trustee by the Holders of Notes entitled to at least 25% of the Voting
      Rights; or

            (ii) any failure on the part of the Master Servicer duly to observe
      or perform in any material respect any of the covenants or agreements on
      the part of the Master Servicer contained in this Agreement (or, if the
      Master Servicer is the Originator, the failure of the Originator to
      repurchase a Mortgage Loan as to which a breach has been established that
      requires a repurchase pursuant to the terms of Section 2.04) which
      continues unremedied for a period of 45 days after the earlier of (i) the
      date on which written notice of such failure, requiring the same to be
      remedied, shall have been given to the Master Servicer by the Depositor or
      the Indenture Trustee, or to the Master Servicer, the Depositor and the
      Indenture Trustee by the Holders of Notes entitled to at least 25% of the
      Voting Rights of the REMIC Trust and (ii) actual knowledge of such failure
      by a Servicing Officer of the Master Servicer; or

            (iii) a decree or order of a court or agency or supervisory
      authority having jurisdiction in the premises in an involuntary case under
      any present or future federal or state bankruptcy, insolvency or similar
      law or the appointment of a conservator or receiver or liquidator in any
      insolvency, readjustment of debt, marshalling of assets and liabilities or
      similar proceeding, or for the winding-up or liquidation of its affairs,
      shall have been entered against the Master Servicer and if such proceeding
      is being contested by the Master Servicer in good faith, such decree or
      order shall have remained in force undischarged or unstayed for a period
      of 60 days or results in the entry of an order for relief or any such
      adjudication or appointment; or

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

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

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

            (vii) any failure of the Master Servicer to make any P&I Advance on
      any Master Servicer Remittance Date required to be made from its own funds
      pursuant to Section 4.03 which continues unremedied until 3:00 p.m. New
      York time on the Business Day immediately following the Master Servicer
      Remittance Date.

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            If a Master Servicer Event of Default described in clauses (i)
through (vi) of this Section shall occur, then, and in each and every such case,
so long as such Master Servicer Event of Default shall not have been remedied,
the Depositor or the Indenture Trustee may, and at the written direction of the
Holders of Notes entitled to at least 51% of Voting Rights of the REMIC Trust,
the Indenture Trustee shall, by notice in writing to the Master Servicer (and to
the Depositor if given by the Indenture Trustee or to the Indenture Trustee if
given by the Depositor), terminate all of the rights and obligations of the
Master Servicer in its capacity as Master Servicer under this Agreement, to the
extent permitted by law, and in and to the Mortgage Loans and the proceeds
thereof. If a Master Servicer Event of Default described in clause (vii) hereof
shall occur, the Indenture Trustee shall, by notice in writing to the Master
Servicer and the Depositor, terminate all of the rights and obligations of the
Master Servicer in its capacity as Master Servicer under this Agreement and in
and to the Mortgage Loans and the proceeds thereof. On or after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer under this Agreement, whether with respect to the Notes (other
than as a Holder of any Note) or the Mortgage Loans or otherwise, shall pass to
and be vested in the Indenture Trustee pursuant to and under this Section and,
without limitation, the Indenture Trustee is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver on behalf of and at the
expense of the Master Servicer, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Master Servicer agrees, at its sole cost and expense, promptly
(and in any event no later than ten Business Days subsequent to such notice) to
provide the Indenture Trustee with all documents and records requested by it to
enable it to assume the Master Servicer's functions under this Agreement, and to
cooperate with the Indenture Trustee in effecting the termination of the Master
Servicer's responsibilities and rights under this Agreement, including, without
limitation, the transfer within one Business Day to the Indenture Trustee for
administration by it of all cash amounts which at the time shall be or should
have been credited by the Master Servicer to the Collection Account held by or
on behalf of the Master Servicer, the Payment Account or any REO Account or
Servicing Account held by or on behalf of the Master Servicer or thereafter be
received with respect to the Mortgage Loans or any REO Property (provided,
however, that the Master Servicer shall continue to be entitled to receive all
amounts accrued or owing to it under this Agreement on or prior to the date of
such termination, whether in respect of P&I Advances or otherwise, and shall
continue to be entitled to the benefits of Section 4.03, notwithstanding any
such termination, with respect to events occurring prior to such termination).
For purposes of this Section 6.01, the Indenture Trustee shall not be deemed to
have knowledge of a Master Servicer Event of Default unless a Responsible
Officer of the Indenture Trustee assigned to and working in the Indenture
Trustee's Corporate Trust Office has actual knowledge thereof or unless written
notice of any event which is in fact such a Master Servicer Event of Default is
received by the Indenture Trustee and such notice references the Notes, the
REMIC Trust, the NIMS Trust or this Agreement.

            The Indenture Trustee shall be entitled to be reimbursed by the
Master Servicer (or by the REMIC Trust if the Master Servicer is unable to
fulfill its obligations

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hereunder) for all costs associated with the transfer of servicing from the
predecessor master servicer, including without limitation, any costs or expenses
associated with the complete transfer of all servicing data and the completion,
correction or manipulation of such servicing data as may be required by the
Indenture Trustee to correct any errors or insufficiencies in the servicing data
or otherwise to enable the Indenture Trustee to service the Mortgage Loans
properly and effectively.

            SECTION 6.02 Indenture Trustee to Act; Appointment of Successor.
(a) On and after the time the Master Servicer receives a notice of termination,
the Indenture Trustee shall be the successor in all respects to the Master
Servicer in its capacity as Master Servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto and arising thereafter
placed on the Master Servicer (except for any representations or warranties of
the Master Servicer under this Agreement, the responsibilities, duties and
liabilities contained in Section 2.04(c) and its obligation to deposit amounts
in respect of losses pursuant to Section 3.12) by the terms and provisions
hereof including, without limitation, the Master Servicer's obligations to make
P&I Advances pursuant to Section 4.03; provided, however, that if the Indenture
Trustee is prohibited by law or regulation from obligating itself to make
advances regarding delinquent mortgage loans, then the Indenture Trustee shall
not be obligated to make P&I Advances pursuant to Section 4.03; and provided
further, that any failure to perform such duties or responsibilities caused by
the Master Servicer's failure to provide information required by Section 6.01
shall not be considered a default by the Indenture Trustee as successor to the
Master Servicer hereunder; provided, however, it is understood and acknowledged
by the parties that there will be a period of transition (not to exceed 90 days)
before the servicing transfer is fully effected. As compensation therefor, the
Indenture Trustee shall be entitled to the Servicing Fee and all funds relating
to the Mortgage Loans to which the Master Servicer would have been entitled if
it had continued to act hereunder (other than amounts which were due or would
become due to the Master Servicer prior to its termination or resignation).
Notwithstanding the above and subject to the next paragraph, the Indenture
Trustee may, if it shall be unwilling to so act, or shall, if it is unable to so
act or if it is prohibited by law from making advances regarding delinquent
mortgage loans, or if the Holders of Notes entitled to at least 51% of the
Voting Rights of the REMIC Trust so request in writing to the Indenture Trustee,
promptly appoint or petition a court of competent jurisdiction to appoint, an
established mortgage loan servicing institution acceptable to each Rating Agency
and having a net worth of not less than $15,000,000 as the successor to the
Master Servicer under this Agreement in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer under this
Agreement. No appointment of a successor to the Master Servicer under this
Agreement shall be effective until the assumption by the successor of all of the
Master Servicer's responsibilities, duties and liabilities hereunder. In
connection with such appointment and assumption described herein, the Indenture
Trustee may make such arrangements for the compensation of such successor out of
payments on Mortgage Loans as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Master Servicer as such hereunder. The Depositor, the Indenture Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such

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succession. Pending appointment of a successor to the Master Servicer under this
Agreement, the Indenture Trustee shall act in such capacity as hereinabove
provided.

            Upon removal or resignation of the Master Servicer, the Indenture
Trustee, with the cooperation of the Depositor, (x) shall solicit bids for a
successor Master Servicer as described below and (y) pending the appointment of
a successor Master Servicer as a result of soliciting such bids, shall serve as
Master Servicer of the Mortgage Loans serviced by such predecessor Master
Servicer. The Indenture Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth above (including the Indenture Trustee or
any affiliate thereof). Such public announcement shall specify that the
successor Master Servicer shall be entitled to the servicing compensation agreed
upon between the Indenture Trustee, the successor Master Servicer and the
Depositor; provided, however, that no such fee shall exceed the Servicing Fee.
Within thirty days after any such public announcement, the Indenture Trustee,
with the cooperation of the Depositor, shall negotiate in good faith and effect
the sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest satisfactory bid as to
the price they will pay to obtain such servicing. The Indenture Trustee upon
receipt of the purchase price shall pay such purchase price to the Master
Servicer being so removed, after deducting from any sum received by the
Indenture Trustee from the successor to the Master Servicer in respect of such
sale, transfer and assignment all costs and expenses of any public announcement
and of any sale, transfer and assignment of the servicing rights and
responsibilities reasonably incurred hereunder. After such deductions, the
remainder of such sum shall be paid by the Indenture Trustee to the Master
Servicer at the time of such sale.

            (b) If the Master Servicer fails to remit to the Indenture Trustee
for payment to the Holders any payment required to be made under the terms of
this Agreement (for purposes of this Section 6.02(b), a "Remittance") because
the Master Servicer is the subject of a proceeding under the federal Bankruptcy
Code and the making of such Remittance is prohibited by Section 362 of the
federal Bankruptcy Code, the Indenture Trustee shall upon notice of such
prohibition, regardless of whether it has received a notice of termination under
Section 6.01, advance the amount of such Remittance by depositing such amount in
the Payment Account on the related Payment Date. The Indenture Trustee shall be
obligated to make such advance only if (i) such advance, in the good faith
judgment of the Indenture Trustee, can reasonably be expected to be ultimately
recoverable from Stayed Funds and (ii) the Indenture Trustee is not prohibited
by law from making such advance or obligating itself to do so. Upon remittance
of the Stayed Funds to the Indenture Trustee or the deposit thereof in the
Payment Account by the Master Servicer, a Indenture Trustee in bankruptcy or a
federal bankruptcy court, the Indenture Trustee may recover the amount so
advanced, without interest, by withdrawing such amount from the Payment Account;
provided, however, nothing in this Agreement shall be deemed to affect the
Indenture Trustee's rights to recover from the Master Servicer's own funds
interest on the amount of any such advance. If the Indenture Trustee at any time
makes an advance under this Subsection which it later determines in its good
faith judgment will not be ultimately recoverable from the Stayed Funds with
respect to which such advance was made, the Indenture

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Trustee shall be entitled to reimburse itself for such advance, without
interest, by withdrawing from the Payment Account, out of amounts on deposit
therein, an amount equal to the portion of such advance attributable to the
Stayed Funds.

            SECTION 6.03 Notification to Holders. (a) Upon any termination
of the Master Servicer pursuant to Section 6.01 above or any appointment of a
successor to the Master Servicer pursuant to Section 6.02 above, the Indenture
Trustee shall give prompt written notice thereof to Holders at their respective
addresses appearing in the Note register maintained by the Indenture Trustee.

            (b) Not later than the later of 60 days after the occurrence of any
event, which constitutes or which, with notice or lapse of time or both, would
constitute a Master Servicer Event of Default or five days after an Authorized
Officer of the Indenture Trustee becomes aware of the occurrence of such an
event, the Indenture Trustee shall transmit by mail to all Holders notice of
each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.

            SECTION 6.04 Waiver of Master Servicer Events of Default. The
Holders representing at least 66% of the Voting Rights evidenced by all Classes
of Notes issued by the REMIC Trust affected by any default or Master Servicer
Event of Default hereunder may waive such default or Master Servicer Event of
Default; provided, however, that a default or Master Servicer Event of Default
under clauses (i) or (vii) of Section 6.01 may be waived only by all of the
Holders of the Notes issued by the REMIC Trust. Upon any such waiver of a
default or Master Servicer Event of Default, such default or Master Servicer
Event of Default shall cease to exist and shall be deemed to have been remedied
for every purpose hereunder. No such waiver shall extend to any subsequent or
other default or Master Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.

                                  ARTICLE VII

                        CONCERNING THE INDENTURE TRUSTEE

            SECTION 7.01 Duties of Indenture Trustee. The Indenture Trustee,
prior to the occurrence of a Master Servicer Event of Default and after the
curing of all Master Servicer Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. During a Master Servicer Event of Default, the
Indenture Trustee shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs. Any permissive right of the Indenture Trustee
enumerated in this Agreement shall not be construed as a duty.

            The Indenture Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Indenture Trustee which are specifically required
to be furnished pursuant to any provision of this Agreement, shall examine them
to determine whether they conform to

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the requirements of this Agreement. If any such instrument is found not to
conform to the requirements of this Agreement in a material manner, the
Indenture Trustee shall take such action as it deems appropriate to have the
instrument corrected, and if the instrument is not corrected to the Indenture
Trustee's satisfaction, the Indenture Trustee will provide notice thereof to the
Noteholders.

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

            (i) Prior to the occurrence of a Master Servicer Event of Default,
      and after the curing of all such Master Servicer Events of Default which
      may have occurred, the duties and obligations of the Indenture Trustee
      shall be determined solely by the express provisions of this Agreement,
      the Indenture Trustee shall not be liable except for the performance of
      such duties and obligations as are specifically set forth in this
      Agreement, no implied covenants or obligations shall be read into this
      Agreement against the Indenture Trustee and, in the absence of bad faith
      on the part of the Indenture Trustee, the Indenture 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 Indenture Trustee that conform to the requirements of
      this Agreement;

            (ii) The Indenture Trustee shall not be personally liable for an
      error of judgment made in good faith by a Responsible Officer or
      Responsible Officers of the Indenture Trustee, unless it shall be proved
      that the Indenture Trustee was negligent in ascertaining the pertinent
      facts; and

            (iii) The Indenture Trustee shall not be personally liable with
      respect to any action taken, suffered or omitted to be taken by it in good
      faith in accordance with the direction of the Holders of Notes entitled to
      at least 25% of the Voting Rights relating to the time, method and place
      of conducting any proceeding for any remedy available to the Indenture
      Trustee, or exercising any trust or power conferred upon the Indenture
      Trustee, under this Agreement.

            SECTION 7.02 Certain Matters Affecting the Indenture Trustee.
(a) Except as otherwise provided in Section 7.01:

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

            (ii) The Indenture Trustee may consult with counsel and any Opinion
      of Counsel shall be full and complete authorization and protection in
      respect of

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      any action taken or suffered or omitted by it hereunder in good faith and
      in accordance with such Opinion of Counsel;

            (iii) The Indenture Trustee shall be under no obligation to exercise
      any of the trusts or powers vested in it by this Agreement or to
      institute, conduct or defend any litigation hereunder or in relation
      hereto at the request, order or direction of any of the Holders, pursuant
      to the provisions of this Agreement, unless such Holders shall have
      offered to the Indenture Trustee reasonable security or indemnity against
      the costs, expenses and liabilities which may be incurred therein or
      thereby; nothing contained herein shall, however, relieve the Indenture
      Trustee of the obligation, upon the occurrence of a Master Servicer Event
      of Default (which has not been cured or waived), to exercise such of the
      rights and powers vested in it by this Agreement, and to use the same
      degree of care and skill in their exercise as a prudent person would
      exercise or use under the circumstances in the conduct of such person's
      own affairs;

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

            (v) Prior to the occurrence of a Master Servicer Event of Default
      hereunder and after the curing of all Master Servicer Events of Default
      which may have occurred, the Indenture Trustee shall not be bound to make
      any investigation into the facts or matters stated in any resolution,
      certificate, statement, instrument, opinion, report, notice, request,
      consent, order, approval, bond or other paper or document, unless
      requested in writing to do so by the Holders of Notes entitled to at least
      25% of the Voting Rights in the REMIC Trust; provided, however, that if
      the payment within a reasonable time to the Indenture Trustee of the
      costs, expenses or liabilities likely to be incurred by it in the making
      of such investigation is, in the opinion of the Indenture Trustee, not
      reasonably assured to the Indenture Trustee by such Noteholders, the
      Indenture Trustee may require reasonable indemnity against such expense,
      or liability from such Noteholders as a condition to taking any such
      action;

            (vi) The Indenture Trustee may execute any of the trusts or powers
      hereunder or perform any duties hereunder either directly or by or through
      agents or attorneys; and

            (vii) The Indenture Trustee shall not be personally liable for any
      loss resulting from the investment of funds held in the Collection Account
      at the direction of the Master Servicer pursuant to Section 3.12.

            (b) All rights of action under this Agreement or under any of the
Notes, enforceable by the Indenture Trustee, may be enforced by it without the
possession of any of the Securities, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the

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Indenture Trustee shall be brought in its name for the benefit of all the
Holders of such Securities, subject to the provisions of this Agreement.

            SECTION 7.03 Indenture Trustee Not Liable for Notes or Mortgage
Loans. The recitals contained herein and in the Securities (other than the
signature of the Indenture Trustee, the authentication of the Note Registrar on
the Notes, the acknowledgments of the Indenture Trustee contained in Article II
and the representations and warranties of the Indenture Trustee in Section 7.12)
shall be taken as the statements of the Trusts and the Indenture Trustee assumes
no responsibility for their correctness. The Indenture Trustee makes no
representations or warranties as to the validity or sufficiency of this
Agreement (other than as specifically set forth in Section 7.12) or of the
Securities (other than the signature of the Indenture Trustee and authentication
of the Note Registrar on the Securities) or of any Mortgage Loan or related
document. The Indenture Trustee shall not be accountable for the use or
application by the Depositor of any of the Notes or of the proceeds of such
Securities, or for the use or application of any funds paid to the Depositor or
the Master Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Master Servicer, other than any
funds held by or on behalf of the Indenture Trustee in accordance with Section
3.10.

            SECTION 7.04 Indenture Trustee May Own Securities. The Indenture
Trustee in its individual capacity or any other capacity may become the owner or
pledgee of Securities with the same rights it would have if it were not
Indenture Trustee.

            SECTION 7.05 Indenture Trustee's and Owner Trustee's Fees and
Expenses. (a) The Indenture Trustee shall, subject to the limitations set
forth below, withdraw from the Payment Account on each Payment Date prior to
making any distribution pursuant to Section 4.01 and pay (i) to itself, the
Indenture Trustee Fee and (ii) to the Owner Trustee, the Owner Trustee Fee and,
to the extent that the funds therein are at anytime insufficient for such
purpose, the Depositor shall pay such fees. Each of the Indenture Trustee and
the Owner Trustee, or any director, officer, employee or agent of the Indenture
Trustee or of the Owner Trustee, shall be indemnified by the REMIC Trust and
held harmless against any loss, liability or expense (not including expenses,
disbursements and advances incurred or made by the Indenture Trustee or by the
Owner Trustee, including the compensation and the expenses and disbursements of
its agents and counsel, in the ordinary course of the Indenture Trustee's or the
Indenture Trustee's performance of its business incurred by the Indenture
Trustee or by the Owner Trustee in connection with or arising out of or in
connection with the acceptance or administration of its obligations and duties
under this Agreement, other than any loss, liability or expense (i) resulting
from the Master Servicer's actions or omissions in connection with this
Agreement and the Mortgage Loans, (ii) that constitutes a specific liability of
the Indenture Trustee pursuant to Section 8.01(c) or (iii) any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or negligence in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder or as a result of a breach of the Indenture
Trustee's obligations under Article VII hereof).

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            As a limitation on the foregoing with respect to certain expenses of
the Indenture Trustee, the Indenture Trustee shall receive from the REMIC Trust
amounts with respect to indemnification for counsel fees and expenses
(collectively, "Legal Fees") in connection with any third-party litigation or
other claims alleging violations of laws or regulations relating to consumer
lending and/or servicing of the REMIC Trust and/or the NIMS Trust (collectively,
"Third-Party Claims") in an amount not greater than $25,000 per month, and
$600,000 in the aggregate (with amounts in excess of $25,000 for any month
carried-forward to subsequent months, until the $600,000 aggregate maximum is
reached). Thereafter, any indemnification of the Legal Fees of the Indenture
Trustee in connection with Third-Party Claims shall be paid solely by the NIMS
Trust, and then solely from amounts otherwise distributable to the Holders of
the NIMS Certificates; provided, that the Indenture Trustee shall have no
obligation to incur additional Legal Fees in excess of $600,000 unless it has
received reasonable security or indemnity in accordance with Section
7.02(a)(iii) hereof, and the Class N Noteholders shall hold the Indenture
Trustee harmless for any such failure to incur additional Legal Fees. Such
indemnity shall survive the termination or discharge of this Agreement and the
resignation or removal of the Indenture Trustee.

            Any amounts payable to the Indenture Trustee or to the Owner
Trustee, or any director, officer, employee or agent of the Indenture Trustee,
in respect of the indemnification provided by this paragraph (a), or pursuant to
any other right of reimbursement from the REMIC Trust that the Indenture
Trustee, the Owner Trustee, or any director, officer, employee or agent of the
Indenture Trustee or of the Owner Trustee, may have hereunder in its capacity as
such, may be withdrawn by the Indenture Trustee from the Payment Account at any
time.

            (b) The Master Servicer agrees to indemnify the Indenture Trustee
and the Owner Trustee from, and hold it harmless against, any loss, liability or
expense resulting from a breach of the Master Servicer's obligations and duties
under this Agreement. Such indemnity shall survive the termination or discharge
of this Agreement and the resignation or removal of the Indenture Trustee or of
the Owner Trustee. Any payment hereunder made by the Master Servicer to the
Indenture Trustee or to the Owner Trustee shall be from the Master Servicer's
own funds, without reimbursement from the REMIC Trust therefor.

            (c) The Indenture Trustee shall establish and maintain one or more
accounts (such account or accounts, the "Special Reserve Account"). On the
Closing Day the Depositor shall deposit $25,000 into the Special Reserve
Account. The Special Reserve Account shall be an Eligible Account owned by the
Depositor in its individual capacity. Amounts on deposit in the Special Reserve
Account shall be invested in Permitted Investments. On each Payment Date all net
investment earnings on the Special Reserve Account moneys shall be paid to the
Depositor and retained in the Special Reserve Account.

            If at any time any Holder of the Class N Certificates incurs any
costs or expenses in connection with Third-Party Claims, such Holder may (if
such Holder is not itself the Single Largest Class N Holder, then with the
written approval of the Single

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Largest Class N Holder) direct the Indenture Trustee to withdraw amounts from
the Special Reserve Account for the purpose of paying such costs and expenses.
The "Single Largest Class N Holder" is the single Holder of the Class N Notes
which represent the greatest Percentage Interest in the Class N Notes held by
any Holder thereof. In no event shall the Depositor be required to deposit more
than the $25,000 initial deposit to the Special Reserve Account, and in no event
shall the existence of the Special Reserve Account reduce the Originator's or
the Master Servicer's liability under the Mortgage Loan Purchase Agreement.
Following the payment in full of all amounts due to the Holders of the Class N
Notes, the Special Reserve Account shall be closed, and all remaining amounts on
deposit therein shall be paid to the Depositor.

            (d) The Indenture Trustee shall deliver to the Depositor and each
Holder of a Class N Note and each Holder of a NIMS Certificate a report
detailing all withdrawals from Special Reserve Account and all payments from the
REMIC Trust or from the NIMs Trust made with respect to Legal Fees on account of
Third-Party Claims. The report shall be delivered monthly, promptly following
any month in which such withdrawals or payments were made.

            SECTION 7.06 Eligibility Requirements for Indenture Trustee. The
Indenture Trustee hereunder shall at all times be a corporation or an
association (other than the Depositor, the Seller, the Owner Trustee, the Master
Servicer or any Affiliate of the foregoing) organized and doing business under
the laws of any state or the United States of America, authorized under such
laws to exercise corporate trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation or association publishes reports of
conditions at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section the combined capital and surplus of such corporation or association
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of conditions so published. In case at any time the Indenture
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Indenture Trustee shall resign immediately in the manner and with
the effect specified in Section 7.07.

            SECTION 7.07 Resignation and Removal of the Indenture Trustee. The
Indenture Trustee may at any time resign and be discharged from the trust hereby
created by giving written notice thereof to the Depositor, the Master Servicer
and the Holders. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor Indenture Trustee by written instrument, in
duplicate, which instrument shall be delivered to the resigning Indenture
Trustee and to the successor Indenture Trustee. A copy of such instrument shall
be delivered to the Holders and the Master Servicer by the Depositor. If no
successor Indenture Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Indenture Trustee may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.

            If at any time the Indenture Trustee shall cease to be eligible in
accordance with the provisions of Section 7.06 and shall fail to resign after
written request therefor

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by the Depositor, or if at any time the Indenture Trustee shall become incapable
of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Indenture Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Indenture Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Indenture Trustee and appoint a successor Indenture
Trustee by written instrument, in duplicate, which instrument shall be delivered
to the Indenture Trustee so removed and to the successor Indenture Trustee. A
copy of such instrument shall be delivered to the Noteholders and the Master
Servicer by the Depositor.

            The Holders of Notes entitled to at least 51% of the Voting Rights
of both trusts together may at any time remove the Indenture Trustee and appoint
a successor Indenture Trustee by written instrument or instruments, in
triplicate, signed by such Holders or their attorneys-in-fact duly authorized,
one complete set of which instruments shall be delivered to the Depositor, one
complete set to the Indenture Trustee so removed and one complete set to the
successor so appointed. A copy of such instrument shall be delivered to the
Holders and the Master Servicer by the Depositor.

            Any resignation or removal of the Indenture Trustee and appointment
of a successor Indenture Trustee pursuant to any of the provisions of this
Section shall not become effective until acceptance of appointment by the
successor Indenture Trustee as provided in Section 7.08.

            SECTION 7.08 Successor Indenture Trustee. Any successor Indenture
Trustee appointed as provided in Section 6.07 shall execute, acknowledge and
deliver to the Depositor and to its predecessor Indenture Trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor Indenture Trustee shall become effective and such successor
Indenture 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 Indenture
Trustee herein. The predecessor Indenture Trustee shall deliver to the successor
Indenture Trustee all Mortgage Files and related documents and statements, as
well as all moneys, held by it hereunder, and the Depositor and the predecessor
Indenture 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 Indenture Trustee all such rights, powers, duties
and obligations.

            No successor Indenture Trustee shall accept appointment as provided
in this Section unless at the time of such acceptance such successor Indenture
Trustee shall be eligible under the provisions of Section 7.06 and the
appointment of such successor Indenture Trustee shall not result in a
downgrading of any Class of Notes by either Rating Agency, as evidenced by a
letter from each Rating Agency.

            Upon acceptance of appointment by a successor Indenture Trustee as
provided in this Section, the Depositor shall mail notice of the succession of
such Indenture Trustee hereunder to all Holders of Notes at their addresses as
shown in the register maintained by the Indenture Trustee. If the Depositor
fails to mail such notice

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within 10 days after acceptance of appointment by the successor Indenture
Trustee, the successor Indenture Trustee shall cause such notice to be mailed at
the expense of the Depositor.

            SECTION 7.09 Merger or Consolidation of Indenture Trustee. Any
corporation or association into which the Indenture Trustee may be merged or
converted or with which it may be consolidated or any corporation or association
resulting from any merger, conversion or consolidation to which the Indenture
Trustee shall be a party, or any corporation or association succeeding to the
business of the Indenture Trustee, shall be the successor of the Indenture
Trustee hereunder; provided, that such corporation or association shall be
eligible under the provisions of Section 7.06, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.

            SECTION 7.10 Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of REMIC Trust, NIMS Trust, or property securing the same may at the time
be located, the Master Servicer and the Indenture Trustee acting jointly shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Indenture Trustee to act as co-Indenture Trustee or
co-Indenture Trustees, jointly with the Indenture Trustee, or separate Indenture
Trustee or separate Indenture Trustees, of all or any part of the REMIC Trust
and NIMS Trust, and to vest in such Person or Persons, in such capacity, such
title to the REMIC Trust and NIMS Trust, or any part thereof, and, subject to
the other provisions of this Section 7.10, such powers, duties, obligations,
rights and trusts as the Master Servicer and the Indenture Trustee may consider
necessary or desirable. If the Master Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
case a Master Servicer Event of Default shall have occurred and be continuing,
the Indenture Trustee alone shall have the power to make such appointment. No
co-Indenture Trustee or separate Indenture Trustee hereunder shall be required
to meet the terms of eligibility as a successor Indenture Trustee under Section
7.06 hereunder and no notice to Holders of Notes of the appointment of
co-Indenture Trustee(s) or separate Indenture Trustee(s) shall be required under
Section 7.08 hereof. In the event that a co-Indenture Trustee is appointed at
the request of the Master Servicer, the fees and expenses of such co-Indenture
Trustee shall be paid by the Master Servicer.

            In the case of any appointment of a co-Indenture Trustee or separate
Indenture Trustee pursuant to this Section 6.10 all rights, powers, duties and
obligations conferred or imposed upon the Indenture Trustee shall be conferred
or imposed upon and exercised or performed by the Indenture Trustee and such
separate Indenture Trustee or co-Indenture Trustee jointly, except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed by the Indenture Trustee (whether as Indenture Trustee hereunder
or as successor to the Master Servicer hereunder), the Indenture 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
NIMS Trust, or any portion thereof in any such jurisdiction) shall be exercised
and

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performed by such separate Indenture Trustee or co-Indenture Trustee at the
direction of the Indenture Trustee.

            Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate Indenture
Trustees and co-Indenture Trustees, as effectively as if given to each of them.

            Every instrument appointing any separate Indenture Trustee or
co-Indenture Trustee shall refer to this Agreement and the conditions of this
Article VI. Each separate Indenture Trustee and co-Indenture Trustee, upon its
acceptance of the trust conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Indenture
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Indenture Trustee. Every such instrument shall be filed with the
Indenture Trustee.

            Any separate Indenture Trustee or co-Indenture Trustee may, at any
time, constitute the Indenture 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 Indenture Trustee or co-Indenture 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 Indenture Trustee, to
the extent permitted by law, without the appointment of a new or successor
Indenture Trustee.

            SECTION 7.11 Appointment of Custodians. The Indenture Trustee may,
with the consent of the Depositor and the Master Servicer, appoint one or more
custodians to hold all or a portion of the Mortgage Files as agent for the
Indenture Trustee, by entering into a custodial agreement acceptable to the
Master Servicer and the Depositor. The appointment of any custodian may at any
time be terminated and a substitute custodian appointed therefor upon the
reasonable request of the Master Servicer to the Indenture Trustee, the consent
to which shall not be unreasonably withheld. The Indenture Trustee shall pay any
and all fees and expenses of any custodian in accordance with each custodial
agreement. The Indenture Trustee initially appoints itself as custodian, and
each Trust, the Depositor and the Master Servicer consent to such appointment.
Subject to Article VII hereof, the Indenture Trustee agrees to comply with the
terms of each custodial agreement and to enforce the terms and provisions
thereof against the custodian for the benefit of the Noteholders having an
interest in any Mortgage File held by such custodian. Each custodian shall be a
depository institution or trust company subject to supervision by federal or
state authority, shall have combined capital and surplus of at least $10,000,000
and shall be qualified to do business in the jurisdiction in which it holds any
Mortgage File. In no event shall the appointment of any custodian pursuant to a
custodial agreement diminish the obligations of the Indenture Trustee hereunder.

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            SECTION 7.12 Appointment of Office or Agency. The Indenture Trustee
will appoint an office or agency in the City of New York where the Notes may be
surrendered for registration of transfer or exchange, and presented for final
distribution, and where notices and demands to or upon the Indenture Trustee in
respect of the Notes and this Agreement may be served.

            SECTION 7.13 Representations and Warranties of the Indenture
Trustee. The Indenture Trustee hereby represents and warrants to each Trust, the
Master Servicer and the Depositor, as of the Closing Date, that:

            (a) The Indenture Trustee is a national banking association duly
      organized, validly existing and in good standing under the laws of the
      United States.

            (b) The execution and delivery of this Agreement by the Indenture
      Trustee, and the performance and compliance with the terms of this
      Agreement by the Indenture Trustee, will not violate the Indenture
      Trustee's charter or bylaws or constitute a default (or an event which,
      with notice or lapse of time, or both, would constitute a default) under,
      or result in the breach of, any material agreement or other instrument to
      which it is a party or which is applicable to it or any of its assets.

            (c) The Indenture Trustee has the full power and authority to enter
      into and consummate all transactions contemplated by this Agreement, has
      duly authorized the execution, delivery and performance of this Agreement,
      and has duly executed and delivered this Agreement.

            (d) This Agreement, assuming due authorization, execution and
      delivery by the Master Servicer and the Depositor, constitutes a valid,
      legal and binding obligation of the Indenture Trustee, enforceable against
      the Indenture Trustee in accordance with the terms hereof, subject to (A)
      applicable bankruptcy, insolvency, receivership, reorganization,
      moratorium and other laws affecting the enforcement of creditors' rights
      generally, and (B) general principles of equity, regardless of whether
      such enforcement is considered in a proceeding in equity or at law.

            (e) The Indenture Trustee is not in violation of, and its execution
      and delivery of this Agreement and its performance and compliance with the
      terms of this Agreement will not constitute a violation of, any law, any
      order or decree of any court or arbiter, or any order, regulation or
      demand of any federal, state or local governmental or regulatory
      authority, which violation, in the Indenture Trustee's good faith and
      reasonable judgment, is likely to affect materially and adversely either
      the ability of the Indenture Trustee to perform its obligations under this
      Agreement or the financial condition of the Indenture Trustee.

            (f) No litigation is pending or, to the best of the Indenture
      Trustee's knowledge, threatened against the Indenture Trustee which would
      prohibit the

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      Indenture Trustee from entering into this Agreement or, in the Indenture
      Trustee's good faith reasonable judgment, is likely to materially and
      adversely affect either the ability of the Indenture Trustee to perform
      its obligations under this Agreement or the financial condition of the
      Indenture Trustee.

                                  ARTICLE VIII

                                   TERMINATION

            SECTION 8.01 Termination Upon Repurchase or Liquidation of All
Mortgage Loans or Repurchase of Mortgages from REMIC Trust. (a) Subject to
Section 8.02, the respective obligations and responsibilities under this
Agreement of the Depositor, the Master Servicer and the Indenture Trustee (other
than the obligations of the Master Servicer to the Indenture Trustee pursuant to
Section 7.05 and of the Master Servicer to provide for and the Indenture Trustee
to make payments in respect of the Securities as hereinafter set forth) shall
terminate upon payment to the Holders and the deposit of all amounts held by or
on behalf of the Indenture Trustee and required hereunder to be so paid or
deposited on the Payment Date coinciding with or following the earlier to occur
of (i) the purchase by the Terminator (as defined below) of all Mortgage Loans
and each REO Property remaining in the REMIC Trust and (ii) the final payment or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan or REO Property remaining in the REMIC Trust. The purchase by the
Terminator of all Mortgage Loans and each REO Property remaining in the REMIC
Trust shall be at a price (the "Termination Price") equal to the greater of (A)
the aggregate Purchase Price of all the Mortgage Loans included in the REMIC
Trust, plus the appraised value of each REO Property, if any, included in the
REMIC Trust, such appraisal to be conducted by an appraiser mutually agreed upon
by the Terminator and the Indenture Trustee in their reasonable discretion and
(B) the aggregate fair market value of all of the assets of the REMIC Trust (as
determined by the Terminator and the Indenture Trustee, as of the close of
business on the third Business Day next preceding the date upon which notice of
any such termination is furnished to Noteholders pursuant to the third paragraph
of this Section 8.01).

            (b) The Holders of the Class S Notes shall have the right, and to
the extent the Holder of the Class S Notes does not exercise such right, the
Holder of the REMIC Certificates shall have the right (the party exercising such
right, including the Master Servicer as described below, the "Terminator"), to
purchase all of the Mortgage Loans and each REO Property remaining in the REMIC
Trust pursuant to clause (i) of the preceding paragraph no later than the
Determination Date in the month immediately preceding the Payment Date on which
the Securities will be retired; provided, however, that the Terminator may elect
to purchase all of the Mortgage Loans and each REO Property remaining in the
REMIC Trust pursuant to clause (i) above only after the Clean-up Call Date;
provided, further, however, that in the event neither the Holder of the Class S
Notes or the Holder of the REMIC Certificates exercises the right to purchase
the Mortgage Loans, the Master Servicer may purchase all of the Mortgage Loans
and each REO Property remaining in the REMIC Trust on the Determination Date
after the

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aggregate Stated Principal Balance of the Mortgage Loans is less then 5% of the
Original Scheduled Principal Balance. By acceptance of the REMIC Certificates,
the Holders of the REMIC Certificates agree, in connection with any termination
hereunder, to assign and transfer any amounts in excess of par, and to the
extent received in respect of such termination, to pay any such amounts to the
Holders of the Class S Notes.

            (c) Notice of the liquidation of the REMIC Trust shall be given
promptly by the Indenture Trustee by letter to Holders mailed (a) in the event
such notice is given in connection with the purchase of the Mortgage Loans and
each REO Property by the Terminator, not earlier than the 15th day and not later
than the 25th day of the month next preceding the month of the final
distribution on the Securities or (b) otherwise during the month of such final
distribution on or before the Payment Date in such month, in each case
specifying (i) the Payment Date upon which the REMIC Trust will terminate and
final payment in respect of the Securities will be made upon presentation and
surrender of the related Securities at the office of the Indenture Trustee
therein designated, (ii) the amount of any such final payment, (iii) that no
interest shall accrue in respect of the Notes from and after the Interest
Accrual Period relating to the final Payment Date therefor and (iv) that the
Record Date otherwise applicable to such Payment Date is not applicable,
payments being made only upon presentation and surrender of the Securities at
the office of the Indenture Trustee. The Indenture Trustee shall give such
notice to the Registrar at the time such notice is given to Holders. In the
event such notice is given in connection with the purchase of all of the
Mortgage Loans and each REO Property remaining in the REMIC Trust by the
Terminator, the Terminator shall deliver to the Indenture Trustee for deposit in
the Payment Account not later than the last Business Day of the month next
preceding the month of the final payment on the Notes an amount in immediately
available funds equal to the above-described purchase price. The Indenture
Trustee shall remit to the Master Servicer from such funds deposited in the
Payment Account (i) any amounts which the Master Servicer would be permitted to
withdraw and retain from the Collection Account pursuant to Section 3.11 and
(ii) any other amounts otherwise payable by the Indenture Trustee to the Master
Servicer from amounts on deposit in the Payment Account pursuant to the terms of
this Agreement, in each case prior to making any final payments pursuant to
Section 9.02(d) below. Upon certification to the Indenture Trustee by a
Servicing Officer of the making of such final deposit, the Indenture Trustee
shall promptly release or cause to be released to the Terminator the Mortgage
Files for the remaining Mortgage Loans, and the Indenture Trustee shall execute
all assignments, endorsements and other instruments necessary to effectuate such
transfer.

            (d) Upon presentation of the Securities by the Holders on the final
Payment Date, the Indenture Trustee shall distribute to each Holder so
presenting and surrendering its Securities the amount otherwise distributable on
such Payment Date in accordance with Section 4.01 in respect of the Securities
so presented and surrendered. Any funds not paid to any Holder or Holders of
Securities being retired on such Payment Date because of the failure of such
Holder or Holders to tender their Securities shall, on such date, be set aside
and held in trust by the Indenture Trustee and credited to the account of the
appropriate non-tendering Holder or Holders. If any Securities as to which
notice has been given pursuant to this Section 8.01 shall not have been
surrendered for

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cancellation within six months after the time specified in such notice, the
Indenture Trustee shall mail a second notice to the remaining non-tendering
Holders to surrender their Securities for cancellation in order to receive the
final payment with respect thereto. If within one year after the second notice
all such Securities shall not have been surrendered for cancellation, the
Indenture Trustee shall, directly or through an agent, mail a final notice to
remaining related non-tendering Holders concerning surrender of their
Securities. The costs and expenses of maintaining the funds in trust and of
contacting such Holders shall be paid out of the assets remaining in the Trusts.
If within one year after the final notice any such Securities shall not have
been surrendered for cancellation, the Indenture Trustee shall pay to the
Depositor all such amounts, and all rights of non-tendering Holders in or to
such amounts shall thereupon cease. No interest shall accrue or be payable to
any Holder on any amount held in trust by the Indenture Trustee as a result of
such Holder's failure to surrender its Securities for final payment thereof in
accordance with this Section 8.01.

            Immediately following the deposit of funds in trust hereunder in
respect of the Securities, each Trust shall terminate.

            SECTION 8.02 Additional Termination Requirements. (a) In the
event that the Terminator purchases all the Mortgage Loans and each REO Property
or the final payment on or other liquidation of the last Mortgage Loan or REO
Property remaining in the REMIC Trust pursuant to Section 8.01, the REMIC Trust
shall be terminated in accordance with the following additional requirements:

            (i) The Indenture Trustee shall specify the first day in the 90-day
      liquidation period in a statement attached to the each REMIC's final Tax
      Return pursuant to Treasury regulation Section 1.860F-1 and shall satisfy
      all requirements of a qualified liquidation under Section 860F of the Code
      and any regulations thereunder, as evidenced by an Opinion of Counsel
      obtained at the expense of the Terminator;

            (ii) During such 90-day liquidation period, and at or prior to the
      time of making of the final payment on the Securities, the Indenture
      Trustee shall sell all of the assets of the REMIC Trust to the Terminator
      for cash; and

            (iii) At the time of the making of the final payment on the Notes,
      the Indenture Trustee shall pay or credit, or cause to be paid or
      credited, to the Holders of the Class R-1 Certificates all cash on hand in
      the REMIC Trust (other than cash retained to meet claims), and the REMIC
      Trust shall terminate at that time.

            (b) At the expense of the applicable Terminator, the Indenture
Trustee shall prepare or cause to be prepared the documentation required in
connection with the adoption of a plan of liquidation of each REMIC created
hereby pursuant to this Section 8.02.

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            (c) By their acceptance of Securities issued by the REMIC Trust, the
Holders thereof hereby agree to authorize the Indenture Trustee to specify the
90-day liquidation period for the REMIC Trust, which authorization shall be
binding upon all successor Holders of Securities issued by the REMIC Trust.

                                   ARTICLE IX

                         PROVISIONS REGARDING THE TRUSTS

            SECTION 9.01 Administration of the Trusts. The Indenture Trustee
hereby agrees to perform the duties set forth in Section 9.02 of this Agreement,
on behalf of the REMIC Trust and the NIMS Trust, respectively.

            (b) The Terminator hereby agrees to perform the duties set forth in
Sections 2.08 and 10.02(a) of each of the REMIC Indenture and the NIMS
Indenture, on behalf of the REMIC Trust and the NIMS Trust, respectively.

            (c) The Depositor hereby agrees to perform, on behalf of the REMIC
Trust and the NIMS Trust, all of the duties of the REMIC Trust and the NIMS
Trust, respectively, set forth in the REMIC Indenture and the NIMS Indenture,
other than those set forth in subsections (a) and (b) above.

            SECTION 9.02 REMIC Administration. (a) The Indenture Trustee, on
behalf of the REMIC Trust, shall elect to treat each REMIC created hereby as a
REMIC under the Code and, if necessary, under applicable state law. Each such
election will be made on Form 1066 or other appropriate federal tax or
information return or any appropriate state return for the taxable year ending
on the last day of the calendar year in which the REMIC Trust Interests are
issued. For the purposes of the REMIC election in respect of the REMIC Trust,
the Class A Notes, the Mezzanine Notes, the Class C Notes and the Class P Notes
shall be designated as the Regular Interests in the REMIC Trust. The Indenture
Trustee shall not permit the creation of any "interests" in any REMIC created
hereby (within the meaning of Section 860G of the Code) other than the REMIC
Regular Interests and the Lower-Tier REMIC Regular Interests.

            (b) The Closing Date is hereby designated as the "Startup Day" of
each REMIC created hereby within the meaning of Section 860G(a)(9) of the Code.

            (c) The Indenture Trustee shall pay out of its own funds, without
any right of reimbursement, any and all expenses relating to any tax audit of
the REMIC Trust (including, but not limited to, any professional fees or any
administrative or judicial proceedings with respect to each REMIC created hereby
that involve the Internal Revenue Service or state tax authorities), other than
the expense of obtaining any tax related Opinion of Counsel except as specified
herein. The Indenture Trustee, as agent for each REMIC and the tax matters
person shall (i) act on behalf of each REMIC in relation to any tax matter or
controversy and (ii) represent each REMIC in any administrative or judicial
proceeding relating to an examination or audit by any governmental taxing
authority with respect thereto. The holder of the largest Percentage

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Interest of each Class of Class R-1 Certificates and Class R-2 Certificates
shall be designated, in the manner provided under Treasury regulations section
1.860F-4(d) and Treasury regulations section 301.6231(a)(7)-1, as the tax
matters person of the related REMIC created hereunder. By their acceptance
thereof, the holder of the largest Percentage Interest of the Class of R-1
Certificates and Class R-2 Certificates hereby agrees to irrevocably appoint the
Indenture Trustee or an Affiliate as its agent to perform all of the duties of
the tax matters person for each REMIC.

            (d) The Indenture Trustee, on behalf of the REMIC Trust, shall
prepare, sign and file all of the Tax Returns in respect of each REMIC. The
expenses of preparing and filing such returns shall be borne by the Indenture
Trustee without any right of reimbursement therefor. The Master Servicer shall
provide on a timely basis to the Indenture Trustee or its designee such
information with respect to the assets of the REMIC Trust as is in its
possession and reasonably required by the Indenture Trustee to enable it to
perform its obligations under this Article IX.

            (e) The Indenture Trustee shall perform on behalf of each REMIC all
reporting and other tax compliance duties that are the responsibility of such
REMIC or trust under the Code, the REMIC Provisions or other compliance guidance
issued by the Internal Revenue Service or any state or local taxing authority.
Among its other duties, as required by the Code, the REMIC Provisions or other
such compliance guidance, the Indenture Trustee shall provide (i) to any
Transferor of a Class R-1 Certificate or a Class R-2 Certificate such
information as is necessary for the application of any tax relating to the
transfer of a Class R-1 Certificate or a Class R-2 Certificate to any Person who
is not a Permitted Transferee, (ii) to the Noteholders such information or
reports as are required by the Code or the REMIC Provisions including reports
relating to interest, original issue discount and market discount or premium
(using the Prepayment Assumption as required) and (iii) to the Internal Revenue
Service the name, title, address and telephone number of the person who will
serve as the representative of each REMIC. The Master Servicer shall provide on
a timely basis to the Indenture Trustee such information with respect to the
assets of the REMIC Trust, including, without limitation, the Mortgage Loans, as
is in its possession and reasonably required by the Indenture Trustee to enable
it to perform its obligations under this subsection. In addition, the Depositor
shall provide or cause to be provided to the Indenture Trustee, within ten (10)
days after the Closing Date, all information or data that the Indenture Trustee
reasonably determines to be relevant for tax purposes as to the valuations and
issue prices of the Notes, including, without limitation, the price, yield,
prepayment assumption and projected cash flow of the Notes.

            (f) The Indenture Trustee, on behalf of the REMIC Trust, shall take
such action and shall cause each REMIC to take such action as shall be necessary
to create or maintain the status thereof as a REMIC under the REMIC Provisions
(and the Master Servicer shall assist the Indenture Trustee, to the extent
reasonably requested by the Indenture Trustee to do specific actions in order to
assist in the maintenance of such status). The Indenture Trustee shall not take
any action, cause the REMIC Trust to take any action or fail to take (or fail to
cause to be taken) any action that, under the REMIC Provisions, if taken or not
taken, as the case may be, could (i) endanger the status of each

                                      113
<PAGE>

REMIC as a REMIC or (ii) result in the imposition of a tax upon the REMIC Trust
(including but not limited to the tax on prohibited transactions as defined in
Section 860F(a)(2) of the Code and the tax on contributions to a REMIC set forth
in Section 860G(d) of the Code) (either such event, an "Adverse REMIC Event")
unless the Indenture Trustee has received an Opinion of Counsel, addressed to
the Indenture Trustee (at the expense of the party seeking to take such action
but in no event at the expense of the Indenture Trustee) to the effect that the
contemplated action will not, with respect to each REMIC, endanger such status
or result in the imposition of such a tax, nor shall the Master Servicer take or
fail to take any action (whether or not authorized hereunder) as to which the
Indenture Trustee has advised it in writing that it has received an Opinion of
Counsel to the effect that an Adverse REMIC Event could occur with respect to
such action; provided, that the Master Servicer may conclusively rely on such
Opinion of Counsel and shall incur no liability for its action or failure to act
in accordance with such Opinion of Counsel. In addition, prior to taking any
action with respect to any REMIC or the respective assets of each, or causing
any REMIC to take any action, which is not contemplated under the terms of this
Agreement, the Master Servicer will consult with the Indenture Trustee or its
designee, in writing, with respect to whether such action could cause an Adverse
REMIC Event to occur with respect to any REMIC Trust, and the Master Servicer
shall not take any such action or cause either any REMIC to take any such action
as to which the Indenture Trustee has advised it in writing that an Adverse
REMIC Event could occur; provided, that the Master Servicer may conclusively
rely on such writing and shall incur no liability for its action or failure to
act in accordance with such writing. The Indenture Trustee may consult with
counsel to make such written advice, and the cost of same shall be borne by the
party seeking to take the action not permitted by this Agreement, but in no
event shall such cost be an expense of the Indenture Trustee. At all times as
may be required by the Code, the Indenture Trustee will ensure that
substantially all of the assets of each REMIC created hereunder will consist of
"qualified mortgages" as defined in Section 860G(a)(3) of the Code and
"permitted investments" as defined in Section 860G(a)(5) of the Code.

            (g) In the event that any tax is imposed on "prohibited
transactions" of the REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of such REMIC as defined
in Section 860G(c) of the Code, on any contributions to any such REMIC after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Indenture Trustee pursuant to Section 8.03
hereof, if such tax arises out of or results from a breach by the Indenture
Trustee of any of its obligations under this Article VIII, (ii) to the Master
Servicer pursuant to Section 8.03 hereof, if such tax arises out of or results
from a breach by the Master Servicer of any of its obligations under Article III
or this Article VIII, or otherwise (iii) against amounts on deposit in the
Payment Account and shall be paid by withdrawal therefrom.

            (h) On or before April 15 of each calendar year, commencing April
15, 2001, the Indenture Trustee shall deliver to the Master Servicer and each
Rating Agency a Certificate from a Responsible Officer of the Indenture Trustee
stating the Indenture Trustee's compliance with this Article VIII.

                                      114
<PAGE>

            (i) The Indenture Trustee shall, for federal income tax purposes,
maintain books and records with respect to each REMIC created hereunder and the
NIMS Trust on a calendar year and on an accrual basis.

            (j) Following the Startup Day, the Indenture Trustee shall not
accept any contributions of assets to any REMIC created hereunder other than in
connection with any Qualified Substitute Mortgage Loan delivered in accordance
with Section 2.04 unless it shall have received an Opinion of Counsel to the
effect that the inclusion of such assets in the REMIC Trust will not cause the
related REMIC to fail to qualify as a REMIC at any time that any Securities
issued by the REMIC Trust are outstanding or subject such REMIC to any tax under
the REMIC Provisions or other applicable provisions of federal, state and local
law or ordinances.

            (k) Neither the Indenture Trustee nor the Master Servicer shall
enter into any arrangement by which any REMIC will receive a fee or other
compensation for services nor permit any such REMIC to receive any income from
assets other than "qualified mortgages" as defined in Section 860G(a)(3) of the
Code or "permitted investments" as defined in Section 860G(a)(5) of the Code.

            SECTION 9.03 Prohibited Transactions and Activities. None of the
Depositor, the Master Servicer, the REMIC Trust or the Indenture Trustee shall
sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of the REMIC Trust, (iii) the
termination of the REMIC Trust pursuant to Article VIII of this Agreement, (iv)
a substitution pursuant to Article II of this Agreement or (v) a purchase of
Mortgage Loans pursuant to Article II of this Agreement), nor acquire any assets
for any REMIC (other than REO Property acquired in respect of a defaulted
Mortgage Loan), nor sell or dispose of any investments in the Collection Account
or the Payment Account for gain, nor accept any contributions to any REMIC after
the Closing Date (other than a Qualified Substitute Mortgage Loan delivered in
accordance with Section 2.04), unless it has received an Opinion of Counsel,
addressed to the Indenture Trustee (at the expense of the party seeking to cause
such sale, disposition, substitution, acquisition or contribution but in no
event at the expense of the Indenture Trustee) that such sale, disposition,
substitution, acquisition or contribution will not (a) affect adversely the
status of any REMIC as a REMIC or (b) cause REMIC to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions.

            SECTION 9.04 Master Servicer and Indenture Trustee
Indemnification. (a) The Indenture Trustee agrees to indemnify the REMIC
Trust, the Depositor and the Master Servicer for any taxes and costs including,
without limitation, any reasonable attorneys fees imposed on or incurred by the
REMIC Trust, the Depositor or the Master Servicer, as a result of a breach of
the Indenture Trustee's covenants set forth in this Article IX.

            (b) The Master Servicer agrees to indemnify the REMIC Trust, the
Depositor and the Indenture Trustee for any taxes and costs including, without
limitation,

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<PAGE>

any reasonable attorneys' fees imposed on or incurred by the REMIC Trust, the
Depositor or the Indenture Trustee, as a result of a breach of the Master
Servicer's covenants set forth in Article III or this Article IX.

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

            SECTION 10.01 Amendment. This Agreement may be amended from time to
time by the Depositor, the Master Servicer, each Trust and the Indenture Trustee
without the consent of any of the Holders, (i) to cure any ambiguity or defect,
(ii) to correct, modify or supplement any provisions herein (including to give
effect to the expectations of Holders), or (iii) to make any other provisions
with respect to matters or questions arising under this Agreement which shall
not be inconsistent with the provisions of this Agreement; provided, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Indenture Trustee, adversely affect in any material respect the interests of any
Holder. No amendment shall be deemed to adversely affect in any material respect
the interests of any Holder who shall have consented thereto, and no Opinion of
Counsel shall be required to address the effect of any such amendment on any
such consenting Holder.

            This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Indenture Trustee with the consent of the
Holders of Notes entitled to at least 66% of the Voting Rights of each affected
Trust 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; provided, however, that no such amendment
shall (i) reduce in any manner the amount of, or delay the timing of, payments
received on Mortgage Loans which are required to be distributed on any Note
without the consent of the Holder of such Security, (ii) adversely affect in any
material respect the interests of the Holders of any Class of Securities in a
manner, other than as described in (i), without the consent of the Holders of
Securities of such Class evidencing at least 66% of the Voting Rights allocated
to such Class, or (iii) modify the consents required by the immediately
preceding clauses (i) and (ii) without the consent of the Holders of all
Securities then outstanding. Notwithstanding any other provision of this
Agreement, for purposes of the giving or withholding of consents pursuant to
this Section 10.01, Securities registered in the name of the Depositor or the
Master Servicer or any Affiliate thereof shall be entitled to Voting Rights with
respect to matters affecting such Securities.

            Notwithstanding any contrary provision of this Agreement, the
Indenture Trustee shall not consent to any amendment to this Agreement unless it
shall have first received an Opinion of Counsel to the effect that such
amendment will not result in the imposition of any tax on any REMIC created
hereby pursuant to the REMIC Provisions or cause any REMIC created hereby to
fail to qualify as a REMIC at any time that any Securities are outstanding.

                                      116
<PAGE>

            Promptly after the execution of any such amendment the Indenture
Trustee shall furnish a copy of such amendment to each Holder.

            It shall not be necessary for the consent of Holders 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 Holders shall be subject to such reasonable regulations as
the Indenture Trustee may prescribe.

            The cost of any Opinion of Counsel to be delivered pursuant to this
Section 10.01 shall be borne by the Person seeking the related amendment, but in
no event shall such Opinion of Counsel be an expense of the Indenture Trustee.

            The Indenture Trustee may, but shall not be obligated to enter into
any amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.

            SECTION 10.02 Recordation of Agreement; Counterparts. To the extent
permitted by applicable law, this Agreement is subject to recordation in all
appropriate public offices for real property records in all the counties or
other comparable jurisdictions in which any or all of the properties subject to
the Mortgages are situated, and in any other appropriate public recording office
or elsewhere, such recordation to be effected by the Master Servicer at the
expense of the Holders, but only upon direction of the Indenture Trustee
accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Holders.

            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 Limitation on Rights of Holders. The death or
incapacity of any Holder shall not operate to terminate this Agreement or the
REMIC Trust, nor entitle such Holder's legal representatives or heirs to claim
an accounting or to take any action or proceeding in any court for a partition
or winding up of the REMIC Trust, nor otherwise affect the rights, obligations
and liabilities of the parties hereto or any of them.

            No Holder shall have any right to vote (except as expressly provided
for herein) or in any manner otherwise control the operation and management of
the REMIC Trust, or the obligations of the parties hereto, nor shall anything
herein set forth, or contained in the terms of any of the Securities, be
construed so as to constitute the Holders from time to time as partners or
members of an association; nor shall any Holder be under any liability to any
third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.

            No Holder shall have any right by virtue of any provision of this
Agreement to institute any suit, action or proceeding in equity or at law upon
or under or

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<PAGE>

with respect to this Agreement, unless (i) such Holder previously shall have
given to the Indenture Trustee a written notice of default and of the
continuance thereof, as hereinbefore provided, and (ii) the Holders of
Securities entitled to at least 25% of the Voting Rights shall have made written
request upon the Indenture Trustee to institute such action, suit or proceeding
in its own name as Indenture Trustee hereunder and shall have offered to the
Indenture Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Indenture
Trustee, for 15 days after its receipt of such notice, request and offer of
indemnity, shall have neglected or refused to institute any such action, suit or
proceeding. It is understood and intended, and expressly covenanted by each
Holder with every other Holder and the Indenture Trustee, that no one or more
Holders of Securities shall have any right in any manner whatsoever by virtue of
any provision of this Agreement to affect, disturb or prejudice the rights of
the Holders of any other of such Securities, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders. For the protection and enforcement of
the provisions of this Section, each and every Holder and the Indenture Trustee
shall be entitled to such relief as can be given either at law or in equity.

            SECTION 10.04 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.

            SECTION 10.05 Notices. All directions, demands and notices hereunder
shall be in writing and shall be deemed to have been duly given when received if
personally delivered at or mailed by first class mail, postage prepaid, or by
express delivery service or delivered in any other manner specified herein, to
(a) in the case of the Depositor, 1585 Broadway, New York, New York 10036, or
such other address or telecopy number as may hereafter be furnished to the
Master Servicer and the Indenture Trustee in writing by the Depositor, (b) in
the case of Long Beach Mortgage Company, 1100 Town & Country Road, Suite 900,
Orange, California 92868, Attention: General Counsel (telecopy number: (714)
543-6847), or such other address or telecopy number as may hereafter be
furnished to the Indenture Trustee and the Depositor in writing by Long Beach
Mortgage Company and (c) in the case of the Indenture Trustee, to the Corporate
Trust Office, or such other address or telecopy number as may hereafter be
furnished to the Master Servicer and the Depositor in writing by the Indenture
Trustee, or (d) in the case of either Trust, to the Owner Trust at Wilmington
Trust Company, Rodney Square North, 1100 N. Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administation. Any notice required or
permitted to be given to a Holder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the register maintained by
the Indenture Trustee. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives such notice. A copy of any notice required to
be telecopied hereunder also shall be mailed to the appropriate party in the
manner set forth above.

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<PAGE>

            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 Notes or the
rights of the Holders thereof.

            SECTION 10.07 Notice to Rating Agencies. The Indenture Trustee shall
use its best efforts promptly to provide notice to the Rating Agencies with
respect to each of the following of which it has actual knowledge:

            (a) Any material change or amendment to this Agreement;

            (b) The occurrence of any Master Servicer Event of Default that has
      not been cured or waived;

            (c) The resignation or termination of the Master Servicer or the
      Indenture Trustee;

            (d) The repurchase or substitution of Mortgage Loans pursuant to or
      as contemplated by Section 2.04;

            (e) The final payment to the Holders of any Class of Securities.

            (f) Any change in the location of the Collection Account or the
      Payment Account;

            (g) Any event that would result in the inability of the Indenture
      Trustee, were it to succeed as Master Servicer, to make advances regarding
      delinquent Mortgage Loans; and

            (h) The filing of any claim under the Master Servicer's blanket bond
      and errors and omissions insurance policy required by Section 3.13 or the
      cancellation or material modification of coverage under any such
      instrument.

            In addition, the Indenture Trustee shall promptly furnish to each
Rating Agency copies of each report to Noteholders described in Section 4.02 and
the Master Servicer, as required pursuant to Section 3.19 and Section 3.20,
shall promptly furnish to each Rating Agency copies of the following:

            (i)   Each  annual   statement  as  to  compliance   described  in
      Section 3.19; and

            (ii) Each annual independent public accountants' servicing report
      described in Section 3.20.

            Any such notice pursuant to this Section 10.07 shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by first class mail,

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<PAGE>

postage prepaid, or by express delivery service to Fitch, Inc., One State Street
Plaza, New York, New York 10007 and to Moody's Investors Service, Inc., 99
Church Street, New York, NY 10048, Attention: MBS Monitoring/Morgan Stanley ABS
Capital I, Inc., Series 2000-1, or such other addresses as the Rating Agencies
may designate in writing to the parties hereto.

            SECTION 10.08 Article and Section References. All article and
section references used in this Agreement, unless otherwise provided, are to
articles and sections in this Agreement.

            SECTION 10.09 Grant of Security Interest. It is the express intent
of the parties hereto that the conveyance of the Mortgage Loans by the Depositor
to the REMIC Trust be, and be construed as, a sale of the Mortgage Loans by the
Depositor and not a pledge of the Mortgage Loans by the Depositor to secure a
debt or other obligation of the Depositor. However, in the event that,
notwithstanding the aforementioned intent of the parties, the Mortgage Loans are
held to be property of the Depositor, then, (a) it is the express intent of the
parties that such conveyance be deemed a pledge of the Mortgage Loans by the
Depositor to the REMIC Trust to secure a debt or other obligation of the
Depositor and (b)(1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the Uniform Commercial Code
as in effect from time to time in the State of New York; (2) the conveyance
provided for in Section 2.01 hereof shall be deemed to be a grant by the
Depositor to the REMIC Trust of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and all amounts payable
to the holders of the Mortgage Loans in accordance with the terms thereof and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Collection Account and the Payment Account, whether in the form of cash,
instruments, securities or other property; (3) the obligations secured by such
security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the Holders of the
Securities issued by the REMIC Trust the benefits of this Agreement relating to
the Mortgage Loans and the REMIC Trust; and (4) notifications to persons holding
such property, and acknowledgments, receipts or confirmations from persons
holding such property, shall be deemed notifications to, or acknowledgments,
receipts or confirmations from, financial intermediaries, bailees or agents (as
applicable) of the REMIC Trust for the purpose of perfecting such security
interest under applicable law. Accordingly, the Depositor hereby grants to the
REMIC Trust a security interest in the Mortgage Loans and all other property
described in clause (2) of the preceding sentence, for the purpose of securing
to the REMIC Trust the performance by the Depositor of the obligations described
in clause (3) of the preceding sentence. Notwithstanding the foregoing, the
parties hereto intend the conveyance pursuant to Section 2.01 to be a true,
absolute and unconditional sale of the Mortgage Loans and assets constituting
the REMIC Trust by the Depositor to the REMIC Trust.

            SECTION 10.10 Limitation of Liability of the Owner Trustee. It is
expressly understood and agreed by the parties hereto that (a) this Indenture is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as

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<PAGE>

Owner Trustee of the REMIC Trust under the REMIC Trust Agreement and the NIMS
Trust under the NIMS Trust Agreement, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the related Trust is made
and intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the related Trust, (c) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually or personally to
perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties to this Indenture and
by any person claiming by, through or under them and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the related Trust or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaking by the Trust under this Indenture or any related documents.

            SECTION 10.11 Third Party Beneficiary. The Owner Trustee shall be an
express third party beneficiary of this Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                      121
<PAGE>

            IN WITNESS WHEREOF, the Depositor, the Master Servicer, the REMIC
Trust, the NIMS Trust and the Indenture Trustee have caused their names to be
signed hereto by their respective officers thereunto duly authorized, in each
case as of the day and year first above written.

                                    MORGAN STANLEY ABS CAPITAL I, INC., as
                                        Depositor

                                    By: /S/
                                       ---------------------------------
                                        Name:   Peter A. Fadel
                                        Title:  Vice President

                                    LONG BEACH MORTGAGE COMPANY,
                                        as Master Servicer

                                    By: /S/
                                       ---------------------------------
                                        Name:   Richard Ladd
                                        Title:  Senior Vice President

                                    BANKERS TRUST COMPANY OF CALIFORNIA,
                                        N.A., as Indenture Trustee

                                    By: /S/
                                       ---------------------------------
                                        Name:   David Co
                                        Title:  Vice President

<PAGE>

                                    MORGAN STANLEY ABS CAPITAL I TRUST 2000-1

                                    By: Wilmington Trust Company, not in its
                                        individual capacity but solely in its
                                        capacity as Owner Trustee

                                    By: /S/
                                       ---------------------------------
                                        Name:   James P. Fadel
                                        Title:  Vice President

                                    MORGAN STANLEY ABS CAPITAL I TRUST 2000-1N

                                    By: Wilmington Trust Company, not in its
                                        individual capacity but solely in its
                                        capacity as Owner Trustee

                                    By: /S/
                                       ---------------------------------
                                        Name:   Patricia A. Evans
                                        Title:  Senior Financial Services
                                        Officer

<PAGE>

                                                                       EXHIBIT A

                         REPRESENTATIONS AND WARRANTIES
                       REGARDING INDIVIDUAL MORTGAGE LOANS

            The Originator hereby represents, warrants and covenants to the
Indenture Trustee, for the benefit of each of the Indenture Trustee, the
Noteholders and to the Depositor that as to each Original Mortgage Loan as of
the Closing Date or as of such date specifically provided herein:

            (a) Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule is true and correct, including, without limitation, the
terms of the Prepayment Charges, if any;

            (b) Term to Maturity. Each Original Mortgage Loan had an original
term to maturity of not greater than 30 years; each Original Mortgage Loan is a
fixed-rate mortgage loan or an adjustable-rate mortgage loan with payments
generally due on the first day of each month and, except with respect to
approximately 0.25% of the Original Mortgage Loans, by outstanding principal
balance of the Original Mortgage Loans as of the Cut-off Date which are Balloon
Loans, each such Mortgage Loan is fully amortizing; with respect to each
Adjustable Rate Mortgage Loan, effective with the first payment due after each
Adjustment Date, the monthly payment amount for each Original Mortgage Loan will
be adjusted to an amount which would amortize fully the outstanding principal
balance of such Mortgage Loan over its remaining term and pay interest at the
Mortgage Rate so adjusted; with respect to each Adjustable Rate Mortgage Loan,
on the first Adjustment Date and on each Adjustment Date thereafter the Mortgage
Rate on each Original Mortgage Loan will be adjusted to equal the sum of the
Index and the related Gross Margin, rounded to the nearest multiple of 0.125%,
subject to the Periodic Rate Cap, the Maximum Mortgage Rate and the Minimum
Mortgage Rate applicable to such Mortgage Loan;

            (c) Geographic Distribution. (i) The Mortgaged Properties securing
the Original Mortgage Loans, measured by Original Scheduled Principal Balance
will not exceed the approximate percentages set forth in the table below, and no
more than approximately 3.00% of the Original Mortgage Loans by Original
Scheduled Principal Balance will be secured by Mortgaged Properties located in
any other single state:

                                      A-1
<PAGE>

                                                Approximate
                                               Concentration
                      State                      Percentage
               -------------------------  ------------------------
               California                          31.68%
               Colorado                             9.16%
               Texas                                4.98%
               New York                             3.44%
               Massachusetts                        3.73%
               Illinois                             3.67%
               Oregon                               3.30%
               Washington                           3.23%
               Michigan                             3.23%

            (ii) as of the Cut-off Date, no more than approximately 0.32% of the
Original Mortgage Loans, by Original Schedule Principal Balance, are secured by
Mortgaged Properties located in any one California zip code area, and no more
than approximately 20.55% of the Original Mortgage Loans, by Original Scheduled
Principal Balance are secured by units in two- to four-family dwellings,
condominiums, town houses, planned unit developments or manufactured housing;
and (iii) at least approximately 79.45% of the Original Mortgage Loans, by
Original Scheduled Principal Balance, are secured by real property with a single
family residence erected thereon;

            (d) Flood Insurance. If the Mortgaged Property securing an Original
Mortgage Loan is identified in the Federal Register by the Federal Emergency
Management Agency ("FEMA") as having special flood hazards, a flood insurance
policy is in effect at the Closing Date which met the requirements of FEMA at
the time such policy was issued;

            (e) Loan to Value Ratio. With respect to each Original Mortgage
Loan, the Loan-to-Value Ratio was less than or equal to 90.00% at the
origination of such Original Mortgage Loan;

            (f) Use. With respect to at least approximately 93.31% of the
Original Mortgage Loans by Original Scheduled Principal Balance, at the time
that the Mortgage Loan was made, the Mortgagor represented that the Mortgagor
would occupy the Mortgaged Property as the Mortgagor's primary residence. With
respect to approximately 6.69% of the Original Mortgage Loans by Original
Scheduled Principal Balance, at the time that the Mortgage Loan was made, the
Mortgagor represented that the Mortgagor would occupy the Mortgaged Property as
the Mortgagor's secondary residence or that the Mortgaged Property would be an
investor property.

            (g) Payments Current. All payments required to be made up to the
Closing Date for the Mortgage Loan under the terms of the Mortgage Note have
been made and credited. Except for approximately 4.20% of the Original Mortgage
Loans, by Original Scheduled Principal Balance, which are 30-59 days Delinquent,
no payment required under the Mortgage Loan is 30 days or more delinquent nor
has any payment

                                      A-2
<PAGE>

under the Mortgage Loan been 30 days or more delinquent at any time since the
origination of the Mortgage Loan;

            (h) No Outstanding Charge. There are no defaults in complying with
the terms of the Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable. The
Originator has not advanced funds, or induced, solicited or knowingly received
any advance of funds by a party other than the Mortgagor, directly or
indirectly, for the payment of any amount required under the Mortgage Loan,
except for interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage Loan proceeds, whichever is earlier, to the day
which precedes by one month the Due Date of the first installment of principal
and interest;

            (i) Original Terms Unmodified. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any respect from
the date of origination, except by a written instrument which has been recorded,
if necessary to protect the interests of the Indenture Trustee, and which has
been delivered to the Indenture Trustee and the terms of which are reflected in
the Mortgage Loan Schedule or included in the Mortgage File. The substance of
any such waiver, alteration or modification has been approved by the title
insurer, if any, to the extent required by the policy, and its terms are
reflected on the Mortgage Loan Schedule. No Mortgagor has been released, in
whole or in part, except in connection with an assumption agreement approved by
the title insurer, to the extent required by the policy, and which assumption
agreement is part of the Mortgage Loan File delivered to the Indenture Trustee
and the terms of which are reflected in the Mortgage Loan Schedule;

            (j) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including, without limitation, the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part, and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto, and no Mortgagor was a debtor in any state or Federal
bankruptcy or insolvency proceeding at the time the Mortgage Loan was
originated;

            (k) Hazard Insurance. Pursuant to the terms of the Mortgage, all
buildings or other improvements upon the Mortgaged Property are insured by a
generally acceptable insurer against loss by fire, hazards of extended coverage
and such other hazards as are customary in the area where the Mortgaged Property
is located, pursuant to insurance policies conforming to the requirements of
Section 3.13 of this Agreement. If required by the Flood Disaster Protection Act
of 1973, as amended, the Mortgage Loan is covered by a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration which policy conforms to Section 3.13 of this Agreement. All
individual insurance policies contain a standard mortgagee clause

                                      A-3
<PAGE>

naming the Seller and its successors and assigns as mortgagee, and all premiums
thereon have been paid. The Mortgage obligates the Mortgagor thereunder to
maintain the hazard insurance policy at the Mortgagor's cost and expense, and on
the Mortgagor's failure to do so, authorizes the holder of the Mortgage to
obtain and maintain such insurance at such Mortgagor's cost and expense, and to
seek reimbursement therefor from the Mortgagor. Where required by state law or
regulation, the Mortgagor has been given an opportunity to choose the carrier of
the required hazard insurance; provided, that the policy is not a "master" or
"blanket" hazard insurance policy covering a condominium, or any hazard
insurance policy covering the common facilities of a planned unit development.
The hazard insurance policy is the valid and binding obligation of the insurer,
is in full force and effect, and will be in full force and effect and inure to
the benefit of the Indenture Trustee upon the consummation of the transactions
contemplated by this Agreement. The Originator has not engaged in, and has no
knowledge of the Mortgagor's having engaged in, any act or omission which would
impair the coverage of any such policy, the benefits of the endorsement provided
for herein, or the validity and binding effect of either, including, without
limitation, no unlawful fee, commission, kickback or other unlawful compensation
or value of any kind has been or will be received, retained or realized by any
attorney, firm or other person or entity, and no such unlawful items have been
received, retained or realized by the Seller;

            (l) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law, including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity and disclosure laws applicable to the Mortgage Loan
have been complied with, the consummation of the transactions contemplated
hereby will not involve the violation of any such laws or regulations, and the
Originator shall maintain in its possession, available for the Indenture
Trustee's inspection, and shall deliver to the Indenture Trustee upon demand,
evidence of compliance with all such requirements;

            (m) No Satisfaction of Mortgage. The Mortgage has not been
satisfied, cancelled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in whole
or in part, nor has any instrument been executed that would effect any such
release, cancellation, subordination or rescission. The Originator has not
waived the performance by the Mortgagor of any action, if the Mortgagor's
failure to perform such action would in the absence of such waiver have caused
the Mortgage Loan to be in default, nor has the Originator waived any default
resulting from any action or inaction by the Mortgagor;

            (n) Location and Type of Mortgaged Property. The Mortgaged Property
is located in the state identified in the Mortgage Loan Schedule and consists of
a single parcel of real property with a detached single family residence erected
thereon, or a two- to four-family dwelling, or an individual condominium unit in
a low-rise condominium project, or an individual unit in a planned unit
development or a de minimis planned unit development; provided, however, that
any condominium unit or planned unit development shall conform with the
applicable Fannie Mae requirements regarding such dwellings and that no Mortgage
Loan is secured by a single parcel of real property with a cooperative housing
corporation erected thereon, a log home, a mobile

                                      A-4
<PAGE>

home, a geodesic domed or subterranean structure, or a condominium over four
stories. In addition, no single parcel of real property measures over ten acres
nor is any parcel zoned for commercial use. As of the date of origination, no
portion of the Mortgaged Property was used for commercial purposes, and since
the date of origination, no portion of the Mortgaged Property has been used for
commercial purposes. With respect to any Mortgage Loan secured by a Mortgaged
Property improved by manufactured housing, (i) the related manufactured housing
unit is permanently affixed to the land, and (ii) the related manufactured
housing unit and the related land are subject to a Mortgage properly filed in
the appropriate public recording office and naming the Seller as mortgagee;

            (o) Valid First Lien. The Mortgage is a valid, subsisting,
enforceable and perfected first lien on the Mortgaged Property, including all
buildings and improvements on the Mortgaged Property and all installations and
mechanical, electrical, plumbing, heating and air conditioning systems located
in or annexed to such buildings, and all additions, alterations and replacements
made at any time with respect to the foregoing, to the extent any of the
foregoing is granted by the related Mortgage. The lien of the Mortgage is
subject only to:

            (1)   the lien of current real property taxes and  assessments not
      yet due and payable;

            (2) covenants, conditions and restrictions, rights of way, easements
      and other matters of the public record as of the date of recording
      acceptable to prudent mortgage lending institutions generally and
      specifically referred to in the lender's title insurance policy delivered
      to the originator of the Mortgage Loan and (a) specifically referred to or
      otherwise considered in the appraisal made for the originator of the
      Mortgage Loan or (b) which do not adversely affect the Appraised Value of
      the Mortgaged Property set forth in such appraisal; and

            (3) other matters to which like properties are commonly subject
      which do not materially interfere with the benefits of the security
      intended to be provided by the Mortgage.

            Any security agreement, chattel mortgage or equivalent document
related to and delivered in connection with the Mortgage Loan establishes and
creates a valid, subsisting, enforceable and perfected first lien and first
priority security interest on the property described therein and the Originator
has full right to sell and assign the same to the Seller;

            (p) Validity of Mortgage Documents. The Mortgage Note and the
Mortgage and any other agreement executed and delivered by a Mortgagor in
connection with a Mortgage Loan are genuine, and each is the legal, valid and
binding obligation of the maker thereof enforceable in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization, receivership, moratorium or other similar laws of
general applicability affecting the enforcement of creditors' rights and (ii)
the application of general principles of equity (including the availability of
equitable remedies), including, without limitation, concepts of materiality,

                                      A-5
<PAGE>

reasonableness, public policy, good faith and fair dealing. All parties to the
Mortgage Note, the Mortgage and any other such related agreement had legal
capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage
Note, the Mortgage and any such agreement, and the Mortgage Note, the Mortgage
and any other such related agreement have been duly and properly executed by
other such related parties;

            (q) Full Disbursement of Proceeds. The Mortgage Loan has been closed
and the proceeds of the Mortgage Loan have been fully disbursed and there is no
requirement for future advances thereunder, and any and all requirements as to
completion of any on-site or off-site improvement and as to disbursements of any
escrow funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing the Mortgage Loan and the recording of the
Mortgage were paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage;

            (r) Ownership. As of the Originator's Transfer Date, the Originator
was the sole owner of record and holder of the Mortgage Loan. As of the
Originator's Transfer Date, the Mortgage Loan was not assigned or pledged, and
the Originator had good, indefeasible and marketable title thereto, and has full
right to transfer and sell the Mortgage Loan to the Seller free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to sell and assign each
Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement and following the
sale of each Mortgage Loan, the Seller owned such Mortgage Loan free and clear
of any encumbrance, equity, participation interest, lien, pledge, charge, claim
or security interest;

            (s) Doing Business. All parties which have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (2) either (i) organized
under the laws of such state, or (ii) qualified to do business in such state, or
(iii) a federal savings and loan association, a savings bank or a national bank
having a principal office in such state, or (3) not doing business in such
state;

            (t) LTV. No Mortgage Loan has an LTV greater than 90%;

            (u) Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title, the form and substance of
which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to Fannie Mae or Freddie Mac with respect to Mortgage Loans
and each such title insurance policy is issued by a title insurer acceptable to
Fannie Mae or Freddie Mac and qualified to do business in the jurisdiction where
the Mortgaged Property is located, insuring the Seller, its successors and
assigns, as to the first priority lien of the Mortgage in the original

                                      A-6
<PAGE>

principal amount of the Mortgage Loan (or to the extent a Mortgage Note provides
for negative amortization, the maximum amount of negative amortization in
accordance with the Mortgage), subject only to the exceptions contained in
clauses (1), (2) and (3) of paragraph (o) of this Exhibit A, and in the case of
Adjustable Rate Mortgage Loans, against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment to the Mortgage Interest Rate and Monthly Payment.
Where required by state law or regulation, the Mortgagor has been given the
opportunity to choose the carrier of the required mortgage title insurance.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress, and against encroachments by or upon the Mortgaged Property or any
interest therein. The Originator, its successor and assigns, are the sole
insureds of such lender's title insurance policy, and such lender's title
insurance policy is valid and remains in full force and effect and will be in
force and effect upon the consummation of the transactions contemplated by this
Agreement. No claims have been made under such lender's title insurance policy,
and, to the Originator's knowledge, no prior holder of the related Mortgage,
including the Originator, has done, by act or omission, anything which would
impair the coverage of such lender's title insurance policy, including, without
limitation, no unlawful fee, commission, kickback or other unlawful compensation
or value of any kind has been or will be received, retained or realized by any
attorney, firm or other person or entity, and no such unlawful items have been
received, retained or realized by the Originator;

            (v) No Defaults. There is no default, breach, violation or event
which would permit acceleration existing under the Mortgage or the Mortgage Note
and no event which, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach, violation or
event which would permit acceleration, and neither the Originator nor its
predecessors or successors have waived any default, breach, violation or event
which would permit acceleration;

            (w) No Mechanics' Liens. As of the date of origination, there are no
mechanics' or similar liens or claims which have been filed for work, labor or
material (and no rights are outstanding that under law could give rise to such
liens) affecting the related Mortgaged Property which are or may be liens prior
to, or equal or coordinate with, the lien of the related Mortgage;

            (x) Location of Improvements; No Encroachments. All improvements
which were considered in determining the Appraised Value of the Mortgaged
Property lay wholly within the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining properties encroach upon
the Mortgaged Property. As of the date of origination, there are no improvements
located on or being part of the Mortgaged Property in violation of any
applicable zoning law or regulation;

            (y) Origination; Payment Terms. The Mortgage Loan was originated by
a Mortgagee approved by the Secretary of Housing and Urban Development pursuant
to Sections 203 and 211 of the National Housing Act, a savings and loan
association, a savings bank, a commercial bank, credit union, insurance company
or other similar institution which is supervised and examined by a federal or
state authority. The

                                      A-7
<PAGE>

Mortgage Loan was originated in accordance with the Underwriting Guidelines.
Principal payments on the Mortgage Loan commenced no more than sixty days after
funds were disbursed in connection with the Mortgage Loan. No Mortgage Loan has
a Mortgage Note date that is prior to January 1, 2000. The Mortgage Interest
Rate is as set forth on the Mortgage Loan Schedule hereto (including in the case
of Adjustable Rate Mortgage Loans, the interest rate and payment limitations set
forth on the Mortgage Loan Schedule hereto). All Mortgage Loans have Due Dates
on the first day of each Month. Each Mortgage Note is payable in equal monthly
installments of principal and interest, which installments of interest (other
than Balloon Loans with respect to their final payment), with respect to
Adjustable Rate Mortgage Loans, are subject to change due to the adjustments to
the Mortgage Interest Rate on each Interest Rate Adjustment Date, with interest
calculated and payable in arrears. Except with respect to any Mortgage Loan
constituting a Balloon Loan, the monthly principal payments on each Mortgage
Loan is sufficient to amortize the Mortgage Loan fully by the stated maturity
date, over an original term of not more than thirty years from commencement of
amortization. There is no negative amortization allowed in the terms of any
Mortgage Note;

            (z) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure. There is no homestead or other exemption available to a
Mortgagor which would interfere with the right to sell the Mortgaged Property at
a trustee's sale or the right to foreclose the Mortgage;

            (aa) Index. With respect to Adjustable Rate Mortgage Loans, the
Index set forth in the Mortgage Note is LIBOR;

            (bb) Occupancy of the Mortgaged Property. As of the date of
origination the Mortgaged Property is lawfully occupied under applicable law.
All inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property and, with respect to
the use and occupancy of the same, including, but not limited to, certificates
of occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities. The Mortgagor represented at the time of
origination of the Mortgage Loan that the Mortgagor would occupy the Mortgaged
Property as the Mortgagor's primary residence (except as set forth on the
Mortgage Loan Schedule attached hereto);

            (cc) No Additional Collateral. The Mortgage Note is not and has not
been secured by any collateral except the lien of the corresponding Mortgage and
the security interest of any applicable security agreement or chattel mortgage
referred to in paragraph (k) above;

            (dd) Deeds of Trust. In the event the Mortgage constitutes a deed of
trust, a trustee, authorized and duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is named in the
Mortgage, and no fees or expenses are or will become payable by the Indenture
Trustee or the Trustee to the

                                      A-8
<PAGE>

trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;

            (ee) Delivery of Mortgage Documents. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other documents required to be
delivered under the Indenture for each Mortgage Loan have been delivered to the
Indenture Trustee;

            (ff) Transfer of Mortgage Loans. The Assignment of Mortgage is in
recordable form, other than the assignee's name and recording information not
yet returned from the recording office, and is acceptable for recording under
the laws of the jurisdiction in which the Mortgaged Property is located. The
transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by
the Originator are not subject to the bulk transfer or similar statutory
provisions in effect in any applicable jurisdiction;

            (gg) Due-On-Sale. With respect to each Fixed Rate Mortgage Loan, the
Mortgage contains an enforceable provision for the acceleration of the payment
of the unpaid principal balance of the Mortgage Loan in the event that the
Mortgaged Property is sold or transferred without the prior written consent of
the mortgagee thereunder;

            (hh) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any separate
account established by the Originator, the Mortgagor, or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor nor does it contain
any other similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature;

            (ii) Assumability. With respect to each Adjustable Rate Mortgage
Loan, the Mortgage Loan Documents provide that after the related first Interest
Rate Adjustment Date, a related Mortgage Loan may only be assumed if the party
assuming such Mortgage Loan meets certain credit requirements stated in the
Mortgage Loan Documents;

            (jj) Consolidation of Future Advances. Any future advances made to
the Mortgagor prior to the Cut-off Date have been consolidated with the
outstanding principal amount secured by the Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term.
The lien of the Mortgage securing the consolidated principal amount is expressly
insured as having first lien priority by a title insurance policy or an
endorsement to the policy insuring the mortgagee's consolidated interest. The
consolidated principal amount does not exceed the original principal amount of
the Mortgage Loan;

            (kk) Mortgaged Property Undamaged. The Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect adversely the value of the Mortgaged
Property as security

                                      A-9
<PAGE>

for the Mortgage Loan or the use for which the premises were intended and each
Mortgaged Property is in good repair. There have not been any condemnation
proceedings with respect to the Mortgaged Property and the Originator has no
knowledge of any such proceedings in the future;

            (ll) Collection Practices; Escrow Payments; Interest Rate
Adjustments. The origination, collection and other servicing practices used by
the Originator with respect to the Mortgage Loan have been in all respects in
compliance with Accepted Servicing Practices, applicable laws and regulations,
and have been in all respects legal and proper. With respect to Escrow Payments,
if any, all such payments are in the possession of, or under the control of, the
Originator and there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made. All Escrow
Payments have been collected in full compliance with state and federal law. An
escrow of funds is not prohibited by applicable law and, if established, is in
an amount sufficient to pay for every item that remains unpaid and has been
assessed but is not yet due and payable. No Escrow Payments or other charges or
payments due the Originator have been capitalized under the Mortgage or the
Mortgage Note. All Mortgage Interest Rate adjustments have been made in strict
compliance with state and federal law and the terms of the related Mortgage
Note. Any interest required to be paid pursuant to state, federal and local law
has been properly paid and credited;

            (mm) Conversion to Fixed Interest Rate. With respect to Adjustable
Rate Mortgage Loans, the Mortgage Loan is not a Convertible Mortgage Loan;

            (nn) Other Insurance Policies. No action, inaction or event has
occurred and no state of facts exists or has existed that has resulted or will
result in the exclusion from, denial of, or defense to coverage under any
insurance policy related to the Mortgage Loans, irrespective of the cause of
such failure of coverage. In connection with the placement of any such
insurance, no commission, fee, or other compensation has been or will be
received by the Originator or by any officer, director, or employee of the
Seller or any designee of the Originator or any corporation in which the
Originator or any officer, director, or employee had a financial interest at the
time of placement of such insurance;

            (oo) No Violation of Environmental Laws. To the best of the
Originator's knowledge, the Mortgaged Property is free from any and all toxic or
hazardous substances and there exists no violation of any local, state or
federal environmental law, rule or regulation;

            (pp) Soldiers' and Sailors' Civil Relief Act. The Mortgagor has not
notified the Originator, and the Originator has no knowledge of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940;

            (qq) Appraisal. The Mortgage File contains an appraisal of the
related Mortgaged Property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, acceptable to the Originator, who had no
interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof, and whose

                                      A-10
<PAGE>

compensation is not affected by the approval or disapproval of the Mortgage
Loan, and the appraisal and appraiser both satisfy the requirements of Title XI
of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and
the regulations promulgated thereunder, all as in effect on the date the
Mortgage Loan was originated;

            (rr) Advances. There are no P&I Advances or Servicing Advances
outstanding with respect to such Mortgage Loan;

            (ss) Construction or Rehabilitation of Mortgaged Property. No
Mortgage Loan was made in connection with the construction or rehabilitation of
a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged
Property;

            (tt) Value of Mortgaged Property. Taking into consideration that the
Mortgage Loans are subprime mortgage loans, the Originator has no knowledge of
any circumstances existing that could reasonably be expected to adversely affect
the value or the marketability of any Mortgaged Property or Mortgage Loan;

            (uu) Credit Information. As to each consumer report (as defined in
the Fair Credit Reporting Act, Public Law 91-508) or other credit information
furnished by the Originator to the Seller, the Depositor and the Indenture
Trustee, that Originator has full right and authority and is not precluded by
law or contract from furnishing such information to the Seller, the Depositor
and the Indenture Trustee;

            (vv) Leaseholds. If the Mortgage Loan is secured by a long-term
residential lease, (1) the lessor under the lease holds a fee simple interest in
the land or is the master lessee under a master ground lease encompassing the
land; (2) the terms of such lease expressly permit the mortgaging of the
leasehold estate, the assignment of the lease without the lessor's consent and
the acquisition by the holder of the Mortgage of the rights of the lessee upon
foreclosure or assignment in lieu of foreclosure or provide the holder of the
Mortgage with substantially similar protections; (3) the terms of such lease do
not (a) allow the termination thereof upon the lessee's default without the
holder of the Mortgage being entitled to receive written notice of, and
opportunity to cure, such default, (b) allow the termination of the lease in the
event of damage or destruction as long as the Mortgage is in existence, (c)
prohibit the holder of the Mortgage from being insured (or receiving proceeds of
insurance) under the hazard insurance policy or policies relating to the
Mortgaged Property or (d) permit any increase in rent other than pre-established
increases set forth in the lease; (4) the original term of such lease is not
less than 15 years; (5) the term of such lease does not terminate earlier than
five years after the maturity date of the Mortgage Note; and (6) the Mortgaged
Property is located in a jurisdiction in which the use of leasehold estates in
transferring ownership in residential properties is a generally accepted
practice;

            (ww) Section 32 Loans. None of the Mortgage Loans is a "High Rate,
High Cost" loan or Section 226.32 loan ("Section 32 Loans") as described in
Regulation Z of the Truth in Lending Act;

                                      A-11
<PAGE>

            (xx) Texas Home Equity Loans. With respect to any Mortgage Loan
which is a Texas Home Equity Loan, any and all requirements of Section 50,
Article XVI of the Texas Constitution applicable to Texas Home Equity Loans
which were in effect at the time of the origination of the Mortgage Loan have
been complied with; and

            (yy) No Fraud, Etc. No fraud, error, omission, misrepresentation, or
similar occurrence with respect to a Mortgage Loan has taken place on the part
of any person, including, without limitation, the Mortgagor, any appraiser, any
builder or developer, or any other party involved in the origination of the
Mortgage Loan.

                                      A-12
<PAGE>

                                                                     EXHIBIT B-1

                INITIAL CERTIFICATION BY THE INDENTURE TRUSTEE
                          CONCERNING THE MORTGAGE FILES

            In accordance with the provisions of Section 2.06 of the Sale and
Servicing Agreement, dated as of July 1, 2000 (the "Sale and Servicing
Agreement"), among the Company, as depositor, Morgan Stanley ABS Capital I Trust
2000-1 (the "REMIC Trust"), Morgan Stanley ABS Capital I Trust 2000-1N (the
"NIMS Trust"), Long Beach Mortgage Company, as originator and master servicer
(the "Master Servicer"), and Bankers Trust Company of California, N.A., as
indenture trustee (the "Indenture Trustee"), the Indenture Trustee hereby
certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in the exception report annexed thereto as not being covered by such
certification), it has reviewed the documents delivered to it pursuant to
Section 2.01 of the Sale and Servicing Agreement and (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(e) of the Sale and Servicing Agreement) required to be delivered to
it are in its possession, (ii) such documents have been reviewed by it and are
not mutilated, torn or defaced unless initialed by the related borrower and
relate to such Mortgage Loan and (iii) based on its examination and only as to
the foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i) through (iii), (ix), (x), (xiii), and (xv) of the
definition of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File.

            The Indenture Trustee has made no independent examination of such
documents beyond the review specifically required in the Sale and Servicing
Agreement and was under no duty or obligation (i) to inspect, review or examine
any such documents, instruments, certificates or other papers to determine
whether they are genuine, enforceable, or appropriate for the represented
purpose or whether they have actually been recorded or that they are other than
what they purport to be on their face or (ii) to determine whether any Mortgage
File should include any of the documents specified in Section 2.01(e) or the
Sale and Servicing Agreement.

            Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Sale and Servicing Agreement.

                                    BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                       as Indenture Trustee

                                    By:
                                       ---------------------------------------
                                       Name:
                                       Title:

Dated: July __, 2000

                                     B-1-1
<PAGE>

                                                                     EXHIBIT B-2

                 FINAL CERTIFICATION BY THE INDENTURE TRUSTEE
                          CONCERNING THE MORTGAGE FILES

            In accordance with the provisions of Section 2.06 of the Sale and
Servicing Agreement, dated as of July 1, 2000 (the "Sale and Servicing
Agreement"), among the Company, as depositor, Morgan Stanley ABS Capital I Trust
2000-1 (the "REMIC Trust"), Morgan Stanley ABS Capital I Trust 2000-1N (the
"NIMS Trust"), Long Beach Mortgage Company, as originator and master servicer
(the "Master Servicer"), and Bankers Trust Company of California, N.A., as
indenture trustee (the "Indenture Trustee"), the Indenture Trustee hereby
certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in the exception report annexed thereto as not being covered by such
certification), it has reviewed the documents delivered to it pursuant to
Section 2.01 of the Sale and Servicing Agreement and (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(e) of the Sale and Servicing Agreement) required to be delivered to
it are in its possession, (ii) such documents have been reviewed by it and are
not mutilated, torn or defaced unless initialed by the related borrower and
relate to such Mortgage Loan and (iii) based on its examination and only as to
the foregoing, the information set forth in the Mortgage Loan Schedule
accurately reflects information set forth in the Mortgage File.

            The Indenture Trustee has made no independent examination of such
documents beyond the review specifically required in the Sale and Servicing
Agreement and was under no duty or obligation (i) to inspect, review or examine
any such documents, instruments, certificates or other papers to determine
whether they are genuine, enforceable, or appropriate for the represented
purpose or whether they have actually been recorded or that they are other than
what they purport to be on their face or (ii) to determine whether any Mortgage
File should include any of the documents specified in Section 2.01(e) or the
Sale and Servicing Agreement.

            Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Sale and Servicing Agreement.

                                    BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
                                       as Indenture Trustee

                                    By:
                                       ---------------------------------------
                                       Name:
                                       Title:

Dated: _______, 2000

                                      B-2-1
<PAGE>

                                                                       EXHIBIT C

                        REQUEST FOR RELEASE OF DOCUMENTS

                                                           -----------, -----

Bankers Trust Company of California, N.A.,
   as Indenture Trustee
1761 East St. Andrew Place
Santa Ana, California 97205

            Re:   Sale and  Servicing  Agreement,  dated as of July 1, 2000
                  among Morgan  Stanley ABS Capital I Trust 2000-1,  Morgan
                  Stanley ABS Capital I Trust  2000-1N,  Morgan Stanley ABS
                  Capital I, Inc., Long Beach Mortgage  Company,  as master
                  servicer, and Bankers Trust Company of California,  N.A.,
                  as indenture trustee
                  ---------------------------------------------------------

            In connection with the administration of the pool of Mortgage Loans
held by Bankers Trust Company of California, N.A., as Indenture Trustee, for the
benefit of the Noteholders, we request the release, and acknowledge receipt, of
the (Mortgage File/[specify document]) for the Mortgage Loan described below,
for the reason indicated.

Mortgagor's Name, Address & Zip Code:
------------------------------------

Mortgage Loan Number:
--------------------

Reason for Requesting Documents (check one)
-------------------------------

____   1.   Mortgage Loan paid in full
                  (Master Servicer hereby certifies that all amounts
                  received in connection therewith have been credited to
                  the Collection Account.)

____  2.    Mortgage Loan liquidated
                  (Master Servicer hereby certifies that all proceeds of
                  foreclosure, insurance or other liquidation have been
                  finally received and credited to the Collection Account.)

____  3.    Mortgage Loan in foreclosure

                                    C-1
<PAGE>

____  4.     Mortgage Loan repurchased pursuant to Section 8.01 of the Sale
             and Servicing Agreement.

____  5.    Mortgage Loan repurchased or substituted pursuant to Article II of
            the Sale and Servicing Agreement (Master Servicer hereby certifies
            that the repurchase price or Substitution Shortfall Amount has been
            credited to the Payment Account and that the substituted mortgage
            loan is a Qualified Substitute Mortgage Loan.)

____  6.    Other
            (explain)___________________________________________________________

            If box 1 or 2 above is checked, and if all or part of the Mortgage
File was previously released to us, please release to us our previous receipt on
file with you, as well as any additional documents in your possession relating
to the above specified Mortgage Loan.

            If box 3, 4, 5 or 6 above is checked, upon our return of all of the
above documents to the Indenture Trustee, please acknowledge your receipt by
signing in the space indicated below, and returning this form.

                                    LONG BEACH MORTGAGE COMPANY, as
                                        Master Servicer

                                    By:
                                       ---------------------------------
                                        Name:
                                        Title:

Documents returned to Indenture Trustee:

BANKERS TRUST COMPANY OF
    CALIFORNIA, N.A.,
    as Indenture Trustee

By:
   ---------------------------
    Name:
    Title:
    Date:

                                      C-2

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