Document:

Exhibit 4.9 

		GUARANTY NO. 2.010.391-4

PRIVATE AGREEMENT FOR THE ESTABLISHMENT OF GUARANTEES AND OTHER COVENANTS

The parties to this agreement are:

A – BANCO BRADESCO S.A., headquartered in Cidade de Deus, Municipality and Jurisdictional District of Osasco, state of São Paulo, [Brazil], federal tax registry
number at the Ministry of Finance CNPJ/MF 60.746.948/0001 -12, hereinbelow referred to as the GUARANTOR; 

B- TIM NORDESTE TELECOMUNICAÇÕES S.A., headquartered at Avenida Ayrton Senna da Silva 1633, Piedade, Jaboatão dos Guararapes, state of Pernambuco,
[Brazil], federal tax registry number at the Ministry of Finance CNPJ/MF 02.336.993/0001 -00, hereinbelow referred to as the SECURED PARTY; and 

C – TELE NORDESTE CELULAR TELECOMUNICAÇÕES S.A., headquartered at Avenida Ayrton Senna da Silva 1633, Piedade, Jaboatão dos Guararapes, state of
Pernambuco, [Brazil], federal tax registry number at the Ministry of Finance CNPJ/MF 02.558.115/0001 -21, as surety of the promissory note of guaranty referred to hereinbelow and joint debtor, hereinafter referred to as SURETY. 

     The aforementioned parties, on their own behalf and through their legal representatives, all of whom undersign this document, hereby agree to the following: 

	 	
1.	
In need of a guaranty that would secure fulfillment of the obligations undertaken in the Financing Agreement by means of a Public Deed of Credit, the SECURED PARTY resorted to the GUARANTOR. The latter proposed to
provide said guaranty, with Banco do Nordeste do Brasil S.A. as BENEFICIARY, in the amount of twenty million reais (R$20,000,000.00), plus interest payments, commissions, the contractual penalty, expenses and other required charges, to remain in
force until the obligations assured by it are finally discharged.	
	 	 	
SOLE PARAGRAPH: the value of the guaranty may be reduced by means of formal communication from the SECURED PARTY to the GUARANTOR, with the BENEFICIARY’s consent. This
communication shall be formalized by means of a letter sent to the GUARANTOR’s Department of Loans and Financings, Sector of Guaranties (Departamento de Empréstimos e Financiamentos do FIADOR, Setor de Fianças), located at Cidade
de Deus, s/no, Vila Yara, Osasco-SP, CEP 06029-900, or by means of an “e-mail” transmitted to the following address: 4130.celula54@bradesco.com.br.	
	 	
2.      		
For providing the guaranty mentioned in the clause above, the SECURED PARTY shall pay the GUARANTOR, as remuneration, a commission of one per cent (1.00%) p.a. of the guaranteed amount, payable on a quarterly and
subsequent basis, through debit to the current account no 77.050-7, which the SECURED PARTY holds at Branch 3208-5/Dantas Barreto, Urb. Recife, PE., of Banco Bradesco S.A.	
	 	
3.      		
The SECURED PARTY hereby authorizes the GUARANTOR, irrevocably and unchangeably, and pursuant to the law, to debit to its current account, referred above, the amounts that are owed in connection with this
agreement.	
	 	
4.      		
As the obligation hereby guaranteed is subject to increases, such as interest on payment past due, fines, monetary restatement and other legal charges, the GUARANTOR is hereby authorized to adopt an identical procedure
to update the guaranty as well.	
	 	
5.      		
If and when the obligation that is the subject of Clause 1 becomes payable, the SECURED PARTY shall promptly settle it and deliver to the GUARANTOR legitimate proof of payment supplied by the BENEFICIARY, together with
the letter of guaranty and any eventual addendum signed by the GUARANTOR or, in the absence of such documents, a document whereby the BENEFICIARY declares the guaranty to be terminated and of no further effect.	
	 	
6.      		
Should the SECURED PARTY fail to discharge the obligation covered by this guaranty, once said guaranty becomes payable, the GUARANTOR may settle it, regardless of any notice, advice or judicial or extrajudicial
summons. In this case, the SECURED PARTY will refund the GUARANTOR for the sums the latter has disbursed to settle the guaranteed obligation, within twenty-four (24) hours, as from when the GUARANTOR submits a request to this effect in writing to
the SECURED PARTY.	
	 	
7.      		
Any amount owed by the SECURED PARTY, by virtue of this agreement, that is past due and unpaid shall be regarded as being in arrears, the amount owed becoming liable for interest on arrears of one percent (1%) per
month or fraction thereof, plus remunerative interest payments at rates equal to 100% of the CDI (Interbank Certificate of Deposit) rates and a fine of two percent (2%) per month, on the ascertained amount.	
	 	
8.      		
For greater ease of execution of any credits due to the GUARANTOR pursuant to this agreement, the SECURED PARTY hereby issues and delivers to said GUARANTOR a promissory note for payment, with full replacement effect,
for the amount of thirty million reais (R$30,000,000.00), equal to 150% of the guaranteed amount, guaranteed by the SURETY named under letter “C” of the opening of this agreement. Whenever the value of the promissory note becomes lower
than the proportion established herein, the SECURED PARTY shall deliver to the GUARANTOR a complementary promissory note, in order to maintain the same proportion of the guaranty hereby established.	
	 	 	
The new promissory notes shall have the same characteristics of the promissory note that is being issued and delivered hereby.	
	 	 	
SOLE PARAGRAPH: The SURETY for the promissory note referred to in the caption of this clause is also present, at this act, as joint debtor, expressly concurring with what is
hereby agreed to, holding itself unconditionally responsible, together with the SECURED PARTY, irrevocably and unchangeably, for the full discharge of all the obligations herein, financial or otherwise, that it hereby undertakes.	
	 	
9.      		
The guarantee hereby established shall remain fully in effect up until complete and final settlement of all of the SECURED PARTY’s obligations has occurred. Return of the original copy of the letter of guaranty
plus any eventual addendum, or delivery of a confirmatory official document issued by the party benefited by the guaranty to the GUARANTOR shall constitute appropriate proof of said guaranty’s termination.	
	 	
10.      		
Failure by the GUARANTOR to exercise any of the rights and possibilities to which it is entitled by virtue of this agreement, as well a eventual tolerance of delay in the discharge of its obligations by the SECURED
PARTY shall in no way affect such rights and possibilities, nor shall they constitute a precedent, novation or modification hereof.	
	 	
11.      		
The SECURED PARTY and its SURETY shall not be allowed to object, under any pretext or justification whatsoever, regardless of how relevant it may be, to payment of the guaranty when so requested by the
BENEFICIARY.	
	 

 

		GUARANTY
          NO. 2.010.391-4

	 	
12.      		
Should it become necessary to resort to judicial means for the settlement of any doubts or issues resulting from this agreement, the losing party shall be responsible for the expenses of the legal proceedings and for
legal fees.	
	 	
13.      		
The SECURED PARTY and the SURETY hereby declare having been aware, in advance, of all clauses and conditions of this agreement and that they expressly agree to all its terms.	
	 	
14.      		
The parties undersigning this agreement declare, under the penalties of the law, that they are the legitimate legal representatives of the SECURED PARTY and of the SURETY, being able to undertake the obligations agreed
to hereby, pursuant to the current contracts / articles of incorporation of the parties to this agreement.	
	 	
15.      		
The court of the jurisdictional district of Osasco, state of São Paulo, [Brazil] is hereby elected for the settlement of all issues that may ensue from this agreement.	
	 	
16.      		
And being thus in agreement with everything established herein, the parties sign this document in three (3) copies of like tenor, to one effect, together with the witnesses named below.	
	 

  
    
      
        
          Osasco, June 24, 2004.

      

    

  

	
GUARANTOR: 
		 
		
[two illegible signatures] [rubber stamp]: Elias Bortniuk [illegible portion of stamp] 
	
	 

		 
		
[rubber stamp]: Antonio Geraldo Majella [illegible portion of stamp] 
	
	 

		 
		
BANCO BRADESCO S.A. 
	
	 	 	 
	
SECURED PARTY: 
		 
		
[illegible signature]
	
	 	 	

	 

		 
		
TIM NORDESTE TELECOMUNICAÇÕES S.A. 
	
	 	 	 
	
SURETY: 
		 
		
[two illegible signatures]
	
	 	 	

	 	 	 TELE NORDESTE
    CELULAR TELECOMUNICAÇÕES S.A. 

	
WITNESSES: 
		 

		 

	
	 	 	 
	 [illegible signature] 
		
[no signature]
	
	

		

	
	
NAME: [written by hand] 
		
NAME: 
		 

	
	
Marcel A. B. Andrade 
		 

		 

	
	
Individuals’ Taxpayers’ Registry – CPF 793.101.174-00 
		 

		 

	

PROMISSORY NOTE

AMOUNT: One hundred and twenty-seven million, nine hundred and seventy-eight thousand three hundred and three reais (R$127,978,303.00)

GUARANTY NUMBER 2013901-3

MATURITY: at sight.

Through this PROMISSORY NOTE, we shall pay to BANCO BRADESCO S.A., headquartered in Cidade de Deus, Municipality and Jurisdictional District of Osasco,
      state of São Paulo, [Brazil], federal tax registry number at the Ministry of Finance CNPJ/MF 60.746.948/0001 -12, or to its order, in the town of Osasco, state of São Paulo, the sum of one hundred and twenty-seven million, nine hundred
      and seventy-eight thousand three hundred and three reais (R$127,978,303.00) in the currency of this country. 

Osasco, State of São Paulo, April 27, 2005.

ISSUER:

[illegible signature]

[rubber stamp]: 

Mário Cesar Pereira de Araújo – President 

TIM NORDESTE TELECOMUNICAÇÕES S.A.

Tax registration number CNPJ/MF 02.36.993/0001-00

SURETY(IES):

[two illegible signatures]

NAME: TIM PARTICIPAÇÕES S.A.

Tax registration number CNPJ/MF 02.558.115/0001-21

 

[illegible signature]

[rubber stamp]: Walmir Kessell – TIM – Finance
and Treasury<PAGE>

                                                                    EXHIBIT 10.1

                       FEDERAL HOME LOAN BANK OF NEW YORK
                     MORTGAGE PARTNERSHIP FINANCE(R) PROGRAM
                  PARTICIPATING FINANCIAL INSTITUTION AGREEMENT
                                 [purchase only]

      THIS PARTICIPATING FINANCIAL INSTITUTION AGREEMENT ("Contract") is dated
as of __________________________, 20___ between the participating financial
institution (the "PFI") that signs this document and the FEDERAL HOME LOAN BANK
OF NEW YORK (the "Bank"), a corporation organized and existing under the laws of
the United States of America.

I.    GENERAL INFORMATION

      This article contains important basic information about this Contract.

      1.1.  Purpose of Contract. The purpose of this Contract is:

            (a) to establish the PFI as an approved seller of mortgages to the
      Bank under the MORTGAGE PARTNERSHIP FINANCE ("MPF(R)") Program, a program
      established by the Federal Home Loan Bank of Chicago (in such capacity,
      the "MPF Provider");

            (b) to establish the terms and conditions for the origination of
      those mortgages which the Bank will purchase;

            (c) to establish the terms and conditions, including, without
      limitation, the Credit Enhancement of the PFI, under which the Bank will
      purchase mortgages;

            (d) to establish the PFI as an approved servicer of mortgages held
      by the Bank, whether sold by the PFI or by others;

            (e) to provide the terms and conditions of servicing mortgages for
      the Bank, whether sold by the PFI or by others; and

            (f) to supercede in certain respects any prior MPF Program
      Participating Financial Agreement(s) which the PFI may have executed
      ("Prior Contract").

      1.2. Consideration. In consideration of the purpose of this Contract and
of all the provisions and mutual promises contained in it, the PFI and the Bank
agree to all that this Contract contains.

      1.3. The Guides. The MPF Provider has issued its guides to PFIs
(collectively, the "Guides"), and, from time to time, issues modifications of
the Guides, and furnishes them to the PFI which the PFI agrees are incorporated
into this Contract by reference as if fully set forth herein. These Guides are:

            (a)   the MORTGAGE PARTNERSHIP FINANCE Origination Guide; and

            (b)   the MORTGAGE PARTNERSHIP FINANCE Servicing Guide.

      Whenever there is a reference to the Guides in this Contract, it means
either or both the Origination Guide and the Servicing Guide, as the context may
require and as they exist now and as they may be amended or supplemented in
writing. The MPF Provider may amend or supplement the Guides, or either of them,
from time to time, at its sole discretion, by furnishing amendments or
supplementary matter to the PFI in accordance with Section 13.2 of this
Contract, and such amendments or supplements shall be included in the Guides for
the purposes hereof. The Origination Guide is applicable to the origination of
Closed Mortgages sold to the Bank whether originated or purchased by the PFI.
The Servicing Guide is applicable to the servicing of mortgages for the Bank
whether originated for or purchased by the Bank from the PFI or from other PFIs.

<PAGE>

      The term "Guides" also includes anything that, in whole or in part,
supersedes or is substituted for the Guides.

      1.4 Certain Definitions. All capitalized terms defined in this Section 1.4
when used in this Contract shall have the meanings set forth in this Section
1.4. All other capitalized terms that are defined in this Contract by use of
quotation marks to indicate a definition shall have the meanings set forth in
the body of this Contract where they are defined. All other capitalized terms
used but not defined herein shall have the same respective meanings as set forth
in the Guides.

            (a) "Acquired Mortgage". Any mortgage which the PFI purchased and
      sold to the Bank or for which the PFI acquired the Servicing and is
      Servicing for the Bank.

            (b) "Actual Credit Enhancement". Until the date a Master Commitment
      is filled, closed or expires, the cumulative amount of the PFI's credit
      enhancement obligation as determined by the MPF Provider's system with
      respect to the mortgages then delivered under that Master Commitment. On
      and after such date, the amount of the PFI's credit enhancement obligation
      as determined by such system with respect to all mortgages actually
      delivered under the Master Commitment in accordance with the applicable
      MPF Mortgage Product description, which may permit the Actual Credit
      Enhancement to be reset from time to time by the MPF Provider. In no event
      shall the Actual Credit Enhancement be less than any minimum amount
      required for the applicable MPF Mortgage Product or greater than the
      Maximum Credit Enhancement stated in the Master Commitment. Further, if
      any mortgages are subsequently purchased or repurchased by the PFI
      pursuant to Section 5.5, the Actual Credit Enhancement may, at the option
      of the Bank, be recalculated as if such mortgages had never been delivered
      under the Master Commitment.

            (c) "Advances Agreement". The advances and security agreement
      between the PFI and the Bank.

            (d) "Applicable Laws". All federal, state and local laws,
      ordinances, rules, regulations and orders applicable to the origination,
      holding, sale or servicing of Mortgages, whether performed as an agent,
      principal, independent contractor or vendor.

            (e) "Business Day". Any day (other than Saturdays and Sundays) that
      the MPF Provider is open for business.

            (f) "Closed Mortgage". A mortgage that the Bank purchases from the
      PFI which is owned by the PFI prior to such purchase and owned by the Bank
      after such purchase and which was previously made or purchased by the PFI.

            (g) "Confirmation". A writing or machine- or
      electronically-generated transmission issued by the Bank confirming the
      Bank's purchase of one or more mortgages and which shall evidence the
      Bank's ownership of such mortgage(s), in a form as specified in the
      Guides.

            (h) "Contract". This document as referenced in the opening clause as
      this Contract, any addenda attached hereto or amendments hereto, and the
      documents incorporated by reference, which are the Guides, the Master
      Commitments issued under this Contract, Delivery Commitments issued
      pursuant to such Master Commitments and, if issued, the MPF Program
      Requirements, and any amendments or supplements of any of the foregoing.

            (i) "Credit Enhancement". The PFI's obligations under Article IV of
      this Contract, including without limitation, the Actual Credit Enhancement
      and Remaining Credit Enhancement for all Mortgages delivered by the PFI to
      the Bank under this Contract, and, if applicable, Mortgages serviced for
      the Bank.

            (j) "Credit Enhancement Fee". A fee payable monthly by the Bank to
      the PFI in consideration of the PFI's Credit Enhancement obligation to
      fund the Realized Loss for a Master

                                        2

<PAGE>

      Commitment, based upon the fee rate applicable to such Master Commitment
      and subject to the terms of the Master Commitment and applicable MPF
      Mortgage Product which may include performance and risk participation
      features as to such Credit Enhancement Fee.

            (k) "DDA". A depository account established by the PFI at the Bank
      which is used for processing transactions under this Contract.

            (l) "Delivery Commitment". The commitment of the parties, evidenced
      by a writing or a machine- or electronically-generated transmission issued
      by the Bank to the PFI accepting the PFI's oral delivery commitment offer
      made from time to time under this Contract and in accordance with the
      provisions of the Guides. Pursuant to the Delivery Commitment, the PFI
      commits to deliver mortgages to the Bank that satisfy the terms set forth
      in the Delivery Commitment within the period set forth therein, and the
      Bank commits to purchase such mortgages in accordance with the provisions
      of the Guides.

            (m) "First Loss Account". A contingent liability account established
      by the Bank for each Master Commitment based on and in the amount required
      under the applicable MPF Mortgage Product description. This account is the
      liability of the Bank with respect to Realized Losses arising under such
      Master Commitment.

            (n) "Indemnified Party". Each of the Bank, any Participant, and each
      of their respective successors and assigns, and each of their respective
      shareholders, directors, officers, employees and agents.

            (o) "Master Commitment". A document (including any addenda or
      attachments thereto) executed by the PFI and the Bank in accordance with
      the Guides, which provides the terms under which the PFI will deliver
      mortgages to the Bank.

            (p) "mortgage / mortgage loan". A residential mortgage loan which is
      evidenced by a mortgage note. The term also includes, as the context
      requires, the mortgage note, the security instrument which secures the
      loan and the evidence of title to the mortgaged property.

            (q) "Mortgage / Mortgage Loan". A mortgage loan delivered to the
      Bank or serviced by the PFI for the Bank under the MPF Program.

            (r) "Mortgage Records". All books, records and information
      (including, without limitation, any item in electronic form) reasonably
      required to document or properly service any mortgage originated, sold or
      serviced by the PFI to or for the Bank.

            (s) "MPF Program Requirements". Requirements with respect to the MPF
      Program which may be established and as amended from time to time by the
      Bank, which are intended to govern certain aspects of the relationship of
      the PFI and the Bank in addition to the rights and duties set forth in
      this Contract and the Guides.

            (t) "Origination and Sales Provisions". The provisions contained in
      Articles III and IV of this Contract under which mortgages may be
      purchased by the Bank.

            (u) "Participant". A Person who acquires an ownership or a
      participation interest in some or all of the Mortgages delivered or
      serviced by the PFI to or for the Bank.

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

            (w) "PFI". The participating financial institution referenced in the
      opening clause of this Contract which signs this Contract, and its
      successors and assigns.

                                        3

<PAGE>

            (x) "PFIs". Two or more financial institutions that are
      participating in the MPF Program, whether members of the Bank or any other
      MPF Bank(s).

            (y) "Prior Contract." If applicable, the Mortgage Partnership
      Finance Program Participating Financial Institution Agreement as
      referenced in Section 1.1 (f) of this Contract previously executed by the
      PFI and the Bank or another MPF Bank.

            (z) "Principal Officers". Those officers of the PFI (i) that are
      "Reporting Persons" under Section 16 of the Securities and Exchange Act of
      1934 and/or (ii) that have a critical influence on or substantive control
      over any material aspect of the PFI's mortgage origination or servicing
      operation or any function related to such operations.

            (aa) "Property" or "Mortgaged Property". The property that is
      subject to a Mortgage or, where the Mortgage has been foreclosed or the
      Servicer has taken title to the property on the Bank's behalf that was
      subject to such Mortgage.

            (bb) "Realized Loss". With respect to a Conventional Mortgage, the
      loss incurred or arising from the default of such Mortgage (after
      application of any applicable governmental or private primary mortgage
      insurance or guaranties, but not including any Supplemental MI Policy) as
      determined in accordance with the Guides and prior to any payments or
      allocations under Article IV of this Contract. With respect to a
      Government Mortgage, the loss incurred in connection with any default,
      whether on the part of the Borrower or the PFI that is not covered by FHA
      Insurance, VA Guaranty or other governmental insurance nor included in the
      Unreimbursed Servicing Expenses.

            (cc) "Remaining Credit Enhancement". At any time, the PFI's
      obligation with respect to a Master Commitment in an amount equal to the
      Actual Credit Enhancement less the Realized Loss paid by the PFI pursuant
      to Section 4.5 of this Contract.

            (dd) "Replacement Contract". Any agreement or combination of
      agreements made by the Bank to substitute an obligor or obligors with
      respect to the PFI's Credit Enhancement, including without limitation, a
      substitute credit enhancement structure, acceptable (in the Bank's sole
      discretion) to the Bank, which obligors may include, but are not limited
      to, one or more other PFIs, mortgage guaranty insurers, surety companies
      or any other type of entity or structure that will result in the Bank
      having the equivalent quality and amount of credit enhancement coverage as
      provided by the PFI under Article IV with respect to each Master
      Commitment.

            (ee) "Servicer". The PFI, in its capacity as a servicer of Mortgages
      under this Contract.

            (ff) "Spread Account". A name for the First Loss Account initially
      used in the MPF Program.

            (gg) "Supplemental MI Policy". With respect to a Master Commitment,
      any and all supplemental or pool mortgage guaranty insurance policies in
      addition to private primary mortgage insurance.

            (hh) "Unreimbursed Servicing Expenses". Those expenses incurred by
      the Servicer or its designee in connection with any defaulted Mortgage
      that are not reimbursed by the FHA Insurance, by the VA Guaranty or by any
      other government agency under the terms of any other governmental
      insurance or guaranty (including, without limitation, all advances made by
      the Servicer to the Bank to pay all principal thereon and interest through
      the month of repayment or repurchase of the Mortgage or in which the
      disposition of the Mortgaged Property occurs, or as may be required to
      obtain the benefit of FHA Insurance, VA Guaranty or other governmental
      insurance or guaranty). Unreimbursed Servicing Expenses are customarily
      incurred by servicers of government mortgages securitized through Ginnie
      Mae. Losses with respect to Mortgages repurchased by the PFI from the Bank
      are the responsibility of the PFI.

                                        4

<PAGE>

II.   ELIGIBILITY REQUIREMENTS TO SELL MORTGAGES

      For the PFI to sell mortgages to the Bank, the PFI must satisfy the
eligibility requirements specified in this article.

      2.1. General Requirements. These are the general requirements the PFI must
meet to be eligible to sell mortgages to the Bank:

            (a) Meet the Bank's Standards. The PFI must have and maintain as one
      of its principal business purposes the origination or purchase of
      mortgages of the type that the PFI will sell to the Bank under this
      Contract. In addition, the PFI, must, at all times, have the capacity to
      originate or purchase mortgages that meet the MPF Program standards and
      the standards generally imposed by other GSEs and private institutional
      mortgage investors. The PFI must, at all times, satisfy the applicable
      requirements for PFIs to originate or sell mortgages set forth in the
      Guides and, if issued, comply with the MPF Program Requirements.

            (b) Have Qualified Staff and Adequate Facilities and Systems. The
      PFI must, at all times, employ personnel or agents who are well trained
      and qualified to perform the functions required under Articles III and IV
      of this Contract, and maintain facilities and systems that are able to
      perform its functions under Articles III and IV of this Contract.

            (c) Maintain Fidelity Bond and Errors and Omissions Coverage. The
      PFI must maintain, at its own expense, a fidelity bond and errors and
      omissions insurance, as required by the Guides.

            (d) Report Basic Changes. The PFI must notify the Bank promptly in
      writing of any material changes that occur in its or its agents' principal
      purpose, activities, manner of originating or acquiring mortgages,
      ownership, financial condition, staffing, facilities, fidelity bond or
      errors and omissions insurance, which changes adversely affect the PFI's
      ability to perform its obligations under this Contract.

      2.2 Ownership and Status of PFI. In approving a PFI in connection with the
obligations of Articles III and IV, the Bank relies on the information the PFI
has provided about the eligibility, qualifications and financial status of the
PFI and its owners. The PFI covenants and agrees to comply with the provisions
of the Guides and, if issued, the MPF Program Requirements regarding these
matters, including, without limitation, the delivery of notices regarding these
matters as required by the Origination Guide. Changes in any such matters may
affect the PFI's eligibility to sell mortgages to the Bank.

      2.3. Financial Information. In order to become and remain a PFI approved
to originate or sell mortgages under this Contract, the PFI agrees to provide
the financial information required by the Guides and, if issued, MPF Program
Requirements from time to time and the PFI shall, at all times, satisfy the
standards set forth in the Guides and the MPF Program Requirements. The PFI
agrees that the Bank may make such information available to the MPF Provider and
to Participants or potential Participants.

      2.4. Access to PFI's Records. As set forth in the Guides, the PFI agrees
to permit, and cause its agents to permit, the Bank's employees and designated
representatives to examine or audit books, records and information pertaining to
the Mortgages.

III.  ORIGINATION AND SALE OF MORTGAGES

      This article contains the basic rules governing the origination of
mortgages and the sale of mortgages to the Bank. The PFI hereby agrees as
follows:

      3.1. Governing Contractual Provisions. The origination and sale of each
Mortgage will be governed by:

                                        5

<PAGE>

            (a)   this Contract;

            (b) the Guides in effect on the day a written or electronic
      commitment is issued to the Borrower for the loan evidenced and secured by
      the Mortgage, except if no commitment is issued to the Borrower, then the
      Guides in effect on the day the Mortgage is closed;

            (c)   the applicable Master Commitment;

            (d)   the applicable Delivery Commitment;

            (e)   the Confirmation issued by the Bank at the time it purchases
                  the Mortgage; and

            (f)   if issued by the Bank, the MPF Program Requirements in effect
                  on the day the applicable Master Commitment is issued or as
                  otherwise specified in the MPF Program Requirements.

      3.2. Eligible Mortgages. The PFI will only sell to the Bank mortgages
which satisfy the requirements set forth herein and in the Guides on the day a
written or electronic commitment is issued to the Borrower for the loan
evidenced and secured by the mortgage, except with respect to any mortgage for
which no commitment is issued to the Borrower, in which case the Guides in
effect on the day the mortgage is closed shall govern.

      3.3 Master Commitment.

            (a) General. Mortgages will be sold to the Bank under Master
      Commitments. The PFI commits to use its best efforts to sell to the Bank
      mortgages satisfying the terms of the Master Commitment within the
      estimated period for the delivery of such mortgages set forth in the
      applicable Master Commitment, as such estimated period may be modified in
      accordance with the Guides.

            (b) Execution of Master Commitments. From time to time, the Bank and
      the PFI may jointly elect in writing to enter into one or more Master
      Commitments. There can be more than one Master Commitment outstanding at
      any time.

            (c) Types of Mortgages. Though various types of mortgages may be
      sold under the MPF Program, only the types of mortgage permitted for a
      given MPF Mortgage Product, as described in the Guides, may be included in
      a Master Commitment for that MPF Mortgage Product.

            (d) First Loss Account Information. Each Master Commitment shall
      have its own First Loss Account (formerly known as a Spread Account) as
      described in Section 4.1, the amount of which shall be determined in
      accordance with the Guides, including without limit, the product
      description for the MPF Mortgage Product applicable to such Master
      Commitment, and the terms of the Master Commitment.

            (e) Allocation of Delivery Commitments to a Master Commitment. The
      PFI shall identify the Master Commitment for which it makes a Delivery
      Commitment offer, and such offer must be consistent with the then unused
      amount of such Master Commitment. The Bank, in its sole discretion, may
      accept any Delivery Commitment offer which acceptance may be oral but in
      all cases shall be evidenced by a written or electronic confirmation of
      such Delivery Commitment thereby allocating it to the identified Master
      Commitment. Unless the Bank approves and the MPF Provider processes a
      waiver of this limitation, once a Delivery Commitment is allocated to a
      Master Commitment such Delivery Commitment shall not be reallocated to
      another Master Commitment.

            (f) Allocation of Mortgages to a Delivery Commitment. Each Mortgage
      must be consistent with the then unallocated amount under an outstanding
      Delivery Commitment, which shall be identified by the PFI with respect to
      such Mortgage, as a condition to the Bank purchasing the Mortgage. Upon
      purchase, such Mortgage shall be allocated to the specified Delivery
      Commitment, and the Bank shall issue

                                        6

<PAGE>

      a Confirmation with respect thereto. Upon such allocation, such Mortgage
      shall not be reallocated to another Delivery Commitment.

            (g) Mandatory Delivery Commitments; Pairoff Fees. The PFI's failure
      to meet its commitment to deliver mortgages in an amount equal to, and
      prior to the expiration of, a Delivery Commitment may result in the
      assessment of a Pairoff Fee. The MPF Provider shall calculate the amount
      of any Pairoff Fee in accordance with the Origination Guide, which amount
      shall be payable by the PFI to the Bank as provided in the Origination
      Guide. In no event shall the Bank be obligated to pay a Pairoff Fee to the
      PFI.

      3.4.  Purchase Price.

            (a) For each Closed Mortgage delivered under this Contract, the PFI
      shall be paid the purchase price determined as provided in the Origination
      Guide or separate agreement with the Bank. The MPF Provider will publish
      the purchase price for any particular Mortgage, which may be at par, at a
      premium or a discount, based upon the applicable Delivery Commitment and
      rate and fee schedule, all as more fully described in the Origination
      Guide. The price schedule for different types of Mortgages may be
      different, and the price schedule for a particular type of Mortgage may
      change daily or more often.

            (b) Nothing in this Section 3.4 or any other provision of this
      Contract shall obligate the Bank to publish prices or shall prohibit the
      Bank from withdrawing any published prices prior to accepting any Delivery
      Commitment offer. Payment of the purchase price for each Closed Mortgage
      under this Contract shall be made by the Bank crediting the PFI's DDA as
      provided in the Guides.

            (c) In the event that the Bank is not opened for business on a
      Business Day and the PFI has outstanding Delivery Commitments under which
      it desires to deliver mortgages to the Bank on that Business Day but the
      PFI is unable to access its DDA, the PFI may nonetheless process the
      settlement of such Delivery Commitments with the MPF Provider as if the
      purchase price for the mortgages being sold to the Bank had been deposited
      to the PFI's DDA. The Bank agrees that the first day on which it opens for
      business after such settlement date, the Bank will credit the amount of
      such purchase price to the PFI's DDA plus interest on the purchase price
      at the Fed Funds Rate from the settlement date through such deposit date.
      For purposes of the Contract, the term "Fed Funds Rate" shall mean, for
      any day, a rate equal to the weighted average rate the Bank earns on its
      overnight investments in the federal funds market, determined as of the
      close of business for that day. Except for the payment of interest on the
      purchase price as provided in this Section 3.4, the Bank shall have no
      liability to the PFI with respect to the delivered mortgage loans due to
      the PFI's inability to access its DDA on any Business Day that the Bank is
      not opened for business.

      3.5. The Bank Has No Obligation to Commit. The fact that the Bank has
executed or delivered this Contract or any Master Commitment does not mean that
the Bank must accept any offer for a Delivery Commitment or make a commitment to
purchase any mortgage through or from the PFI.

      3.6. PFI's Role as Mortgage Seller and Servicer.

            (a) This Section 3.6 (a) shall be applicable to all Closed
      Mortgages. The PFI shall owe the Bank fiduciary duties in the origination,
      selling and servicing of the Mortgages, with respect to (i) the handling
      of money, (ii) the handling of Mortgage Documents, and (iii) compliance
      with Applicable Laws in the origination, sale and servicing of the
      Mortgages. The PFI shall originate or acquire all such Mortgages under
      this Contract in its own name and transfer such Mortgages to the Bank in
      accordance with the Origination Guide. Except for any Mortgages the PFI
      repurchases under Section 5.5, the PFI acknowledges and agrees that at no
      time will it or any other Person (other than the Bank, the Participants
      and their respective successors and assigns) have any interest in Closed
      Mortgages purchased under this Contract after the sale of such Mortgages
      to the Bank.

                                        7

<PAGE>

            (b) The Bank's interest in all Mortgages delivered under this
      Contract shall be evidenced by a Confirmation that shall conclusively
      establish the Bank's ownership of the Mortgages. Section 5.5 of this
      Contract specifies certain circumstances in which the PFI may be obligated
      to purchase or repurchase a Mortgage from the Bank. Except for any
      Mortgages the PFI purchases or repurchases under Section 5.5, the PFI will
      take all action necessary to protect the rights of the Bank, the
      Participants and their respective successors and assigns in the Mortgages
      delivered under this Contract against any other Person claiming any
      interest arising by, through or under the PFI and/or any prior holder of
      the Mortgages.

      3.7 Intent of the Parties. It is the intent of the Bank and the PFI that
      the acquisition by the Bank of all the Closed Mortgages that are sold
      under the terms of this Contract shall be deemed for all purposes to be a
      sale and not a borrowing by the PFI secured by such Closed Mortgages. Each
      of the parties agrees for the benefit of the other party that it shall
      treat the conveyance of the Mortgages hereunder as a sale by the PFI and a
      purchase by the Bank, respectively.

IV.   CREDIT ENHANCEMENT; REALIZED LOSSES

      4.1.  First Loss Account (Spread Account) for Conventional Mortgages.

            (a) Establishment. In accordance with the MPF Mortgage Product terms
      and the Master Commitment, the Bank shall assume liability for a certain
      amount of Realized Loss (the "First Loss Account", formerly known as the
      "Spread Account") arising under each Conventional Mortgage Master
      Commitment. The First Loss Account functions as a deductible for the
      Credit Enhancement provided by the PFI or credit enhancement obligations
      undertaken by other Persons. The First Loss Account is the responsibility
      of the Bank.

            (b) Allocations. The Bank shall determine the amount of the First
      Loss Account for each Master Commitment, which amount may be calculated on
      a monthly basis, or at the time the Mortgages are delivered under such
      Master Commitment, or as otherwise agreed between the parties, in
      accordance with the terms of the Guides and such Master Commitment.

            (c) Losses. Without limiting the provisions of Section 4.6, all
      Realized Loss on Conventional Mortgages (and related REO properties) up to
      the amount of the First Loss Account for a Master Commitment will be the
      responsibility of the Bank in accordance with the provisions of Section
      4.3 below.

      4.2.  Credit Enhancement Obligations.

            (a) The PFI hereby agrees to pay to the Bank an amount equal to the
      Realized Loss for the Mortgages delivered under each Conventional Mortgage
      Master Commitment which exceeds the available First Loss Account but in no
      event shall such amount exceed, in the aggregate, the lesser of (i) the
      Actual Credit Enhancement for such Master Commitment or (ii) any other
      limitations in the applicable MPF Mortgage Product terms and/or as may be
      specified in the Master Commitment.

            (b) For certain conventional MPF Mortgage Products, the amount of
      the Maximum Credit Enhancement will be set at execution of the Master
      Commitment and for other conventional MPF Mortgage Products it will be an
      amount equal to a specified percentage of the Mortgages delivered under
      the Master Commitment. The Maximum Credit Enhancement is the PFI's maximum
      liability for Realized Loss with respect to the pool of Mortgages to be
      delivered under any Master Commitment for which a Maximum Credit
      Enhancement is stated. The Bank and the PFI may from time to time modify
      the Maximum Credit Enhancement in accordance with the Guides. As
      individual Mortgages are assigned to Delivery Commitments, the Bank in
      accordance with the Guides will calculate the Actual Credit Enhancement
      required for such Master Commitment including such Delivery Commitments.
      In no case shall the Actual Credit Enhancement exceed the then outstanding
      Maximum Credit Enhancement for any pool. When the Master Commitment is
      closed to further Delivery Commitments and all Delivery Commitments
      allocated to such Master Commitment have either expired or been funded,
      the Actual Credit

                                        8

<PAGE>

      Enhancement calculated by the Bank in accordance with the Guides shall
      become the Remaining Credit Enhancement, which Remaining Credit
      Enhancement shall be reduced over time as payments are made by the PFI to
      the Bank with respect to Realized Loss, and as may be adjusted from time
      to time by the Bank in accordance with the terms of the Master Commitment.

            (c) The PFI agrees that the Bank may obtain a Replacement Contract
      should the Bank reasonably and in good faith determine that (i) the value
      of the PFI's Credit Enhancement has become impaired, (ii) an event
      pertaining to the PFI has occurred which results in the Mortgages
      delivered under the Master Commitment not having an equivalent credit
      enhancement to "AA" as determined by the MPF Program rating system, or
      (iii) that a material adverse change has occurred in the financial
      condition of the PFI or in any collateral pledged by the PFI, excluding
      the Mortgages, to secure its obligations under this Contract or the
      Advances Agreement. In the event the Bank exercises its rights to obtain a
      Replacement Contract under this Section 4.2 (c) then as of that date, the
      Bank shall have all the rights provided in Section 10.2 (b) of this
      Contract. The Bank's exercise of its right to obtain a Replacement
      Contract shall not affect, limit or be deemed to satisfy any prior or
      outstanding claim against a PFI for a Realized Loss.

      4.3.  Allocation of Realized Loss and Unreimbursed Servicing Expenses.

            (a) Conventional Mortgages - Realized Loss. This Section 4.3 (a)
      shall be applicable to all Conventional Mortgages except as may be
      otherwise specified in the Master Commitment. Upon the Bank's receipt of
      notification from the Servicer of the amount of a Realized Loss as
      provided in Section 4.4 below, such Realized Loss (after application of
      any applicable governmental or private primary mortgage insurance or
      guaranties) will be allocated to, and paid or incurred by, the following
      Persons in the following order of priority:

                  (i) First, by the Bank up to the amount of the First Loss
            Account except to the extent that all or any part of such Realized
            Loss is covered under any Supplemental MI Policy;

                  (ii) Second, any Realized Loss that is covered under any
            Supplemental MI Policy (i.e., a Realized Loss in excess of the
            deductible for such Supplemental MI Policy), by the issuer of the
            Supplemental MI Policy as insurance proceeds, until the benefits
            available under the Supplemental MI Policy have been paid in full;

                  (iii) Third, any Realized Loss, which when aggregated with all
            prior Realized Loss, is in excess of the First Loss Account and is
            not covered by any Supplemental MI Policy, up to the amount of the
            PFI's Remaining Credit Enhancement for the Master Commitment, by the
            PFI and remitted as provided in Section 4.5 below; and

                  (iv) Finally, any Realized Loss remaining after the
            application set forth in clauses (i) through (iii) of this Section
            4.3 (a) shall be allocated directly to the Bank.

      If the First Loss Account for a Master Commitment increases over time, it
      is possible that such First Loss Account could be fully applied to
      Realized Loss at a given point in time but that subsequent credits to the
      First Loss Account would be available to cover future Realized Loss. No
      subsequent credits to the First Loss Account will be used to reimburse the
      PFI for Realized Loss previously incurred and paid by the PFI under clause
      (iii).

            (b) Government Mortgages - Realized Loss. This Section 4.3 (b) shall
be applicable to all Government Mortgages. The PFI as the Servicer shall be
responsible for any and all Unreimbursed Servicing Expenses for any Government
Mortgage (after application of all applicable FHA Insurance, VA Guaranty or
other government insurance or guaranty) in accordance with Section 7.1(d) below,
and therefore no losses with respect to a Government Mortgage are payable by the
Bank except as may expressly be agreed to in writing by the Bank. However,
should the Bank incur any Realized Loss arising from the PFI's default as
Servicer of the Mortgages, such Realized Loss will be subject to the provisions
of Section 7.4. The Bank may create a First Loss Account in an amount
established for the applicable MPF loan product applicable to

                                       9
<PAGE>

    any Realized Loss the Bank might incur, but such First Loss Account shall
    not be available to pay or reimburse the PFI as the Servicer for
    Unreimbursed Servicing Expenses.

      4.4. Procedure for Making Claims against the First Loss Account. In the
event that the Servicer or any other applicable mortgage loan servicer
determines that there is a Realized Loss with respect to a Conventional Mortgage
or REO, the Servicer or such other mortgage loan servicer will promptly deliver
a written notice as specified in the Servicing Guide and the Bank shall charge
the applicable First Loss Account with the amount as provided for in the
Servicing Guide except to the extent that the Bank disputes the existence or
determination of any Realized Loss or the amount thereof or the process related
thereto, in which event the Bank's determination of Realized Loss shall control.
The Servicer or any other applicable mortgage loan servicer shall be reimbursed
for such portion of the Realized Loss chargeable to the First Loss Account to
the extent that such Servicer or other mortgage loan servicer has previously
advanced such funds to the Bank.

      4.5. Procedure for Making Claims against the PFI. If a notice of Realized
Loss delivered pursuant to Section 4.4 includes an amount to be paid by the PFI
pursuant to Section 4.3 (a) (iii) above and the PFI has not already advanced all
of such amount to the Bank, the Bank shall immediately debit from the PFI's DDA
that part of such amount not previously advanced. Further, in the event that the
PFI fails to pay any amounts it is required to pay under this Contract at such
time as it is required to do so, then at such time or thereafter, the Bank may
debit such amounts from the PFI's DDA, and if such amounts are payable to a
third party, to make the payment on behalf of the PFI, and if such amounts are
payable to the Bank, to retain such amounts. In the event that any such debit
from the PFI's DDA shall cause the balance in such account to become negative,
such deficit shall be subject to the overdraft provisions of the depository
agreement between the PFI and the Bank, which may include, without limitation,
treating such overdraft as an advance under the Advances Agreement. In the event
of the breach by the PFI of its obligation to make any payment due under this
Contract, the Bank shall have all rights available at law or in equity,
including specifically, but not limited to, (x) the right to terminate, in whole
or in part, the rights of the PFI under this Contract, (y) the right of set-off
against any funds of the PFI held by, or at, the Bank and (z) the right to
realize upon any collateral pledged to the Bank to secure the PFI's obligations
to the Bank.

      4.6. Credit Enhancement Fees. For each Master Commitment, in consideration
of the obligation of the PFI to fund a Realized Loss pursuant to Section 4.3(a)
(iii), the Bank shall pay to the PFI monthly a Credit Enhancement Fee determined
in accordance with the Guides, based upon the Credit Enhancement Fee rate
applicable to such Master Commitment, subject, however, to the terms of the MPF
Mortgage Product and Master Commitment which may include, but are not limited
to, performance or risk participation features or a delay in payment of such
Credit Enhancement Fees.

      4.7. Credit and Collateral for the PFI's Obligations. The PFI shall pledge
collateral pursuant to the terms and conditions of the Advances Agreement to
secure its Credit Enhancement. As security for its Credit Enhancement together
with all other obligations of the PFI arising under this Contract, the PFI,
pursuant to the Advances Agreement, assigns, transfers, and pledges to the Bank,
and grants to the Bank, a security interest in collateral identified, by
category, by specific item or otherwise, by the PFI. The Credit Enhancement and
all other obligations of the PFI under this Contract shall be an obligation
arising under and secured pursuant to the Advances Agreement, and deemed to be
Indebtedness or Liabilities (if either term is used in the Advances Agreement)
of the PFI and an extension of credit by the Bank pursuant to the Advances
Agreement. The PFI shall at all times maintain an adequate amount of pledged
collateral for its Credit Enhancement, which amount shall be determined by the
Bank, taking into account other credit obligations of the PFI secured pursuant
to the terms and conditions of the Advances Agreement. It is understood and
agreed, notwithstanding any other provision of this Contract or any pledge of
collateral for a particular purpose, that all collateral, and proceeds thereof,
in which the Bank has a security interest secures any and all indebtedness or
liability of the PFI to the Bank arising under any agreement with the Bank as
more fully provided in the Advances Agreement and in Section 4.8 of this
Contract. Notwithstanding the foregoing provision of this Section 4.7, the
collateral and security interest granted hereunder shall not be deemed in any
manner to evidence that the delivery of the Mortgages hereunder is a secured
borrowing as opposed to a true sale. The PFI agrees that until all Mortgages
serviced or credit enhanced under this Contract are repaid or otherwise disposed
of, the PFI will continue to provide the Bank with financial information as
required by the Guides, the MPF Program Requirements and the Bank from time to
time, and to notify the Bank promptly in writing of any material changes that
occur in the PFI's financial condition. The PFI further agrees that the Bank

                                       10
<PAGE>

may provide such financial information to the MPF Provider and other
Participants or potential Participants in the Mortgages. Further, the PFI
represents and warrants to the Bank that the PFI has the full power and
authority to provide the Credit Enhancement required under this Article IV, and
has duly authorized such Credit Enhancement as more particularly described in
Section 5.2 (b).

      4.8. Right of Setoff and Grant of Security Interest. To secure any and all
indebtedness or liability of the PFI to the Bank under this Contract and under
any other agreement with the Bank, however and whenever incurred or evidenced,
whether direct or indirect, absolute or contingent, due or to become due, the
PFI hereby assigns, transfers, and pledges to the Bank and grants to the Bank a
first priority security interest in (i) all balances, credits, deposits, moneys,
and drafts now or hereafter in the deposit account(s) or any other account that
the PFI may maintain with the Bank, (ii) all collateral provided by the PFI from
time to time as described in Section 4.7 above, and (iii) any rights accruing to
the PFI under the terms of this Contract including, without limitation,
servicing rights with respect to the Mortgages delivered and/or serviced under
this Contract; and the Bank is authorized to charge such indebtedness or
liability against the deposit account(s), or any other account or such other
collateral, whether or not the same is then due. The Bank shall notify the PFI
of any actions taken pursuant to this Section 4.8, but such notification shall
not be a condition precedent to the right of the Bank to take any such action.
The Bank shall have all other rights available at law or in equity with respect
to the right of setoff and the security interest provided in this Section 4.8.
The PFI hereby authorizes the Bank to create and file such Uniform Commercial
Code financing statements and take such other action from time to time as the
Bank deems necessary and appropriate to perfect and maintain the perfection of
the Bank's security interest and rights under this Section 4.8. Further, the PFI
agrees, at its cost, to (i) execute and deliver to the Bank such specific pledge
or security agreement as is provided in the Guides, the MPF Program Requirements
or required by the Bank, and (ii) execute, deliver and file such Uniform
Commercial Code financing statements and take such other action from time to
time as the Bank may reasonably request to perfect and maintain the perfection
of the Bank's security interest and rights under this Section 4.8.
Notwithstanding the provisions of Section 19.3, the perfection and priority of
any security interest granted by the PFI to secure the PFI's obligations under
this Contract shall be governed by the laws of the relevant jurisdiction
determined in accordance with the applicable provisions of the Uniform
Commercial Code in effect in the state where the Bank is located.

V. ORIGINATION OF MORTGAGES - PFI'S WARRANTIES

      5.1. General. The PFI makes certain warranties to the Bank set forth in
Sections 5.2 and 5.3. These warranties:

            (a) apply to each Closed Mortgage and each Acquired Mortgage;

            (b) are made as of the date hereof, except for warranties under
      Section 5.3 with respect to Mortgages originated after the date hereof,
      which are made with respect to each Mortgage, (i) as of the date of sale
      to the Bank of each Closed Mortgage and, (ii) for all other Acquired
      Mortgages, as of the day the PFI acquires the servicing for such Acquired
      Mortgage;

            (c) made under Section 5.2 and the warranties made under Section 5.3
      (a), (b), (c), (e), (h), (n) and (t) are made each day thereafter until
      this Contract expires (which shall be the date on which all of the
      Mortgages delivered or serviced under this Contract are repaid in cash,
      liquidated, purchased or repurchased by the PFI, or the Mortgaged
      Properties are disposed of and all proceeds are reduced to cash),
      provided, however, that representations under Section 5.3 (a) shall not be
      deemed to be a representation that the Mortgage is not in default after
      the date of sale;

            (d) are for the benefit of the Bank and any Participants, and its
      and their respective successors and assigns;

            (e) include the warranties set forth in the Guides; and

            (f) survive the termination of this Contract, unless the Bank agrees
      in writing to an earlier termination.

                                       11
<PAGE>

      Warranties may be waived, but only by the Bank in a writing duly executed
      and delivered by the Bank.

      5.2. General PFI Warranties. The PFI makes each of the representations and
warranties set forth below regarding the PFI:

            (a) It is duly organized, validly existing and in good standing
      under the laws governing its creation and existence, and has full
      corporate power and authority to own its property, to carry on its
      business as presently conducted and to enter into and perform its
      obligations under this Contract;

            (b) The execution, delivery and performance by it of this Contract
      have been duly authorized by all necessary action on its part, including
      approval of its board of directors and such approval is duly and properly
      recorded in the minutes, books and records of the PFI and a copy of this
      Contract is maintained in the official records of the PFI. Neither the
      execution and delivery of this Contract by it, nor the consummation by it
      of the transactions herein contemplated, nor compliance by it with the
      provisions hereof, will conflict with or result in a material breach of,
      or constitute a material default under (i) any of the provisions of any
      law, governmental rule, regulation, judgment, decree or order binding on
      it or its properties; (ii) its organizational documents or by-laws; or
      (iii) the terms of any material indenture or other agreement or instrument
      to which it is a party or by which it is bound. Neither it nor any of its
      Affiliates is a party to, bound by, or in breach of 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 its knowledge may in the
      future materially and adversely affect its ability to perform its
      obligations under this Contract or its business, operations, financial
      condition, properties or assets;

            (c) The execution, delivery and performance by it of this Contract
      and the consummation of the transactions contemplated hereby do not
      require the consent or approval of, the giving of notice to, the
      registration with, or the taking of any other action in respect of, any
      state, federal or other governmental authority or agency, except such as
      has been obtained, given, effected or taken prior to the date hereof;

            (d) This Contract has been duly executed and delivered by it and
      constitutes a legal, valid and binding obligation of it, enforceable
      against it in accordance with the terms hereof, except as such enforcement
      may be limited by bankruptcy, insolvency, reorganization, receivership,
      conservatorship, moratorium and other similar laws affecting the
      enforcement of creditors' rights in general and by general equity
      principles, regardless of whether such enforcement is considered in a
      proceeding in equity or at law;

            (e) There are no actions, suits or proceedings pending or, to its
      knowledge, threatened against or affecting it, before or by any court,
      administrative agency, arbitrator or governmental body (i) with respect to
      any of the transactions contemplated by this Contract or (ii) with respect
      to any other matter which in its judgment will be determined adversely to
      it and will, if determined adversely to it, materially and adversely
      affect it or its business, assets, operations or condition (financial or
      otherwise) or materially and adversely affect its ability to perform its
      obligations under this Contract;

            (f) The PFI has all licenses, permits, authorizations, approvals and
      consents of all governmental authorities required in order for it to
      originate, purchase, hold and sell the Mortgages, and in all cases, to
      service the Mortgages;

            (g) The PFI satisfies all requirements set forth in the Guides and,
      if applicable, the MPF Program Requirements to be an eligible Mortgage
      originator, an eligible Mortgage seller and an eligible Mortgage servicer;

            (h) The PFI is in compliance with all Applicable Laws;

                                       12
<PAGE>

            (i) The PFI is solvent and no event has occurred or is contemplated
      to occur (based on facts presently known to the PFI) which event would
      have a material adverse impact on the financial condition of the PFI or
      the ability of the PFI to perform its obligations hereunder and under the
      Guides; and

            (j) The PFI understands the nature and structure of the transactions
      contemplated under this Contract; it is familiar with all of the documents
      and instruments relating to such transactions; it understands the risks
      inherent in such transactions, including, without limitation, the risk of
      loss related to the PFI's Credit Enhancement, if any, with respect to
      Mortgages delivered to the Bank under this Contract; and it has not relied
      on the Bank for any guidance or expertise in analyzing the financial,
      accounting, tax or other consequences of the transactions contemplated by
      this Contract or otherwise relied on the Bank in any manner.

      5.3. Specific Mortgage Representations, Warranties and Covenants. The PFI
makes each of the following specific representations and warranties with respect
to each Mortgage and each Property, and, where applicable, covenants as follows:

            (a) Mortgage Meets Requirements. The Mortgage conforms to all of the
      applicable requirements in the Guides, this Contract and Applicable Laws.

            (b) PFI Authorized to Do Business. The PFI and any other party
      involved in the origination of the Mortgage, at all applicable times:

                  (1) were authorized to transact business in all applicable
                  jurisdictions, including, without limitation, the jurisdiction
                  where the Property is located, unless at all such times, such
                  authorization to transact business was not required, based
                  upon the activities of the PFI or other relevant party, as the
                  case may be;

                  (2) possessed all licenses, permits and approvals required by
                  all Applicable Laws, including, without limitation, all
                  Applicable Laws of the jurisdiction where the Property is
                  located; and

                  (3) complied with all Applicable Laws.

            (c) PFI has Full Right to Originate, Sell or Service. The PFI has,
      and in the case of any Acquired Mortgage, every prior holder of any
      interest in such Mortgage or prior servicer has, full power and authority
      to originate, purchase, sell and service the Mortgage, and each has duly
      authorized the origination or purchase and sale and servicing of the
      Mortgage. The PFI has not, and in the case of any Acquired Mortgage, no
      prior holder of any interest in such Mortgage or prior servicer has,
      granted to any Person other than the Bank any interest in the Mortgage or
      the right to fund or hold the Mortgage, or any interest therein except as
      authorized in this Contract. In addition, neither the PFI's nor any prior
      holder's nor any prior servicer's right, power and authority to originate
      or purchase and sell, and service the Mortgage is subject to any other
      Person's interest, consent or approval or to any agreement with any other
      Person.

            (d) Lien on Property. The Mortgage is a valid and subsisting
      perfected first lien and security interest on the Property described in
      it, and the Property is free and clear of all encumbrances and liens
      having priority over it except for (i) liens for real estate taxes, and
      liens for special assessments, that are not yet due and payable, (ii)
      covenants, conditions and restrictions, rights of way, easements and other
      matters of the public record as of the date of recording, acceptable to
      mortgage lending institutions generally and (iii) other matters to which
      like properties are commonly subject which do not materially interfere
      with the benefits of the security intended to be provided by the Mortgage
      or the use, enjoyment, value or marketability of the related Property.

            (e) Documents are Valid and Enforceable. All documents and
      instruments constituting a part of the Mortgage have been properly signed
      and delivered, are legal, valid and binding obligations of

                                       13
<PAGE>

      the Persons purporting to be parties thereto, enforceable in accordance
      with their respective terms, subject only to bankruptcy laws, Soldiers'
      and Sailors' Relief Acts, laws relating to administering decedents'
      estates and general principles of equity.

            (f) Property Not Subject to Liens. The Property is free and clear of
      all mechanics' liens, materialmen's liens or similar liens and there are
      no rights outstanding that could result in any of such liens being imposed
      on the Property. The PFI does not make the warranty in this subsection (f)
      if the PFI furnishes the Bank with a title insurance policy in an amount
      and in a form acceptable to the Bank and issued by a title insurance
      company acceptable to the Bank that gives the Bank substantially the same
      protection as this warranty.

            (g) Title Insurance. There is a mortgagee title insurance policy or
      other title evidence acceptable to the Bank, on the Property. The title
      insurance policy is in a current ALTA form (or other generally acceptable
      form) issued by a title insurance company satisfying the standards set
      forth in the Guides, is in an amount equal to the maximum principal amount
      of the Mortgage and includes all title endorsements required by the
      Guides. The title insurance insures (or the other title evidence protects)
      the Bank or the PFI (pursuant to Section 3.6), as holding a first
      perfected lien against the Property.

            (h) Modification or Subordination of Mortgage. Except and only to
      the extent as expressly consented to by the Bank in a writing signed and
      delivered by the Bank, the PFI has not done, and in the case of any
      Acquired Mortgage, no prior servicer or holder of any interest in such
      Mortgage has done, any of the following, except as may be necessary to
      reform the Mortgage documents for the purpose of correcting or conforming
      such Mortgage documents to accurately reflect the Mortgage transaction:

                  (1)   materially modified or waived any provision of the
                  Mortgage;

                  (2)   satisfied or canceled the Mortgage in whole or in part;

                  (3)   subordinated the Mortgage in whole or in part;

                  (4)   released the Property in whole or in part from the
                  Mortgage lien; or

                  (5)   signed any release, cancellation, modification or
                  satisfaction of the Mortgage.

            (i) Mortgage in Good Standing. There is no default (or event or
      occurrence which, with notice or lapse of time or both, if uncured, would
      constitute a default) under the Mortgage, and all of the following that
      have become due and payable have been paid:

                  (1)   taxes;

                  (2)   governmental and other assessments;

                  (3)   insurance premiums;

                  (4)   water, sewer and municipal charges;

                  (5)   leasehold payments; and

                  (6)   ground rents.

            (j) Advances. The PFI has not, and in the case of any Acquired
      Mortgage, no prior servicer or holder of any interest in such Mortgage
      has, made or knowingly received from others, any direct or indirect
      advance of funds in connection with the loan transaction on behalf of the
      Borrower except as provided in the Guides. This warranty does not cover
      payment of interest out of proceeds of the Mortgage for the period
      commencing on the earliest of:

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<PAGE>

                  (1)   the date of the Mortgage Note; or

                  (2)   the date on which the Mortgage proceeds were disbursed;
                  or

                  (3)   the date one month before the first installment of
                  principal and interest on the Mortgage is due,

      and ending on the last day of the month in which such date occurs, by the
      PFI, and in the case of any Acquired Mortgage, by the initial servicer or
      holder of such Mortgage.

            (k) Property Conforms to Zoning Laws. The PFI has no, and in the
      case of any Mortgage which the PFI purchased or acquired the servicing
      for, no prior servicer or holder of any interest in such Mortgage has any,
      knowledge that any improvement to the Property is in violation of any
      applicable zoning law or regulation.

            (l) Property Intact. The Property is not damaged by fire, wind or
      other cause of loss. There are no proceedings pending or, to the best of
      the PFI's knowledge, and in the case of any Mortgage which the PFI
      purchased or acquired the servicing for, to the best of each prior
      servicer's and holder's knowledge, threatened, for the partial or total
      condemnation of the Property.

            (m) Improvements. Any improvements that are included in the
      appraised value of the Property are totally within the Property's
      boundaries and building restriction lines. No improvements on adjoining
      Property encroach on the Property unless the Guides permit such an
      encroachment.

            (n) Mortgage Not Usurious. The Mortgage is not usurious and either
      meets or is exempt from all applicable usury laws or regulations.

            (o) Compliance With Applicable Laws. The PFI and, in the case of any
      Acquired Mortgage, every prior holder and servicer of the Mortgage has
      complied with all Applicable Laws in connection with the Mortgage.

            (p) Property is Insured.

                  (1) A property insurance policy on the Property is in effect
                  that is provided by the Borrower or, if the Borrower fails to
                  do so, by the PFI. It is written by an insurance company
                  satisfying the standards set forth in the Guides, in the form
                  required by the Guides, and provides fire and extended
                  coverage for an amount at least equal to the amount required
                  by the Guides.

                  (2) A flood insurance policy is in effect on the Property if
                  required by the Guides, in conformance with the requirements
                  of the Guides.

                  (3) Any policy included in this warranty contains a standard
                  mortgage clause that names the PFI or, with the Bank's
                  approval, the Bank as mortgagee.

            (q) Mortgage is Acceptable Investment. The PFI knows of nothing, and
      in the case of any Acquired Mortgage, no prior servicer or holder of such
      Mortgage, at the time it transferred its interest in the Mortgage, knew of
      anything involving the Mortgage, the Property, the Borrower or the
      Borrower's credit standing that can reasonably be expected to:

                  (1) cause GSEs or private institutional investors to regard
                  the Mortgage as an unacceptable investment;

                  (2) cause the Mortgage to become delinquent; or

                                       15
<PAGE>

                  (3) adversely affect the Mortgage's value or marketability,
                  including, without limitation, any environmental conditions.

            (r) Mortgage Insurance or Guaranty in Force. If the Mortgage is
      required to be insured by a mortgage insurance company, the PFI represents
      that the Mortgage is so insured and that the insurance is in full force.
      If a Mortgage is intended to be insured by the FHA under the National
      Housing Act as amended ("FHA Insurance"), guaranteed by the VA under the
      Servicemen's Readjustment Act of 1944 as amended ("VA Guaranty"), or
      insured or guaranteed by any other federal agency, the PFI represents that
      (1) each Mortgage to be insured by the FHA is eligible for FHA Insurance,
      and the FHA Insurance premiums that are due and payable for each such
      Mortgage have been paid, (2) each Mortgage to be guaranteed by the VA is
      eligible for a VA Guaranty, and any VA Guaranty fees that are due and
      payable for each such Mortgage have been paid, and (c) each Mortgage to be
      federally insured or guaranteed is eligible for such insurance or
      guaranty, and any fees or premiums that are due and payable for each such
      Mortgage have been paid, and all actions required to obtain such insurance
      or guaranty have been taken. In addition, the PFI and each prior servicer
      and holder of the Mortgage have complied with all Applicable Laws
      pertaining to such FHA, VA or other federal insurance or guaranty, or with
      the provisions of the mortgage insurance contract, that cover the
      Mortgage.

            (s) Adjustable Mortgages. If the Guides and applicable Master
      Commitment permit adjustable rate mortgages, and the Mortgage provides
      that the interest rate or the principal balance of the Mortgage may be
      adjusted, the PFI represents that all of the terms of the Mortgage may be
      enforced by the Bank, its successors and assigns and all prior adjustments
      made or required to be made have been made in accordance with the
      applicable Mortgage provisions and Applicable Laws. These adjustments will
      not affect the priority of the lien as a first priority perfected lien
      against the Property.

            (t) Mortgage Assignments. For each Closed Mortgage, the PFI has done
      or shall do the following within the time period set forth in the Guides:

                  (1) The Mortgage Note has been endorsed by the PFI in blank
                  and delivered to the Bank, and if the Mortgage is an Acquired
                  Mortgage, by the payee thereof and by each successive holder
                  of such Mortgage. Each such endorsement shall be substantially
                  in the following form: "Pay to the order of [assignee's name],
                  without recourse" except that the final endorsement from the
                  PFI shall leave a blank rather than complete the assignee's
                  name. An endorsement without recourse does not and shall not
                  be deemed to limit any of the PFI's representations,
                  warranties or covenants under this Contract.

                  (2) Unless MERS is the mortgagee of record, the PFI has
                  executed and delivered to the Bank an Assignment of Mortgage
                  in blank, satisfying the requirements of the Origination
                  Guide. If the Mortgage is an Acquired Mortgage and MERS is not
                  the mortgagee of record, the original mortgagee thereof and
                  each successive holder of such Mortgage has executed and,
                  except for the PFI, recorded in the appropriate real estate
                  records, an Assignment of Mortgage substantially in the form
                  of the aforementioned Assignment of Mortgage, which
                  Assignments or certified copies thereof have been delivered to
                  the Bank, as necessary to satisfy the requirements of the
                  Origination Guide.

                  (3) Each such endorsement and Assignment has been duly
                  authorized, executed and delivered by each applicable party to
                  each thereof and is the legal, valid and binding obligation of
                  such party, enforceable in accordance with its terms.

                  (4) The PFI has delivered to the Bank the Mortgage File for
                  such Mortgage in compliance with the Origination Guide.

                                       16
<PAGE>

                  (5) The original Mortgage was duly recorded in the appropriate
                  real estate records where such recordation is necessary to
                  perfect the lien thereof, in compliance with the Guides.

            (u) Compliance Matters. The servicing of such Mortgage is properly
      held by the PFI and all notices required by Applicable Laws regarding any
      transfer of servicing shall have been delivered to the applicable
      Borrower. The servicing of such Mortgage by the PFI and any other servicer
      has complied in all material respects with the applicable Mortgage
      documents and Applicable Laws pertaining to servicing.

            (v) Ownership of Mortgages. Except and only to the extent as
      expressly consented to by the Bank in a writing signed and delivered by
      the Bank, immediately prior to giving effect to the Assignment of Mortgage
      to the Bank, the PFI holds all right, title and interest in and to the
      Mortgage, including, without limitation, all servicing rights with respect
      thereto, free and clear of all liens, encumbrances, participation
      interests, claims or other interests of any other Person.

            (w) Industry Standard Practices. The origination and collection
      practices relating to the Mortgage used by the PFI, and in the case of any
      Acquired Mortgage, all prior servicers and holders of such Mortgage, have
      been legal, proper, prudent and customary in origination and servicing of
      residential first mortgage loans.

            (x) Full Disbursement. The proceeds of the Mortgage have been fully
      disbursed. All costs, fees and expenses incurred in making, closing or
      recording the Mortgage have been paid in full.

            (y) No Foreclosure. There is no foreclosure proceeding pending or,
      to the best of the PFI's knowledge, threatened, with respect to such
      Mortgage or any Property subject thereto.

            (z) No Bulk Transfer. No transfer of such Mortgage by any holder
      thereof, including (without limitation) the transfer by the PFI to the
      Bank was or is the subject of any bulk sale law or other similar law of
      any jurisdiction.

      5.4. Notice of Breach. The PFI shall promptly give the Bank notice of any
breach of any representation or warranty set forth herein or incorporated herein
by reference, which notice shall be in writing and shall describe in reasonable
detail the nature of such breach. The PFI shall promptly provide to the Bank
such additional information regarding any such breach, as the Bank shall
request.

      5.5. Consequences of Untrue, Misleading or Incomplete Warranties or
Representations; Purchase or Repurchase.

            (a) The Bank may require the PFI to purchase or repurchase a
      Mortgage if any warranty or representation made by the PFI about the
      Mortgage or the related Property is untrue, misleading or incomplete
      (whether the warranty is in this Contract or any of the Guides, or was
      made at the Bank's specific request).

            (b) The Bank may require such purchase or repurchase whether or not
      the PFI had actual knowledge of the breach of warranty or representation.
      The Bank may also enforce any other remedy available at law or in equity.

            (c) To effect the sale or resale of such Mortgage, the Bank shall
      debit an amount equal to the purchase or repurchase price from the PFI's
      DDA, and in the event that any such debit from the PFI's DDA shall cause
      the balance in such account to become negative, such deficit shall be
      subject to the overdraft provisions of the depository agreement between
      the PFI and the Bank, which may include, without limitation, treating such
      overdraft as an advance. The purchase or repurchase price shall be as
      provided in the Guides, which shall include adjustments to the price to
      reflect any premium or discount paid to or by, the Bank to or from, the
      PFI in connection with the purchase of such Mortgage but shall not include
      fees paid to the PFI by the Borrower.

                                       17
<PAGE>

      5.6. Consequences of Untrue, Misleading or Incomplete Warranties or
Representations - Termination of Contract. While untrue, misleading or
incomplete warranties or representations about a particular Mortgage or Property
may be the basis for requiring the PFI to purchase or repurchase the Mortgage,
there can be additional consequences. Such untrue, misleading or incomplete
warranties or representations may also give rise to liabilities of the PFI under
Section 5.7. In addition, untrue, misleading or incomplete warranties or
representations can, under certain circumstances as determined by the Bank, be
treated as a breach of this Contract that could result in the withdrawal of the
Bank's approval of the PFI and the termination of this Contract as set forth in
Articles X and XI.

      5.7. Indemnification for Breach of Warranties or Representations; Holding
the Bank Harmless. If there is a breach of warranty or representation under this
Contract (whether such breach was intentional, negligent, or unintentional or
whether or not the PFI had actual or constructive knowledge thereof), the PFI
agrees to indemnify, defend and hold the Bank and the other Indemnified Parties
harmless from and against any related losses, damages, claims, actions, causes
of action, liabilities, obligations, judgments, penalties, fines, forfeitures,
costs and expenses, including, without limitation, legal fees and expenses.
Without limiting the PFI's obligation for any Remaining Credit Enhancement in
effect from time to time, the indemnification arising under this Section 5.7
shall not be deemed to be a guarantee of the payment by any obligor of any
Mortgage. If the Bank seeks indemnification under this Section 5.7, it must
promptly give the PFI notice of any legal action. However, delay or failure by
the Bank to provide such notice shall not release the PFI from any indemnity
obligations, except and only to the extent that the PFI shows that such delay or
failure materially prejudiced the defense of such action. The PFI shall be
responsible to conduct such defense through counsel reasonably satisfactory to
the Bank; provided, however, that the Bank is permitted to control fully the
defense of any such claim and to settle any such claim subject to the PFI's
approval, which approval shall not be unreasonably withheld; provided further
that the Bank shall have the right to retain counsel to represent it at its
expense in connection with any such claim. If there is a default by the PFI of
its indemnity obligation, or a default under or termination of this Contract, or
the Bank believes that there is a conflict between the Bank and the PFI or its
counsel, the Bank may engage separate counsel at the expense of the PFI. If the
PFI fails to assume the defense of an action within ten (10) days after
receiving notice, then the PFI shall be bound by any determination made in the
action or by any compromise or settlement the Bank may effect. The Bank agrees
to use reasonable efforts to mitigate any claims tendered to the PFI. The Bank
shall assign to the PFI all of its claims for recovery against third parties for
any indemnification provided by the PFI, whether such claims arise pursuant to
insurance coverage, contribution, subrogation or otherwise.

VI. ELIGIBILITY REQUIREMENTS FOR SERVICERS

      For the PFI to service Mortgages for the Bank, the PFI must satisfy the
eligibility requirements specified in this article.

      6.1. General Requirements. These are the general requirements the PFI must
meet to be eligible to service mortgages for the Bank:

            (a) Meet the Bank's Standards. The PFI must have and maintain as one
      of its principal business purposes, the servicing of mortgages of the type
      that PFI will service under this Contract. In addition, the PFI, in the
      Bank's judgment, must, at all times, have the capacity to service
      mortgages for the Bank in a manner satisfying the Bank's servicing
      standards and the standards generally imposed by other GSEs and private
      institutional mortgage investors. Finally, the PFI must, at all times,
      satisfy the applicable requirements for servicers of mortgages set forth
      in the Guides and, if issued, in the MPF Program Requirements.

            (b) Have Qualified Staff and Adequate Facilities and Systems. The
      PFI must, at all times, employ personnel or agents who are well trained
      and qualified to perform the functions required of the PFI, as Servicer,
      under this Contract, and the PFI and any agents must maintain facilities
      and systems that, in the Bank's judgment, are able to perform its
      functions as Servicer under this Contract.

            (c) Maintain Fidelity Bond and Errors and Omissions Coverage. The
      PFI must maintain, at its own expense, a fidelity bond and errors and
      omissions insurance, as required by the Guides.

                                       18
<PAGE>

            (d) Report Basic Changes. The PFI must notify the Bank promptly in
      writing of any material changes that occur in its principal purpose,
      activities, financial condition, staffing, facilities, fidelity bond or
      errors and omissions insurance.

      6.2. Ownership and Status of Servicer. In approving a PFI as Servicer, the
Bank relies on the information the PFI has provided about the eligibility,
qualifications and financial status of the PFI and its owners. The PFI covenants
and agrees to comply with the provisions of the Guides and, if issued, the MPF
Program Requirements, regarding these matters, including, without limitation,
the delivery of notices regarding these matters as required by the Servicing
Guide. Changes in any such matters may affect the PFI's eligibility to service
Mortgages for the Bank.

      6.3. Financial Information. In order to become and remain an approved
Servicer under this Contract, the PFI must provide the financial information
required by the Guides from time to time and must satisfy the standards set
forth in the Guides and the MPF Program Requirements. The PFI further agrees
that the Bank may provide such financial information to the MPF Provider and
other Participants or potential Participants in the Mortgages.

      6.4. Access to PFI's Records. As set forth in the Guides, the PFI agrees
to permit, and cause its agents to permit, the Bank's employees and designated
representatives to examine or audit books, records and information pertaining to
the Mortgages.

VII. SERVICING MORTGAGES

      This article contains the basic rules governing the servicing of Mortgages
owned by the Bank (whether originated by the PFI or any other Person) and
Mortgages for which the PFI acquires the Servicing subject to the terms of this
Contract, during the period that the PFI is to service such Mortgages.

      7.1. Servicing Duties of the Servicer. The PFI hereby agrees to perform
the following servicing duties for the benefit of the Bank and any Participants:

            (a) Scope of Duties. The Servicer will diligently perform all duties
      that are necessary or incident to the servicing of Mortgages that the
      Servicer is required to service by the terms of this Contract or any other
      existing or future agreement between the Bank and the Servicer.

            (b) Mortgages to be Serviced. Any Closed Mortgage and any Acquired
      Mortgage will be serviced by the PFI for the Bank according to the terms
      of this Contract, unless, with respect to any such Mortgage, the Bank
      gives the PFI written notification or consent that such Mortgage will not
      be serviced by the PFI, whether:

                  (1) at the time of acquisition by the Bank, as applicable;

                  (2) thereafter as a result of the PFI or its designee
                  breaching any representation, warranty, covenant or agreement
                  contained in Articles V, VI or VII of this Contract or in any
                  provision of the Guides pertaining to the servicing of the
                  Mortgages or eligibility to service the Mortgages; or.

                  (3) at the time of the transfer of Servicing to another.

            (c) Service According to Guides and Industry Standards. Any Mortgage
      serviced under this Contract must be serviced by the Servicer according to
      the provisions in the Guides in effect on the date of this Contract or as
      the Guides may be amended or supplemented in the future, provided that
      such amendments or supplements shall apply only for Mortgages delivered to
      the Bank on or after the respective effective dates thereof unless such
      amendments or supplements (i) implement or are required by Applicable Law,
      or (ii) do not materially increase the PFI's responsibilities. The
      Servicer will also follow other

                                       19

<PAGE>

      reasonable instructions the Bank or MPF Provider (through its Master
      Servicer) gives it from time to time and shall follow accepted industry
      standards and comply with Applicable Laws when servicing a Mortgage for
      the Bank, which includes without limitation, the maintenance of all
      insurance and guaranty coverage required by the Guides and the payment of
      all premiums and fees thereon as they become due and payable.

            (d) Service at Servicer's Own Expense. The Servicer shall be solely
      responsible for all costs of Servicing unless the Guides expressly provide
      otherwise. Without limiting the foregoing sentence, the Servicer shall be
      responsible for Unreimbursed Servicing Expenses as provided in Section
      4.3, and shall, if required by the Bank, repurchase delinquent Government
      Mortgages in accordance with the provisions of the Guides or as the Bank
      otherwise agrees in writing.

            (e) Special Responsibilities in Foreclosures. Among the other duties
      that may be assigned to the Servicer through the Bank's special
      instructions or under the terms of the Guides is the responsibility to
      manage and appropriately dispose of the Property when a Mortgage it is
      servicing for the Bank has been foreclosed, or possession or title has
      been acquired by the Servicer on behalf of the Bank. The Servicer shall
      manage the Property according to the terms of the Mortgage (during the
      foreclosure process) and shall manage and dispose of the Property in
      accordance with the Guides (both during the foreclosure process, or the
      acceptance of a deed in lieu of foreclosure or other remedy, and after
      title to the Property has been acquired on behalf of the Bank).

            (f) Service Until Need Ends. The Servicer shall service each
      Mortgage continuously from the date its servicing duties begin until the
      earliest of:

                  (1) the Mortgage's principal and interest have been paid in
                  full and the Mortgage shall have been canceled or released of
                  record and a satisfaction or canceled Note shall have been
                  issued to the Borrower;

                  (2) the Mortgage has been foreclosed or liquidated and the
                  Mortgaged Property properly disposed of; or

                  (3) the Servicer's servicing duties are transferred or
                  terminated in accordance with this Contract.

      7.2. Compensation.

            (a) The Servicer's compensation for servicing Mortgages under this
      Contract, including, without limitation, the management and disposal of
      foreclosure Properties, shall be the Servicing Fees specified in the
      Guides and in the Master Commitment.

            (b) From time to time the MPF Provider may publish amendments to the
      Guides or revisions of the MPF Mortgage Products that effect a change in
      the Servicer's compensation which will take effect no earlier than thirty
      (30) days after such publication. However, such a change shall not affect
      Master Commitments under which one or more Delivery Commitments have been
      issued before the effective date of the change.

      7.3. Ownership of Records.

            (a) General. The Mortgage Records are the Bank's property at all
      times. This is true whether or not the Servicer developed or originated
      them.

      The Mortgage Records shall include, but are not limited to:

                  (1)   all Mortgage documents;

                  (2)   tax receipts;

                                       20
<PAGE>

                  (3)   insurance policies;

                  (4)   insurance premium receipts;

                  (5)   ledger sheets or their electronic equivalent;

                  (6)   payment records;

                  (7)   insurance claim files and correspondence;

                  (8)   foreclosure files and correspondence;

                  (9)   current and historical data files; and

                  (10)  all other papers, records, correspondence, memoranda and
                        electronic data.

            (b) Servicer as Custodian. The Mortgage Records belong to the Bank.
      The Servicer shall have possession of the Mortgage Records only with the
      Bank's approval. The Servicer hereby acknowledges that it is acting as the
      Bank's custodian in connection with any Mortgage Records at any time in
      its possession or control and it shall have no other interest in them.
      This is true whether the Servicer receives the Mortgage Records from an
      outside source or prepares them itself.

            (c) Delivery.

                  (1) The Servicer shall deliver to the Bank or its designee
                  such original Mortgage Records as the Guides shall require. In
                  addition, when the Bank or its designee asks in writing for
                  any Mortgage Records, the Servicer shall deliver them promptly
                  to the Bank or its designee. The Servicer shall also provide
                  such Servicing information as required by the Guides and as
                  the Bank may reasonably request from time to time.

                  (2) If the Bank asks the Servicer in writing for reproductions
                  of any Mortgage Records the Servicer or any predecessor
                  servicer or holder of any Mortgage microfilmed, condensed or
                  stored in electronic form, the Servicer will reproduce them in
                  fully readable form promptly at no cost to the Bank or its
                  designee. Further, in the event the Bank requires copies of an
                  extensive number of Mortgage Records (in contrast to normal
                  quality control reviews or similar targeted requests for
                  Mortgage Records) that have been microfilmed, condensed or
                  stored in electronic form, the Servicer may provide duplicates
                  of the microfilm or condensed data, or electronically transmit
                  such data, to the Bank in a format readable by the Bank or its
                  designee rather than provide reproductions of the Mortgage
                  Records in paper format.

      7.4. Agreement to Indemnify, Defend and Hold Harmless.

            (a) The PFI as the Servicer agrees to indemnify, defend and hold the
      Bank and the other Indemnified Parties harmless from and against all
      losses, damages, claims, actions, causes of action, liabilities,
      obligations, judgments, penalties, fines, forfeitures, costs and expenses,
      including, without limitation, legal fees and expenses, that result from
      (i) the failure or purported failure of the PFI or its assignee or
      designee in any way to perform its servicing obligations and duties with
      respect to the Mortgages or managing or disposing of Property in
      accordance with this Contract or the Guides, or (ii) the actual or
      purported willful misfeasance, bad faith or negligence of the PFI or its
      assignee or designee in the performance of its obligations or duties as
      the Servicer in connection with this Contract or the Guides, or the
      reckless disregard of such obligations or duties. In no event shall this
      indemnification be deemed to be a guarantee of payment by any obligor of
      any Mortgage. If an Indemnified Party seeks indemnification under this
      Section 7.4 (a), it must promptly give the PFI notice of any legal action
      or dispute. However,

                                       21
<PAGE>

      delay or failure by the Indemnified Party to provide such notice shall not
      release the PFI from any indemnity obligations, except and only to the
      extent that the PFI shows that such delay or failure materially prejudiced
      the defense of such action. The PFI shall be responsible to conduct such
      defense through counsel reasonably satisfactory to the Indemnified Party;
      provided, however, that the Indemnified Party is permitted to control
      fully the defense of any such claim and to settle any such claim subject
      to the PFI's approval, which approval shall not be unreasonably withheld;
      provided further that the Indemnified Party shall have the right to retain
      counsel to represent it at its expense in connection with any such claim.
      If the PFI fails to comply with its indemnity obligations or breaches this
      Contract, or the Bank believes that there is a conflict between the Bank
      and the PFI or its counsel, the Bank may engage separate counsel at the
      expense of the PFI. If the PFI fails to assume the defense of an action
      within ten (10) days after receiving notice, then the PFI shall be bound
      by any determination made in the action or by any compromise or settlement
      the Indemnified Party may effect. The Indemnified Party shall use
      reasonable efforts to mitigate any claims tendered to the PFI. The
      Indemnified Party shall assign to the PFI all of its claims for recovery
      against third parties for any indemnification provided by the PFI, whether
      such claims arise pursuant to insurance coverage, contribution,
      subrogation or otherwise.

            (b) If any Person, including, without limitation, any governmental
      agency, department or official, sues the Bank or any other Indemnified
      Party, makes a claim against any Indemnified Party or starts a proceeding
      against any Indemnified Party based on the PFI's acts or omissions, or
      purported acts or omissions, in servicing Mortgages or managing or
      disposing of Property, the PFI's obligation to indemnify, defend and hold
      harmless the Bank or any other Indemnified Parties shall be met regardless
      of whether the suit, claim or proceeding has merit or not.

            (c) The PFI's indemnification obligation does not apply, however, to
      the extent that during a suit, claim or proceeding, the Bank gives the PFI
      express written instructions and solely as a result of the PFI following
      them an Indemnified Party suffers losses, damages, judgments or legal
      expenses.

      7.5. PFI's Role as Mortgage Servicer. The Servicer shall be an independent
contractor and shall not be an agent for the Bank except as may be expressly
provided for in the Guides, and shall not hold itself out as an agent of the
Bank.

VIII. ASSIGNMENT, CONSIDERATION AND CONTINUANCE

      This article describes the Bank's requirements covering assignment of,
consideration for, and continuance of, this Contract.

      8.1. Assignment. Because the relationships created by this Contract are
personal, the PFI may not, without the Bank's prior written approval, assign:

            (a) this Contract (whether in whole or in part) under any
      circumstances, either voluntarily or involuntarily, by operation of law,
      or otherwise;

            (b) its responsibility regarding the origination of Mortgages under
      this Contract;

            (c) its Credit Enhancement arising under Article IV of this
      Contract, nor may the PFI enter into or acquire any agreement to
      indemnify, offset, hedge or share its Credit Enhancement, including,
      without limitation, such agreements as mortgage pool insurance,
      reinsurance or securitizations in any form; or

            (d) any fees payable or rights arising under this Contract.

Notwithstanding the foregoing, other Persons may assist the PFI in originating
Mortgages, either as an agent of the PFI or as a vendor supplying services to
the PFI. In all such cases, the PFI shall remain primarily responsible and
liable for (and shall not be released from) the performance of all PFI
obligations hereunder and shall be and remain primarily liable for the acts and
omissions of such other Persons. In addition, the PFI shall be solely
responsible for

                                       22
<PAGE>

any payments due all such other Persons for their services, and shall indemnify,
defend and hold harmless the Bank and the other Indemnified Parties from and
against all losses, damages, claims, actions, causes of action, liabilities,
obligations, judgments and expenses (including, without limitation, legal fees
and expenses) relating to such services or such Persons. Nothing in this
Contract shall be deemed to limit the Bank's right to sell, pledge, hypothecate,
securitize or assign the Mortgages or any interests or rights it has arising out
of the Mortgages or under this Contract.

      8.2. Limited Value of Contract to PFI.

            (a) The PFI acknowledges that it has paid the Bank no monetary
      consideration for making it an approved PFI or Servicer.

            (b) The PFI also agrees that, except for any premium payable with
      respect to Mortgages delivered under this Contract, any Credit Enhancement
      Fee payable under this Contract, the Servicing Fee with respect to the
      servicing of Mortgages under this Contract, or any termination fee for
      terminating servicing under this Contract, this Contract has no value to
      the PFI.

      8.3. Requirements for Continuance. The PFI acknowledges that it may
continue to originate, sell and service Mortgages under this Contract only as
long as, among other things, it continues to meet all of the eligibility
requirements set forth in this Contract, the Guides and, if issued, the MPF
Program Requirements.

IX. ASSIGNING MORTGAGE SERVICING

      The PFI may not sell, assign or pledge its responsibility for servicing
all or any part of the Mortgages that it is servicing for the Bank without first
obtaining the Bank's written consent, which consent may be granted or withheld
by the Bank in its sole discretion and may be subject to conditions specified in
the Guides.

X. BREACHES OF CONTRACT

      The Bank can treat the PFI's taking certain actions, or failing to take
certain actions, as a breach of this Contract. A breach of this Contract can
lead to a termination of this Contract by the Bank at the Bank's option.
Termination is provided for in detail in Article XI. In addition, upon the PFI's
breach of this Contract, the Bank, at its option, may revoke the Bank's approval
of the PFI as a Mortgage originator, seller or servicer.

      10.1 Specific Breaches of Contract. The following constitute breaches of
this Contract:

            (a) Harm, Damage, Loss or Untrue Warranties. It is a breach of this
      Contract if any act or omission of the PFI in connection with the
      origination, sale, servicing or Credit Enhancement of any Mortgage causes
      the Bank any harm, damage or loss, provided, however, that the PFI's
      liability for any such breach shall not be deemed to be a guarantee of the
      payment by any obligor of any Mortgage except to the extent of any
      Remaining Credit Enhancement in effect from time to time. It is also a
      breach of this Contract if the PFI breaches any representations or
      warranties made or furnished by or on behalf of the PFI in connection with
      this Contract (including, without limitation, those set forth in Section
      5.2) or if the PFI delivers to the Bank any Mortgage which breaches any of
      the warranties described in Section 5.3.

            (b) Failure to Comply with this Contract, the Guides or the MPF
      Program Requirements. It is a breach of this Contract if the PFI does not
      comply, through any act or omission, with any term or condition of this
      Contract, the Guides or, if issued, the MPF Program Requirements.

            (c) Failure to Properly Foreclose or Liquidate. Where a Mortgage is
      in default and the PFI is required or has decided to foreclose or
      liquidate such Mortgage, it is a breach of this Contract if the PFI fails
      to take prompt and diligent action consistent with Applicable Laws to
      foreclose on or otherwise appropriately liquidate such Mortgage and to
      perform all incidental actions, whether or not the failure results from
      the acts or omissions of an attorney, trustee or other Person or entity
      the PFI chooses to effect foreclosure or liquidation.

                                       23
<PAGE>

            (d) Failure to Properly Manage, Dispose of, or Effect Proper
      Conveyance of Title. It is a breach of this Contract if any Mortgage
      serviced under this Contract has been foreclosed or the possession or
      title to the Property has been taken by the PFI on behalf of the Bank and
      the PFI fails to properly manage, dispose of or effect proper conveyance
      of title to the Mortgaged Property in accordance with this Contract, the
      Guides, any Applicable Laws or any applicable Mortgage insurance policies
      or contracts.

            (e) PFI's Financial Ability Impaired. It is a breach of this
      Contract if there is a change in the PFI's financial status that, in the
      Bank's opinion, materially and adversely affects the PFI's ability to
      satisfactorily perform any of its obligations under this Contract. Changes
      of this type include without limitation:

                  (1) the PFI's insolvency;

                  (2) adjudication of the PFI as a bankrupt;

                  (3) appointment of a receiver or conservator for the PFI;

                  (4) the PFI's execution of a general assignment for the
                  benefit of its creditors; or

                  (5) any regulatory action taken against the PFI by any
                  regulatory agency that in the Bank's sole judgment is likely
                  to have a material adverse impact on the financial condition
                  of the PFI or its ability to perform any of its obligations
                  under this Contract.

            (f) Failure to Obtain the Bank's Prior Written Consent. It is a
      breach of this Contract if the PFI fails to obtain the Bank's prior
      written consent for:

                  (1)   a sale or transfer (directly or indirectly) of the
                  majority interest in the PFI; or

                  (2)   a change in its corporate status, charter or structure.

            (g) Failure to Comply with Eligibility Standards. It is a breach of
      this Contract if the PFI, in the Bank's opinion, fails at any time to meet
      the eligibility standards for originating, selling or servicing Mortgages
      set forth in this Contract, the Guides or, if issued, the MPF Program
      Requirements.

            (h) Court Findings against PFI or Principal Officers. It is a breach
      of this Contract if:

                  (1) a court of competent jurisdiction finds that the PFI or
                  any of its Principal Officers has committed an act of civil
                  fraud related to the PFI's lending or mortgage origination,
                  selling or servicing activities, or that, in the Bank's
                  reasonable opinion, adversely affects the PFI's reputation or
                  the Bank's reputation or interests; or

                  (2) the PFI or any of its Principal Officers is convicted of
                  any criminal act related to the PFI's lending or mortgage
                  origination, selling or servicing activities or that, in the
                  Bank's opinion, adversely affects the PFI's reputation or the
                  Bank's reputation or interests.

            (i) Cross-Defaults. It is a breach of this Contract if any default
      occurs under any other agreement between (1) the PFI (or any Affiliate of
      the PFI) and the Bank, or (2) the PFI (or any Affiliate of the PFI) and
      any other Federal Home Loan Bank.

            (j) Replacement Contract. It is a breach of the Contract if the PFI
      does not immediately reimburse the Bank for any funds advanced by the Bank
      to obtain a Replacement Contract.

      10.2. The Bank's Rights upon Breach.

                                       24
<PAGE>

            (a) Rights Regarding PFI Relationship. If there is a breach of this
      Contract by the PFI, the Bank will have no obligation to permit the PFI to
      correct or cure the breach and the Bank shall have the following rights:

                  (1) the right (but not the obligation) to require or permit
                  the PFI to take any reasonable action to correct or cure the
                  breach, provided, however, if the Bank determines the PFI's
                  breach is capable of being cured and is not the result of the
                  PFI's breach of a fiduciary duty, willful misconduct or
                  intentional wrongdoing, then the Bank may, in its sole
                  discretion, so notify the PFI and allow the PFI a reasonable
                  time period, as determined by the Bank, to cure such breach,
                  and if the breach is not cured within such time period, then
                  the Bank may enforce its rights as provided in Section 10.2
                  and under Article XI;

                  (2) the right to terminate this Contract in whole or in part,
                  except for a breach that involves an individual Mortgage which
                  the Bank requires the PFI to purchase or repurchase, and (i)
                  that, in the Bank's sole judgment, is not indicative of a
                  pattern or practice on the part of the PFI which is likely to
                  result in breaches with respect to other Mortgages, or (ii)
                  that, in the Bank's sole judgment, does not involve a breach
                  of fiduciary duty, willful misconduct or intentional
                  wrongdoing on the part of the PFI or its designee;

                  (3) the right to revoke the Bank's approval of the PFI as an
                  approved Originator, seller or Servicer; and

                  (4) any other rights under this Contract or the Guides or
                  available at law or in equity, including, without limitation,
                  the Bank's rights to indemnification provided for in this
                  Contract and the Guides.

            (b) Rights With Respect to the Collateral and the Advances
      Agreement. Without limiting the provisions of subsection (a) above, in the
      event of a breach of this Contract by the PFI or the Bank's exercise of
      its rights under Section 4.2 (c), the Bank shall have any and all of the
      following rights, which are not mutually exclusive and which are in
      addition to, and not in limitation of any rights of the Bank under the
      Advances Agreement:

                  (1) to obtain a Replacement Contract (which may be one or more
                      agreements as determined by the Bank in its sole
                      discretion);

                  (2) to terminate the PFI's right to receive any Credit
                      Enhancement Fee or Government Loan Fee accruing under each
                      Master Commitment; thereafter, the Bank may pay such
                      Credit Enhancement Fee to the obligor of, or as needed to
                      fund, the Replacement Contract as well as to reinstate, if
                      necessary, and to maintain in force any credit enhancement
                      agreements provided by third parties that were in place
                      prior to the breach, such as FHA insurance, supplemental
                      mortgage insurance, VA guaranty, and others as may be
                      applicable;

                  (3) to liquidate any collateral securing the PFI's Credit
                      Enhancement under Article IV and to apply the proceeds
                      thereof in such manner as the Bank may determine to any
                      obligations of the PFI to the Bank, whether arising under
                      this Contract or any other agreement, including without
                      limitation to the cost of obtaining any and all
                      Replacement Contracts, and any other damages incurred by
                      the Bank arising under this Contract; and

                  (4) to treat any sums paid (or payable) or incurred to obtain
                      a Replacement Contract, which sums shall include but are
                      not limited to, the present value of future payments

                                       25
<PAGE>

                      due under the Replacement Contract (that are in excess of
                      the present value of any Credit Enhancement Fees that
                      would have been payable to the PFI with respect to each
                      Master Commitment), as Indebtedness or Liabilities (if
                      either such term is used in the Advances Agreement) of the
                      PFI to the Bank, and an extension of credit by the Bank
                      pursuant to the Advances Agreement, and shall become
                      immediately due and payable under this Contract by the
                      PFI;

      provided, however, upon the PFI's full and unconditional payment of the
      amounts advanced by the Bank to obtain a Replacement Contract together
      with all prior or outstanding claims against the PFI, if any, the PFI
      shall be released of its Credit Enhancement under Article IV with respect
      to that Master Commitment and the Bank shall have no obligation to pay
      Credit Enhancement Fees to the PFI.

            (c) Forbearance Not a Waiver. Any forbearance by the Bank in
      exercising any of its rights will not be a waiver of any present or future
      right the Bank has under this Contract to so terminate it or to revoke the
      Bank's approval of the PFI as an approved Originator, seller or Servicer.

XI. TERMINATION OF CONTRACT

      Without limiting the rights of the parties as provided elsewhere in this
Contract, this Contract may be terminated for the reasons and in the manner as
provided in this Article XI.

      11.1. Termination by Either Party of Mortgage Origination Arrangements.
The Origination and Sale Provisions of this Contract may be terminated by the
PFI or by the Bank, with or without cause, by giving notice to the other party.
Notice of termination of the Origination and Sale Provisions may be given at any
time but must conform to Article XIII of this Contract. In the event of
termination of the Origination and Sale Provisions for cause, such termination
shall take effect immediately upon notice of termination, and may include the
cancellation of the unused portion of any Master Commitments. Termination of the
Origination and Sale Provisions without cause shall be effective with respect to
the unused portion of any Master Commitments sixty (60) days after notice of
termination is given, unless the notice specifies a later effective date.
Termination of the Origination and Sale Provisions will not affect any
outstanding Delivery Commitments for which the Bank has issued its written
acceptance, provided, however, that if the PFI has breached this Contract, the
Bank may declare any or all outstanding Delivery Commitments and its acceptance
thereof void. No termination fee is payable with respect to the termination of
the Origination and Sale Provisions, whether terminated by the PFI or the Bank.
Nothing in this Section 11.1 shall affect the PFI's obligations, or impair the
Bank's rights, with respect to the Mortgages delivered to the Bank under this
Contract prior to such termination or pursuant to Delivery Commitments entered
into prior to such termination.

      11.2. Termination by PFI of Mortgage Servicing Arrangements. The PFI may
terminate the provisions of this Contract covering the servicing of Mortgages by
giving the Bank notice at any time. Notice must conform to Article XIII of this
Contract. Termination is effective the last day of the third calendar month
after the calendar month in which notice is given. If the PFI terminates the
servicing provisions of this Contract in whole or in part, the Bank will not pay
the PFI a termination fee, and the PFI shall pay the costs of transferring the
servicing of the Mortgages to a party acceptable to the Bank.

      11.3. Termination by the Bank of Servicing Arrangements. The Bank may
terminate the provisions of this Contract covering the servicing of Mortgages by
following the procedures outlined below.

            (a) Termination Without Cause. The Bank may, in its sole discretion,
      terminate the servicing provisions of this Contract by giving the PFI
      notice of the termination and directing the PFI to transfer the Servicing
      to a party designated by the Bank in exchange for a termination fee. Such
      termination of Servicing shall take effect on the last day of the third
      calendar month after the calendar month in which the Bank gives its notice
      unless a later date is specified. The termination fee for such transfer of
      Servicing shall be equal to the fair market value of such transferred
      Servicing, which shall be mutually agreed upon by the PFI, the Bank and
      the designated buyer. If the parties are not able to agree on the fair
      market value of such Servicing they shall abide by the determination of
      fair market value made by

                                       26
<PAGE>

      an independent nationally recognized evaluator of mortgage servicing
      agreed upon by the Bank and the PFI. The Bank shall pay reasonable
      servicing transfer expenses in connection with a termination without
      cause.

            (b) Termination With Cause. The Bank may terminate Servicing if the
      PFI breaches this Contract, including, without limitation, any of those
      breaches listed in Section 10.1, provided, however, if the Bank, in its
      sole judgment, determines the PFI's breach is capable of being cured and
      is not the result of the PFI's breach of a fiduciary duty, willful
      misconduct or intentional wrongdoing, the Bank may so notify the PFI and
      specify a time period, determined by the Bank in its sole discretion, to
      cure such breach, and if the breach is not cured within such time period,
      then the Bank may enforce its rights to terminate Servicing as provided in
      this Section 11.3 (b). The Bank may terminate Servicing by giving the PFI
      a notice of termination. Notwithstanding anything in this Contract to the
      contrary, the Bank may make the termination effective immediately, and the
      Bank will not pay the PFI a termination fee or any of the proceeds from
      any sale of the Servicing involved. Furthermore, the Bank will not pay a
      termination fee if a Mortgage is purchased by the PFI under Article V.

The provisions applicable to any such termination with or without cause,
including, without limitation, the procedures for effecting any such termination
and the transfer of servicing, are set forth in the Servicing Guide.

      11.4. Credit Enhancement Obligations Not Terminated. Unless such
obligations are earlier modified, waived or released by the Bank in writing or
replaced by a Replacement Contract accepted by the Bank in full satisfaction of
the PFI's Credit Enhancement, the PFI's Credit Enhancement under Article IV,
including without limitation, the representations and supporting obligations,
are not subject to termination and shall survive termination of this Contract.
Such obligations shall remain in full force and effect until the last of the
Mortgages delivered, credit enhanced or serviced under this Contract is repaid,
liquidated, or foreclosed or the Mortgaged Property relating thereto is disposed
of.

      11.5. Rights of Termination Not Impaired. The exercise of a right of
termination under any provision of this Contract will not impair any further
right of termination under another provision.

XII. SURVIVAL OF RESPONSIBILITIES AND LIABILITIES

      Notwithstanding anything contained in this Contract to the contrary, in
the event that all or any part of this Contract is terminated, any and all of
the responsibilities and liabilities of the PFI in existence before the
termination of this Contract, including without limitation, the obligations
arising under Articles IV and V and Sections 7.3, 7.4, 19.5 and 19.6, shall
survive such termination and shall continue to exist after termination unless
the Bank expressly releases the PFI from any of such responsibilities or
obligations in writing. This is true whether this Contract was terminated by the
PFI or by the Bank.

XIII. NOTICE

      13.1. General. Whenever notice is required under this Contract or by
Applicable Law, it must be given as described in this article. All demands,
notices and communications under this Contract shall be in writing (except as
expressly provided in Section 13.2 below) and shall be delivered in person or
sent by certified United States mail, postage prepaid, return receipt requested
or sent by facsimile transmission or sent through a nationally recognized
overnight delivery service, addressed at the applicable party's address. Any
such notice shall be deemed delivered upon the earlier of actual receipt and, in
the case of notice by United States mail, three Business Days after deposit with
the United States post office, and in the case of notice by overnight courier,
the Business Day immediately following the date so deposited with the overnight
delivery service.

      13.2. The Guides and Other Documents. Copies of the Guides, including,
without limitation, any amendments or supplements, or any changes or
pronouncements with respect thereto, will be provided to the PFI from time to
time by the Bank, at its option, either (a) via regular mail or other delivery
service, or (b) electronically by posting these items on an Internet website and
notifying the PFI of the Internet address of such website.

                                       27
<PAGE>

      13.3. Addresses. For purposes of this Article XIII, the addresses and
facsimile numbers for the Bank and the PFI (and the electronic transmission
information for the PFI) are as set forth in the Addendum attached hereto. Any
change must be given in writing in accordance with the provisions of Section
13.1, but shall be effective only upon actual receipt.

      13.4 Telephonic and Electronic Communications. In addition to the
provisions set forth in the Guides, the PFI hereby authorizes the Bank, from
time to time without notice to the PFI, to record telephonic and other
electronic communications of the PFI with the Bank.

XIV. PRIOR AGREEMENTS

      The Origination and Sales Provisions of the Prior Contract and the terms
and conditions of any Master Commitments executed pursuant to the Prior Contract
shall continue to govern all Mortgages delivered under Master Commitments
executed pursuant to the Prior Contract, but in all other respects such
Mortgages shall be governed by and serviced under this Contract including,
without limitation, Section 3.7 thereof. Except for the Origination and Sales
Provisions applicable to Mortgages delivered under the Prior Contract, this
Contract supersedes and replaces the Prior Contract. This Contract shall govern
all Acquired Mortgages and all Mortgages delivered under Master Commitments
executed pursuant to this Contract in all respects. This Article XIV does not
affect the respective rights or obligations of the PFI or the Bank under any
prior agreement or understanding that does not relate to the origination,
selling or servicing of Mortgages to which this Contract relates.

XV. SEVERABILITY AND ENFORCEMENT

      15.1. Severability. If any provision of this Contract conflicts with
Applicable Law, the other provisions of this Contract that can be carried out
without the conflicting provision will not be affected.

      15.2. Rights and Remedies Cumulative. All rights and remedies under this
Contract are distinct and cumulative not only as to each other but as to any
rights or remedies afforded by law or equity. They may be exercised together,
separately or successively. Subject to Section 19.6, these rights and remedies
are for the benefit of the parties and their respective successors and assigns.

XVI. CAPTIONS

      This Contract's captions and headings are for convenience only and are not
part of this Contract.

XVII. SCOPE OF CONTRACT

      The following provision applies, whether or not it is contrary to other
provisions in this Contract. The Bank reserves the right to restrict the PFI's
selling or servicing of Mortgages for the Bank to the type that the PFI and its
employees have the experience and ability to originate or service.

XVIII. OTHER PARTIES

      18.1. Participants. The PFI acknowledges that the Bank may and intends to
enter into one or more participation agreements with other Persons (the
"Participants") to convey participation interests in some or all of the
mortgages sold or serviced under this Contract. Nothing in this Contract shall
prohibit such participation agreements. The PFI authorizes the Bank to disclose
to potential Participants the information used to approve the PFI as PFI, credit
enhancer and Servicer and to maintain those qualifications so long as such
potential Participants have agreed in writing to maintain the confidentiality of
such information.

      18.2. Master Servicer; Custodian; Underwriter; Subservicer; etc. The PFI
acknowledges and agrees that from time to time the Bank may enter into
agreements with other Persons regarding the Mortgages. Such agreements may
include master servicing agreements, custodial agreements, underwriting
agreements, securitization agreements, subservicing agreements and other
agreements for the benefit of the Bank, the Participants and their respective
successors and assigns. No party to such other agreement shall owe any
obligation to the PFI. To the

                                       28
<PAGE>

extent the Bank assigns or delegates any of its rights or obligations to any
such other party from time to time and so notifies the PFI thereof in writing,
the PFI shall be bound by such assignment or delegation. In such event, the PFI
agrees that it shall not be the agent of any such other party.

XIX. MISCELLANEOUS PROVISIONS

      19.1. Amendment. All amendments to this Contract shall be in writing duly
executed and delivered by the PFI and the Bank, except as expressly provided in
the Guides; provided, however, that the Bank may extend the period applicable to
any Master Commitment without the written approval of the PFI.

      19.2. REMIC, FASIT or Other Securitization or Sale Transaction. The PFI
hereby acknowledges and agrees that the Bank may hereafter transfer some or all
of the Mortgages to purchasers of whole loans or into a trust or other entity,
which trust or other entity may elect REMIC or FASIT status. In the case of any
such transfer (whether or not such entity elects REMIC or FASIT status), (a) the
Bank may assign to the transferee the Bank's rights under this Contract in
respect of the Mortgages so transferred and upon such assignment, the transferee
shall be entitled to all rights of the Bank under this Contract in respect of
such Mortgages, except to the extent provided otherwise in the transfer
agreement between the Bank and such transferee, (b) the PFI will comply with all
applicable REMIC or FASIT legal and regulatory requirements in connection with
the performance of its obligations and the exercise of its rights hereunder, and
(c) upon the request of the Bank, the PFI shall provide all information
reasonably required and otherwise cooperate with the Bank, any applicable rating
agencies and any prospective transferees or investors in connection with any
such securitization or sale of any or all of the Mortgages and shall enter into
such amendments to this Contract as the Bank shall reasonably request to
effectuate the provisions of this Section 19.2.

      19.3. Governing Law. The parties acknowledge that the MORTGAGE PARTNERSHIP
FINANCE Program is or will be offered to participating financial institutions in
numerous states, that the MPF Provider will be providing services to the Bank,
the PFI and all participating financial institutions wherever located, and that
this Contract will be performed in part in the State of Illinois because of the
services to be provided by the MPF Provider to, or on behalf of, the Bank.
THEREFORE THE PARTIES AGREE THAT THIS CONTRACT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE STATUTORY AND COMMON LAW OF THE UNITED STATES OF AMERICA.
TO THE EXTENT FEDERAL LAW INCORPORATES OR DEFERS TO STATE LAW, THE RELEVANT
STATE LAW SHALL BE THE LAW OF THE STATE OF ILLINOIS (WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES) APPLICABLE TO AGREEMENTS TO BE PERFORMED IN THE STATE OF
ILLINOIS. ANY ACTION OR PROCEEDING TO ENFORCE OR INTERPRET THIS CONTRACT SHALL
BE BROUGHT IN THE STATE OR FEDERAL COURT FOR THE COUNTY AND STATE WHERE THE BANK
IS LOCATED, AND IF ANY BASIS FOR FEDERAL JURISDICTION EXISTS IN SUCH ACTION OR
PROCEEDING, IT MUST BE BROUGHT IN THE FEDERAL COURT FOR SUCH STATE AND COUNTY.
Section 4.7 of this Contract provides that the Advances Agreement will govern
the pledging of collateral by the PFI to secure obligations under this Contract,
in addition to any other obligations of the PFI arising under the Advances
Agreement or other contracts or agreements between the Bank and the PFI. It is
expressly agreed and understood that the choice of Illinois law in this Section
19.3 shall apply only to this Contract, and shall not apply to any transaction
governed by the terms of the Advances Agreement or other contracts or agreements
between the Bank and the PFI, which shall continue to be governed by the choice
of law specified therein, even if such transaction is related to a transaction
under this Contract. In addition, the PFI agrees that if it should bring any
action or proceeding seeking to obtain any legal or equitable relief against the
Bank under or arising out of this Contract or any transaction contemplated by
this Contract, and such relief is not granted by the final decision, after any
and all appeals, of a court of competent jurisdiction, the PFI will pay all
attorneys' fees and other costs incurred by the Bank in connection therewith.
The PFI agrees to reimburse the Bank for all costs and expenses (including
reasonable fees and out-of- pocket expenses of counsel for the Bank) incurred by
the Bank in connection with the enforcement or preservation of the Bank's rights
under this Contract including, but not limited to, its rights in respect of any
Mortgages sold or serviced by the PFI and any collateral pledged to the Bank in
connection with such Mortgages.

                                       29
<PAGE>

      19.4. Intention of the Parties. It is the intention of the parties hereto
that this Contract does not create a joint venture or partnership between the
PFI and the Bank, but rather this Contract constitutes a contractual arrangement
between the parties. The Bank shall not be obligated to purchase any particular
mortgage unless and until it formally commits in writing to do so.

      19.5. Confidentiality of Proprietary Information. The PFI agrees to
maintain the confidentiality of any information provided by the Bank or the MPF
Provider which is labeled "confidential" or "proprietary information" or
otherwise transmitted as confidential information, including, without
limitation, the Credit Enhancement data described in Section 19.6, and not to
disclose such information except to employees who have a need to know its
contents and to third party agents who have a need to know and have signed
confidentiality agreements protecting the Bank. It is understood that such
information will not be considered confidential if (a) it is or becomes publicly
available through no breach of the PFI's obligations under this Contract, (b) it
is provided by the Bank to any third Person without restriction on disclosure,
(c) it is provided to the PFI by a third Person who properly has such
information, without restriction on disclosure and without breach by such third
Person of any nondisclosure obligation it may have, or (d) it is independently
developed by the PFI without use of the Bank's information. If the PFI is served
with process or any other governmental or regulatory request for such
confidential information, the PFI shall immediately notify the Bank's General
Counsel, or if the Bank has no General Counsel, the Bank's President, prior to
complying with such process or request, except where such prior notice is
prohibited by law.

      19.6. Use of Credit Enhancement Data. Information regarding the
determination of the Actual Credit Enhancement or proposed Credit Enhancement,
both on a loan level basis and on a pool level basis, supplied by the MPF
Provider on behalf of the Bank is proprietary information. This information is
shared with the PFI for the sole purposes of assisting the PFI to evaluate
whether to originate for, or sell a mortgage or mortgages to the Bank, and for
the PFI to determine the appropriate capital treatment for such mortgage(s), and
for no other purpose, including but not limited to valuation for market
securitization purposes. The Bank and MPF Provider, their vendors and licensors
and all Affiliates thereof do not and cannot warrant the accuracy, adequacy or
completeness of, or performance or results that may be obtained by using the MPF
Provider's system and/or any information or data generated with the use of this
system or the capital, accounting, regulatory or tax treatment applicable to the
PFI. The information and data generated by the MPF Provider's system are
provided "as is" without any express or implied warranties, including but not
limited to any implied warranties of merchantability or fitness for any
particular purpose or use. With respect to such information and data generated
by or with the use of the MPF Provider's system, neither the Bank, MPF Provider,
their vendors and licensors nor any Affiliates thereof shall be liable to any
PFI or anyone else for any inaccuracy, delay, interruption in service, error or
omission, regardless of cause, or for any damages resulting therefrom. Neither
the Bank, MPF Provider, their vendors and licensors and all Affiliates thereof
nor anyone else who has been involved in the creation or production of the MPF
Provider's system and/or delivery of the information and data generated thereby
or any component of the forgoing shall be liable for any indirect, incidental,
special, punitive, consequential or similar damages, such as but not limited to,
loss of anticipated profits or benefits resulting from the use of the
information and data generated by the MPF Provider's system, even if any of them
has been advised as to the possibility of such damages. This limitation of
liability shall apply to any claim or cause whatsoever whether such claim or
cause arises in contract, tort or otherwise. In the event that liability is
nevertheless imposed, the cumulative liability of the Bank and MPF Provider,
their vendors and licensors and all Affiliates thereof shall not exceed twenty
thousand dollars ($20,000) in the aggregate.

      19.7. Successors and Assigns. This Contract will inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns; provided, however, that the foregoing provision shall not be deemed to
permit the assignment by the PFI of any of its rights or obligations hereunder
in violation of this Contract.

      19.8 Conflict with Guides. In the event of any conflict between the
provisions of this Contract and the provisions of the Guides, the Guides shall
prevail unless this Contract expressly provides otherwise.

                                       30
<PAGE>

XX. SIGNATURES

      By executing this Contract, the PFI and the Bank agree to all of this
Contract's terms and provisions. The PFI and the Bank have caused this Contract
to be executed and delivered by their duly authorized officers as of the date
first written above.

      This Contract takes effect when executed and delivered by both the PFI and
the Bank.

                                             THE PFI:

                                             __________________________________,

                                             a _________________________________

                                             By: _______________________________

                                             Name: _____________________________

                                             Title: ____________________________

                                             By: _______________________________

                                             Name: _____________________________

                                             Title: ____________________________

                                             THE BANK:

                                             FEDERAL HOME LOAN BANK OF NEW YORK

                                             By: _______________________________

                                             Name: _____________________________

                                             Title: ____________________________

                                             By: _______________________________

                                             Name: _____________________________

                                             Title: ____________________________

Customer No.___________________

"MORTGAGE PARTNERSHIP FINANCE" and "MPF" are registered trademarks of the
Federal Home Loan Bank of Chicago.

                                       31
<PAGE>

                                    ADDENDUM

      Address and Other Contact Information

The Bank:

Address:

Federal Home Loan Bank of New York
101 Park Avenue, 5th Floor
New York,NY 10178-0599
Attention: MORTGAGE PARTNERSHIP FINANCE (R) Group

Facsimile No.: (212) 949-0374

Electronic Transmission: doyle@fhlbny.com

The PFI:

Address: _______________________
         _______________________
         _______________________
Attention: _______________

Facsimile No.:  (___) ___-____

Electronic Transmission:
________________________________

[List authorized individuals, their respective roles, their addresses, e-mail
addresses, telephone numbers and facsimile numbers.]

                                       32

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