Document:

Exhibit 4.1

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                       MORGAN STANLEY ABS CAPITAL I INC.,

                                  as Depositor,

                             OCWEN FEDERAL BANK FSB,

                                  as Servicer,

                           CDC MORTGAGE CAPITAL INC.,

                             as Unaffiliated Seller,

                                       and

                      DEUTSCHE BANK NATIONAL TRUST COMPANY,

                                   as Trustee,

                         POOLING AND SERVICING AGREEMENT

                           Dated as of August 1, 2003

                       CDC MORTGAGE CAPITAL TRUST 2003-HE3

                       MORTGAGE PASS-THROUGH CERTIFICATES,
                                 SERIES 2003-HE3

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<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I DEFINITIONS..........................................................8

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
                  WARRANTIES..................................................49

   Section 2.01      Conveyance of Mortgage Loans.............................49
   Section 2.02      Acceptance by the Trustee of the Mortgage Loans..........55
   Section 2.03      Representations, Warranties and Covenants of the
                     Unaffiliated Seller and the Servicer.....................56
   Section 2.04      The Depositor and the Mortgage Loans.....................59
   Section 2.05      Delivery of Opinion of Counsel in Connection with
                     Substitutions and Non-Qualified Mortgages................59
   Section 2.06      Execution and Delivery of Certificates...................59
   Section 2.07      REMIC Matters............................................59
   Section 2.08      Representations and Warranties of the Depositor..........59

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS....................61

   Section 3.01      Servicer to Service Mortgage Loans.......................61
   Section 3.02      Subservicing Agreements Between the Servicer and
                     Subservicers.............................................63
   Section 3.03      Successor Subservicers...................................64
   Section 3.04      Liability of the Servicer................................64
   Section 3.05      No Contractual Relationship Between Subservicers
                     and the Trustee..........................................64
   Section 3.06      Assumption or Termination of Subservicing Agreements
                     by Trustee...............................................64
   Section 3.07      Collection of Certain Mortgage Loan Payments;
                     Establishment of Certain Accounts........................65
   Section 3.08      Subservicing Accounts....................................68
   Section 3.09      Collection of Taxes, Assessments and Similar Items;
                     Escrow Accounts..........................................68
   Section 3.10      Collection Account.......................................69
   Section 3.11      Withdrawals from the Collection Account..................70
   Section 3.12      Investment of Funds in the Account.......................71
   Section 3.13      Maintenance of Hazard Insurance and Errors and
                     Omissions and Fidelity Coverage..........................73
   Section 3.14      Enforcement of Due-On-Sale Clauses Assumption
                     Agreements...............................................74
   Section 3.15      Realization Upon Defaulted Mortgage Loans................75
   Section 3.16      Release of Mortgage Files................................77
   Section 3.17      Title, Conservation and Disposition of REO Property......78
   Section 3.18      Notification of Adjustments..............................80
   Section 3.19      Access to Certain Documentation and Information
                     Regarding the Mortgage Loans.............................80
   Section 3.20      Documents, Records and Funds in Possession of the
                     Servicer to be Held for the Trustee......................80
   Section 3.21      Servicing Compensation...................................81
   Section 3.22      Annual Statement as to Compliance........................81

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<PAGE>

   Section 3.23      Annual Independent Public Accountants' Servicing
                     Statement; Financial Statements..........................81
   Section 3.24      Trustee to Act as Servicer...............................82
   Section 3.25      Compensating Interest....................................83
   Section 3.26      Credit Reporting; Gramm-Leach-Bliley Act.................83
   Section 3.27      Advance Facilities.......................................83

ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE SERVICER.........................85

   Section 4.01      Advances.................................................85
   Section 4.02      Priorities of Distribution...............................86
   Section 4.03      Monthly Statements to Certificateholders.................92
   Section 4.04      Certain Matters Relating to the Determination of LIBOR...96
   Section 4.05      The Certificate Insurance Policy.........................96
   Section 4.06      Effect of Payments by the Certificate Insurer;
                     Subrogation..............................................98

ARTICLE V THE CERTIFICATES....................................................99

   Section 5.01      The Certificates.........................................99
   Section 5.02      Certificate Register; Registration of Transfer and
                     Exchange of Certificates.................................99
   Section 5.03      Mutilated, Destroyed, Lost or Stolen Certificates.......104
   Section 5.04      Persons Deemed Owners...................................104
   Section 5.05      Access to List of Certificateholders' Names and
                     Addresses...............................................104
   Section 5.06      Maintenance of Office or Agency.........................105
   Section 5.07      Rights of the Certificate Insurer to Exercise Rights
                     of Class A-1 and Class A-3 Certificateholders...........105
   Section 5.08      Trustee To Act Solely with Consent of the Certificate
                     Insurer.................................................106
   Section 5.09      Mortgage Loans, Trust Fund and Accounts Held for
                     Benefit of the Certificate Insurer......................106
   Section 5.10      Certificate Insurer Default.............................106

ARTICLE VI THE DEPOSITOR AND THE SERVICER....................................107

   Section 6.01      Respective Liabilities of the Depositor and the
                     Servicer................................................107
   Section 6.02      Merger or Consolidation of the Depositor or the
                     Servicer................................................107
   Section 6.03      Limitation on Liability of the Depositor, the Servicer
                     and Others..............................................107
   Section 6.04      Limitation on Resignation of the Servicer...............109
   Section 6.05      Additional Indemnification by the Servicer; Third
                     Party Claims............................................109

ARTICLE VII DEFAULT..........................................................109

   Section 7.01      Events of Default.......................................109
   Section 7.02      Trustee to Act; Appointment of Successor................112
   Section 7.03      Notification to Certificateholders......................113

ARTICLE VIII CONCERNING THE TRUSTEE..........................................113

   Section 8.01      Duties of the Trustee...................................113
   Section 8.02      Certain Matters Affecting the Trustee...................114
   Section 8.03      Trustee Not Liable for Certificates or Mortgage Loans...115
   Section 8.04      Trustee May Own Certificates............................116
   Section 8.05      Trustee's Fees and Expenses.............................116

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<PAGE>

   Section 8.06      Eligibility Requirements for the Trustee................116
   Section 8.07      Resignation and Removal of the Trustee..................116
   Section 8.08      Successor Trustee.......................................117
   Section 8.09      Merger or Consolidation of the Trustee..................118
   Section 8.10      Appointment of Co-Trustee or Separate Trustee...........118
   Section 8.11      Tax Matters.............................................119
   Section 8.12      Periodic Filings........................................121
   Section 8.13      Tax Classification of the Excess Reserve Fund Account...123
   Section 8.14      Cap Agreement...........................................124

ARTICLE IX TERMINATION.......................................................124

   Section 9.01      Termination upon Liquidation or Purchase of the
                     Mortgage Loans..........................................124
   Section 9.02      Final Distribution on the Certificates..................125
   Section 9.03      Additional Termination Requirements.....................126

ARTICLE X MISCELLANEOUS PROVISIONS...........................................126

   Section 10.01     Amendment...............................................126
   Section 10.02     Recordation of Agreement; Counterparts..................128
   Section 10.03     Governing Law...........................................129
   Section 10.04     Intention of Parties....................................129
   Section 10.05     Notices.................................................129
   Section 10.06     Severability of Provisions..............................130
   Section 10.07     Assignment..............................................130
   Section 10.08     Limitation on Rights of Certificateholders..............131
   Section 10.09     Inspection and Audit Rights.............................131
   Section 10.10     Certificates Nonassessable and Fully Paid...............132
   Section 10.11     The Certificate Insurer Default.........................132
   Section 10.12     Third Party Beneficiary.................................132
   Section 10.13     Waiver of Jury Trial....................................132
   Section 10.14     Limitation of Damages...................................132

SCHEDULES
---------

Schedule I        Mortgage Loan Schedule
Schedule IA       Mortgage Loan Schedule - Group I
Schedule IB       Mortgage Loan Schedule - Group II
Schedule II       Representations and Warranties of the Servicer
Schedule IIA      Further Representations and Warranties of the Servicer
Schedule III      Representations and Warranties as to the Unaffiliated Seller

EXHIBITS
--------

Exhibit A         Form of Class A-1, Class A-2, Class A-3, Class A-4, Class
                  A-5, Class M-1, Class M-2, Class M-3, Class B-1, Class B-2 and
                  Class B-3 Certificate
Exhibit B         [Reserved]
Exhibit C         Form of Class P Certificate

                                       iii
<PAGE>

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

                                       iv
<PAGE>

                  THIS POOLING AND SERVICING AGREEMENT, dated as of August 1,
2003, among MORGAN STANLEY ABS CAPITAL I INC., a Delaware corporation, as
depositor (the "Depositor"), OCWEN FEDERAL BANK FSB, a federally chartered
savings bank, as servicer (the "Servicer"), CDC MORTGAGE CAPITAL INC., a New
York corporation, as unaffiliated seller (the "Unaffiliated Seller") and
DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association, as trustee
(the "Trustee"),

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

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

                              PRELIMINARY STATEMENT

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

                  The Upper Tier REMIC shall hold as assets the several classes
of uncertificated Middle Tier Regular Interests. Each such Middle Tier Regular
Interest is hereby designated as a regular interest in the Middle Tier REMIC.
Class MT-A-1, Class MT-A-2, Class MT-A-3, Class MT-A-4, Class MT-A-5, Class
MT-M-1, Class MT-M-2, Class MT-M-3, Class MT-B-1, Class MT-B-2 and Class MT-B-3
are hereby designated the MT Accretion Directed Classes. The Class P Certificate
represents beneficial ownership of the Prepayment Charges, which portion of the
Trust Fund shall be treated as a grantor trust.

                  The Middle Tier REMIC shall hold as assets the several classes
of uncertificated Lower Tier Regular Interests. Each such Lower Tier Regular
Interest is hereby designated as a regular interest in the Lower Tier REMIC.

                  The Lower Tier REMIC shall hold as assets all of the assets
included in the Trust Fund other than Prepayment Charges, the Excess Reserve
Fund Account, the Pre-Funding Accounts, the Capitalized Interest Account and the
Cap Agreement. The Lower Tier REMIC shall issue the following classes of
interests, and each Lower Tier Interest, other than the Class LT-R Interest, is
hereby designated as a regular interest in the Lower Tier REMIC.
<PAGE>

<TABLE>
<CAPTION>
Lower Tier Class     Tier Interest     Initial Tier Principal
   Designation            Rate                 Amount             Latest Possible Maturity Date
----------------     -------------     ----------------------     -----------------------------

<S>                       <C>               <C>                         <C>
Class LT-C                (1)               $558,949,180                November 25, 2033

Class LT-N                (2)                    (3)                    November 25, 2033

Class LT-PO               (4)               $154,608,415                November 25, 2033

Class LT-R                (5)                    (5)                    November 25, 2033
</TABLE>

(1)      The interest rate with respect to any Distribution Date for this
         interest is (i) during the Pre-Funding Period, an interest rate equal
         to a per annum variable rate equal to the weighted average of the
         Adjusted Net Mortgage Rates then in effect on the beginning of the
         related Due Period on the Initial Mortgage Loans, and (ii) thereafter,
         a per annum variable rate equal to the weighted average of the Adjusted
         Net Mortgage Rates then in effect on the beginning of the related Due
         Period on the Mortgage Loans.

(2)      The interest rate with respect to any Distribution Date for the Class
         LT-N is (i) during the Pre-Funding Period, all interest on the
         Subsequent Mortgage Loans for such Distribution Date divided by
         $154,608,415, and (ii) thereafter, 0.00%.

(3)      The Class LT-N will have a notional principal balance equal to
         $154,608,415.

(4)      The interest rate with respect to any Distribution Date for the Class
         LT-PO is (i) during the Pre-Funding Period, 0.00% and (ii) thereafter,
         a per annum variable rate equal to the weighted average of the Adjusted
         Net Mortgage Rates then in effect on the beginning of the related Due
         Period on the Mortgage Loans.

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

                  During the Pre-Funding Period, all principal payments
(scheduled and prepaid) and Realized Losses with respect to the Initial Mortgage
Loans shall be allocated to the Class LT-C, until such Class is paid in full or
eliminated by such losses. All principal payments (scheduled and prepaid) and
Realized Losses generated with respect to the Subsequent Mortgage Loans and any
amounts transferred from the Pre-Funding Accounts to the Lower Tier REMIC shall
be allocated to the Class LT-PO.

                  On each Distribution Date thereafter, all principal payments
(scheduled and prepaid) and Realized Losses generated with respect to the
Mortgage Loans shall be allocated, pro rata, to the Class LT-C and Class LT-PO,
until such Classes are paid in full or eliminated by such losses.

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

                                        2
<PAGE>

<TABLE>
<CAPTION>
                        Tier
Middle Tier Class     Interest       Initial Tier Principal      Corresponding      Latest Possible
   Designation          Rate                 Amount                  Class           Maturity Date
-----------------     --------     -------------------------     -------------     -----------------
<S>                      <C>       <C>                             <C>             <C>
Class MT-A-1             (1)       1/2 of the                      Class A-1       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-A-2             (1)       1/2 of the                      Class A-2       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-A-3             (1)       1/2 of the                      Class A-3       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-A-4             (1)       1/2 of the                      Class A-4       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-A-5             (1)       1/2 of the                      Class A-5       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-M-1             (1)       1/2 of the                      Class M-1       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-M-2             (1)       1/2 of the                      Class M-2       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-M-3             (1)       1/2 of the                      Class M-3       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-B-1             (1)       1/2 of the                      Class B-1       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-B-2             (1)       1/2 of the                      Class B-2       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-B-3             (1)       1/2 of the                      Class B-3       November 25, 2033
                                   Corresponding Class
                                   initial principal balance

Class MT-                (1)       1/2 of the sum of the                           November 25, 2033
Accrual                            Pool Stated Principal
                                   Balance, the
                                   Subordinated Amount
                                   and the Pre-Funding
                                   Amount, minus $100.
</TABLE>

                                        3
<PAGE>

<TABLE>
<CAPTION>
                        Tier
Middle Tier Class     Interest       Initial Tier Principal      Corresponding      Latest Possible
   Designation          Rate                 Amount                  Class           Maturity Date
-----------------     --------     -------------------------     -------------     -----------------
<S>                      <C>       <C>                             <C>             <C>
Class MT-N               (2)                   (3)                                 November 25, 2033

Class MT-R               (4)                   (4)                                 November 25, 2033
</TABLE>

(1)      The interest rate with respect to any Distribution Date for these
         interests is (i) during the Pre-Funding Period, the weighted average
         Pass-Through Rate of the Class LT-C and Class LT-PO, and (ii)
         thereafter, a per annum variable rate equal to the weighted average of
         the Adjusted Net Mortgage Rates then in effect on the beginning of the
         related Due Period on the Mortgage Loans.

(2)      The Class MT-N is entitled to all distributions of interest on the
         Class LT-N.

(3)      The Class MT-N will have a notional principal balance equal to the
         notional principal balance of the Class LT-N.

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

                  On each Distribution Date, 50% of the increase in the
Subordinated Amount will be payable as a reduction of the principal balances of
the MT Accretion Directed Classes and will be accrued and added to the principal
balance of the MT-Accrual Class. To this end, each MT Accretion Directed Class
will be reduced by an amount equal to 50% of any increase in the Subordinated
Amount that is attributable to a reduction in the principal balance of its
Corresponding Class. On each Distribution Date, the increase in the principal
balance of the MT-Accrual Class may not exceed interest accruals for such
Distribution Date for the MT-Accrual Class. If, with respect to any Distribution
Date, 50% of the increase in the Subordinated Amount exceeds accrued interest on
the MT-Accrual Class, the excess (accumulated with all such excess for all prior
Distribution Dates) will be added to any increase in the Subordinated Amount for
purposes of calculating accrued interest on the MT-Accrual Class payable as
principal on the MT Accretion Directed Classes on the next Distribution Date.

                  All principal payments (scheduled and prepaid) on the Mortgage
Loans shall be allocated 50% to the MT-Accrual Class and 50% to the MT Accretion
Directed Classes, until paid in full. To this end, principal payments shall be
allocated among such MT Accretion Directed Classes in an amount equal to 50% of
the principal amounts allocated to their respective Corresponding Classes.
Notwithstanding the foregoing, principal payments allocated to the Class X
Certificates that result in the reduction of the Subordinated Amount shall be
allocated to the MT-Accrual Class until paid in full. Realized losses shall be
applied so that after all distributions have been made on each Distribution Date
(i) the principal balance of each MT Accretion Directed Class is equal to 50% of

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<PAGE>

the principal balance of its Corresponding Class, and (ii) the MT-Accrual Class
is equal to 50% of the sum of (1) the Pool Stated Principal Balance, (2) the
Subordinated Amount, and (3) the Pre-Funding Amount, minus $100.

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

<TABLE>
<CAPTION>
Upper Tier Class      Upper Tier       Initial Upper Tier     Corresponding      Latest Possible
   Designation       Interest Rate      Principal Amount          Class           Maturity Date
----------------     -------------     ------------------     -------------     -----------------
<S>                      <C>              <C>                 <C>               <C>
   Class A-1              (1)             $200,000,000        Class A-1(17)     November 25, 2033

   Class A-2              (2)             $110,000,000        Class A-2(17)     November 25, 2033

   Class A-3              (3)             $145,000,000        Class A-3(17)     November 25, 2033

   Class A-4              (4)             $ 80,000,000        Class A-4(17)     November 25, 2033

   Class A-5              (5)             $ 44,765,000        Class A-5(17)     November 25, 2033

   Class M-1              (6)             $ 45,311,000        Class M-1(17)     November 25, 2033

   Class M-2              (7)             $ 35,321,000        Class M-2(17)     November 25, 2033

   Class M-3              (8)             $  7,849,000        Class M-3(17)     November 25, 2033

   Class B-1              (9)             $  9,276,000        Class B-1(17)     November 25, 2033

   Class B-2             (10)             $  9,276,000        Class B-2(17)     November 25, 2033

   Class B-3             (11)             $ 13,202,000        Class B-3(17)     November 25, 2033

   Class X-1(16)         (12)                  (12)                             November 25, 2033

   Class X-2(16)         (13)                  (14)           Class X           November 25, 2033

   Class UT-R            (15)             $                   Class R           November 25, 2033
</TABLE>

(1)      The Class A-1 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the least of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 0.300% or
         (y) after the Optional Termination Date, 0.600%, (b) the Adjusted WAC
         Cap and (c) the Loan Group I Cap.

(2)      The Class A-2 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the least of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 0.360% or
         (y) after the Optional Termination Date, 0.720%, (b) the Adjusted WAC
         Cap and (c) the Loan Group II Cap.

(3)      The Class A-3 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the least of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 0.300% or
         (y) after the Optional Termination Date, 0.600%, (b) the Adjusted WAC
         Cap and (c) the Loan Group II Cap.

                                        5
<PAGE>

(4)      The Class A-4 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the least of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 0.190% or
         (y) after the Optional Termination Date, 0.380%, (b) the Adjusted WAC
         Cap and (c) the Loan Group II Cap.

(5)      The Class A-5 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the least of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 0.500% or
         (y) after the Optional Termination Date, 1.000%, (b) the Adjusted WAC
         Cap and (c) the Loan Group II Cap.

(6)      The Class M-1 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the lesser of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 0.700% or
         (y) after the Optional Termination Date, 1.050% and (b) the Adjusted
         WAC Cap.

(7)      The Class M-2 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the lesser of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 1.750% or
         (y) after the Optional Termination Date, 2.625% and (b) the Adjusted
         WAC Cap.

(8)      The Class M-3 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the lesser of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 2.100% or
         (y) after the Optional Termination Date, 3.150% and (b) the Adjusted
         WAC Cap.

(9)      The Class B-1 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the lesser of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 3.400% or
         (y) after the Optional Termination Date, 5.100% and (b) the Adjusted
         WAC Cap.

(10)     The Class B-2 Certificates will bear interest during each Interest
         Accrual Period at a per annum rate equal to the lesser of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 3.750% or
         (y) after the Optional Termination Date, 5.625% and (b) the Adjusted
         WAC Cap.

(11)     The Class B-3 Certificates will bear interest during each Interest
         Accrual Period at a variable rate equal to the lesser of (a) one-month
         LIBOR plus (x) on or prior to the Optional Termination Date, 3.750% or
         (y) after the Optional Termination Date, 5.625% and (b) the Adjusted
         WAC Cap.

(12)     The Class X has an initial principal balance of $13,557,494, but it
         will not accrue interest on such balance but will accrue interest on a
         notional principal balance. As of any Distribution Date, the Class X-1
         shall have a notional principal balance equal to the Pool Stated
         Principal Balance as of the first day of the related Interest Accrual
         Period. With respect to any Interest Accrual Period, the Class X-1
         shall bear interest at a rate equal to the excess, if any, of the WAC
         Cap over the product of (i) 2 and (ii) the weighted average
         Pass-Through Rate of the Middle Tier Regular Interests, where each MT
         Accretion Directed Class is subject to a cap and a floor equal to the
         Pass-Through Rate on its Corresponding Class, and the MT-Accrual Class

                                        6
<PAGE>

         is subject to a cap of zero. With respect to any Distribution Date,
         interest that so accrues on the notional principal balance of the Class
         X-1 shall be deferred in an amount equal to any increase in the
         Subordinated Amount on such Distribution Date. Such deferred interest
         shall not itself bear interest.

(13)     The Class X-2 is entitled to all distributions of interest on the Class
         MT-N.

(14)     The Class X-2 will have a notional principal balance equal to the
         notional principal balance of the Class MT-N.

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

(16)     The Class X Certificates will represent two regular interests in the
         Upper Tier REMIC, the Class X-1 and Class X-2.

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

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

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

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

Subordinated Certificates..................  Class M-1, Class M-2, Class M-3,
                                             Class B-1, Class B-2 and Class B-3
                                             Certificates.

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

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

Floating Rate Certificates.................  Class A-1, Class A-2, Class A-3,
                                             Class A-4, Class A-5 and
                                             Subordinated Certificates.

                                        7
<PAGE>

LIBOR Certificates.........................  Class A-1, Class A-2, Class A-3,
                                             Class A-4, Class A-5 and
                                             Subordinated Certificates.

Non-Delay Certificates.....................  Class A-1, Class A-2, Class A-3,
                                             Class A-4, Class A-5, Class X and
                                             Subordinated Certificates.

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

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

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

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

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

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

                                    ARTICLE I

                                   DEFINITIONS

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

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

                  Aames: Aames Capital Corporation, a California corporation.

                  Aames Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Aames, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Aames in connection with
any Subsequent Transfer of Aames Mortgage Loans.

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

                                        8
<PAGE>

                  Aames Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of June 23, 2003, as amended to date, by and
between the Unaffiliated Seller and Aames.

                  Accepted Servicing Practices: With respect to any Mortgage
Loan, those mortgage servicing practices set forth in Section 3.01.

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

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

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

                  Adjustable Rate Mortgage Loan: A Mortgage Loan bearing
interest at an adjustable rate.

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

                  Adjusted Net Mortgage Rate: As to each Mortgage Loan and at
any time, the per annum rate equal to the Mortgage Rate less the Expense Fee
Rate.

                  Adjusted WAC Cap: The weighted average Pass-Through Rate of
the Middle Tier Regular Interests (other than the Class MT-N) minus, in the case
of each of the Class A-1 and Class A-3 Certificates, the Premium Rate, in
respect of the Class A-1 or Class A-3 Certificates, respectively.

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

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

                  Advance Facility: As defined in Section 3.27.

                  Advance Facility Trustee: As defined in Section 3.27.

                  Advance Reimbursement Amount: As defined in Section 3.27.

                                        9
<PAGE>

                  Advancing Person: As defined in Section 3.27.

                  Aegis: Aegis Mortgage Corporation, a Delaware corporation.

                  Aegis Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Aegis, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Aegis in connection with
any Subsequent Transfer of Aegis Mortgage Loans.

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

                  Aegis Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of December 1, 2002, as amended to date, by and
between the Unaffiliated Seller and Aegis.

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

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

                  Ameriquest: Ameriquest Mortgage Company, a Delaware
corporation.

                  Ameriquest Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and Ameriquest, and each other Assignment and
Recognition Agreement by and among the Unaffiliated Seller, the Depositor and
Ameriquest in connection with any Subsequent Transfer of Ameriquest Mortgage
Loans.

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

                  Ameriquest Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of June 30, 2003, as amended to date, by and
between the Unaffiliated Seller and Ameriquest.

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

                                       10
<PAGE>

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

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

                  Assignment and Recognition Agreement: The Aames Assignment
Agreement, the Aegis Assignment Agreement, the Ameriquest Assignment Agreement,
the BNC Assignment Agreement, the Chapel Mortgage Assignment Agreement, the
Encore Assignment Agreement, the First Banc Assignment Agreement, the First NLC
Assignment Agreement, the Impac Assignment Agreement, the Master Financial
Assignment Agreement, the Novelle Assignment Agreement, the People's Choice
Assignment Agreement or the SIB Mortgage Assignment Agreement, as applicable.

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

                  Average Net Proceeds: As defined in Exhibit M hereto.

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

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

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

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

                                       11
<PAGE>

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

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

                  BNC Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and BNC, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and BNC in connection with any
Subsequent Transfer of BNC Mortgage Loans.

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

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

                  Book-Entry Certificates: As specified in the Preliminary
Statement.

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

                  Cap Agreement: The interest rate cap agreement dated August
25, 2003 with the Cap Provider, as "Party A" thereunder, and the Unaffiliated
Seller, as "Party B" thereunder, or any replacement thereof.

                  Cap Provider: CDC Financial Products, Inc., a Delaware
corporation, and any successor thereto.

                  Capitalized Interest Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 3.07(e) in the name of
the Trustee for the benefit of the Offered Certificateholders and designated
"Deutsche Bank National Trust Company, in trust for registered holders of CDC
Mortgage Capital Trust 2003-HE3, Mortgage Pass-Through Certificates, Series
2003-HE3".

                  Capitalized Interest Requirement: With respect to the
Distribution Dates occurring in September 2003, October 2003 and November 2003,
the excess, if any, of (x) the Accrued Certificate Interests for all classes of
the Offered Certificates for such Distribution Date over (y) all scheduled
installments of interest (net of the related Expense Fees) due on the Mortgage
Loans in the related Due Period. In no event will the Capitalized Interest
Requirement be less than zero.

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

                                       12
<PAGE>

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

                  Certificate Insurance Policy: The Financial Guaranty Insurance
Policy No. 51439-N, and all endorsements thereto dated the Closing Date, issued
by the Certificate Insurer for the benefit of the Class A-1 and Class A-3
Certificateholders.

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

                  Certificate Insurer Default: The existence and continuance of
any of the following:

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

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

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

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

                  Certificate Register: The register maintained pursuant to
Section 5.02.

                  Certificateholder or Holder: The person in whose name a
Certificate is registered in the Certificate Register, except that, solely for
the purpose of giving any consent pursuant to this Agreement, any Certificate
registered in the name of the Depositor or any Affiliate of the Depositor shall
be deemed not to be Outstanding and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect such consent has been obtained;
provided, however, that if any such Person (including the Depositor) owns 100%

                                       13
<PAGE>

of the Percentage Interests evidenced by a Class of Certificates, such
Certificates shall be deemed to be Outstanding for the purposes of any provision
hereof that requires the consent of the Holders of Certificates of a particular
Class as a condition to the taking of any action hereunder. The Trustee is
entitled to rely conclusively on a certification of the Depositor or any
Affiliate of the Depositor in determining which Certificates are registered in
the name of an Affiliate of the Depositor.

                  Certification: As defined in Section 8.12(b).

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

                  Chapel Mortgage Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and Chapel Mortgage, and each other
Assignment and Recognition Agreement by and among the Unaffiliated Seller, the
Depositor and Chapel Mortgage in connection with any Subsequent Transfer of
Chapel Mortgage Loans.

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

                  Chapel Mortgage Purchase Agreement: The Mortgage Loan Purchase
and Warranties Agreement, dated as of June 4, 2002, as amended to date, by and
between the Unaffiliated Seller and Chapel Mortgage.

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

                  Class A Certificates: The Class A-1 Certificates, the Class
A-2 Certificates, the Class A-3 Certificates, the Class A-4 Certificates and the
Class A-5 Certificates.

                  Class A Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the aggregate Class Certificate Balances of
the Class A Certificates immediately prior to such Distribution Date over (ii)
the lesser of (A) the product of 62.50% of the Current Maximum Amount and (B)
the excess, if any, of the Current Maximum Amount over $3,567,788.

                  Class A-1 Allocation Percentage: With respect to any
Distribution Date, the percentage equivalent of a fraction, (i) the numerator of
which is the Group I Principal Remittance Amount for such Distribution Date and
(ii) the denominator of which is the Principal Remittance Amount for such
Distribution Date.

                  Class A-1 Certificates: All Certificates bearing the class
designation of "Class A-1 Certificates."

                                       14
<PAGE>

                  Class A-1 Deficiency: With respect to any Distribution Date
and the Class A-1 Certificates, an amount equal to the sum of:

                  (i)      the Class A-1 Interest Deficit Amount; plus

                  (ii)     the Class A-1 Principal Parity Amount, if any, for
         such Distribution Date.

                  Class A-1 Interest Deficit Amount: With respect to any
Distribution Date and the Class A-1 Certificates, the product of (i) the
Interest Deficit Amount and (ii) a fraction, the numerator of which is the
outstanding Class Certificate Balance of the Class A-1 Certificates on such
Distribution Date, and the denominator of which is the aggregate outstanding
Class Certificate Balances of all Class A Certificates on such Distribution
Date, in each case, without taking into account any reduction of principal on
such Certificates on such Distribution Date.

                  Class A-1 Principal Parity Amount: With respect to any
Distribution Date, the product of (i) the Principal Parity Deficit and (ii) a
fraction, the numerator of which is the initial Class Certificate Balance of the
Class A-1 Certificates, and the denominator of which is the initial aggregate
Class Certificate Balances of all Class A Certificates.

                  Class A-2 Certificates: All Certificates bearing the class
designation of "Class A-2 Certificates."

                  Class A-3 Certificates: All Certificates bearing the class
designation of "Class A-3 Certificates."

                  Class A-3 Deficiency: With respect to any Distribution Date
and the Class A-3 Certificates, an amount equal to the sum of:

                  (i)      the Class A-3 Interest Deficit Amount; plus

                  (ii)     the Class A-3 Principal Parity Amount, if any, for
         such Distribution Date.

                  Class A-3 Interest Deficit Amount: With respect to any
Distribution Date and the Class A-3 Certificates, the product of (i) the
Interest Deficit Amount and (ii) a fraction, the numerator of which is the
outstanding Class Certificate Balance of the Class A-3 Certificates on such
Distribution Date, and the denominator of which is the aggregate outstanding
Class Certificate Balances of all Class A Certificates on such Distribution
Date, in each case, without taking into account any reduction of principal on
such Certificates on such Distribution Date.

                  Class A-3 Principal Parity Amount: With respect to any
Distribution Date, the product of (i) the Principal Parity Deficit and (ii) a
fraction, the numerator of which is the initial Class Certificate Balance of the
Class A-3 Certificates, and the denominator of which is the initial aggregate
Class Certificate Balances of all Class A Certificates.

                  Class A-4 Certificates: All Certificates bearing the class
designation of "Class A-4 Certificates."

                                       15
<PAGE>

                  Class A-5 Certificates: All Certificates bearing the class
designation of "Class A-5 Certificates."

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

                  Class B-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (D) the Class Certificate
Balance of the Class M-3 Certificates (after taking into account distribution of
the Class M-3 Principal Distribution Amount on such Distribution Date), and (E)
the Class Certificate Balance of the Class B-1 Certificates immediately prior to
such Distribution Date over (ii) the lesser of (A) 89.90% of the Current Maximum
Amount and (B) the excess, if any, of the Current Maximum Amount over
$3,567,788.

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

                  Class B-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (D) the Class Certificate
Balance of the Class M-3 Certificates (after taking into account distribution of
the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the
Class Certificate Balance of the Class B-1 Certificates (after taking into
account distribution of the Class B-1 Principal Distribution Amount on such
Distribution Date), and (F) the Class Certificate Balance of the Class B-2
Certificates immediately prior to such Distribution Date over (ii) the lesser of
(A) 92.50% of the Current Maximum Amount and (B) the excess, if any, of the
Current Maximum Amount over $3,567,788.

                  Class B-3 Certificates: All Certificates bearing the class
designation of "Class B-3 Certificates".

                  Class B-3 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (D) the Class Certificate
Balance of the Class M-3 Certificates (after taking into account distribution of
the Class M-3 Principal Distribution Amount on such Distribution Date), (E) the

                                       16
<PAGE>

Class Certificate Balance of the Class B-1 Certificates (after taking into
account distribution of the Class B-1 Principal Distribution Amount on such
Distribution Date), (F) the Class Certificate Balance of the Class B-2
Certificates (after taking into account distribution of the Class B-2 Principal
Distribution Amount on such Distribution Date) and (G) the Class Certificate
Balance of the Class B-3 Certificates immediately prior to such Distribution
Date over (ii) the lesser of (A) 96.20% of the Current Maximum Amount and (B)
the excess, if any, of the Current Maximum Amount over $3,567,788.

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

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

                  Class M-1 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), and (B) the Class Certificate Balance of the Class M-1 Certificates
immediately prior to such Distribution Date over (ii) the lesser of (A) 75.20%
of the Current Maximum Amount and (B) the excess, if any, of the Current Maximum
Amount over $3,567,788.

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

                  Class M-2 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), and (C) the Class Certificate Balance of the Class
M-2 Certificates immediately prior to such Distribution Date over (ii) the
lesser of (A) 85.10% of the Current Maximum Amount and (B) the excess, if any,
of the Current Maximum Amount over $3,567,788.

                  Class M-3 Certificates: All Certificates bearing the class
designation of "Class M-3 Certificates".

                  Class M-3 Principal Distribution Amount: With respect to any
Distribution Date, the excess of (i) the sum of (A) the aggregate Class
Certificate Balances of the Class A Certificates (after taking into account
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (B) the Class Certificate Balance of the Class M-1 Certificates (after

                                       17
<PAGE>

taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class Certificate Balance of the Class M-2
Certificates (after taking into account distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), and (D) the Class Certificate
Balance of the Class M-3 Certificates immediately prior to such Distribution
Date over (ii) the lesser of (A) 87.30% of the Current Maximum Amount and (B)
the excess, if any, of the Current Maximum Amount over $3,567,788.

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

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

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

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

                  Closing Date: August 25, 2003.

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

                  Collection Account: As defined in Section 3.10(a).

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

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

                  Corporate Trust Office: The designated office of the Trustee
in the State of California at which at any particular time its corporate trust
business with respect to this Agreement is administered, which office at the
date of the execution of this Agreement is located at 1761 East St. Andrew
Place, Santa Ana, California 92705, Attn: Trust Administration DC03M3, facsimile
no. (714) 247-6478 and which is the address to which notices to and
correspondence with the Trustee should be directed.

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

                                       18
<PAGE>

          Middle Tier                Upper Tier             Corresponding
       Class Designation              Interest               Certificate
       -----------------             ----------             -------------

         Class MT-A-1                 Class A-1              Class A-1
         Class MT -A-2                Class A-2              Class A-2
         Class MT -A-3                Class A-3              Class A-3
         Class MT -A-4                Class A-4              Class A-4
         Class MT -A-5                Class A-5              Class A-5
         Class MT -M-1                Class M-1              Class M-1
         Class MT -M-2                Class M-2              Class M-2
         Class MT -M-3                Class M-3              Class M-3
         Class MT -B-1                Class B-1              Class B-1
         Class MT -B-2                Class B-2              Class B-2
         Class MT -B-3                Class B-3              Class B-3

                  Cumulative Loss Percentage: With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Applied Realized Loss Amounts incurred from the Cut-off Date
to the last day of the preceding calendar month less any amounts received with
respect to Applied Realized Loss Amounts on the related Mortgage Loans
subsequent to the Final Recovery Determination being made with respect to such
Mortgage Loans and the denominator of which is the Scheduled Principal Balance
of the Mortgage Loans as of the Cut-off Date.

                  Current Maximum Amount: With respect to any Distribution Date,
the sum of (i) the aggregate of the Stated Principal Balances of the Mortgage
Loans in the Trust at such time, and (ii) with respect to each Distribution Date
on or prior to November 25, 2003, the Pre-Funding Amount immediately prior to
such Distribution Date, net of investment earnings on deposit therein.

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

                  Cut-off Date: With respect to the Initial Mortgage Loans,
August 1, 2003, and with respect to each Subsequent Mortgage Loan, the related
Subsequent Cut-off Date.

                  Cut-off Date Pool Principal Balance: The aggregate Stated
Principal Balances of all Mortgage Loans as of the Cut-off Date.

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

                  Data Tape Information: The information provided by the
Unaffiliated Seller as of August 1, 2003 to the Depositor setting forth the
following information with respect to each Mortgage Loan: (1) the Mortgagor's
name; (2) as to each Mortgage Loan, the Scheduled Principal Balance as of the
Cut-off Date; (3) the Mortgage Rate Cap; (4) the Index; (5) a code indicating
whether the Mortgaged Property is owner-occupied; (6) the type of Mortgaged

                                       19
<PAGE>

Property; (7) the first date on which the Monthly Payment was due on the
Mortgage Loan and, if such date is not consistent with the Due Date currently in
effect, such Due Date; (8) the "paid through date" based on payments received
from the related Mortgagor; (9) the original principal amount of the Mortgage
Loan; (10) with respect to Adjustable Rate Mortgage Loans, the Maximum Mortgage
Rate; (11) the type of Mortgage Loan (i.e., fixed or adjustable); (12) a code
indicating the purpose of the loan (i.e., purchase, rate and term refinance,
equity take-out refinance); (13) a code indicating the documentation style
(i.e., full, asset verification, income verification and no documentation); (14)
the credit risk score (FICO score); (15) the loan credit grade classification
(as described in the Underwriting Guidelines); (16) with respect to each
Adjustable Rate Mortgage Loan, the Minimum Mortgage Rate; (17) the Mortgage Rate
at origination; (18) with respect to each Adjustable Rate Mortgage Loan, the
first Adjustment Date immediately following the Cut-off Date; (19) the Value of
the Mortgaged Property; (20) a code indicating the type and term of Prepayment
Charges applicable to such Mortgage Loan, if any; and (21) with respect to each
Adjustable Rate Mortgage Loan, the Periodic Mortgage Rate Cap. With respect to
the Mortgage Loans in the aggregate, the Data Tape Information shall set forth
the following information, as of the Cut-off Date: (1) the number of Mortgage
Loans; (2) the current aggregate outstanding principal balance of the Mortgage
Loans; (3) the weighted average Mortgage Rate of the Mortgage Loans; and (4) the
weighted average maturity of the Mortgage Loans.

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

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

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

                  Delay Certificates: As specified in the Preliminary Statement.

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

                  Delinquency Trigger Event: With respect to a Distribution Date
after the Stepdown Date, the event that is in effect if the quotient (expressed
as a percentage) of (x) the three-month rolling daily average of the Stated
Principal Balance of 60+ Day Delinquent Loans as of the last day of the related
Due Period, over (y) the Pool Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period exceeds 37.50% of the prior period's
Senior Enhancement Percentage.

                                       20
<PAGE>

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

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

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

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

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

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

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

                  Distribution Account: The separate Eligible Account created
and maintained by the Trustee pursuant to Section 3.07(d) in the name of the
Trustee for the benefit of the Certificateholders and designated "Deutsche Bank
National Trust Company, in trust for registered holders of CDC Mortgage Capital
Trust 2003-HE3, Mortgage Pass-Through Certificates, Series 2003-HE3".

                  Distribution Date: The 25th day of each calendar month after
the initial issuance of the Certificates, or if such day is not a Business Day,
the next succeeding Business Day, commencing in September 2003.

                  Document Exception Report: The report attached to Exhibit G
hereto.

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

                                       21
<PAGE>

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

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

                  Eligible Institution: A federal or state chartered depository
institution or trust company, which (x) with respect to any Eligible Account,
the amounts on deposit in which will be held for less than 30 days, the
commercial paper, short-term debt obligations, or other short-term deposits of
which are rated at least "F1" by Fitch, "P-1" by Moody's, and either "A-1+" or
"A-1", if the amounts on deposit represent less than 20% of the initial par
value of the securities, are not intended to be used as credit enhancement and
are to be held for less than 30 days, by Standard & Poor's (or a comparable
rating if another Rating Agency is specified by the Depositor by written notice
to the Servicer and the Trustee) or (y) with respect to any Eligible Account,
the amounts on deposit in which will be held for no more than 365 days, the
long-term unsecured debt obligations of which are rated at least "A" by Fitch,
"A" by Standard & Poor's and "A2" by Moody's (or a comparable rating if another
Rating Agency is specified by the Depositor by written notice to the Servicer
and the Trustee).

                  Encore: Encore Credit Corporation, a California corporation.

                  Encore Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Encore, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Encore in connection with
any Subsequent Transfer of Encore Mortgage Loans.

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

                  Encore Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of December 1, 2002, as amended to date, by and
between the Unaffiliated Seller and Encore.

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

                  ERISA-Restricted Certificate: As specified in the Preliminary
Statement.

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

                  Escrow Payments: As defined in Section 3.09(b).

                                       22
<PAGE>

                  Event of Default: As defined in Section 7.01.

                  Excess Reserve Fund Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Sections 3.07(b) and 3.07(c)
in the name of the Trustee for the benefit of the Offered Certificateholders and
designated "Deutsche Bank National Trust Company, in trust for registered
holders of CDC Mortgage Capital Trust 2003-HE3, Mortgage Pass-Through
Certificates, Series 2003-HE3".

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

                  Expense Fees: As to each Mortgage Loan, the sum of the
Servicing Fee and the Trustee Fee.

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

                  Extra Principal Distribution Amount: As of any Distribution
Date, the lesser of (x) the related Total Monthly Excess Spread for such
Distribution Date and (y) the Subordination Deficiency for such Distribution
Date.

                  Fannie Mae: The Federal National Mortgage Association, or any
successor thereto.

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

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

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

                  Final Certification: A certification submitted by the Trustee
in substantially the form of Exhibit G hereto.

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

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

                                       23
<PAGE>

                                                                Final Scheduled
                                                               Distribution Date
                                                               -----------------
Class A-1 Certificates.....................................    November 25, 2033
Class A-2 Certificates.....................................    November 25, 2033
Class A-3 Certificates.....................................    November 25, 2033
Class A-4 Certificates.....................................    November 25, 2033
Class A-5 Certificates.....................................    November 25, 2033
Class M-1 Certificates.....................................    November 25, 2033
Class M-2 Certificates.....................................    November 25, 2033
Class M-3 Certificates.....................................    November 25, 2033
Class B-1 Certificates.....................................    November 25, 2033
Class B-2 Certificates.....................................    November 25, 2033
Class B-3 Certificates.....................................    November 25, 2033
Class X Certificates.......................................    November 25, 2033
Class P Certificates.......................................    November 25, 2033
Class R Certificates.......................................    November 25, 2033

                  First Banc: First Banc Mortgage, Inc., a Missouri corporation.

                  First Banc Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and First Banc, and each other Assignment and
Recognition Agreement by and among the Unaffiliated Seller, the Depositor and
First Banc in connection with any Subsequent Transfer of First Banc Mortgage
Loans.

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

                  First Banc Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of April 1, 2003, as amended to date, by and
between the Unaffiliated Seller and First Banc.

                  First NLC: First NLC Financial Services, LLC, a Florida
limited liability company.

                  First NLC Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and First NLC, and each other Assignment and Recognition Agreement
by and among the Unaffiliated Seller, the Depositor and First NLC in connection
with any Subsequent Transfer of First NLC Mortgage Loans.

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

                                       24
<PAGE>

                  First NLC Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of October 14, 2002, as amended to date, by and
between the Unaffiliated Seller and First NLC.

                  Fitch: Fitch, Inc. If Fitch is designated as a Rating Agency
in the Preliminary Statement, for purposes of Section 10.05(b) the address for
notices to Fitch shall be Fitch, Inc., One State St. Plaza, New York, New York
10004, Attention: Residential Mortgage Surveillance Group - Morgan Stanley ABS
Capital I Inc. 2003-HE3, or such other address as Fitch may hereafter furnish to
the Depositor and the Servicer.

                  Fixed Rate Mortgage Loan: A Mortgage Loan bearing interest at
a fixed rate.

                  Floating Rate Certificates: As specified in the Preliminary
Statement.

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

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

                  Group I Basic Principal Distribution Amount: With respect to
any Distribution Date, the excess of (i) the Group I Principal Remittance Amount
for such Distribution Date over (ii) the product of (a) the Excess Subordinated
Amount, if any, for such Distribution Date and (b) the Class A-1 Allocation
Percentage.

                  Group I Interest Remittance Amount: With respect to any
Distribution Date, the portion of the Interest Remittance Amount that was
collected or advanced on the Group I Mortgage Loans.

                  Group I Mortgage Loans: The Mortgage Loans allocated to Group
I which primarily support the Class A-1 Certificates, as initially set forth on
Schedule IA hereto.

                  Group I Pre-Funding Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 3.07(f) in the name of
the Trustee for the benefit of the Certificateholders, and designated "Deutsche
Bank National Trust Company, in trust for registered holders of CDC Mortgage
Capital Trust 2003-HE3, Mortgage Pass-Through Certificates, Series 2003-HE3,"
the funds of which, during the Pre-Funding Period, shall be applied solely to
the purchase of Group I Subsequent Mortgage Loans.

                  Group I Principal Distribution Amount: With respect to any
Distribution Date, the sum of (i) the Group I Basic Principal Distribution
Amount for such Distribution Date and (ii) the product of (a) the Extra
Principal Distribution Amount for such Distribution Date and (b) the Class A-1
Allocation Percentage.

                  Group I Principal Remittance Amount: With respect to any
Distribution Date, that portion of the Principal Remittance Amount for such
Distribution Date that was collected or advanced on the Group I Mortgage Loans.

                                       25
<PAGE>

                  Group II Basic Principal Distribution Amount: With respect to
any Distribution Date, the excess of (i) the Group II Principal Remittance
Amount for such Distribution Date over (ii) the product of (a) the Excess
Subordinated Amount, if any, for such Distribution Date and (b) the Group II
Class A Allocation Percentage.

                  Group II Class A Allocation Percentage: With respect to any
Distribution Date, the percentage equivalent of a fraction, (i) the numerator of
which is the Group II Principal Remittance Amount for such Distribution Date and
(ii) the denominator of which is the Principal Remittance Amount for such
Distribution Date.

                  Group II Class A Certificates: The Class A-2, Class A-3, Class
A-4 and Class A-5 Certificates.

                  Group II Interest Remittance Amount: With respect to any
Distribution Date, the portion of the Interest Remittance Amount that was
collected or advanced on the Group II Mortgage Loans.

                  Group II Mortgage Loans: The Mortgage Loans allocated to Group
II which primarily support the Group II Class A Certificates, as initially set
forth on Schedule IB hereto.

                  Group II Pre-Funding Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 3.07(f) in the name of
the Trustee for the benefit of the Certificateholders, and designated "Deutsche
Bank National Trust Company, in trust for registered holders of CDC Mortgage
Capital Trust 2003-HE3, Mortgage Pass-Through Certificates, Series 2003-HE3,"
the funds of which, during the Pre-Funding Period, shall be applied solely to
the purchase of Group II Subsequent Mortgage Loans.

                  Group II Principal Distribution Amount: With respect to any
Distribution Date, the sum of (i) the Group II Basic Principal Distribution
Amount for such Distribution Date and (ii) the product of (a) the Extra
Principal Distribution Amount for such Distribution Date and (b) the Group II
Class A Allocation Percentage.

                  Group II Principal Remittance Amount: With respect to any
Distribution Date, that portion of the Principal Remittance Amount for such
Distribution Date that was collected or advanced on the Group II Mortgage Loans.

                  Group I Subsequent Mortgage Loans: The Mortgage Loans
hereafter transferred and assigned to the Trust Fund and allocated to Group I
pursuant to Section 2.01(c), each of which shall have been purchased by the
Unaffiliated Seller under a Mortgage Loan Purchase Agreement.

                  Group II Subsequent Mortgage Loans: The Mortgage Loans
hereafter transferred and assigned to the Trust Fund and allocated to Group II
pursuant to Section 2.01(c), each of which shall have been purchased by the
Unaffiliated Seller under a Mortgage Loan Purchase Agreement.

                                       26
<PAGE>

                  High Cost Loan: A Mortgage Loan classified as (a) a "high
cost" loan under the Home Ownership and Equity Protection Act of 1994 or (b) a
"high cost," "threshold," "covered", "predatory" or similar loan under any other
applicable state, federal or local law.

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

                  Impac: Impac Funding Corporation, a California corporation.

                  Impac Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Impac, and each other Assignment and Recognition Agreement by
and among the Unaffiliated Seller, the Depositor and Impac in connection with
any Subsequent Transfer of Impac Mortgage Loans.

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

                  Impac Purchase Agreement: The Amended and Restated Mortgage
Loan Purchase and Warranties Agreement, dated as of January 29, 2003, as amended
to date, by and between the Unaffiliated Seller and Impac.

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

                  Initial Cut-off Date: August 1, 2003.

                  Initial Group I Pre-Funded Amount: The amount of $52,273,158.

                  Initial Group II Pre-Funded Amount: The amount of $99,054,546.

                  Initial Mortgage Loans: The Mortgage Loans delivered by the
Depositor on the Startup Date.

                  Initial Pre-Funded Amount: The sum of the Initial Group I
Pre-Funded Amount and the Initial Group II Pre-Funded Amount.

                  Insurance and Indemnity Agreement: The Insurance and Indemnity
Agreement dated as of August 1, 2003 among the Certificate Insurer, the Servicer
and the Unaffiliated Seller, as such agreement may be amended or supplemented in
accordance with the provisions thereof.

                  Insurance Payment Account: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 4.05(c) in the name of
the Trustee for the benefit of the Class A-1 and Class A-3 Certificateholders
and the Certificate Insurer, and designated "Deutsche Bank National Trust
Company, in trust for Financial Security Assurance Inc. and the registered
holders of CDC Mortgage Capital Trust 2003-HE3, Mortgage Pass-Through
Certificates, Series 2003-HE3."

                                       27
<PAGE>

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

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

                  Insured Payment: With respect to any Distribution Date, the
sum of the Class A-1 Deficiency and the Class A-3 Deficiency for that
Distribution Date.

                  Interest Accrual Period: With respect to any Distribution
Date, the period beginning with the immediately preceding Distribution Date (or
in the case of the first Distribution Date, the period from and including the
Closing Date to but excluding such first Distribution Date) and ending on the
day prior to the current Distribution Date (on an actual/360 day count basis).

                  Interest Deficit Amount: With respect to any Distribution
Date, the excess of (i) the aggregate Accrued Certificate Interest for all
Classes of the Class A Certificates on such Distribution Date, over (ii) an
amount equal to the Interest Remittance Amount less the Premium Amount and the
Trustee Fee, in each case, for such Distribution Date.

                  Interest Rate Adjustment Date: With respect to each Adjustable
Rate Mortgage Loan, the date, specified in the related Mortgage Note and the
Mortgage Loan Schedule, on which the Mortgage Rate is adjusted.

                  Interest Rate Cap Payment: Beginning on the first Distribution
Date, and continuing through the 20 Distribution Dates thereafter, the amount,
if any, equal to the product of (a) the number of basis points by which LIBOR
exceeds 6.75% (up to a maximum excess of 200 basis points) and (b) the amount
set forth on the notional balance and multiplier schedule attached to the Cap
Agreement as applicable to that Distribution Date, based on an "actual/360"
accrual. Commencing June 24, 2005 until and including February 24, 2006 (subject
to adjustment in accordance with ISDA's "Preceding Business Day Convention"),
the Interest Rate Cap Payment will be the amount, if any, equal to the product
of (a) the number of basis points by which LIBOR exceeds 7.75% (up to a maximum
excess of 100 basis points) and (b) the amount set forth on the notional balance
and multiplier schedule attached to the Cap Agreement as applicable to that
Distribution Date, based on an "actual/360" accrual.

                  Interest Remittance Amount: With respect to any Distribution
Date, the sum of (a) the sum, without duplication, of the following amounts
received by the Trustee from the Servicer on the related Remittance Date:

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

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

                                       28
<PAGE>

                  (iii)    the interest component of all Substitution Adjustment
         Amounts and Repurchase Prices received by the Servicer during the
         related Due Period;

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

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

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

(b) the Capitalized Interest Requirement, if any, deposited into the
Distribution Account on such Distribution Date

                  Investment Account: As defined in Section 3.12(a).

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

                  Late Payment Rate: Has the meaning ascribed thereto in the
Insurance and Indemnity Agreement.

                  LIBOR: With respect to any Interest Accrual Period for the
LIBOR Certificates, the rate determined by the Trustee on the related LIBOR
Determination Date on the basis of the offered rate for one-month U.S. dollar
deposits as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the rates at
which one-month U.S. dollar deposits are offered by the Reference Banks at
approximately 11:00 a.m. (London time) on such date to prime banks in the London
interbank market. In such event, the Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that date will be the
arithmetic mean of the quotations (rounded upwards if necessary to the nearest
whole multiple of 1/16%). If fewer than two quotations are provided as
requested, the rate for that date will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m. (New York City time) on such date for one-month U.S.
dollar loan to leading European banks.

                  LIBOR Certificates: As specified in the Preliminary Statement.

                                       29
<PAGE>

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

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

                  Liquidation Event: With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from coverage under this Agreement by reason of its being
purchased, sold or replaced pursuant to or as contemplated by this Agreement.
With respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from coverage under this Agreement by reason of its being
purchased pursuant to this Agreement.

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

                  Loan Group I Cap: The per annum rate equal to the weighted
average gross rate of the Group I Mortgage Loans then in effect on the beginning
of the related Due Period, less the applicable Expense Fee Rate and further
reduced by the Premium Rate in respect of the Class A-1 Certificates.

                  Loan Group II Cap: The per annum rate equal to the weighted
average gross rate of the Group II Mortgage Loans then in effect on the
beginning of the related Due Period, less the applicable Expense Fee Rate and,
in the case of the Class A-3 Certificates only, further reduced by the Premium
Rate in respect of the Class A-3 Certificates.

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

                  London Business Day: Any day on which dealings in deposits of
United States dollars are transacted in the London interbank market.

                  Loss Trigger Event: With respect to any Distribution Date, the
event that is in effect if the aggregate amount of Realized Losses incurred
since the related Cut-off Date through the last day of the related Prepayment
Period divided by the Maximum Pool Principal Balance exceeds the applicable
percentage as follows with respect to such Distribution Date: (a) 3.00% for the
Distribution Dates occurring from September 2005 to August 2006; (b) 4.25% for
the Distribution Dates occurring from September 2006 to August 2007; (c) 5.25%

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for Distribution Dates occurring from September 2007 to August 2008; and (d)
6.00% for Distribution Dates occurring in September 2008 and thereafter.

                  Lower Tier Regular Interest: As described in the Preliminary
Statement.

                  Lower Tier REMIC: As described in the Preliminary Statement

                  Master Financial: Master Financial, Inc., a California
corporation.

                  Master Financial Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and Master Financial, and each other
Assignment and Recognition Agreement by and among the Unaffiliated Seller, the
Depositor and Master Financial in connection with any Subsequent Transfer of
Master Financial Mortgage Loans.

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

                  Master Financial Purchase Agreement: The Mortgage Loan
Purchase and Warranties Agreement, dated as of June 1, 2003, as amended to date,
by and between the Unaffiliated Seller and Master Financial.

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

                  Maximum Pool Principal Balance: The aggregate Stated Principal
Balances of all Initial Mortgage Loans as of the Initial Cut-off Date plus the
Initial Pre-Funded Amount.

                  Middle Tier Regular Interest: As described in the Preliminary
Statement.

                  Middle Tier REMIC: As described in the Preliminary Statement.

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

                  Monthly Statement: The statement delivered to the
Certificateholders pursuant to Section 4.03.

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

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<PAGE>

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

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

                  Mortgage Loan Purchase Agreement: The Aames Purchase
Agreement, the Aegis Purchase Agreement, the Ameriquest Purchase Agreement, the
BNC Purchase Agreement, the Chapel Mortgage Purchase Agreement, the Encore
Purchase Agreement, the First Banc Purchase Agreement, the First NLC Purchase
Agreement, the Impac Purchase agreement, the Master Financial Purchase
Agreement, the Novelle Purchase Agreement, the People's Choice Purchase
Agreement and the SIB Purchase Agreement, as applicable.

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

                  Mortgage Loan Schedule: A schedule of Mortgage Loans annexed
hereto as Schedule I, such schedule setting forth the following information with
respect to each Mortgage Loan: (1) the Originator's Mortgage Loan number; (2)
the city, state and zip code of the Mortgaged Property; (3) a code indicating
whether the Mortgaged Property is a single family residence, two-family
residence, three-family residence, four-family residence, PUD or condominium;
(4) the current Mortgage Interest Rate; (5) the current net Mortgage Rate; (6)
the current Monthly Payment; (7) the Gross Margin; (8) the original term to
maturity; (9) the scheduled maturity date; (10) the principal balance of the
Mortgage Loan as of the Cut-off Date after deduction of payments of principal
due on or before the Cut-off Date whether or not collected; (11) the
Loan-to-Value Ratio; (12) the next Interest Rate Adjustment Date; (13) the
lifetime Mortgage Interest Rate Cap; (14) whether the Mortgage Loan is
convertible or not; (15) a code indicating the mortgage guaranty insurance
company; (16) the Servicing Fee; (17) the identity of the related Originator of
such Mortgage Loan; (18) the Mortgagor's name; (19) the "paid-through" date
(based on payments received from the related Mortgagor) as of the Cut-off Date;
and (20) the Servicing Transfer Date.

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

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

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

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<PAGE>

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

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

                  Net Interest Margin Securities: As defined in Section 9.01.

                  Net Monthly Excess Cash Flow: For any Distribution Date the
amount remaining for distribution pursuant to subsection 4.02(a)(iii) (before
giving effect to distributions pursuant to such subsection).

                  Net Prepayment Interest Shortfall: For any Distribution Date,
the amount by which the sum of the Prepayment Interest Shortfalls exceeds the
sum of the Compensating Interest payments made on such Distribution Date.

                  NIM Closing Date: On or about August 25, 2003.

                  NIMs Trust: CDC Mortgage Capital Inc. NIM Trust 2003-HE3N, a
Delaware business trust.

                  Non-Delay Certificates: As specified in the Preliminary
Statement.

                  Nonrecoverable Advance: Any Servicing Advances previously made
or proposed to be made in respect of a Mortgage Loan or REO Property, which, in
the good faith business judgment of the Servicer, will not or, in the case of a
proposed Servicing Advance, would not, be ultimately recoverable from related
late payments, Insurance Proceeds, Liquidation Proceeds or otherwise on such
Mortgage Loan or REO Property. The determination by the Servicer that it has
made a Nonrecoverable Advance or that any proposed Servicing Advances, if made,
would constitute a Nonrecoverable Advance, shall be evidenced by an Officers'
Certificate delivered to the Trustee.

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

                  Notice of Final Distribution: The notice to be provided
pursuant to Section 9.02 to the effect that final distribution on any of the
Certificates shall be made only upon presentation and surrender thereof.

                  Novelle: Novelle Financial Services, Inc., a California
corporation.

                  Novelle Assignment Agreement: The Assignment and Recognition
Agreement, dated as of August 25, 2003, by and among the Unaffiliated Seller,
the Depositor and Novelle, and each other Assignment and Recognition Agreement
by and among the Unaffiliated Seller, the Depositor and Novelle in connection
with any Subsequent Transfer of Novelle Mortgage Loans.

                                       33
<PAGE>

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

                  Novelle Purchase Agreement: The Mortgage Loan Purchase and
Warranties Agreement, dated as of September 27, 2002, by and between the
Unaffiliated Seller and Novelle.

                  Ocwen: Ocwen Federal Bank FSB, a federally chartered savings
bank.

                  Offered Certificates: As specified in the Preliminary
Statement.

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

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

                  Optional Termination Date: means:

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

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

                  Originator: The party that originated or acquired a Mortgage
Loan and, more specifically, (i) with respect to any Aames Mortgage Loan, Aames,
(ii) with respect to any Aegis Mortgage Loan, Aegis, (iii) with respect to any
Ameriquest Mortgage Loan, Ameriquest, (iv) with respect to any BNC Mortgage
Loan, BNC, (v) with respect to any Chapel Mortgage Loan, Chapel Mortgage, (vi)

                                       34
<PAGE>

with respect to any Encore Mortgage Loan, Encore, (vii) with respect to any
First Banc Mortgage Loan, First Banc, (viii) with respect to any First NLC
Mortgage Loan, First NLC, (ix) with respect to any Impac Mortgage Loan or
Novelle Mortgage Loan, Impac or Novelle, as applicable, (x) with respect to any
Master Financial Mortgage Loan, Master Financial, (xi) with respect to any
People's Choice Mortgage Loan, People's Choice and (xii) with respect to any SIB
Mortgage Loan, SIB Mortgage.

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

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

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

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

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

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

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

                  Pass-Through Margin: With respect to each Class of Regular
Certificates, on or prior to the Optional Termination Date the following
percentages: Class A-1 Certificates, 0.300%, Class A-2 Certificates, 0.360%,
Class A-3 Certificates, 0.300%, Class A-4 Certificates, 0.190%, Class A-5
Certificates, 0.500%, Class M-1 Certificates, 0.700%, Class M-2 Certificates,
1.750%, Class M-3 Certificates, 2.100%, Class B-1 Certificates, 3.400%, Class
B-2 Certificates, 3.750% and Class B-3 Certificates, 3.750%. Commencing on the
first Distribution Date after the Optional Termination Date, the Pass-Through
Margins shall increase to: Class A-1 Certificates, 0.600%, Class A-2
Certificates, 0.720%, Class A-3 Certificates, 0.600%, Class A-4 Certificates,
0.380%, Class A-5 Certificates, 1.000%, Class M-1 Certificates, 1.050%, Class
M-2 Certificates, 2.625%, Class M-3 Certificates, 3.150%, Class B-1
Certificates, 5.100%, Class B-2 Certificates, 5.625% and Class B-3 Certificates,
5.625%.

                                       35
<PAGE>

                  Pass-Through Rate: For each Class of Certificates and each
Lower Tier and Middle Tier Regular Interest, the per annum rate set forth or
calculated in the manner described in the Preliminary Statement.

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

                  People's Choice Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003 as amended to date, by and
among the Unaffiliated Seller, the Depositor and People's Choice, and each other
Assignment and Recognition Agreement by and among the Unaffiliated Seller, the
Depositor and People's Choice in connection with any Subsequent Transfer of
People's Choice Mortgage Loans.

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

                  People's Choice Purchase Agreement: The Amended and Restated
Mortgage Loan Purchase and Warranties Agreement, dated as of October 24, 2002,
as amended to date, by and between the Unaffiliated Seller and People's Choice.

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

                  Periodic Mortgage Rate Cap: With respect to an Adjustable Rate
Mortgage Loan, the periodic limit on each Mortgage Rate adjustment as set forth
in the related Mortgage Note.

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

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

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

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

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

                                       36
<PAGE>

         unsecured rating categories at the time of such investment or
         contractual commitment providing for such investment;

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

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

                  (vii)    if previously confirmed in writing to the Trustee and
         to the Certificate Insurer, any other demand, money market or time
         deposit, or any other obligation, security or investment, as may be
         acceptable to the Rating Agencies as a permitted investment of funds
         backing "Aaa" or "AAA" rated securities;

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

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

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

                                       37
<PAGE>

                  Physical Certificates: As specified in the Preliminary
Statement.

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

                  Preference Amount: Any amounts distributed in respect of the
Class A-1 Certificates or Class A-3 Certificates that are recovered from any
Holder of such Certificates as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code or other similar law in accordance
with a final, nonappealable order of a court having competent jurisdiction and
which have not theretofore been repaid to such Holder.

                  Preference Claim: As defined in Section 4.05(f).

                  Pre-Funding Accounts: The Group I Pre-Funding Account and the
Group II Pre-Funding Account.

                  Pre-Funding Amount: With respect to any date, the amount on
deposit in the Pre-Funding Accounts.

                  Pre-Funding Earnings: With respect to a Pre-Funding Account,
the actual investment earnings realized on amounts deposited in such Pre-Funding
Account.

                  Pre-Funding Period: The period commencing on the Startup Date
and ending on the earliest to occur of (i) the date on which the amount on
deposit in the Pre-Funding Account (exclusive of any investment earnings) is
less than $100,000, (ii) the date on which any Event of Default occurs and (iii)
November 24, 2003.

                  Premium Amount: The product of (i) the Premium Rate and (ii)
the sum of the Certificate Balances of the Class A-1 Certificates and the Class
A-3 Certificates immediately prior to such Distribution Date.

                  Premium Rate: The rate at which the "Premium" is determined as
described in the letter dated August 25, 2003 between the Unaffiliated Seller
and the Certificate Insurer (a copy of which shall be provided by the
Unaffiliated Seller to the Trustee).

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

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

                                       38
<PAGE>

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

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

                  Principal Parity Deficit: With respect to any Distribution
Date, the excess of (i) the aggregate Class Certificate Balances of the Class A
Certificates on that Distribution Date, after taking into account any reduction
(other than, with respect to the Class A-1 and Class A-3 Certificates,
reductions due to payments from the Certificate Insurance Policy on that
Distribution Date), of those Class Certificate Balances on that Distribution
Date, less the excess of (a) any Principal Parity Deficits for all prior
Distribution Dates over (b) any Class A-1 or Class A-3 Principal Parity Amounts
for all prior Distribution Dates over (ii) the Current Maximum Amount for that
Distribution Date. For the first Distribution Date, the Principal Parity Deficit
will equal zero.

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

                  Principal Prepayment in Full: Any Principal Prepayment made by
a Mortgagor of the entire principal balance of a Mortgage Loan.

                  Principal Remittance Amount: With respect to any Remittance
Date, the sum, without duplication, of: (i) all scheduled installments of
principal due on the Mortgage Loans during the related Due Period and received
or advanced by the Servicer on or prior to the related Remittance Date; (ii) the
principal component of all Condemnation Proceeds, Insurance Proceeds and
Liquidation Proceeds during the related Due Period (in each case, net of
remaining (i.e., not deducted from the Interest Remittance Amount) unreimbursed
expenses incurred in connection with a liquidation or foreclosure and
unreimbursed Advances, if any); (iii) all partial or full prepayments on the
Mortgage Loans received during the related Prepayment Period; (iv) the principal
component of all Substitution Adjustment Amounts and Repurchase Prices received
by the Servicer during the related Due Period; and (v) the principal component
of the proceeds of any termination of the Trust Fund; reduced by remaining
amounts (i.e., not deducted from the Interest Remittance Amount) in
reimbursement for Advances previously made with respect to the Mortgage Loans
and other amounts as to which the Servicer is entitled to be reimbursed pursuant
to this Agreement.

                  Private Certificates: As specified in the Preliminary
Statement.

                  Prospectus Supplement: The Prospectus Supplement, dated August
22, 2003, relating to the Offered Certificates.

                  PUD: Planned Unit Development.

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<PAGE>

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

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

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

                  Realized Loss: The excess of the outstanding principal balance
of a defaulted Mortgage Loan over the net Liquidation Proceeds with respect
thereto that are allocable to principal.

                  Reference Bank: As defined in Section 4.04.

                  Regular Certificates: As specified in the Preliminary
Statement.

                  Reimbursement Amount: As of any Distribution Date, the sum of
(a)(i) all Insured Payments previously received by the Trustee and all
Preference Amounts previously paid by the Certificate Insurer and in each case
not previously repaid to the Certificate Insurer pursuant to Section 4.02(a)
plus (ii) interest accrued on each such Insured Payment and Preference Amounts
not previously repaid calculated at the Late Payment Rate from the date the
Trustee received the related Insured Payment or Preference Amounts were paid by
the Certificate Insurer and (b)(i) any amounts then due and owing to the
Certificate Insurer under the Insurance and Indemnity Agreement (excluding the
Premium Amount due on such Distribution Date), as certified to the Trustee by
the Certificate Insurer plus (ii) interest on such amounts at the rate specified
in the Insurance and Indemnity Agreement. The Certificate Insurer shall notify
the Trustee and the Unaffiliated Seller of the amount of any Reimbursement
Amount.

                  Relief Act Shortfall: With respect to any Distribution Date
and any Mortgage Loan, any reduction in the amount of interest or principal
collectible on such Mortgage Loan for the most recently ended Due Period as a

                                       40
<PAGE>

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

                  Remainder Amount: As defined in Section 9.01.

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

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

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

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

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

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

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

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

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

                                       41
<PAGE>

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

                  Residual Certificates: As specified in the Preliminary
Statement.

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

                  Rule 144A Letter: As defined in Section 5.02(b).

                  Scheduled Payment: The scheduled monthly payment on a Mortgage
Loan due on any Due Date allocable to principal and/or interest on such Mortgage
Loan which, unless otherwise specified herein, shall give effect to any related
Debt Service Reduction and any Deficient Valuation that affects the amount of
the monthly payment due on such Mortgage Loan.

                  Scheduled Principal Balance: With respect to any Mortgage
Loan: (a) as of the Cut-off Date, the outstanding principal balance of such
Mortgage Loan as of such date, net of the principal portion of all unpaid
Monthly Payments, if any, due on or before such date; (b) as of any Due Date
subsequent to the Cut-off Date up to and including the Due Date in the calendar
month in which a Liquidation Event occurs with respect to such Mortgage Loan,
the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date,
minus the sum of (i) the principal portion of each Monthly Payment due on or
before such Due Date but subsequent to the Cut-off Date, whether or not
received, (ii) all Principal Prepayments received before such Due Date but after
the Cut-off Date, (iii) the principal portion of all Liquidation Proceeds and
Insurance Proceeds received before such Due Date but after the Cut-off Date, net
of any portion thereof that represents principal due (without regard to any
acceleration of payments under the related Mortgage and Mortgage Note) on a Due
Date occurring on or before the date on which such proceeds were received and
(iv) any reduction in the principal balance of such Mortgage Loan incurred with
respect thereto as a result of a Deficient Valuation occurring before such Due
Date, but only to the extent such reduction in principal balance represents a
reduction in the portion of principal of such Mortgage Loan not yet due (without
regard to any acceleration of payments under the related Mortgage and Mortgage
Note) as of the date of such Deficient Valuation; and (c) as of any Due Date
subsequent to the occurrence of a Liquidation Event with respect to such
Mortgage Loan, zero.

                  SEC: As defined in Section 8.12(a).

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

                  Senior Enhancement Percentage: With respect to any
Distribution Date, the percentage obtained by dividing (x) the sum of (i) the
aggregate Class Certificate Balances of the Subordinated Certificates and (ii)
the Subordinated Amount (in each case after taking into account the

                                       42
<PAGE>

distributions of the Principal Distribution Amount for such Distribution Date)
by (y) the Current Maximum Amount for that Distribution Date.

                  Senior Specified Enhancement Percentage: As of any date of
determination, 37.50%.

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

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

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

                  (b)      the quotient (expressed as a percentage) of (x) the
         Stated Principal Balance of Mortgage Loans 60 days Delinquent or more
         as of the end of the related Due Period (including Mortgage Loans in
         bankruptcy, foreclosure or represented by an REO Property) over (y) the
         aggregate Stated Principal Balance of the Mortgage Loans as of the end
         of the related Due Period, exceeds 20%.

                  Servicing Advances: The reasonable "out-of-pocket" costs and
expenses (including legal fees) incurred by the Servicer in the performance of
its servicing obligations in connection with a default, delinquency or other
unanticipated event, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures and litigation, in
respect of a particular Mortgage Loan, (iii) the management (including
reasonable fees in connection therewith) and liquidation of any REO Property and
(iv) the performance of its obligations under Section 3.01, Section 3.09,
Section 3.13 and Section 3.15 hereof. Servicing advances also include any
reasonable "out-of-pocket" costs and expenses (including legal fees) incurred by
the Servicer in connection with executing and recording instruments of
satisfaction, deeds of reconveyance or Assignments of Mortgage in connection
with any satisfaction or foreclosure in respect of any Mortgage Loan to the
extent not recovered from the Mortgagor or otherwise payable under this
Agreement. The Servicer shall not be required to make any Nonrecoverable
Advances.

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

                                       43
<PAGE>

3.11) of such Monthly Payment collected by the Servicer, or as otherwise
provided under Section 3.11.

                  Servicing Fee Rate: With respect to each Mortgage Loan, 0.50%
per annum.

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

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

                  Servicing Transfer Date: With respect to each Mortgage Loan,
the date on which Ocwen commenced servicing such Mortgage Loan, as set forth on
the Mortgage Loan Schedule.

                  SIB Mortgage: SIB Mortgage Corp., a New Jersey corporation.

                  SIB Mortgage Assignment Agreement: The Assignment and
Recognition Agreement, dated as of August 25, 2003, by and among the
Unaffiliated Seller, the Depositor and SIB Mortgage, and each other Assignment
and Recognition Agreement by and among the Unaffiliated Seller, the Depositor
and SIB Mortgage in connection with any Subsequent Transfer of SIB Mortgage
Loans.

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

                  SIB Mortgage Purchase Agreement: The Mortgage Loan Purchase
and Warranties Agreement, dated as of July 11, 2002, as amended to date, by and
between the Unaffiliated Seller and SIB Mortgage.

                  Similar Law: As defined in Section 5.02(b).

                  Specified Subordinated Amount: With respect to any
Distribution Date prior to the Stepdown Date, an amount equal to 1.90% of the
Maximum Pool Principal Balance; and with respect to any Distribution Date on and
after the Stepdown Date, an amount equal to 3.80% of the Current Maximum Amount
for that Distribution Date subject to a minimum amount equal to 0.50% of the
Maximum Pool Principal Balance; provided, however, that if, on any Distribution
Date, a Delinquency Trigger Event has occurred, the Specified Subordinated
Amount shall not be reduced to the applicable percentage of the Current Maximum
Amount, but instead remain the same as the prior period's Specified Subordinated
Amount until the distribution date on which a Delinquency Trigger Event is no
longer occurring; provided, further, that if, on any Distribution Date, a Loss
Trigger Event exists, the Specified Subordinated Amount shall equal 2.40% of the
Maximum Pool Principal Balance until the Distribution Date on which a Loss

                                       44
<PAGE>

Trigger Event no longer exists. When the Class Certificate Balance of each Class
of Offered Certificates has been reduced to zero, the Specified Subordinated
Amount shall thereafter equal zero.

                  Standard & Poor's: Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, Inc. If Standard & Poor's is designated
as a Rating Agency in the Preliminary Statement, for purposes of Section
10.05(b) the address for notices to Standard & Poor's shall be Standard &
Poor's, 55 Water, New York, New York 10041, Attention: Residential Mortgage
Surveillance Group - Morgan Stanley ABS Capital I Inc. 2003-HE3, or such other
address as Standard & Poor's may hereafter furnish to the Depositor and the
Servicer.

                  Startup Day: For each REMIC created hereunder, the Closing
Date.

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

                  Stepdown Date: The later to occur of (i) the earlier to occur
of (a) the Distribution Date in September 2006 and (b) the Distribution Date on
which the aggregate Class Certificate Balances of the Class A Certificates are
reduced to zero and (ii) the first Distribution Date on which the Senior
Enhancement Percentage (calculated for this purpose only after taking into
account scheduled and unscheduled payments of principal on the Mortgage Loans on
the last day of the related Due Period but prior to any applications of
Principal Distribution Amount to the Offered Certificates on the applicable
Distribution Date) is greater than or equal to the Senior Specified Enhancement
Percentage.

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

                  Subordinated Certificates: As specified in the Preliminary
Statement.

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

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

                  Subservicer: As defined in Section 3.02(a).

                                       45
<PAGE>

                  Subservicing Account: As defined in Section 3.08.

                  Subservicing Agreement: As defined in Section 3.02.

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

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

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

                  Subsequent Transfer Agreement: A subsequent transfer agreement
in substantially the form of Exhibit L.

                  Subsequent Transfer Date: The Business Day on which a
Subsequent Transfer occurs.

                  Substitute Mortgage Loan: A Mortgage Loan substituted by the
Unaffiliated Seller or an Originator for a Deleted Mortgage Loan in accordance
with the terms of this Agreement or the related Mortgage Loan Purchase
Agreement, which must, on the date of such substitution, as confirmed in a
Request for Release, substantially in the form of Exhibit K, (i) have a Stated
Principal Balance, after deduction of the principal portion of the Scheduled
Payment due in the month of substitution, not in excess of, and not more than
10% less than, the Stated Principal Balance of the Deleted Mortgage Loan; (ii)
be accruing interest at a rate no lower than and not more than 1% per annum
higher than, that of the Deleted Mortgage Loan; (iii) have a Loan-to-Value Ratio
no higher than that of the Deleted Mortgage Loan; (iv) have a remaining term to
maturity no greater than (and not more than one year less than that of) the
Deleted Mortgage Loan; and (v) comply with each representation and warranty set
forth in Sections 3.01(f), 3.01(h) and 3.03 of the Unaffiliated Seller's
Agreement and each representation and warranty set forth in the applicable
Mortgage Loan Purchase Agreement.

                  Substitution Adjustment Amount: The meaning ascribed to such
term pursuant to Section 2.03.

                  Tax Service Contract: As defined in Section 3.09(a).

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

                  Termination Price: As defined in Section 9.01.

                                       46
<PAGE>

                  Total Monthly Excess Spread: As to any Distribution Date, an
amount equal to the excess if any, of (i) the interest collected (prior to the
Remittance Date) or advanced on the Mortgage Loans for Due Dates during the
related Due Period (net of Expense Fees, Premium Amount and Reimbursement
Amounts, if any) over (ii) the sum of the interest payable to the Classes of
Floating Rate Certificates on such Distribution Date.

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

                  Transfer Affidavit:  As defined in section 5.02(b).

                  Transferor Certificate: As defined in Section 5.02(b).

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

                  Trust Fund: The corpus of the trust created hereunder
consisting of (i) the Mortgage Loans and all interest and principal received on
or with respect thereto after the related Cut-off Date, other than such amounts
which were due on the Mortgage Loans on or before the related Cut-off Date; (ii)
each Account, and all amounts deposited therein pursuant to the applicable
provisions of this Agreement; (iii) property that secured a Mortgage Loan and
has been acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; (iv)
all rights of the Depositor against the Unaffiliated Seller under the
Unaffiliated Seller's Agreement; (v) all rights of the Depositor against each
Originator under the related Assignment and Recognition Agreement and the
related Mortgage Loan Purchase Agreement; (vi) the Certificate Insurance Policy;
(vii) the Cap Agreement, for the benefit of the Holders of the Offered
Certificates (other than the Class A-1 Certificateholders); and (viii) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing.

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

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

                  Trustee Fee Rate: With respect to each Mortgage Loan, 0.0042%
per annum.

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

                  Unpaid Interest Amounts: As of any Distribution Date and any
Class of Certificates, the sum of (a) the excess of (i) the sum of the Accrued
Certificate Interest for such Distribution Date and any portion of such Accrued
Certificate Interest from prior Distribution Dates remaining unpaid over (ii)

                                       47
<PAGE>

the amount in respect of interest on such Class of Certificates actually
distributed on that Distribution Date and (b) 30 days' interest on such excess
at the applicable Pass-Through Rate (to the extent permitted by applicable law).

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

                  Upper Tier Regular Interest: As described in the Preliminary
Statement.

                  Upper Tier REMIC: As described in the Preliminary Statement.

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

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

                  WAC Cap: With respect to the Mortgage Loans as of any
Distribution Date, the product of (i) the weighted average of the Adjusted Net
Mortgage Rates then in effect on the beginning of the related Due Period on the
Mortgage Loans, in the case of each of the Class A-1 and Class A-3 Certificates,
minus the Premium Rate in respect of the Class A-1 or Class A-3 Certificates,
respectively, and (ii) a fraction, the numerator of which is 30 and the
denominator of which is the actual number of days in the Interest Accrual Period
related to such Distribution Date.

                                       48
<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

                  Section 2.01      Conveyance of Mortgage Loans.
                                    ----------------------------

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

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

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

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

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

                                       49
<PAGE>

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

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

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

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

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

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

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

                                       50
<PAGE>

Assignment of Mortgage is required to be recorded pursuant to the terms hereof,
the Mortgage shall be assigned from the related Originator, to "Deutsche Bank
National Trust Company, as trustee under the Pooling and Servicing Agreement
dated as of August 1, 2003, Morgan Stanley ABS Capital I Inc. Trust 2003-HE3."
In the event that any such assignment is lost or returned unrecorded because of
a defect therein, the Unaffiliated Seller shall cause the related Originator to
promptly prepare a substitute assignment to cure such defect and thereafter
cause each such assignment to be duly recorded. In the event the Unaffiliated
Seller does not pay or otherwise reimburse the Servicer for any of the foregoing
costs of recording any such Assignment of Mortgage, the Servicer shall be
entitled to be reimbursed from the Trust Fund from amounts on deposit in the
Collection Account. In the event the related Originator fails to reimburse the
Unaffiliated Seller for the recording costs described above, upon receipt of
written direction from the Unaffiliated Seller, the Trustee shall assign its
rights under the applicable Mortgage Loan Purchase Agreement solely with respect
to payment of such expenses to the Unaffiliated Seller.

                  The Unaffiliated Seller shall use commercially reasonable
efforts to assist the Servicer in causing the related Originator to deliver (at
the expense of such Originator pursuant to the related Mortgage Loan Purchase
Agreement) to the Servicer copies of all trailing documents required to be
included in the Custodial File at the same time the originals or certified
copies thereof are delivered to the Trustee, such documents, including, but not
limited to, the mortgagee policy of title insurance and any mortgage loan
documents upon return from the recording office. The Unaffiliated Seller shall
use commercially reasonable efforts to assist the Servicer in seeking
reimbursement from the related Originator pursuant to the related Mortgage Loan
Purchase Agreement for any fees or costs incurred by the Servicer in obtaining
such documents.

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

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

                                       51
<PAGE>

                  (c)      Purchase and Sale of Subsequent Mortgage Loans.

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

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

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

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

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

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

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

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

                                       52
<PAGE>

                           (f)      the Unaffiliated Seller shall have delivered
                  to the Trustee an executed Assignment and Recognition
                  Agreement with respect to each related Originator of
                  Subsequent Mortgage Loans to be added to the Trust Fund on
                  such Subsequent Transfer Date (which Assignment and
                  Recognition Agreement shall include a representation and
                  warranty from the related Originator that none of the
                  Subsequent Mortgage Loans is a High Cost Loan, none of the
                  Subsequent Mortgage Loans is covered by the Home Ownership and
                  Equity Protection Act of 1994 and none of the Subsequent
                  Mortgage Loans is in violation of any comparable state law);

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

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

                           (i)      the Unaffiliated Seller shall have obtained
                  the consent of the Certificate Insurer.

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

                           (a)      none may be second lien mortgage loans;

                           (b)      no more than 21.25% and no less than 19.00%
                  may be Fixed Rate Mortgage Loans;

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

                           (d)      the weighted average gross Mortgage Rate
                  must not be less than 7.88%, or more than 8.23%;

                           (e)      the weighted average LTV must not exceed
                  81.00%, and no more than 52.00% of the Mortgage Loans may have
                  LTVs in excess of 80.00%;

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

                           (g)      at least 84.00% of the Mortgage Loans must
                  have prepayment penalties;

                           (h)      the weighted average Gross Margin for the
                  Adjustable Rate Mortgage Loans must be at least 6.40%;

                                       53
<PAGE>

                           (i)      the weighted average credit score (FICO
                  Score) must be at least 604, and none of the Mortgage Loans
                  may have credit scores below 500; and

                           (j)      no Mortgage Loan originated on or after
                  October 1, 2002 but before or on March 7, 2003 will be secured
                  by property located in the State of Georgia and no mortgage
                  loan originated on or after March 7, 2003 is a "high cost home
                  loan" as defined under the Georgia Fair Lending Act.

                  (iv)     The obligation of the Trust Fund to purchase the
         Subsequent Mortgage Loans on a Subsequent Transfer Date is subject to
         the requirements that, following the purchase of such Subsequent
         Mortgage Loans, with respect to Group II:

                           (a)      no more than 4.00% may be second lien
                  mortgage loans;

                           (b)      no more than 33.00% and no less than 29.00%
                  may be Fixed Rate Mortgage Loans;

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

                           (d)      the weighted average gross Mortgage Rate
                  must not be less than 7.90%, or more than 8.25%;

                           (e)      the weighted average LTV must not exceed
                  80.59%, and no more than 52.00% of the Mortgage Loans may have
                  LTVs in excess of 80.00%;

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

                           (g)      at least 85.00% of the Mortgage Loans must
                  have prepayment penalties;

                           (h)      the weighted average Gross Margin for the
                  Adjustable Rate Mortgage Loans must be at least 6.30%;

                           (i)      the weighted average credit score (FICO
                  score) must be at least 609, and none of the mortgage loans
                  may have credit scores below 500; and

                           (j)      no mortgage loan originated on or after
                  October 1, 2002 but before or on March 7, 2003 will be secured
                  by property located in the State of Georgia and no mortgage
                  loan originated on or after March 7, 2003 is a "high cost home
                  loan" as defined under the Georgia Fair Lending Act.

                  Any of the requirements set forth in clauses (ii), (iii) and
         (iv) above may be waived or modified in any respect with the consent of
         the Certificate Insurer and the Rating Agencies.

                                       54
<PAGE>

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

                  Section 2.02      Acceptance by the Trustee of the Mortgage
                                    -----------------------------------------
Loans.
-----

                  The Trustee shall acknowledge, on each Delivery Date, receipt
of the documents identified in the Initial Certification in the form annexed
hereto as Exhibit F, and declares that it holds and will hold such documents and
the other documents delivered to it pursuant to Section 2.01, and that it holds
or will hold such other assets as are included in the Trust Fund, in trust for
the exclusive use and benefit of all present and future Certificateholders and
the Certificate Insurer. The Trustee acknowledges that it will maintain
possession of the related Mortgage Notes in the State of California, unless
otherwise permitted by the Rating Agencies and the Certificate Insurer.

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

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

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

                                       55
<PAGE>

                  Section 2.03      Representations, Warranties and Covenants of
                                    --------------------------------------------
the Unaffiliated Seller and the Servicer.
----------------------------------------

                  (a)      The Servicer hereby makes the representations and
warranties set forth in (i) Schedule II hereto to the Depositor, the
Unaffiliated Seller, the Certificate Insurer and the Trustee and (ii) Schedule
IIA hereto to the Unaffiliated Seller and the Certificate Insurer, in each case,
as of the Closing Date, and with respect to Subsequent Mortgage Loans, as of the
related Subsequent Transfer Date; provided, however, that in the case of clause
(ii), the Servicer only makes representations and warranties with respect to
those Mortgage Loans for which the Servicing Transfer Date has occurred prior to
the Closing Date or the related Subsequent Transfer Date, as applicable.

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

                  (c)      It is understood and agreed by the Servicer and the
Unaffiliated Seller that the representations and warranties set forth in Section
2.03 shall survive the transfer of the Mortgage Loans to the Trust Fund, and
shall inure to the benefit of the Trust Fund notwithstanding any restrictive or
qualified endorsement on any Mortgage Note or Assignment of Mortgage or the
examination or failure to examine any Mortgage File. Upon discovery by any of
the Depositor, the Unaffiliated Seller, the Certificate Insurer, the Trustee or
the Servicer of a breach by the Unaffiliated Seller of any of the foregoing
representations or any of the representations and warranties made pursuant to
Sections 3.01(f), 3.01(h) or 3.03 of the Unaffiliated Seller's Agreement or by
any Originator of the representations and warranties made pursuant to the
related Assignment and Recognition Agreement, the party discovering such breach
shall give prompt written notice to the others.

                  (d)      Within 90 days of the earlier of either discovery by
or notice to the Unaffiliated Seller of any breach of a representation or
warranty set forth in Section 3.01(f), 3.01(h) or 3.03 of the Unaffiliated
Seller's Agreement that materially and adversely affects the value of the
Mortgage Loans or the interest of the Trustee, the Certificate Insurer or the
Certificateholders therein, the Unaffiliated Seller shall use its best efforts
to cure such breach in all material respects and, if such breach cannot be
remedied, the Unaffiliated Seller shall, (i) if such 90-day period expires prior
to the second anniversary of the related Delivery Date, remove such Mortgage
Loan from the Trust Fund and substitute in its place a Substitute Mortgage Loan,
in the manner and subject to the conditions set forth in this Section 2.03; or
(ii) repurchase such Mortgage Loan at the Repurchase Price; provided, however,
that any such substitution pursuant to (i) above shall not be effected prior to
the delivery to the Trustee of the Opinion of Counsel required by Section 2.05,
if any, and a Request for Release substantially in the form of Exhibit K, and
the Mortgage File for any such Substitute Mortgage Loan.

                  With respect to any Substitute Mortgage Loan or Loans, the
Unaffiliated Seller shall deliver to the Trustee for the benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related Assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.01, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.01. No substitution is permitted to be made in any calendar month

                                       56
<PAGE>

after the Determination Date for such month. Scheduled Payments due with respect
to Substitute Mortgage Loans in the Due Period of substitution shall not be part
of the Trust Fund and will be retained by the related Originator on the next
succeeding Distribution Date. For the Due Period of substitution, distributions
to Certificateholders will include the monthly payment due on any Deleted
Mortgage Loan for such Due Period and thereafter the related Originator shall be
entitled to retain all amounts received in respect of such Deleted Mortgage
Loan.

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

                  Upon discovery that any document does not comply with the
requirements set forth in clauses (i) through (iv) of the Trustee's review of
the Custodial Files pursuant to Section 2.02 or receipt of written notice of a
breach of a representation and warranty, the Trustee shall in turn promptly
notify the applicable Originator (with a copy to the Servicer, the Certificate
Insurer and the Unaffiliated Seller) in writing of such non compliance or breach
and request that the related Originator cure such non compliance or breach
within the time period set forth in the applicable Mortgage Loan Purchase
Agreement (but in any event, within 60 days from the date the related Originator
is notified of such non compliance or breach) and if the related Originator does
not cure such non compliance or breach in all material respects during such
period, the Trustee shall notify such Originator to repurchase such Mortgage
Loan from the Trust Fund at the Repurchase Price. In the event the Trustee
receives written notice of a breach by any Originator of a representation and
warranty that is subject to an automatic sixty-day repurchase obligation
pursuant to Section 9.03 of the related Mortgage Loan Purchase Agreement, which
representations and warranties relate to Prepayment Fees, Predatory Lending
Regulations, Single Premium Credit Insurance, the Georgia Fair Lending Act, the
Fair Credit Reporting Act, New York State Banking Law or failure of a Mortgage
Loan to constitute a "qualified mortgage" within the meaning of Section
860G(a)(3) of the Code, the Trustee shall notify such Originator to repurchase
the Mortgage Loan at the Repurchase Price within sixty (60) days of such
Originator's receipt of such notice.

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

                                       57
<PAGE>

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

                  (g)      In the event that the Unaffiliated Seller or the
related Originator, as applicable, shall have repurchased a Mortgage Loan, the
Repurchase Price therefor shall be deposited in the Collection Account pursuant
to Section 3.10 on or before the Remittance Date for the Distribution Date in
the month following the month during which the Unaffiliated Seller or the
related Originator, as applicable, became obligated hereunder to repurchase or
replace such Mortgage Loan and upon such deposit of the Repurchase Price, the
delivery of the Opinion of Counsel required by Section 2.05 and receipt of a
Request for Release in the form of Exhibit K hereto, the Trustee shall release
the related Custodial File to such Person as directed by the Servicer, and the
Trustee shall execute and deliver at such Person's direction such instruments of
transfer or assignment prepared by such Person, in each case without recourse,
as shall be necessary to transfer title from the Trustee. It is understood and
agreed that the obligation under this Agreement of any Person to cure,
repurchase or replace any Mortgage Loan as to which a breach has occurred and is
continuing shall constitute the sole remedy against such Persons respecting such
breach available to Certificateholders, the Depositor, the Unaffiliated Seller,
the Certificate Insurer or the Trustee on their behalf. In the event such
required repurchase or replacement does not occur, the Trustee shall take such
actions as directed upon written direction from the Depositor or the Certificate
Insurer and the provision of reasonable indemnity satisfactory to the Trustee in
accordance with Sections 6.03 and 8.02.

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

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

                                       58
<PAGE>

                  Section 2.04      The Depositor and the Mortgage Loans.
                                    ------------------------------------

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

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

                  Section 2.05      Delivery of Opinion of Counsel in Connection
                                    --------------------------------------------
with Substitutions and Non-Qualified Mortgages.
----------------------------------------------

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

                  Section 2.06      Execution and Delivery of Certificates.
                                    --------------------------------------

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

                  Section 2.07      REMIC Matters.
                                    -------------

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

                  Section 2.08      Representations and Warranties of the
                                    -------------------------------------
Depositor.
---------

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

                                       59
<PAGE>

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

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

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

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

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

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

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

                                       60
<PAGE>

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

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

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

                  Section 3.01      Servicer to Service Mortgage Loans.
                                    ----------------------------------

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

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

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

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

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

                  To the extent consistent with the foregoing, the Servicer
shall seek to maximize the timely and complete recovery of principal and
interest on the Mortgage Notes. Subject only to the above-described servicing
standards and the terms of this Agreement and of the respective Mortgage Loans,
the Servicer shall have full power and authority, acting alone or through
Subservicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Servicer in its own name or in the name of a Subservicer is hereby authorized

                                       61
<PAGE>

and empowered by the Trustee when the Servicer believes it appropriate in its
best judgment in accordance with the servicing standards set forth above, to
execute and deliver any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Mortgage Loans and the Mortgaged Properties and to institute
foreclosure proceedings or obtain a deed-in-lieu of foreclosure so as to convert
the ownership of such properties, and to hold or cause to be held title to such
properties, on behalf of the Trustee. The Servicer shall service and administer
the Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any reports required to be provided to them thereby.
The Servicer shall also comply in the performance of this Agreement with all
reasonable rules and requirements of each insurer under any standard hazard
insurance policy. Subject to Section 3.15, the Trustee shall execute, at the
written request of the Servicer, and furnish to the Servicer and any Subservicer
such documents as are necessary or appropriate to enable the Servicer or any
Subservicer to carry out their servicing and administrative duties hereunder,
and the Trustee hereby grants to the Servicer, and this Agreement shall
constitute, a power of attorney to carry out such duties including a power of
attorney to take title to Mortgaged Properties after foreclosure on behalf of
the Trustee. The Trustee shall execute a separate power of attorney in favor of
the Servicer for the purposes described herein to the extent necessary or
desirable to enable the Servicer to perform its duties hereunder. The Trustee
shall not be liable for the actions of the Servicer or any Subservicers under
such powers of attorney.

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

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

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

                                       62
<PAGE>

                  Section 3.02      Subservicing Agreements Between the Servicer
                                    --------------------------------------------
and Subservicers.
----------------

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

                  Unless otherwise approved by the Certificate Insurer (so long
as no Certificate Insurer Default has occurred and is continuing), each
Subservicer shall be (i) authorized to transact business in the state or states
in which the related Mortgaged Properties it is to service are situated, if and
to the extent required by applicable law to enable the Subservicer to perform
its obligations hereunder and under the Subservicing Agreement, (ii) an
institution approved as a mortgage loan originator by the Federal Housing
Administration or an institution that has deposit accounts insured by the FDIC
and (iii) a Freddie Mac or Fannie Mae approved mortgage servicer. Each
Subservicing Agreement must impose on the Subservicer requirements conforming to
the provisions set forth in Section 3.08 and provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Servicer will
examine each Subservicing Agreement and will be familiar with the terms thereof.
The terms of any Subservicing Agreement will not be inconsistent with any of the
provisions of this Agreement. The Servicer and the Subservicers may enter into
and make amendments to the Subservicing Agreements or enter into different forms
of Subservicing Agreements; provided, however, that any such amendments or
different forms shall be consistent with and not violate the provisions of this
Agreement, and that no such amendment or different form shall be made or entered
into which could be reasonably expected to be materially adverse to the
interests of the Trustee, without the consent of the Trustee. Any variation
without the consent of the Trustee from the provisions set forth in Section 3.08
relating to insurance or priority requirements of Subservicing Accounts, or
credits and charges to the Subservicing Accounts or the timing and amount of
remittances by the Subservicers to the Servicer, are conclusively deemed to be
inconsistent with this Agreement and therefore prohibited. The Servicer shall
deliver to the Trustee, the Unaffiliated Seller, the Certificate Insurer and the
Depositor copies of all Subservicing Agreements, and any amendments or
modifications thereof, promptly upon the Servicer's execution and delivery of
such instruments.

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

                                       63
<PAGE>

                  Section 3.03      Successor Subservicers.
                                    ----------------------

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

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

                  Section 3.04      Liability of the Servicer.
                                    -------------------------

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

                  Section 3.05      No Contractual Relationship Between
                                    -----------------------------------
Subservicers and the Trustee.
----------------------------

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

                  Section 3.06      Assumption or Termination of Subservicing
                                    -----------------------------------------
Agreements by Trustee.
---------------------

                  In the event the Servicer at any time shall for any reason no
longer be the Servicer (including by reason of the occurrence of a Event of
Default), the Trustee or its designee shall thereupon assume all of the rights
and obligations of the Servicer under each Subservicing Agreement that the
Servicer may have entered into, with copies thereof provided to the Trustee

                                       64
<PAGE>

prior to the Trustee assuming such rights and obligations, unless the Trustee
elects to terminate any Subservicing Agreement in accordance with its terms as
provided in Section 3.03.

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

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

                  Section 3.07      Collection of Certain Mortgage Loan
                                    -----------------------------------
Payments; Establishment of Certain Accounts.
-------------------------------------------

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

                                       65
<PAGE>

Prepayment Charge, for the benefit of the Holders of the Class P Certificates,
by depositing such amount into the Collection Account together with and at the
time that the amount prepaid on the related Mortgage Loan is required to be
deposited into the Collection Account. Notwithstanding any provision in this
Agreement to the contrary, in the event the Prepayment Charge payable under the
terms of the Mortgage Note is less than the amount of the Prepayment Charge set
forth in the Mortgage Loan Schedule or other information provided to the
Servicer, the Servicer shall not have any liability or obligation with respect
to such difference, and in addition shall not have any liability or obligation
to pay the amount of any uncollected Prepayment Charge if the failure to collect
such amount is the direct result of inaccurate or incomplete information on the
Mortgage Loan Schedule.

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

                  (ii)     On each Distribution Date, the Trustee shall deposit
         the amount of any Basis Risk Payment made for the benefit of the
         Certificateholders and any Interest Rate Cap Payment made for the
         benefit of the Offered Certificates other than the Class A-1
         Certificates for such date into the Excess Reserve Fund Account.

                  (c)      (i)      On each Distribution Date on which there
exists a Basis Risk CarryForward Amount on any Class of Certificates, the
Trustee shall (1) withdraw from the Distribution Account and deposit in the
Excess Reserve Fund Account, as set forth in Section 4.02(a)(iii)(N), the lesser
of (a) the sum of (x) the Class X Distributable Amount (without regard to the
reduction in the definition thereof with respect to the Basis Risk CarryForward
Amount) (to the extent remaining after the distributions specified in Sections
4.02(a)(iii)(A)-(M), and (y) the Interest Rate Cap Payment, if any, with respect
to such Distribution Date, and (b) the Basis Risk CarryForward Amount and (2)
withdraw from the Excess Reserve Fund Account amounts necessary to pay to such
Class or Classes of Certificates the Basis Risk CarryForward Amount. Such
payments shall be allocated to those Classes on a pro rata basis based upon the
amount of Basis Risk CarryForward Amount owed to each such Class and shall be
paid in the priority set forth in Section 4.02(a)(iii)(O).

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

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

                                       66
<PAGE>

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

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

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

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

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

                  In the event that the Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee in writing to
withdraw such amount from the Distribution Account, any provision herein to the
contrary notwithstanding. Such direction may be accomplished by delivering
notice to the Trustee which describes the amounts deposited in error in the
Distribution Account. All funds deposited in the Distribution Account shall be
held by the Trustee in trust for the Certificateholders until disbursed in
accordance with this Agreement or withdrawn in accordance with Section 4.02. In
no event shall the Trustee incur liability for withdrawals from the Distribution
Account at the direction of the Servicer.

                  (e)      The Trustee shall establish and maintain the
Capitalized Interest Account, on behalf of the Certificateholders. On the
Closing Date, the Trustee shall deposit $669,588 into the Capitalized Interest
Account from the proceeds of the sale of the Offered Certificates. Withdrawals
from the Capitalized Interest Account shall be made in accordance with Sections
4.02(c) and (d). The Trustee shall account for the Capitalized Interest Account
as an outside reserve fund within the meaning of Treasury Regulation 1.860G-2(h)
and not as an asset of any REMIC created pursuant to this Agreement. The
beneficial owner of the Capitalized Interest Account shall be the Unaffiliated
Seller.

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

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

                                       67
<PAGE>

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

                  Section 3.08      Subservicing Accounts.
                                    ---------------------

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

                  Section 3.09      Collection of Taxes, Assessments and Similar
                                    --------------------------------------------
Items; Escrow Accounts.
----------------------

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

                  (b)      To the extent that the services described in this
paragraph (b) are not otherwise provided pursuant to the Tax Service Contracts
described in paragraph (a) hereof, the Servicer undertakes to perform such
functions. The Servicer shall establish and maintain, or cause to be established
and maintained, one or more accounts (the "Escrow Accounts"), which shall be
Eligible Accounts. The Servicer shall deposit in the clearing account (which
account must be an Eligible Account) in which it customarily deposits payments
and collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Servicer's receipt thereof, all collections from the Mortgagors (or related
advances from Subservicers) for the payment of taxes, assessments, hazard
insurance premiums and comparable items for the account of the Mortgagors
("Escrow Payments") collected on account of the Mortgage Loans and shall
thereafter deposit such Escrow Payments in the Escrow Accounts, in no event more
than two Business Days after the deposit of such funds in the clearing account,
for the purpose of effecting the payment of any such items as required under the
terms of this Agreement. Withdrawals of amounts from an Escrow Account may be
made only to (i) effect payment of taxes, assessments, hazard insurance
premiums, and comparable items; (ii) reimburse the Servicer (or a Subservicer to
the extent provided in the related Subservicing Agreement) out of related

                                       68
<PAGE>

collections for any advances made pursuant to Section 3.01 (with respect to
taxes and assessments) and Section 3.13 (with respect to hazard insurance);
(iii) refund to Mortgagors any sums as may be determined to be overages; (iv)
pay interest, if required and as described below, to Mortgagors on balances in
the Escrow Account, and the Servicer shall be entitled to withdraw from the
Escrow Account any interest earned and not required to be paid to Mortgagors;
(v) clear and terminate the Escrow Account at the termination of the Servicer's
obligations and responsibilities in respect of the Mortgage Loans under this
Agreement or (vi) recover amounts deposited in error. As part of its servicing
duties, the Servicer or Subservicers shall pay to the Mortgagors interest on
funds in Escrow Accounts, to the extent required by law and, to the extent that
interest earned on funds in the Escrow Accounts is insufficient, to pay such
interest from its or their own funds, without any reimbursement therefor. To the
extent that a Mortgage does not provide for Escrow Payments, the Servicer shall
determine whether any such payments are made by the Mortgagor in a manner and at
a time that avoids the loss of the Mortgaged Property due to a tax sale or the
foreclosure of a tax lien. The Servicer assumes full responsibility for the
payment of all such bills within such time and shall effect payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of
same or the making of the Escrow Payments and shall make advances from its own
funds to effect such payments; provided, however, that such advances are deemed
to be Servicing Advances.

                  Section 3.10      Collection Account.
                                    ------------------

                  (a)      On behalf of the Trustee, the Servicer shall
establish and maintain, or cause to be established and maintained, one or more
Eligible Accounts (such account or accounts, the "Collection Account"), held in
trust for the benefit of the Trustee. On behalf of the Trustee, the Servicer
shall deposit or cause to be deposited in the clearing account (which account
must be an Eligible Account) in which it customarily deposits payments and
collections on mortgage loans in connection with its mortgage loan servicing
activities on a daily basis, and in no event more than one Business Day after
the Servicer's receipt thereof, and shall thereafter deposit in the Collection
Account, in no event more than two Business Days after the deposit of such funds
into the clearing account, as and when received or as otherwise required
hereunder, the following payments and collections received or made by it
subsequent to the related Cut-off Date (other than in respect of principal or
interest on the related Mortgage Loans due on or before the related Cut-off
Date, and except for $9,370.42 in interest, which is being retained by the
Unaffiliated Seller), or payments (other than Principal Prepayments) received by
it on or prior to the related Cut-off Date but allocable to a Due Period
subsequent thereto:

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

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

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

                                       69
<PAGE>

                  (iv)     any amounts required to be deposited pursuant to
         Section 3.12 in connection with any losses realized on Permitted
         Investments with respect to funds held in the Collection Account;

                  (v)      any amounts required to be deposited by the Servicer
         pursuant to the second paragraph of Section 3.13(a) in respect of any
         blanket policy deductibles;

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

                  (vii)    all Prepayment Charges collected by the Servicer.

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

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

                  Section 3.11      Withdrawals from the Collection Account.
                                    ---------------------------------------

                  (a)      The Servicer shall, from time to time, make
withdrawals from the Collection Account for any of the following purposes or as
described in Section 4.01:

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

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

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

                                       70
<PAGE>

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

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

                  (vi)     to reimburse the Servicer for (a) any P&I Advance or
         Servicing Advance previously made which the Servicer has determined to
         be a Nonrecoverable P&I Advance or Nonrecoverable Servicing Advance in
         accordance with the provisions of Section 4.01 and (b) any unpaid
         Servicing Fees to the extent not recoverable from Late Collections or
         other amounts received with respect to the related Mortgage Loan under
         Section 3.11(a)(iii); provided, that this clause (b) shall only apply
         with respect to Servicing Fees to second lien Mortgage Loans;

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

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

                  (ix)     to reimburse the Servicer, the Unaffiliated Seller,
         the Depositor, the Certificate Insurer or the Trustee, as the case may
         be, for expenses reasonably incurred in respect of the breach or defect
         giving rise to the purchase obligation under Section 2.03 of this
         Agreement that were included in the Repurchase Price of the Mortgage
         Loan, including any expenses arising out of the enforcement of the
         purchase obligation to the extent not otherwise paid pursuant to the
         terms hereof;

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

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

                  (b)      The Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
justifying any withdrawal from the Collection Account, to the extent held by or
on behalf of it, pursuant to subclauses (a)(ii), (iii), (v), (vi), (vii), (viii)
and (ix) above. The Servicer shall provide written notification to the Trustee,
on or prior to the next succeeding Remittance Date, upon making any withdrawals
from the Collection Account pursuant to subclause (a)(vii) above.

                  Section 3.12      Investment of Funds in the Account.
                                    ----------------------------------

                  (a)      The Servicer may direct the investment of funds in
the Collection Account and may direct the Trustee to invest funds in the
Distribution Account, and the Unaffiliated Seller may direct the Trustee to

                                       71
<PAGE>

invest the funds in the Pre-Funding Accounts and the Capitalized Interest
Account (each of such Accounts, for purposes of this Section 3.12, an
"Investment Account"), in one or more Permitted Investments bearing interest or
sold at a discount, and maturing, unless payable on demand no later than the
Business Day immediately preceding the date on which such funds are required to
be withdrawn from such account pursuant to this Agreement. All such investment
directions shall be in writing and if the Trustee does not receive such written
instructions no investment shall be made. All such Permitted Investments shall
be held to maturity, unless payable on demand. Any investment of funds in an
Investment Account shall be made in the name of the Trustee. The Trustee shall
be entitled to sole possession (except with respect to investment direction of
funds held in the related Account and any income and gain realized thereon) over
each such investment, and any certificate or other instrument evidencing any
such investment shall be delivered directly to the Trustee or its agent,
together with any document of transfer necessary to transfer title to such
investment to the Trustee. In the event amounts on deposit in an Investment
Account are at any time invested in a Permitted Investment payable on demand,
the Trustee may:

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

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

                  (b)      (i)      All income and gain realized from the
         investment of funds deposited in the Collection Account and the
         Distribution Account held by or on behalf of the Servicer, shall be for
         the benefit of the Servicer and shall be subject to its withdrawal in
         the manner set forth in Section 3.11 in the case of income in the
         Collection Account, and on each Distribution Date, the Trustee shall
         withdraw from the Distribution Account, and remit to the Servicer all
         amounts in respect of such income and gain in the Distribution Account.
         Whether in regard to the Collection Account or the Distribution
         Account, the Servicer shall deposit in the Collection Account or the
         Distribution Account, as applicable, the amount of any loss of
         principal incurred in respect of any such Permitted Investment directed
         by the Servicer made with funds in such accounts immediately upon
         realization of such loss.

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

                                       72
<PAGE>

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

                  (d)      The Trustee or its Affiliates are permitted to
receive additional compensation that could be deemed to be in the Trustee's
economic self-interest for (i) serving as investment adviser, administrator,
shareholder, servicing agent, custodian or sub-custodian with respect to certain
of the Permitted Investments, (ii) using Affiliates to effect transactions in
certain Permitted Investments and (iii) effecting transactions in certain
Permitted Investments. Such compensation shall not be considered an amount that
is reimbursable or payable pursuant to this Agreement.

                  Section 3.13      Maintenance of Hazard Insurance and Errors
                                    ------------------------------------------
and Omissions and Fidelity Coverage.
-----------------------------------

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

                                       73
<PAGE>

shall be in an amount equal to the lesser of (i) the unpaid principal balance of
the related Mortgage Loan and (ii) the maximum amount of such insurance
available for the related Mortgaged Property under the national flood insurance
program (assuming that the area in which such Mortgaged Property is located is
participating in such program).

                  In the event that the Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's (or such other rating that is comparable to such rating) insuring
against hazard losses on all of the Mortgage Loans, it shall conclusively be
deemed to have satisfied its obligations as set forth in the first two sentences
of this Section 3.13, it being understood and agreed that such policy may
contain a deductible clause, in which case the Servicer shall, in the event that
there shall not have been maintained on the related Mortgaged Property or REO
Property a policy complying with the first two sentences of this Section 3.13,
and there shall have been one or more losses which would have been covered by
such policy, deposit to the Collection Account from its own funds the amount not
otherwise payable under the blanket policy because of such deductible clause. In
connection with its activities as administrator and servicer of the Mortgage
Loans, the Servicer agrees to prepare and present, on behalf of itself, the
Trustee claims under any such blanket policy in a timely fashion in accordance
with the terms of such policy.

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

                  Section 3.14      Enforcement of Due-On-Sale Clauses
                                    ----------------------------------
Assumption Agreements.
---------------------

                  The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Servicer shall not be required to take such action if, in its sole
business judgment, the Servicer believes it is not in the best interests of the
Trust Fund and shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause or if any of the other conditions set forth

                                       74
<PAGE>

in the proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as the Mortgagor and becomes liable under the Mortgage
Note; provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer, has a credit risk rating at
least equal to that of the original Mortgagor and such substitution is in the
best interest of Certificateholders as determined by the Servicer. In connection
with any assumption, modification or substitution, the Servicer shall apply such
underwriting standards and follow such practices and procedures as shall be
normal and usual in its general mortgage servicing activities and as it applies
to other mortgage loans owned solely by it. The Servicer shall not take or enter
into any assumption and modification agreement, however, unless (to the extent
practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy, or a new policy meeting the requirements of this Section is obtained.
Any fee collected by the Servicer in respect of an assumption or substitution of
liability agreement will be retained by the Servicer as additional servicing
compensation. In connection with any such assumption, no material term of the
Mortgage Note (including, but not limited to, the related Mortgage Rate and the
amount of the Scheduled Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Servicer shall notify the Trustee
that any such substitution, modification or assumption agreement has been
completed by forwarding to the Trustee the executed original of such
substitution or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.

                  Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.14, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.

                  Section 3.15      Realization Upon Defaulted Mortgage Loans.
                                    -----------------------------------------

                  The Servicer shall use its best efforts, consistent with
customary servicing practices as described in Section 3.01, to foreclose upon or
otherwise comparably convert (which may include an acquisition of REO Property)
the ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07, and which are not
released from this Agreement pursuant to any other provision hereof. The
Servicer shall use reasonable efforts to realize upon such defaulted Mortgage
Loans in such manner as will maximize the receipt of principal and interest by
the Trustee, taking into account, among other things, the timing of foreclosure
proceedings. The foregoing is subject to the provisions that, in any case in

                                       75
<PAGE>

which Mortgaged Property shall have suffered damage from an uninsured cause, the
Servicer shall not be required to expend its own funds toward the restoration of
such property unless it shall determine in its sole discretion (i) that such
restoration will increase the net proceeds of liquidation of the related
Mortgage Loan to the Trustee, after reimbursement to itself for such expenses,
and (ii) that such expenses will be recoverable by the Servicer through
Insurance Proceeds or Liquidation Proceeds from the related Mortgaged Property,
as contemplated in Section 3.11. The Servicer shall be responsible for all other
costs and expenses incurred by it in any such proceedings; provided, however,
that it shall be entitled to reimbursement thereof from the related property, as
contemplated in Section 3.11.

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

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

                  After reviewing the environmental inspection report, the
Servicer shall determine how to proceed with respect to the Mortgaged Property.
In the event (a) the environmental inspection report indicates that the
Mortgaged Property is contaminated by hazardous or toxic substances or wastes
and (b) the Servicer determines to proceed with foreclosure or acceptance of a
deed in lieu of foreclosure, the Servicer shall be reimbursed for all reasonable
costs associated with such foreclosure or acceptance of a deed in lieu of
foreclosure and any related environmental clean-up costs, as applicable, from
the related Liquidation Proceeds, or if the Liquidation Proceeds are
insufficient to fully reimburse the Servicer, the Servicer shall be entitled to
be reimbursed from amounts in the Collection Account pursuant to Section 3.11

                                       76
<PAGE>

hereof. In the event the Servicer determines not to proceed with foreclosure or
acceptance of a deed in lieu of foreclosure, the Servicer shall be reimbursed
from general collections for all Servicing Advances made with respect to the
related Mortgaged Property from the Collection Account pursuant to Section 3.11
hereof.

                  Section 3.16      Release of Mortgage Files.
                                    -------------------------

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

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

                  Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer any court pleadings, requests for
trustee's sale or other documents reasonably necessary to the foreclosure or
trustee's sale in respect of a Mortgaged Property or to any legal action brought
to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by the Mortgage Note or Mortgage or otherwise available at law or in
equity, or shall exercise and deliver to the Servicer a power of attorney
sufficient to authorize the Servicer to execute such documents on its behalf.

                                       77
<PAGE>

Each such certification shall include a request that such pleadings or documents
be executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale.

                  Upon receipt of a Request for Release under this Section 3.16,
the Trustee shall deliver the related Custodial File to the Servicer by regular
mail, unless the Servicer requests that the Trustee deliver such Custodial File
to the Servicer by overnight courier (in which case such delivery shall be at
the Servicer's expense). To the extent that the Servicer requires an overnight
courier for such delivery and incurs the related expense due to the Servicer not
having previously received copies of the documents required to be delivered to
the Servicer hereunder, the Unaffiliated Seller shall use commercially
reasonable efforts to assist the Servicer in causing the related Originator
pursuant to the related Mortgage Loan Purchase Agreement to reimburse the
Servicer for such expense.

                  Section 3.17      Title, Conservation and Disposition of REO
                                    ------------------------------------------
Property.
--------

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

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

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

                  (d)      [Reserved].

                                       78
<PAGE>

                  (e)      The Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall deposit such
funds in the Collection Account.

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

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

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

                  (i)      The Servicer shall use its reasonable best efforts to
sell, or cause the Subservicer to sell, any REO Property as soon as possible,
but in no event later than the conclusion of the third calendar year beginning
after the year of its acquisition by the REMIC unless (i) the Servicer applies
for an extension of such period from the Internal Revenue Service pursuant to
the REMIC Provisions and Code Section 856(e)(3), in which event such REO
Property shall be sold within the applicable extension period, or (ii) the
Servicer obtains for the Trustee an Opinion of Counsel, addressed to the
Depositor, the Trustee and the Servicer, to the effect that the holding by the
REMIC of such REO Property subsequent to such period will not result in the
imposition of taxes on "prohibited transactions" as defined in Section 860F of
the Code or cause the REMIC to fail to qualify as a REMIC under the REMIC
Provisions or comparable provisions of relevant state laws at any time. The
Servicer shall manage, conserve, protect and operate each REO Property for the
Trustee solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) or result in the receipt by
the REMIC of any "income from non-permitted assets" within the meaning of
Section 860F(a)(2)(B) of the Code or any "net income from foreclosure property"
which is subject to taxation under Section 860G(a)(1) of the Code. Pursuant to
its efforts to sell such REO Property, the Servicer shall either itself or
through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Trustee on behalf of the Certificateholders, rent the same,
or any part thereof, as the Servicer deems to be in the best interest of the
Trustee on behalf of the Certificateholders for the period prior to the sale of
such REO Property; provided, however, that any rent received or accrued with
respect to such REO Property qualifies as "rents from real property" as defined
in Section 856(d) of the Code.

                                       79
<PAGE>

                  Section 3.18      Notification of Adjustments.
                                    ---------------------------

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

                  Section 3.19      Access to Certain Documentation and
                                    -----------------------------------
Information Regarding the Mortgage Loans.
----------------------------------------

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

                  Section 3.20      Documents, Records and Funds in Possession
                                    ------------------------------------------
of the Servicer to be Held for the Trustee.
------------------------------------------

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

                                       80
<PAGE>

                  Section 3.21      Servicing Compensation.
                                    ----------------------

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

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

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

                  Section 3.22      Annual Statement as to Compliance.
                                    ---------------------------------

                  The Servicer will deliver or cause to be delivered to the
Depositor, the Rating Agencies, the Unaffiliated Seller, the Certificate
Insurer, and the Trustee on or before March 15th of each calendar year,
commencing in 2004, an Officers' Certificate stating, as to each signatory
thereof, that (i) a review of the activities of the Servicer during the
preceding calendar year and of performance under this Agreement has been made
under such officers' supervision, and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all of its
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officers and the nature and status thereof.

                  Section 3.23      Annual Independent Public Accountants'
                                    --------------------------------------
Servicing Statement; Financial Statements.
-----------------------------------------

                  Not later than March 15th of each calendar year commencing in
2004, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Depositor, the
Unaffiliated Seller, the Certificate Insurer, the Rating Agencies and the
Trustee a report stating that (i) it has obtained a letter of representation
regarding certain matters from the management of the Servicer which includes an
assertion that the Servicer has complied with certain minimum residential

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mortgage loan servicing standards, identified in the Uniform Single Attestation
Program for Mortgage Bankers established by the Mortgage Bankers Association of
America, with respect to the servicing of residential mortgage loans during the
most recently completed fiscal year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that may be appropriate. In rendering its report such firm may rely, as to
matters relating to the direct servicing of residential mortgage loans by
Subservicers, upon comparable reports of firms of independent certified public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those Subservicers.

                  Section 3.24      Trustee to Act as Servicer.
                                    --------------------------

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

                  Every subservicing agreement entered into by the Servicer
shall contain a provision giving the successor Servicer the option to terminate
such agreement in the event a successor Servicer is appointed.

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

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

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<PAGE>

                  Section 3.25      Compensating Interest.
                                    ---------------------

                  The Servicer shall remit to the Trustee on each Remittance
Date an amount from its own funds equal to the Compensating Interest for the
related Distribution Date.

                  Section 3.26      Credit Reporting; Gramm-Leach-Bliley Act.
                                    ----------------------------------------

                  (a)      The Servicer agrees to fully furnish, in accordance
with the Fair Credit Reporting Act and its implementing regulations, accurate
and complete information (i.e., favorable and unfavorable) on its borrower
credit files to Equifax, Experian, and Trans Union Credit Information Company
(three of the credit repositories), on a monthly basis.

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

                  Section 3.27      Advance Facilities.
                                    ------------------

                  With the prior written consent of the Certificate Insurer, the
Servicer is hereby authorized to enter into a financing or other facility (an
"Advance Facility") under which (l) the Servicer sells, assigns or pledges to
another Person (an "Advancing Person") the Servicer's rights under this
Agreement to be reimbursed for any Advances and/or (2) an Advancing Person
agrees to fund some or all P&I Advances or Servicing Advances required to be
made by the Servicer pursuant to this Agreement. Except as provided in the
preceding sentence, no consent of any party is required before the Servicer may
enter into an Advance Facility. Notwithstanding the existence of any Advance
Facility under which an Advancing Person agrees to fund P&I Advances and/or
Servicing Advances on the Servicer's behalf, the Servicer shall remain obligated
pursuant to this Agreement to make P&I Advances and Servicing Advances pursuant
to and as required by this Agreement, and shall not be relieved of such
obligations by virtue of such Advance Facility.

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

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

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

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<PAGE>

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

                  Any amendment to this Section 3.27 or to any other provision
of this Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 3.27, including
amendments to add provisions relating to a successor Servicer, may be entered
into by the Trustee, the Depositor, the Unaffiliated Seller and the Servicer
without the consent of any Certificateholder, but with the consent of the
Certificate Insurer, notwithstanding anything to the contrary in this Agreement.
Prior to entering into an Advance Facility, the Servicer shall notify the lender
under such facility in writing that: (a) the Advances financed by and/or pledged
to the lender are obligations owed to the Servicer on a non-recourse basis
payable only from the cash flows and proceeds received under this Agreement for
reimbursement of such Advances only to the extent provided herein, and the
Trustee is not otherwise obligated or liable to repay any Advances financed by
the lender; (b) the Servicer will be responsible for remitting to the lender the
applicable amounts collected by it as reimbursement for Advances funded by the
lender, subject to the restrictions and priorities created in this Agreement;
(c) the Trustee shall not have any responsibility to track or monitor the
administration of the financing arrangement between the Servicer and the lender;
(d) if the Servicer is replaced by a successor servicer, the lender shall
continue to be entitled to receive reimbursements as provided in clause (a)
above but shall have no further right to make advances with respect to the
transaction subject to this Agreement; and (e) (i) the pledge, if any, of
Servicer's rights to the lender under the facility conveys no rights (such as a
right to fees after the removal of the Servicer or the right to become a
substitute servicer) under this Agreement, or against the Trust Fund, any
investor in or guarantor of securities issued hereunder, or any person other
than the Servicer, (ii) the Servicer is only pledging assets and rights that it
owns and any purported pledge of any assets or rights that are not property of
the Servicer shall be of force and effect and will not be deemed to create any
additional rights or assets of either the lender or the Servicer and (iii) the
lender shall take such steps as are reasonably necessary to confirm to a
successor servicer that it has no rights in any collateral due or payable on or
after the date of servicing transfer other than the Servicer's rights to
reimbursement of Advances (to be repaid pursuant to the terms of this Agreement)
for Advances made prior to such servicing transfer.

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<PAGE>

                                   ARTICLE IV

                                DISTRIBUTIONS AND
                            ADVANCES BY THE SERVICER

                  Section 4.01      Advances.
                                    --------

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

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

                  (c)      The obligation of the Servicer to make such P&I
Advances is mandatory, notwithstanding any other provision of this Agreement but
subject to (d) below, and, with respect to any Mortgage Loan or REO Property,
shall continue until a Final Recovery Determination in connection therewith or
the removal thereof from coverage under this Agreement, except as otherwise
provided in this Section.

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

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<PAGE>

respectively, shall be evidenced by an Officers' Certificate of the Servicer
delivered to the Trustee.

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

                  Section 4.02      Priorities of Distribution.
                                    --------------------------

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

                  (i)      from the Interest Remittance Amount, in the following
         order of priority:

                  (A)      to the Certificate Insurer, the Premium Amount for
                           such Distribution Date;

                  (B)      concurrently, with equal priority of payment:

                           (1)      payable solely from the Group I Interest
                                    Remittance Amount for that Distribution
                                    Date, to the holders of the Class A-1
                                    Certificates, the Accrued Certificate
                                    Interest and any Unpaid Interest Amounts for
                                    the Class A-1 Certificates, and to the
                                    extent that the Group I Interest Remittance
                                    Amount is less than the Accrued Certificate
                                    Interest and any Unpaid Interest Amounts for
                                    the Class A-1 Certificates, payable from any
                                    Group II Interest Remittance Amount for that
                                    Distribution Date remaining after payment of
                                    the Accrued Certificate Interest, any Unpaid
                                    Interest Amounts and related administrative
                                    fees with respect to the Group II Class A
                                    Certificates, to the holders of the Class
                                    A-1 Certificates, the unpaid portion of the
                                    Accrued Certificate Interest and any Unpaid
                                    Interest Amounts for the Class A-1
                                    Certificates; and

                           (2)      payable solely from the Group II Interest
                                    Remittance Amount for that Distribution
                                    Date, to the holders of the Group II Class A
                                    Certificates, pro rata, the Accrued
                                    Certificate Interest and any Unpaid Interest
                                    Amounts for the Group II Class A
                                    Certificates, and to the extent that the
                                    Group II Interest Remittance Amount is less
                                    than the Accrued Certificate Interest and
                                    any Unpaid Interest Amounts for the Group II
                                    Class A Certificates, payable from any Group
                                    I Interest Remittance Amount for that
                                    Distribution Date remaining after payment of
                                    the Accrued Certificate Interest, any Unpaid
                                    Interest Amounts and related administrative
                                    fees with respect to the Class A-1
                                    Certificates, to the holders of each Class
                                    of the Group II Class A Certificates, pro
                                    rata, the unpaid portion of the Accrued

                                       86
<PAGE>

                                    Certificate Interest and any Unpaid Interest
                                    Amounts for the Group II Class A
                                    Certificates;

                  (C)      from both the Group I Interest Remittance Amount and
                           the Group II Interest Remittance Amount to the
                           Certificate Insurer, the amount of any Reimbursement
                           Amount then owing to it on account of a prior draw
                           relating to interest on the Class A-1 or Class A-3
                           Certificates;

                  (D)      from both the Group I Interest Remittance Amount and
                           the Group II Interest Remittance Amount to the Class
                           M-1 Certificates, the Accrued Certificate Interest
                           for such Class on such Distribution Date;

                  (E)      from both the Group I Interest Remittance Amount and
                           the Group II Interest Remittance Amount to the Class
                           M-2 Certificates, the Accrued Certificate Interest
                           for such class on such Distribution Date;

                  (F)      from both the Group I Interest Remittance Amount and
                           the Group II Interest Remittance Amount to the Class
                           M-3 Certificates, the Accrued Certificate Interest
                           for such Class on such Distribution Date;

                  (G)      from both the Group I Interest Remittance Amount and
                           the Group II Interest Remittance Amount to the Class
                           B-1 Certificates, the Accrued Certificate Interest
                           for such Class on such Distribution Date;

                  (H)      from both the Group I Interest Remittance Amount and
                           the Group II Interest Remittance Amount to the Class
                           B-2 Certificates, the Accrued Certificate Interest
                           for such Class on such Distribution Date; and

                  (I)      from both the Group I Interest Remittance Amount and
                           the Group II Interest Remittance Amount to the Class
                           B-3 Certificates, the Accrued Certificate Interest
                           for such Class on such Distribution Date;

                  (ii)     (x) on each Distribution Date (A) before the Stepdown
         Date or (B) with respect to which a Trigger Event is in effect, to the
         holders of the Class or Classes of Offered Certificates then entitled
         to distributions of principal as set forth below, and to the
         Certificate Insurer, from the amounts remaining on deposit in the
         Distribution Account after making distributions pursuant to clause (i)
         above, an amount equal to the Principal Distribution Amount in the
         following order of priority:

                  (A)      concurrently, with equal priority of payment:

                               (1) to the holders of the Class A-1 Certificates,
                      the Class A-1 Allocation Percentage of the Principal
                      Distribution Amount, until the Class Certificate Balance
                      of the Class A-1 Certificates has been reduced to zero;
                      and

                               (2) to the holders of the Group II Class A
                      Certificates pro rata, the Group II Class A Allocation
                      Percentage of the Principal Distribution Amount, until the
                      Class Certificate Balance of each Class of the Group II
                      Class A Certificates has been reduced to zero, such amount

                                       87
<PAGE>

                      to be allocated pro rata to the Class A-2, Class A-3 and
                      Group II Class A Sequential Certificates, with amounts
                      allocated to the Group II Class A Sequential Certificates
                      further allocated first to the Class A-4 Certificates
                      until those Certificates are reduced to zero and then to
                      the Class A-5 Certificates until those Certificates are
                      reduced to zero;

                  (B)      to the Certificate Insurer, the amount of any
                           Reimbursement Amount then owing to the Certificate
                           Insurer on account of a prior draw relating to
                           principal on the Class A-1 or Class A-3 Certificates;

                  (C)      concurrently, with equal priority of payment:

                               (1) if the Class Certificate Balance of the Class
                      A-1 Certificates has been reduced to zero, then to the
                      Holders of the Group II Class A Certificates pro rata, the
                      amount of any remaining Principal Distribution Amount,
                      until the Class Certificate Balance of each Class of the
                      Group II Class A Certificates has been reduced to zero,
                      such amount to be allocated pro rata to the Class A-2,
                      Class A-3 and Group II Class A Sequential Certificates,
                      with amounts allocated to the Group II Class A Sequential
                      Certificates further allocated first to the Class A-4
                      Certificates until those Certificates are reduced to zero
                      and then to the Class A-5 Certificates until those
                      Certificates are reduced to zero; or

                               (2) if the Class Certificate Balance of each
                      Class of the Group II Class A Certificates has been
                      reduced to zero, then to the Holders of the Class A-1
                      Certificates, the amount of any remaining Principal
                      Distribution Amount, until the Class Certificate Balance
                      of the Class A-1 Certificates has been reduced to zero;

                  (D)      to the Class M-1, Class M-2, Class M-3, Class B-1,
                           Class B-2 and Class B-3 Certificates, in that order,
                           until the respective Class Certificate Balances are
                           reduced to zero;

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

                  (A)      concurrently, with equal priority of payment:

                               (1) to the holders of the Class A-1 Certificates,
                      the Class A-1 Allocation Percentage of the lesser of the
                      Principal Distribution Amount and the Class A Principal
                      Distribution Amount, until the Class Certificate Balance
                      of the Class A-1 Certificates has been reduced to zero;
                      and

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<PAGE>

                               (2) to the holders of the Group II Class A
                      Certificates, the Group II Class A Allocation Percentage
                      of the lesser of the Principal Distribution Amount and the
                      Class A Principal Distribution Amount, until the Class
                      Certificate Balance of each Class of the Group II Class A
                      Certificates has been reduced to zero, such amount to be
                      allocated pro rata to the Class A-2, Class A-3 and Group
                      II Class A Sequential Certificates, with amounts allocated
                      to the Group II Class A Sequential Certificates further
                      allocated first to the Class A-4 Certificates until those
                      Certificates are reduced to zero and then to the Class A-5
                      Certificates until those Certificates are reduced to zero;

                  (B)      to the Certificate Insurer, the amount of any
                           Reimbursement Amount then owing to the Certificate
                           Insurer on account of a prior draw relating to
                           principal on the Class A-1 or Class A-3 Certificates;

                  (C)      concurrently, with equal priority of payment:

                               (1) if the Class Certificate Balance of the Class
                      A-1 Certificates has been reduced to zero, then to the
                      holders of the Group II Class A Certificates pro rata, any
                      remaining amounts allocable but not required to be
                      distributed pursuant to clauses (A)(1) or (B) of this
                      subsection (y), until the Class Certificate Balance of
                      each Class of the Group II Class A Certificates has been
                      reduced to zero, such amount to be allocated pro rata to
                      the Class A-2, Class A-3 and Group II Class A Sequential
                      Certificates, with amounts allocated to the Group II Class
                      A Sequential Certificates further allocated first to the
                      Class A-4 Certificates until those Certificates are
                      reduced to zero and then to the Class A-5 Certificates
                      until those Certificates are reduced to zero; or

                               (2) if the Class Certificate Balance of each
                      Class of the Group II Class A Certificates has been
                      reduced to zero, then to the holders of the Class A-1
                      Certificates, any remaining amounts allocable but not
                      required to be distributed pursuant to clauses (A)(2) or
                      (B) of this subsection (y), until the Class Certificate
                      Balance of the Class A-1 Certificates has been reduced to
                      zero;

                  (D)      to the Class M-1 Certificates, the lesser of the
                           remaining Principal Distribution Amount and the Class
                           M-1 Principal Distribution Amount, until the Class
                           Certificate Balance thereof has been reduced to zero;

                  (E)      to the Class M-2 Certificates, the lesser of the
                           remaining Principal Distribution Amount and the Class
                           M-2 Principal Distribution Amount, until the Class
                           Certificate Balance thereof has been reduced to zero;

                  (F)      to the Class M-3 Certificates, the lesser of the
                           remaining Principal Distribution Amount and the Class
                           M-3 Principal Distribution Amount, until the Class
                           Certificate Balance thereof has been reduced to zero;

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<PAGE>

                  (G)      to the Class B-1 Certificates, the lesser of the
                           remaining Principal Distribution Amount and the Class
                           B-1 Principal Distribution Amount, until the Class
                           Certificate Balance thereof has been reduced to zero;

                  (H)      to the Class B-2 Certificates, the lesser of the
                           remaining Principal Distribution Amount and the Class
                           B-2 Principal Distribution Amount, until the Class
                           Certificate Balance thereof has been reduced to zero;
                           and

                  (I)      to the Class B-3 Certificates, the lesser of the
                           remaining Principal Distribution Amount and the Class
                           B-3 Principal Distribution Amount, until the Class
                           Certificate Balance thereof has been reduced to zero;

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

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

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

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

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

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

                  (F)      to the holders of the Class M-3 Certificates, any
                           Unpaid Interest Amounts for such Class;

                  (G)      to the holders of the Class M-3 Certificates, any
                           Unpaid Realized Loss Amount for such Class;

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

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

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

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<PAGE>

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

                  (L)      to the holders of the Class B-3 Certificates, any
                           Unpaid Interest Amounts for such Class;

                  (M)      to the holders of the Class B-3 Certificates, any
                           Unpaid Realized Loss Amount for such Class;

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

                  (O)      from amounts on deposit in the Excess Reserve Fund
                           Account (not including any Interest Rate Cap Payment
                           included in that account) with respect to such
                           Distribution Date, an amount equal to any Basis Risk
                           CarryForward Amount for such Distribution Date in the
                           same order and priority in which Accrued Certificate
                           Interest is allocated among those Classes of
                           Certificates;

                  (P)      from any Interest Rate Cap Payment on deposit in the
                           Excess Reserve Fund Account with respect to that
                           Distribution Date, an amount equal to any unpaid
                           remaining Basis Risk CarryForward Amount with respect
                           to the Certificates other than the Class A-1
                           Certificates, for that Distribution Date (after
                           giving effect to distributions pursuant to clause (O)
                           above) in the same order and priority in which
                           Accrued Certificate Interest is allocated among those
                           Classes of Certificates;

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

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

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

                  (c)      On the September 2003, October 2003 and November 2003
Distribution Dates, the Trustee shall transfer from the Capitalized Interest
Account to the Distribution Account the Capitalized Interest Requirement, if
any, for such Distribution Date.

                  (d)      On the Distribution Date following either the final
Subsequent Transfer Date or November 24, 2003, whichever date is earlier, any
amounts remaining in the Capitalized Interest Account and all Pre-Funding
Earnings in the Pre-Funding Accounts, after taking into account the transfers in

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respect of the Distribution Date described in clause (c) above, shall be paid by
the Trustee to the Unaffiliated Seller.

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

                  (f)      If the Pre-Funding Amount available in either
Pre-Funding Account (exclusive of Pre-Funding Earnings) has been reduced to
$100,000 or less by the close of business on October 1, 2003 then, on the
October 27, 2003 Distribution Date, after giving effect to any reductions in
such Pre-Funding Amount on such date, the Trustee shall withdraw from the
related Pre-Funding Account on such date and deposit in the Distribution Account
the amount on deposit in such Pre-Funding Account other than any Pre-Funding
Earnings; if the Pre-Funding Amount available in either Pre-Funding Account has
not been reduced to zero by the close of business on November 24, 2003, the
Trustee shall withdraw from each Pre-Funding Account the amount on deposit
therein, other than the Pre-Funding Earnings, and deposit such amount on the
November 25, 2003 Distribution Date into the Distribution Account. Each amount
deposited into the Distribution Account pursuant to the preceding sentence from
the Group I Pre-Funding Account shall be distributed to the Holders of the Class
A-1, Class M and Class B Certificates, pro rata; each amount deposited into the
Distribution Account pursuant to the preceding sentence from the Group II
Pre-Funding Account shall be distributed to the Holders of the Group II Class A,
Class M and Class B Certificates, pro rata, in each case, based on their
relative Class Certificate Balances immediately prior to the related
Distribution Date, as a separate payment of principal, on the related
Distribution Date.

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

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

                  (2)      Second, pro rata, as a reduction of the Accrued
         Certificate Interest for the Class A-1, Class A-2, Class A-3, Class
         A-4, Class A-5, Class M-1, Class M-2, Class M-3, Class B-1, Class B-2
         and Class B-3 Certificates, based on the amount of interest to which
         such Classes would otherwise be entitled.

                  Section 4.03      Monthly Statements to Certificateholders.
                                    ----------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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<PAGE>

                  (xii)    whether a Trigger Event has occurred and is
         continuing (including the calculation of thereof and the aggregate
         outstanding balance of all 60+ Day Delinquent Loans);

                  (xiii)   the amount on deposit in the Excess Reserve Fund
         Account (after giving effect to distributions on such Distribution
         Date);

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

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

                  (xvi)    the Subordinated Amount and Required Subordinated
         Amount;

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

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

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

                  (xx)     the Class A-1 Deficiency, the Class A-3 Deficiency
         and the Insured Payment for such Distribution Date;

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

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

                  (b)      The Trustee's responsibility for providing the above
statement is limited to the availability, timeliness and accuracy of the
information derived from the Servicer pursuant to Section 4.03(d) below or, in
the case of the Reimbursement Amount, from the Certificate Insurer. The Trustee
will provide the above statement via the Trustee's internet website, except that
the Trustee shall deliver a hard copy of such statement to the Certificate
Insurer on each Distribution Date. The Trustee's website will initially be
located at https://www.corporatetrust.db.com and assistance in using the website
can be obtained by calling the Trustee's investor relations desk at
1-800-735-7777. A paper copy of the statement will also be made available upon
request.

                  (c)      Within a reasonable period of time after the end of
each calendar year, the Trustee shall cause to be furnished to each Person who
at any time during the calendar year was a Certificateholder, a statement
containing the information set forth in clauses (a)(i), (a)(ii) and (a)(vii) of
this Section 4.03 aggregated for such calendar year or applicable portion

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thereof during which such Person was a Certificateholder. Such obligation of the
Trustee shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.

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

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

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

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

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

                  (iv)     the individual and aggregate Stated Principal Balance
         of the Mortgage Loans (combined and for each of the Group I and Group
         II Mortgage Loans);

                  (v)      the individual and aggregate Scheduled Principal
         Balances of the Mortgage Loans (combined and for each of the Group I
         and Group II Mortgage Loans);

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

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

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

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                  Section 4.04      Certain Matters Relating to the
                                    -------------------------------
Determination of LIBOR.
----------------------

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

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

                  Section 4.05      The Certificate Insurance Policy.
                                    --------------------------------

                  (a)      Within two (2) days following each Remittance Date,
the Trustee shall determine with respect to the immediately following
Distribution Date, the amount to be on deposit in the Distribution Account on
such Distribution Date as a result of the (i) Servicer's remittance of the
Interest Remittance Amount and the Principal Remittance Amount on the related
Remittance Date, and (ii) any transfers to the Distribution Account made from
the Capitalized Interest Account and/or the Pre-Funding Account relating to such
Distribution Date pursuant to Section 4.02 hereof, excluding the amount of any
Insured Payment.

                  (b)      If on any Distribution Date there is a Class A-1
Deficiency and/or Class A-3 Deficiency, the Trustee shall complete a Notice in
the form of Exhibit A to the Certificate Insurance Policy and submit such notice
to the Certificate Insurer no later than 12:00 noon New York City time on the
second Business Day preceding such Distribution Date as a claim for an Insured
Payment in an amount equal to such Class A-1 Deficiency and/or Class A-3
Deficiency.

                  (c)      The Trustee shall establish a separate Eligible
Account for the benefit of Holders of the Class A-1 Certificates, the Class A-3
Certificates and the Certificate Insurer, referred to herein as the "Insurance
Payment Account," over which the Trustee shall have exclusive control and sole
right of withdrawal. The Trustee shall deposit upon receipt any amount paid

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under the Certificate Insurance Policy in the Insurance Payment Account and
distribute such amount only for purposes of payment to the Class A-1
Certificateholders and/or Class A-3 Certificateholders, as applicable, of the
Insured Amount and such amount may not be applied to satisfy any costs, expenses
or liabilities of the Servicer, the Trustee or the Trust Fund. Amounts paid
under the Certificate Insurance Policy, to the extent needed to pay the Insured
Amount, shall be transferred to the Distribution Account on the related
Distribution Date and disbursed by the Trustee to the Class A-1
Certificateholders and Class A-3 Certificateholders in accordance with Section
4.02. It shall not be necessary for such payments to be made by checks or wire
transfers separate from the checks or wire transfers used to pay other
distributions to the Class A-1 Certificateholders and Class A-3
Certificateholders with other funds available to make such payment. However, the
amount of any payment of principal or of interest on the Class A-1 Certificates
or Class A-3 Certificates to be paid from funds transferred from the Insurance
Payment Account shall be noted as provided in paragraph (d) below in the
Certificate Register and in the statement to be furnished to Holders of such
Certificates pursuant to Section 4.03(a). Funds held in the Insurance Payment
Account shall not be invested. Any funds remaining in the Insurance Payment
Account on the first Business Day following a Distribution Date shall be
returned to the Certificate Insurer pursuant to the written instructions of the
Certificate Insurer by the end of such Business Day.

                  (d)      The Trustee shall keep a complete and accurate record
of the amount of interest and principal paid in respect of any Class A-1
Certificate or Class A-3 Certificate from moneys received under the Certificate
Insurance Policy. The Certificate Insurer shall have the right to inspect such
records at reasonable times during normal business hours upon one Business Day's
prior notice to the Trustee.

                  (e)      In the event that the Trustee has received a
certified copy of an order of the appropriate court that any Insured Payment has
been voided in whole or in part as a preference payment under applicable
bankruptcy law, the Trustee shall so notify the Certificate Insurer, shall
comply with the provisions of the Certificate Insurance Policy to obtain payment
by the Certificate Insurer of such voided Insured Payment, and shall, at the
time it provides notice to the Certificate Insurer, notify, by mail to the Class
A-1 and Class A-3 Certificateholders of the affected Certificates that, in the
event any Class A-1 or Class A-3 Certificateholder's Insured Payment is so
recovered, such Class A-1 or Class A-3 Certificateholder, as applicable, will be
entitled to payment pursuant to the Certificate Insurance Policy, a copy of
which shall be made available through the Trustee, the Certificate Insurer or
the Certificate Insurer's fiscal agent, if any, and the Trustee shall furnish to
the Certificate Insurer or its fiscal agent, if any, its records evidencing the
payments which have been made by the Trustee and subsequently recovered from the
Class A-1 or Class A-3 Certificateholders, and dates on which such payments were
made.

                  (f)      The Trustee shall promptly notify the Certificate
Insurer of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee has actual knowledge, seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency, receivership
or similar law (a "Preference Claim") of any distribution made with respect to
the Class A-1 or Class A-3 Certificates. Each Class A-1 and Class A-3
Certificateholder, by its purchase of Class A-1 or Class A-3 Certificates, the
Servicer and the Trustee agree that the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of

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any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedes or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to, and each Class A-1 and Class A-3 Certificateholder, the Servicer
and the Trustee hereby delegate and assign to the Certificate Insurer, to the
fullest extent permitted by law, the rights of the Trustee, the Servicer and
each Class A-1 and Class A-3 Certificateholder in the conduct of any such
Preference Claim, including, without limitation, all rights of any party to any
adversary proceeding or action with respect to any court order issued in
connection with any such Preference Claim.

                  (g)      The Trustee shall, upon retirement of the Class A-1
and Class A-3 Certificates, furnish to the Certificate Insurer a notice of such
retirement, and, upon retirement of the Class A-1 and Class A-3 Certificates and
the expiration of the term of the Certificate Insurance Policy, surrender the
Certificate Insurance Policy to the Certificate Insurer for cancellation.

                  Section 4.06      Effect of Payments by the Certificate
                                    -------------------------------------
Insurer; Subrogation.
--------------------

                  Anything herein to the contrary notwithstanding, any payment
with respect to principal of or interest on the Class A-1 or Class A-3
Certificates which is made with moneys received pursuant to the terms of the
Certificate Insurance Policy shall not be considered payment of the Class A-1 or
Class A-3 Certificates from the Trust Fund. The Depositor, the Servicer and the
Trustee acknowledge, and each Holder by its acceptance of a Class A-1 or Class
A-3 Certificate agrees, that without the need for any further action on the part
of the Certificate Insurer, the Depositor, the Servicer, the Trustee or the
Certificate Registrar (a) to the extent the Certificate Insurer makes payments,
directly or indirectly, on account of principal of or interest on the Class A-1
or Class A-3 Certificates to the Holders of such Class A-1 or Class A-3
Certificates, the Certificate Insurer will be fully subrogated to, and each
Class A-1 and Class A-3 Certificateholder, the Servicer and the Trustee hereby
delegate and assign to the Certificate Insurer, to the fullest extent permitted
by law, the rights of such Holders to receive such principal and interest from
the Trust Fund, including, without limitation, any amounts due to the Class A-1
or Class A-3 Certificateholders in respect of securities law violations arising
from the offer and sale of the Class A-1 or Class A-3 Certificates, and (b) the
Certificate Insurer shall be paid such amounts from the sources and in the
manner provided herein for the payment of such amounts and as provided in the
Insurance and Indemnity Agreement. The Trustee and the Servicer shall cooperate
in all respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement without limiting the rights or affecting the interests of
the Holders as otherwise set forth herein.

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                                    ARTICLE V

                                THE CERTIFICATES

         Section 5.01      The Certificates.
                           ----------------

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

         The Depositor hereby directs the Trustee to register the Class X and
the Class P Certificates initially to "CDC Mortgage Capital Inc." and then on
the Closing Date as follows: "Deutsche Bank National Trust Company, as Indenture
Trustee on behalf of the Noteholders of the CDC Mortgage Capital Inc. NIM Trust
2003-HE3N", and to deliver such Class X and Class P Certificates on the NIM
Closing Date to Deutsche Bank National Trust Company, as trustee of the NIM
Trust.

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

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

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

         Section 5.02      Certificate Register; Registration of Transfer and
                           --------------------------------------------------
Exchange of Certificates.
------------------------

         (a)      The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 5.06, a Certificate Register for the
Trust Fund in which, subject to the provisions of subsections (b) and (c)

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below and to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. Upon surrender for registration of transfer of
any Certificate, the Trustee shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and aggregate Percentage Interest.

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

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

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

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

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the Depositor and the Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

         Except with respect to the transfer of the Class X and Class P
Certificates to the NIMs Trust on the Closing Date, no transfer of an
ERISA-Restricted Certificate shall be made unless the Trustee shall have
received a representation letter from the transferee in substantially the form
of Exhibit J, to the effect that such transferee is not an employee benefit plan
or arrangement subject to Title I of ERISA, Section 4975 of the Code or any
Federal, state or local law ("Similar Law") materially similar to the foregoing
provisions of ERISA or the Code, nor a person acting on behalf of any such plan
or arrangement nor using the assets of any such plan or arrangement to effect
such transfer. For purposes of the preceding sentence, with respect to an
ERISA-Restricted Certificate that is not a Private Certificate, in the event the
representation letter referred to in the preceding sentence is not furnished,
such representation shall be deemed to have been made to the Trustee by the
transferee's (including an initial acquiror's) acceptance of the
ERISA-Restricted Certificates. In the event that such representation is
violated, such attempted transfer or acquisition shall be void and of no effect.

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

         (c)      Each Person who has or who acquires any Ownership Interest in
a Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

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

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

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

                                       101
<PAGE>

         it has actual knowledge that such Person (i) is not a Permitted
         Transferee or that such Transfer Affidavit is false, (ii) if such
         transfer is for the purpose of impeding the assessment or collection of
         tax, (iii) if it has actual knowledge or reason to know that the
         proposed transferee would be unwilling or unable to pay taxes
         attributed to the Residual Certificate or (iv) if it has actual
         knowledge or reason to know that the proposed transferee will not honor
         the restrictions on subsequent transfers of the Residual Certificate
         set forth in this Section 5.02(c) and in the Transfer Affidavit, (D) to
         conduct a reasonable investigation of the financial condition of the
         proposed transferee and transfer its Ownership Interest in the Residual
         Certificate only if, as a result of such investigation, it concludes
         that the proposed transferee has historically paid its debts as they
         came due and will continue to pay its debts as they come due in the
         future, and (E) not to cause income from its Ownership Interest in a
         Residual Certificate to be attributable to a foreign permanent
         establishment or fixed base (within the meaning of an applicable income
         tax treaty) of the Person or another U.S. taxpayer.

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

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

         The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trust Fund, the Trustee, the
Unaffiliated Seller or the Servicer, to the effect that the elimination of such
restrictions will not cause the transfer to be disregarded under Treasury
Regulation 1.860E-1(c), cause the Trust Fund hereunder to fail to qualify as a
REMIC at any time that the Certificates are outstanding or result in the

                                       102
<PAGE>

imposition of any tax on the Trust Fund, a Certificateholder or another Person.
Each Person holding or acquiring any Ownership Interest in a Residual
Certificate hereby consents to any amendment of this Agreement which, based on
an Opinion of Counsel furnished to the Trustee, is reasonably necessary (a) to
ensure that the record ownership of, or any beneficial interest in, a Residual
Certificate is not transferred, directly or indirectly, to a Person that is not
a Permitted Transferee and (b) to provide for a means to compel the Transfer of
a Residual Certificate which is held by a Person that is not a Permitted
Transferee to a Holder that is a Permitted Transferee.

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

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

         All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.

         If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Trustee or the Depositor is
unable to locate a qualified successor, (y) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Depository or (z) after the occurrence of an Event of Default, Certificate
Owners representing at least 51% of the Certificate Balance of the Book-Entry
Certificates together advise the Trustee and the Depository through the
Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive,
fully-registered Certificates (the "Definitive Certificates") to Certificate
Owners requesting the same. Upon surrender to the Trustee of the related Class

                                       103
<PAGE>

of Certificates by the Depository, accompanied by the instructions from the
Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Servicer, the Depositor nor the Trustee shall be
liable for any delay in delivery of such instruction and each may conclusively
rely on, and shall be protected in relying on, such instructions. The Depositor
shall provide the Trustee with an adequate inventory of certificates to
facilitate the issuance and transfer of Definitive Certificates. Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder; provided, that the
Trustee shall not by virtue of its assumption of such obligations become liable
to any party for any act or failure to act of the Depository.

         Section 5.03      Mutilated, Destroyed, Lost or Stolen Certificates.
                           -------------------------------------------------

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

         Section 5.04      Persons Deemed Owners.
                           ---------------------

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

         Section 5.05      Access to List of Certificateholders' Names and
                           -----------------------------------------------
Addresses.
---------

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Servicer or such Certificateholders at

                                       104
<PAGE>

such recipients' expense the most recent list of the Certificateholders of such
Trust Fund held by the Trustee, if any. The Depositor and every
Certificateholder, by receiving and holding a Certificate, agree that the
Trustee shall not be held accountable by reason of the disclosure of any such
information as to the list of the Certificateholders hereunder, regardless of
the source from which such information was derived.

         Section 5.06      Maintenance of Office or Agency.
                           -------------------------------

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

         Section 5.07      Rights of the Certificate Insurer to Exercise Rights
                           ----------------------------------------------------
 of Class A-1 and Class A-3 Certificateholders.
----------------------------------------------

         By accepting its Class A-1 or Class A-3 Certificate, each Class A-1 and
Class A-3 Certificateholder agrees that unless a Certificate Insurer Default
exists, the Certificate Insurer shall be deemed to be the Class A-1 and Class
A-3 Certificateholders for all purposes (other than with respect to the receipt
of payment on the Class A-1 and Class A-3 Certificates) and shall have the right
to exercise all rights of the Class A-1 and Class A-3 Certificateholders under
this Agreement and under the Class A-1 and Class A-3 Certificates without any
further consent of the Class A-1 or Class A-3 Certificateholders, including,
without limitation:

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

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

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

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

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

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

         (g)      any rights or remedies expressly given the Class A-1 or Class
A-3 Certificateholders.

                                       105
<PAGE>

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

         Section 5.08      Trustee To Act Solely with Consent of the Certificate
                           -----------------------------------------------------
Insurer.
-------

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

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

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

         (c)      undertake any litigation.

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

         Section 5.09      Mortgage Loans, Trust Fund and Accounts Held for
                           ------------------------------------------------
Benefit of the Certificate Insurer.
----------------------------------

         (a)      The Trustee shall hold the Trust Fund and the Custodial Files
for the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement and in the Certificates to the benefit of Holders
of the Certificates shall be deemed to include the Certificate Insurer. The
Trustee shall follow all reasonable instructions and requests of the Certificate
Insurer to assist it to take action to preserve or enforce the Certificate
Insurer's rights or interests under this Agreement unless a Certificate Insurer
Default exists.

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

         Section 5.10      Certificate Insurer Default.
                           ---------------------------

         Notwithstanding anything elsewhere in this Agreement or in the
Certificates to the contrary, if a Certificate Insurer Default exists, or if and
to the extent the Certificate Insurer has delivered its written renunciation of
all of its rights under this Agreement, all provisions of this Agreement which
(a) permit the Certificate Insurer to exercise rights of the Class A-1 or Class
A-3 Certificateholders, (b) restrict the ability of the Certificateholders, the
Servicer or the Trustee to act without the consent or approval of the
Certificate Insurer, (c) provide that a particular act or thing must be
acceptable to the Certificate Insurer, (d) permit the Certificate Insurer to
direct (or otherwise to require) the actions of the Trustee, the Servicer or the
Certificateholders, (e) provide that any action or omission taken with the
consent, approval or authorization of the Certificate Insurer shall be
authorized hereunder or shall not subject the party taking or omitting to take
such action to any liability hereunder or (f) which have a similar effect, shall

                                       106
<PAGE>

be of no further force and effect and the Trustee shall administer the Trust
Fund and perform its obligations hereunder solely for the benefit of the Holders
of the Certificates. Nothing in the foregoing sentence, nor any action taken
pursuant thereto or in compliance therewith, shall be deemed to have released
the Certificate Insurer from any obligation or liability it may have to any
party or to the Class A-1 or Class A-3 Certificateholders hereunder, under any
other agreement, instrument or document (including, without limitation, the
Certificate Insurance Policy) or under applicable law.

                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

         Section 6.01      Respective Liabilities of the Depositor and the
                           ------------------------------------------------
Servicer.
--------

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

         Section 6.02      Merger or Consolidation of the Depositor or the
                           -----------------------------------------------
Servicer.
--------

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

         Any Person into which the Depositor or the Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Servicer shall be a party, or any person succeeding to the
business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
the successor or surviving Person to the Servicer shall be qualified to sell
mortgage loans to, and to service mortgage loans on behalf of, Fannie Mae or
FHLMC.

         The Servicer is and shall continue to be an institution which is a
Fannie Mae and FHLMC approved seller/servicer in good standing and shall
maintain a net worth of at least $30,000,000.

         Section 6.03      Limitation on Liability of the Depositor, the
                           ----------------------------------------------
Servicer and Others.
-------------------

         Neither the Depositor, the Servicer, the Trustee nor any of their
respective directors, officers, employees or agents shall be under any liability
to the Certificateholders for any action taken or for refraining from the taking
of any action in good faith pursuant to this Agreement, or for errors in
judgment; provided, however, that this provision shall not protect the
Depositor, the Servicer, the Trustee or any such Person against any breach of

                                       107
<PAGE>

representations or warranties made by it herein or protect the Depositor, the
Servicer, the Trustee or any such Person from any liability which would
otherwise be imposed by reasons of willful misfeasance, bad faith or gross
negligence (or with respect to the Servicer or the Trustee, negligence) in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor and any director, officer, employee or agent of
the Depositor may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Depositor, the Servicer, the Trustee and any director, officer,
employee or agent of the Depositor, the Servicer or the Trustee shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense incurred in connection with any audit, controversy or judicial
proceeding relating to a governmental taxing authority or any legal action
relating to this Agreement or the Certificates (including, as to the Trustee,
the undertaking of actions as directed by the Unaffiliated Seller or the
Certificate Insurer pursuant to Section 2.03), other than any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross negligence
(or with respect to the Servicer or the Trustee, negligence) in the performance
of their respective duties hereunder or by reason of reckless disregard of their
respective obligations and duties hereunder. The Depositor shall not be under
any obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective duties hereunder and which in its opinion may
involve it in any expense or liability; provided, however, that the Depositor
may in its discretion undertake any such action (or direct the Trustee to
undertake any such actions pursuant to Section 2.03 hereof for the benefit of
the Certificateholders) that it may deem necessary or desirable in respect of
this Agreement and the rights and duties of the parties hereto and interests of
the Trustee and the Certificateholders hereunder. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust Fund, and the Depositor shall be
entitled to be reimbursed therefor out of the Collection Account.

         Neither the Servicer nor any of the officers, employees or agents of
the Servicer shall be under any liability to the Trustee or the Depositor for
any action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement; provided, however, that this provision shall not
protect the Servicer or any such person against any breach of warranties or
representations made herein, or failure to perform its obligations in compliance
with the terms of this Agreement, or any liability which would otherwise be
imposed by reason of any breach of the terms and conditions of this Agreement.
The Servicer and any officer, employee or agent of the Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. The Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to its duties to service the Mortgage Loans in accordance with
this Agreement and which in its opinion may involve it in any expenses or
liability; provided, however, that the Servicer may undertake any such action
which it may deem necessary or desirable in respect to this Agreement and the
rights and duties of the parties hereto. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust Fund, and the Servicer shall be entitled to
be reimbursed therefor out of the Collection Account. In the event the Servicer
agrees, at the request of the Depositor, to act on behalf of the Depositor in
any litigation relating to the origination of a Mortgage Loan, the Depositor
shall pay all expenses associated with the defense and management of such claim
(without reimbursement from the Trust Fund).

                                       108
<PAGE>

         Section 6.04      Limitation on Resignation of the Servicer.
                           -----------------------------------------

         The Servicer shall not assign this Agreement or resign from the
obligations and duties hereby imposed on it except by mutual consent of the
Servicer, the Certificate Insurer, the Depositor and the Trustee or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Servicer. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Depositor and the Trustee
which Opinion of Counsel shall be in form and substance acceptable to the
Depositor and the Trustee. No such resignation shall become effective until a
successor shall have assumed the Servicer's responsibilities and obligations
hereunder. Notwithstanding anything to the contrary herein, the Servicer may
pledge or assign as collateral all its rights, title and interest under this
Agreement to a lender (the "Lender"); provided that the Lender may only
terminate the Servicer under this Agreement if there has been an Event of
Default under this Agreement, in which event the Lender may replace the Servicer
in the same manner and subject to the same conditions applicable in the event
the Servicer is appointing a successor Servicer upon a servicer termination
pursuant to Section 7.02.

         Section 6.05      Additional Indemnification by the Servicer; Third
                           -------------------------------------------------
Party Claims.
------------

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

                                  ARTICLE VII

                                     DEFAULT

         Section 7.01      Events of Default.
                           -----------------

         "Event of Default," wherever used herein, means any one of the
following events:

                                       109
<PAGE>

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

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

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

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

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

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

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

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

                                       110
<PAGE>

         (i)      any reduction, withdrawal or qualification of the Servicer's
servicer rating by any Rating Agency which results in the Servicer being deemed
unacceptable by any Rating Agency to act as a primary servicer for this
transaction or a primary servicer or a special servicer for any other
mortgage-backed or asset-backed transaction rated or to be rated by any such
Rating Agency; or

         (j)      the Certificate Insurer notifies the Trustee in writing of any
uncured "event of default" (as such term is used in the Insurance and Indemnity
Agreement) by the Servicer under the Insurance and Indemnity Agreement.

         If an Event of Default shall occur, then, and in each and every such
case, so long as such Event of Default shall not have been remedied, the Trustee
may, subject to Section 5.08(a), or at the direction of the Certificate Insurer,
or of Holders holding at least 51% of the Voting Rights, the Trustee shall, by
notice in writing to the Servicer (with a copy to each Rating Agency), terminate
all of the rights and obligations of the Servicer under this Agreement and in
and to the Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder; provided, however, that the Trustee shall not be
required to give written notice to the Servicer of the occurrence of an Event of
Default described in clauses (b) through (i) of this Section 7.01 unless and
until a Responsible Officer of the Trustee has actual knowledge of the
occurrence of such an Event of Default. On and after the receipt by the Servicer
of such written notice, all authority and power of the Servicer hereunder,
whether with respect to the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee. The Trustee shall make any P&I Advance which the Servicer
failed to make subject to Section 4.01, whether or not the obligations of the
Servicer have been terminated pursuant to this Section. The Trustee is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. Unless expressly provided in such written notice, no such termination
shall affect any obligation of the Servicer to pay amounts owed pursuant to
Article VIII. The Servicer agrees to cooperate with the Trustee in effecting the
termination of the Servicer's responsibilities and rights hereunder, including,
without limitation, the transfer to the Trustee of all cash amounts which shall
at the time be credited to the Collection Account, or thereafter be received
with respect to the Mortgage Loans.

         Notwithstanding any termination of the activities of the Servicer
hereunder, the Servicer shall be entitled to receive, out of any late collection
of a Scheduled Payment on a Mortgage Loan which was due prior to the notice
terminating such Servicer's rights and obligations as Servicer hereunder and
received after such notice, that portion thereof to which such Servicer would
have been entitled pursuant to Section 3.11, and any other amounts payable to
such Servicer hereunder the entitlement to which arose prior to the termination
of its activities hereunder in accordance with Section 3.11 and in the time
period specified in Section 3.11. The Servicer shall continue to be entitled to
the benefits of Section 6.03, notwithstanding any termination hereunder, with
respect to events occurring prior to such termination.

                                       111
<PAGE>

         Section 7.02      Trustee to Act; Appointment of Successor.
                           ----------------------------------------

         On and after the time the Servicer receives a notice of termination
pursuant to Section 3.24 or Section 7.01, subject to the third paragraph of this
Section 7.02, the Trustee shall, unless the Certificate Insurer shall have named
an alternative successor Servicer and given written notice thereof to the
Trustee of at least 30 days prior to the effective date of the transfer of
servicing to such successor, subject to and to the extent provided in Section
3.05, be the successor to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof and applicable law
including the obligation to make P&I Advances or Servicing Advances pursuant to
Section 4.01. As compensation therefor, the Trustee shall be entitled to all
funds relating to the Mortgage Loans that the Servicer would have been entitled
to charge to the Collection Account or Distribution Account if the Servicer had
continued to act hereunder including, if the Servicer was receiving the
Servicing Fee, the Servicing Fee and the income on investments or gain related
to the Collection Account and Distribution Account.

         Notwithstanding the foregoing, if the Trustee has become the successor
to the Servicer in accordance with Section 7.01, the Trustee may, if it shall be
unwilling to so act, or shall, if it is prohibited by applicable law from making
P&I Advances and Servicing Advances pursuant to Section 4.01 or if it is
otherwise unable to so act, appoint, or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution the
appointment of which does not adversely affect the then current rating of the
Certificates by each Rating Agency, as the successor to the Servicer hereunder
in the assumption of all or any part of the responsibilities, duties or
liabilities of the Servicer hereunder. Any successor to the Servicer shall be an
institution which is a Fannie Mae and FHLMC approved seller/servicer in good
standing, which has a net worth of at least $30,000,000, which is willing to
service the Mortgage Loans and which executes and delivers to the Depositor and
the Trustee an agreement accepting such delegation and assignment, containing an
assumption by such Person of the rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer (other than liabilities of the
Servicer under Section 6.03 incurred prior to termination of the Servicer under
Section 7.01), with like effect as if originally named as a party to this
Agreement; provided that each Rating Agency acknowledges that its rating of the
Certificates in effect immediately prior to such assignment and delegation will
not be qualified or reduced, as a result of such assignment and delegation.
Pending appointment of a successor to the Servicer hereunder, the Trustee,
unless the Trustee is prohibited by law from so acting, shall, subject to
Section 3.05, act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such
successor shall agree; provided, however, that no such compensation shall be in
excess of the Servicing Fee Rate and amounts paid to the Servicer from
investments. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor servicer shall be deemed to be in
default hereunder by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof or any failure to perform, or any
delay in performing, any duties or responsibilities hereunder, in either case
caused by the failure of the Servicer to deliver or provide, or any delay in
delivering or providing, any cash, information, documents or records to it.

                                       112
<PAGE>

         Notwithstanding any provision in this Agreement to the contrary, prior
to the 20th day following the notice of termination of the Servicer and with the
consent of the Certificate Insurer (such consent not to be unreasonably
withheld, delayed or conditioned), the terminated Servicer may appoint a
successor Servicer that satisfies the eligibility criteria of a successor
Servicer set forth in this Section 7.02; provided such successor Servicer agrees
to fully effect the servicing transfer within 90 days following the termination
of the Servicer and to make all P&I Advances and Servicing Advances that would
otherwise be made by the Trustee under this Section 7.02 as of the date of such
appointment and prior thereto, the terminated Servicer makes all P&I Advances
and Servicing Advances; otherwise the Trustee shall appoint a successor Servicer
as otherwise set forth in this Section 7.02. Any proceeds received in connection
with the appointment of such successor Servicer shall be the property of the
terminated Servicer or its designee.

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

         Section 7.03      Notification to Certificateholders.
                           ----------------------------------

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

         (b)      Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Certificateholders, the Certificate
Insurer, the Unaffiliated Seller and each Rating Agency notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.

                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

         Section 8.01      Duties of the Trustee.
                           ---------------------

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

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

                                       113
<PAGE>

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

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

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

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

         (c)      the Trustee shall not be liable with respect to any action
taken, suffered, or omitted to be taken by it in good faith in accordance with
the direction of the Certificate Insurer, or of Holders of Certificates
evidencing not less than 25% of the Voting Rights of Certificates relating to
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon the
Trustee under this Agreement.

         Section 8.02      Certain Matters Affecting the Trustee.
                           -------------------------------------

         Except as otherwise provided in Section 8.01:

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

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

         (c)      the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement;

         (d)      the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or

                                       114
<PAGE>

other paper or document, unless requested in writing so to do by the Certificate
Insurer, or by Holders of Certificates evidencing not less than 25% of the
Voting Rights allocated to each Class of Certificates;

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

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

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

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

         (i)      the Trustee shall be under no obligation to exercise any of
the trusts, rights or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the request,
order or direction of any of the Certificateholders, pursuant to this Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity satisfactory to the Trustee against the costs, expenses
and liabilities which may be incurred therein or thereby.

         Section 8.03      Trustee Not Liable for Certificates or Mortgage
                           -----------------------------------------------
Loans.
-----

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

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

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

                                       115
<PAGE>

         Section 8.04      Trustee May Own Certificates.
                           ----------------------------

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

         Section 8.05      Trustee's Fees and Expenses.
                           ---------------------------

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

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

         Section 8.06      Eligibility Requirements for the Trustee.
                           ----------------------------------------

         The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by federal or state authority and with a credit
rating which would not cause either of the Rating Agencies to reduce their
respective then current ratings of the Certificates (or having provided such
security from time to time as is sufficient to avoid such reduction) as
evidenced in writing by each Rating Agency. If such corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 8.06 the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with this
Section 8.06, the Trustee shall resign immediately in the manner and with the
effect specified in Section 8.07. The entity serving as Trustee may have normal
banking and trust relationships with the Depositor and its affiliates or the
Servicer and its affiliates; provided, however, that such entity cannot be an
affiliate of the Depositor, the Unaffiliated Seller or the Servicer other than
the Trustee in its role as successor to the Servicer.

         Section 8.07      Resignation and Removal of the Trustee.
                           --------------------------------------

         The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor, the
Servicer, the Certificate Insurer, the Unaffiliated Seller, each Rating Agency
not less than 60 days before the date specified in such notice, when, subject to

                                       116
<PAGE>

Section 8.08, such resignation is to take effect, and acceptance by a successor
trustee in accordance with Section 8.08 meeting the qualifications set forth in
Section 8.06. If no successor trustee meeting such qualifications shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice or resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.

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

         The Certificate Insurer or the Holders of Certificates entitled to at
least 51% of the Voting Rights may at any time remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
such Holders or their attorneys-in-fact duly authorized, one complete set of
which shall be delivered by the successor Trustee to the Servicer, one complete
set to the Trustee so removed and one complete set to the successor so
appointed. The successor trustee shall notify each Rating Agency of any removal
of the Trustee.

         Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to this Section 8.07 shall become effective upon
acceptance of appointment by the successor trustee as provided in Section 8.08.

         Section 8.08      Successor Trustee.
                           -----------------

         Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Servicer an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The Depositor, the Certificate Insurer, the Servicer
and the predecessor trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers, duties,
and obligations.

         No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of its acceptance, the successor trustee is
eligible under Section 8.06 and its appointment does not adversely affect the
then current rating of the Certificates.

                                       117
<PAGE>

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Depositor.

         Section 8.09      Merger or Consolidation of the Trustee.
                           --------------------------------------

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder; provided that such corporation shall be eligible under
Section 8.06 without the execution or filing of any paper or further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.

         Section 8.10      Appointment of Co-Trustee or Separate Trustee.
                           ---------------------------------------------

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Servicer and the Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund or any part
thereof, whichever is applicable, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider appropriate. If the Servicer shall not
have joined in such appointment within 15 days after the receipt by it of a
request to do so, or in the case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.06 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 8.08.

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

         (a)      To the extent necessary to effectuate the purposes of this
Section 8.10, all rights, powers, duties and obligations conferred or imposed
upon the Trustee, except for the obligation of the Trustee under this Agreement
to advance funds on behalf of the Servicer, shall be conferred or imposed upon
and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or as
successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the applicable Trust
Fund or any portion thereof in any such jurisdiction) shall be exercised and

                                       118
<PAGE>

performed singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;

         (b)      No trustee hereunder shall be held personally liable because
of any act or omission of any other trustee hereunder and such appointment shall
not, and shall not be deemed to, constitute any such separate trustee or
co-trustee as agent of the Trustee;

         (c)      The Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee; and

         (d)      The Trustee, and not the Servicer, shall be liable for the
payment of reasonable compensation and expenses to any such separate trustee or
co-trustee from the Trustee Fee payable to the Trustee on each Distribution
Date.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees, when
and as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection and indemnity to, the
Trustee. Every such instrument shall be filed with the Trustee and a copy
thereof given to the Servicer and the Depositor.

         Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

         Section 8.11      Tax Matters.
                           -----------

         As set forth in the Preliminary Statement, the assets within the Trust
Fund for which any REMIC election is to be made shall constitute, and the
conduct of matters relating to such assets shall be consistent with the
treatment of such assets as, a REMIC. To this end, the Trustee covenants and
agrees to act as agent (and the Trustee is hereby appointed to act as agent) on
behalf of any REMIC created hereunder, and that in such capacity it shall:

         (a)      prepare and file in a timely manner, a U.S. Real Estate
Mortgage Investment Conduit Income Tax Return (Form 1066 or any successor form
adopted by the Internal Revenue Service) and prepare and file with the Internal
Revenue Service and applicable state or local tax authorities income tax or
information returns for each taxable year with respect to any REMIC described in
the Preliminary Statement containing such information and at the times and in
the manner as may be required by the Code or state or local tax laws,
regulations, or rules, and furnish to Certificateholders the schedules,
statements or information at such times and in such manner as may be required
thereby;

                                       119
<PAGE>

         (b)      within thirty days of the Closing Date, furnish to the
Internal Revenue Service on Form 8811 or as otherwise may be required by the
Code, the name, title, address, and telephone number of the person that the
holders of the Certificates may contact for tax information relating thereto,
together with such additional information as may be required by such Form, and
update such information at the time or times in the manner required by the Code;

         (c)      make an election that each of the Lower Tier REMIC, the Middle
Tier REMIC and the Upper Tier REMIC be treated as a REMIC on the federal tax
return for its first taxable year (and, if necessary, under applicable state
law);

         (d)      prepare and forward to the Certificateholders and to the
Internal Revenue Service and, if necessary, state tax authorities, all
information returns and reports as and when required to be provided to them in
accordance with the REMIC Provisions, including the calculation of any original
issue discount using the Prepayment Assumption (as defined in the Prospectus
Supplement);

         (e)      provide information necessary for the computation of tax
imposed on the transfer of a Residual Certificate to a Person that is not a
Permitted Transferee, or an agent (including a broker, nominee or other
middleman) of a Non-Permitted Transferee, or a pass-through entity in which a
Non-Permitted Transferee is the record holder of an interest (the reasonable
cost of computing and furnishing such information may be charged to the Person
liable for such tax);

         (f)      to the extent that they are under its control, conduct matters
relating to such assets at all times that any Certificates are outstanding so as
to maintain the status as a REMIC under the REMIC Provisions;

         (g)      not knowingly or intentionally take any action or omit to take
any action that would cause the termination of the REMIC status of any REMIC
created hereunder;

         (h)      pay, from the sources specified in the last paragraph of this
Section 8.11, the amount of any federal or state tax, including prohibited
transaction taxes as described below, imposed on any REMIC created hereunder
before its termination when and as the same shall be due and payable (but such
obligation shall not prevent the Trustee or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall not prevent the
Trustee from withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings);

         (i)      cause federal, state or local income tax or information
returns to be signed by the Trustee or such other person as may be required to
sign such returns by the Code or state or local laws, regulations or rules;

         (j)      maintain records relating to each REMIC created hereunder,
including the income, expenses, assets, and liabilities thereof on a calendar
year basis and on the accrual method of accounting and the fair market value and
adjusted basis of the assets determined at such intervals as may be required by
the Code, as may be necessary to prepare the foregoing returns, schedules,
statements or information; and

                                       120
<PAGE>

         (k)      as and when necessary and appropriate, represent each REMIC
created hereunder in any administrative or judicial proceedings relating to an
examination or audit by any governmental taxing authority, request an
administrative adjustment as to any taxable year of each REMIC created
hereunder, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax item of any REMIC created
hereunder, and otherwise act on behalf of the REMIC in relation to any tax
matter or controversy involving it.

         The Trustee shall treat the rights of the Class P Certificateholders to
Prepayment Charges as the beneficial ownership of interests in a grantor trust,
and not as an obligation of any REMIC created hereunder, for federal income tax
purposes.

         To enable the Trustee to perform its duties under this Agreement, the
Depositor shall provide to the Trustee within ten days after the Closing Date
all information or data that the Trustee requests in writing and determines to
be relevant for tax purposes to the valuations and offering prices of the
Certificates, including the price, yield, prepayment assumption, and projected
cash flows of the Certificates and the Mortgage Loans. Moreover, the Depositor
shall provide information to the Trustee concerning the value to each Class of
Certificates of the right to receive Basis Risk CarryForward Amounts from the
Excess Reserve Fund Account. Thereafter, the Depositor shall provide to the
Trustee promptly upon written request therefor any additional information or
data that the Trustee may, from time to time, reasonably request to enable the
Trustee to perform its duties under this Agreement. The Depositor hereby
indemnifies the Trustee for any losses, liabilities, damages, claims, or
expenses of the Trustee arising from any errors or miscalculations of the
Trustee that result from any failure of the Depositor to provide, or to cause to
be provided, accurate information or data to the Trustee on a timely basis.

         If any tax is imposed on "prohibited transactions" of any REMIC created
hereunder as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of such REMIC as defined in Section 860G(c) of the Code,
on any contribution to the REMIC after the Startup Day pursuant to Section
860G(d) of the Code, or any other tax is imposed, including any minimum tax
imposed on the REMIC pursuant to Sections 23153 and 24874 of the California
Revenue and Taxation Code, if not paid as otherwise provided for herein, the tax
shall be paid by (i) the Trustee if such tax arises out of or results from
negligence of the Trustee in the performance of any of its obligations under
this Agreement, (ii) the Servicer if such tax arises out of or results from a
breach by the Servicer of any of its obligations under this Agreement, (iii) the
Unaffiliated Seller shall pay if such tax arises out of or results from the
Unaffiliated Seller's obligation to repurchase a Mortgage Loan pursuant to
Section 2.03, or (iv) in all other cases, or if the Trustee, the Servicer or the
Unaffiliated Seller fails to honor its obligations under the preceding clauses
(i) or (ii), any such tax will be paid with amounts otherwise to be distributed
to the Certificateholders, as provided in Section 4.02(a).

         Section 8.12      Periodic Filings.
                           ----------------

         (a)      The Trustee and the Servicer shall reasonably cooperate with
the Depositor in connection with the Trust's satisfying the reporting
requirements under the Securities Exchange Act of 1934, as amended. The Trustee
shall prepare on behalf of the Trust any Forms 8-K and 10-K customary for

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<PAGE>

similar securities as required by the Exchange Act and the Rules and Regulations
of the Securities and Exchange Commission (the "SEC") thereunder, and the
Trustee shall file (via the SEC's Electronic Data Gathering and Retrieval
System) such Forms with the SEC on behalf of the Depositor. The Depositor hereby
grants to the Trustee a limited power of attorney to execute and file each such
Form 8-K but only to the extent no accompanying certification is required to be
filed on behalf of the Depositor. Such power of attorney shall continue until
either the earlier of (i) receipt by the Trustee from the Depositor of written
termination of such power of attorney and (ii) the termination of the Trust. The
Depositor shall execute the Form 10-K. The Trustee shall have no liability with
respect to any failure to properly prepare or file such periodic reports
resulting from or relating to the Trustee's inability or failure to obtain any
information not resulting from its own negligence or willful misconduct.

         (b)      Each Form 8-K shall be filed by the Trustee with the SEC
within 15 days after each Distribution Date, including a Form 8-K with a copy of
the statement to the Certificateholders for such Distribution Date as an exhibit
thereto. Prior to March 30th of each year (or such earlier date as may be
required by the Exchange Act and the Rules and Regulations of the SEC), the
Trustee shall file a Form 10-K, in substance as required by applicable law or
the SEC's staff interpretations. Such Form 10-K shall include as exhibits the
Servicer's annual statement of compliance described under Section 3.22 (upon
which the Trustee may rely) and the accountant's report described under Section
3.23, in each case to the extent they have been timely delivered to the Trustee.
If they are not so timely delivered, the Trustee shall file an amended Form 10-K
including such documents as exhibits reasonably promptly after they are
delivered to the Trustee. The Form 10-K shall also include a certification in
the form attached hereto as Exhibit M (the "Certification"), which shall be
signed by the senior officer of the Depositor in charge of securitization. The
Trustee shall prepare and deliver each Form 10-K to the Depositor for execution
no later than March 20th (or if such day is not a Business Day, the immediately
preceding Business Day) of each year. The Depositor shall return the executed
Form 10-K to the Trustee for filing no later than March 25th (or if such day is
not a Business Day, the immediately preceding Business Day) of each year.

         (c)      Notwithstanding that the Certification is to be signed by an
officer of the Depositor, a Responsible Officer of the Trustee shall sign a
certification, in the form attached hereto as Exhibit N for the benefit of the
Depositor and its officers, directors and Affiliates in respect of items 1
through 3 thereof of the Certification (provided, however, that the Trustee
shall not undertake an analysis of the accountant's report attached as an
exhibit to the Form 10-K), and a Servicing Officer of the Servicer who is
responsible for the servicing and administration of the Mortgage Loans shall
sign a certification in the form attached hereto as Exhibit N for the benefit of
the Depositor, the Trustee and their respective officers, directors and
Affiliates in respect of items 4 and 5 of the Certification. Each such
certification shall be delivered to the Depositor and the Trustee (as
applicable), no later than March 15th of each year (or if such day is not a
Business Day, the immediately preceding Business Day) and the Depositor shall
deliver the Certification to be filed to the Trustee no later than March 20th of
each year (or if such day is not a Business Day, the immediately preceding
Business Day). In the event that prior to the filing date of the Form 10-K in
March of each year, the Trustee or the Servicer has actual knowledge of
information material to the Certification, that party shall promptly notify the
Depositor and each of the other parties signing the certifications. In addition,

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<PAGE>

(i) the Trustee shall indemnify and hold harmless the Depositor and its
officers, directors and Affiliates from and against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments and other costs and expenses arising out of or based upon any
breach of the Trustee's obligations under this Section 8.12(c) or the Trustee's
negligence, bad faith or willful misconduct in connection therewith and (ii) the
Servicer shall indemnify and hold harmless the Depositor, the Trustee and their
respective officers, directors and Affiliates from and against any losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments and other costs and expenses arising out of or based
upon any breach of the Servicer's obligations under this Section 8.12(c) or the
Servicer's negligence, bad faith or willful misconduct in connection therewith.
If the indemnification provided for herein is unavailable or insufficient to
hold harmless the indemnified party then (i) the Trustee agrees in connection
with a breach of the Trustee's obligations under this Section 8.12(c) or the
Trustee's negligence, bad faith or willful misconduct in connection therewith
that it shall contribute to the amount paid or payable by the Depositor as a
result of the losses, claims, damages or liabilities of the Depositor in such
proportion as is appropriate to reflect the relative fault of the Depositor on
the one hand and the Trustee on the other and (ii) the Servicer agrees that it
shall contribute to the amount paid or payable by the Depositor and/or the
Trustee as a result of the losses, claims, damages or liabilities of the
Depositor and/or the Trustee in such proportion as is appropriate to reflect the
relative fault of the Depositor and the Trustee, as the case may be, on the one
hand and the Servicer on the other in connection with a breach of the Servicer's
obligations under this Section 8.12(c) or the Servicer's negligence, bad faith
or willful misconduct in connection therewith.

         (d)      Upon any filing with the Securities and Exchange Commission,
the Trustee shall promptly deliver to the Depositor a copy of any such executed
report, statement or information.

         (e)      Prior to January 30 of the first year in which the Trustee is
able to do so under applicable law, the Trustee shall, in accordance with
applicable law, file a Form 15D Suspension Notification with respect to the
Trust Fund in a timely manner.

         Section 8.13      Tax Classification of the Excess Reserve Fund
                           ---------------------------------------------
Account.
-------

         For federal income tax purposes, the Trustee shall treat the Excess
Reserve Fund Account as an outside reserve fund, within the meaning of Treasury
Regulation ss. 1.860G-2(h), that is beneficially owned by the holder of the
Class X Certificate. The Trustee shall treat the rights that each Class of
Certificates has to receive payments of Basis Risk CarryForward Amounts from the
Excess Reserve Fund Account as rights to receive payments under an interest rate
cap contract written by the Class X Certificateholder in favor of each Class.
Accordingly, each Class of Certificates (excluding the Class X, Class P and
Class R Certificates) will comprise two components - an Upper Tier Regular
Interest and an interest in a notional principal contract. The Trustee shall
allocate the issue price for a Class of Certificates between such two components
for purposes of determining the issue price of the Upper Tier Regular Interest
component based on information received from the Depositor.

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<PAGE>

         Section 8.14      Cap Agreement.
                           -------------

         The Trustee is hereby authorized and directed to execute and deliver
the Cap Agreement and to acknowledge the provisions thereof.

                                   ARTICLE IX

                                   TERMINATION

         Section 9.01      Termination upon Liquidation or Purchase of the
                           -----------------------------------------------
Mortgage Loans.
--------------

         Subject to Section 9.03, the obligations and responsibilities of the
Depositor, the Servicer and the Trustee created hereby with respect to the Trust
Fund shall terminate upon the earlier of (a) the purchase, on or after the
applicable Optional Termination Date, by the Servicer or the Class X
Certificateholders of all Mortgage Loans (and REO Properties) at the price equal
to the sum of (i) 100% of the Stated Principal Balance of each Mortgage Loan
(other than in respect of REO Property) plus accrued interest thereon at the
applicable Adjusted Mortgage Rate, (ii) the lesser of (x) the appraised value of
any REO Property as determined by the higher of two appraisals completed by two
independent appraisers selected by the Servicer at the expense of the Servicer
and (y) the Stated Principal Balance of each Mortgage Loan related to any REO
Property, in each case plus accrued and unpaid interest thereon at the
applicable Adjusted Net Mortgage Rate and (iii) all costs and expenses incurred
by, or on behalf of, the Trust Fund, of which the Trustee has actual knowledge,
in connection with any violation by such Mortgage Loan of any predatory or
abusive-lending law (the "Termination Price") and (b) the later of (i) the
maturity or other liquidation (or any Advance with respect thereto) of the last
Mortgage Loan remaining in the Trust Fund and the disposition of all REO
Property and (ii) the distribution to Certificateholders of all amounts required
to be distributed to them pursuant to this Agreement. In no event shall the
trusts created hereby continue beyond the expiration of 21 years from the death
of the survivor of the descendants of Joseph P. Kennedy, the late Ambassador of
the United States to the Court of St. James's, living on the date hereof.

         Notwithstanding the foregoing, if Standard & Poor's has rated a class
of debt securities ("Net Interest Margin Securities") that are backed by the
Class X Certificates and Class P Certificates and that are outstanding on any
date on which the Servicer intends to exercise its option to purchase the
Mortgage Loans, the Servicer will be permitted to exercise such option only if
one of the following additional conditions is met: (i) after distribution of the
Termination Price to the Certificateholders (other than the Holders of the Class
X Certificates, Class P Certificates and Class R Certificates) to redeem the
related Certificates, the remainder of the Termination Price (the "Remainder
Amount") is distributed to the Holders of the Class X Certificates and Class P
Certificates and is sufficient to pay the outstanding principal amount of and
accrued and unpaid interest on the Net Interest Margin Securities; or (ii) (A)
at the same time that the Servicer remits the Termination Price to the Trustee,
it also remits to the Trustee an additional amount which, in combination with
the Remainder Amount, is sufficient to pay the outstanding principal amount of
and accrued and unpaid interest on the Net Interest Margin Securities, and (B)
the Trustee remits the Remainder Amount to the Holders of the Class X
Certificates and Class P Certificates and remits that additional amount directly
to the indenture trustee (plus any outstanding fees and expenses due and owing

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<PAGE>

to the indenture trustee) under the indenture creating the Net Interest Margin
Securities.

         No such purchase will be permitted without the consent of the
Certificate Insurer, unless no draw on the Certificate Insurance Policy would be
made and no amounts due to the Certificate Insurer would remain unreimbursed on
the final Distribution Date.

         Section 9.02      Final Distribution on the Certificates.
                           --------------------------------------

         If on any Determination Date, the Servicer determines that there are no
Outstanding Mortgage Loans and no other funds or assets in the Trust Fund other
than the funds in the Collection Account, the Servicer shall direct the Trustee
promptly to send a Notice of Final Distribution each Certificateholder. If the
Servicer or the Class X Certificateholder elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.01, at least 20 days prior to the date the
Notice of Final Distribution is to be mailed to the affected Certificateholders
such electing party shall notify the Depositor and the Trustee of the date the
Servicer or the Class X Certificateholder intends to terminate the Trust Fund
and of the applicable repurchase price of the Mortgage Loans and REO Properties.

         A Notice of Final Distribution, specifying the Distribution Date on
which Certificateholders may surrender their Certificates for payment of the
final distribution and cancellation, shall be given promptly by the Trustee by
letter to Certificateholders mailed not earlier than the 10th day and not later
than the 15th day of the month next preceding the month of such final
distribution. Any such Notice of Final Distribution shall specify (a) the
Distribution Date upon which final distribution on the Certificates will be made
upon presentation and surrender of Certificates at the office therein
designated, (b) the amount of such final distribution, (c) the location of the
office or agency at which such presentation and surrender must be made, and (d)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, distributions being made only upon presentation and surrender of the
Certificates at the office therein specified. The Trustee will give such Notice
of Final Distribution to each Rating Agency at the time such Notice of Final
Distribution is given to Certificateholders.

         In the event such Notice of Final Distribution is given, the Servicer
shall cause all funds in the Collection Account to be remitted to the Trustee
for deposit in the Distribution Account on the Business Day prior to the
applicable Distribution Date in an amount equal to the final distribution in
respect of the Certificates. Upon such final deposit with respect to the Trust
Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee shall promptly release to the Servicer the Custodial Files for the
Mortgage Loans.

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in each case on
the final Distribution Date and in the order set forth in Section 4.02, in
proportion to their respective Percentage Interests, with respect to
Certificateholders of the same Class, an amount equal to (i) as to each Class of
Regular Certificates (except the Class X Certificate), the Certificate Balance
thereof plus for each such Class and the Class X Certificate accrued interest
thereon in the case of an interest-bearing Certificate and (ii) as to the
Residual Certificates, the amount, if any, which remains on deposit in the

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<PAGE>

Distribution Account (other than the amounts retained to meet claims) after
application pursuant to clause (i) above.

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Class R Certificateholders
shall be entitled to all unclaimed funds and other assets of the Trust Fund
which remain subject hereto.

         Section 9.03      Additional Termination Requirements.
                           -----------------------------------

         In the event the Servicer or the Class X Certificateholder, as
applicable, exercises its purchase option with respect to the Mortgage Loans as
provided in Section 9.01, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Servicer or the Class X
Certificateholder, as applicable, to the effect that the failure to comply with
the requirements of this Section 9.03 will not (i) result in the imposition of
taxes on "prohibited transactions" on either REMIC as defined in Section 860F of
the Code, or (ii) cause either the Lower Tier REMIC, the Middle Tier REMIC or
the Upper Tier REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding:

         (a)      The Trustee shall sell all of the assets of the Trust Fund to
the Servicer or the Class X Certificateholder, as applicable, and, within 90
days of such sale, shall distribute to the Certificateholders the proceeds of
such sale in complete liquidation of each of the Lower Tier REMIC, the Middle
Tier REMIC and the Upper Tier REMIC.

         (b)      The Trustee shall attach a statement to the final federal
income tax return for each of the Lower Tier REMIC, the Middle Tier REMIC and
the Upper Tier REMIC stating that pursuant to Treasury Regulation ss. 1.860F-1,
the first day of the 90-day liquidation period for each such REMIC was the date
on which the Trustee sold the assets of the Trust Fund to the Servicer or the
Class X Certificateholder, as applicable.

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

         Section 10.01     Amendment.
                           ---------

         This Agreement may be amended from time to time (x) by the Depositor,
the Servicer and the Trustee, with the prior written consent of the Certificate
Insurer, (y) with the consent of the Unaffiliated Seller unless the Trustee
receives an Opinion of Counsel (which Opinion of Counsel shall not be an expense
of the Trustee or the Trust Fund) stating that the amendment will not adversely

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<PAGE>

affect the Unaffiliated Seller, but (z) without the consent of any of the
Certificateholders (i) to cure any ambiguity or mistake, (ii) to correct any
defective provision herein or to supplement any provision herein which may be
inconsistent with any other provision herein, (iii) to add to the duties of the
Depositor or the Servicer, (iv) to add any other provisions with respect to
matters or questions arising hereunder or (v) to modify, alter, amend, add to or
rescind any of the terms or provisions contained in this Agreement; provided,
that any action pursuant to clauses (iv) or (v) above shall not, as evidenced by
an Opinion of Counsel (which Opinion of Counsel shall not be an expense of the
Trustee or the Trust Fund), adversely affect in any material respect the
interests of any Certificateholder; and provided, further, that the amendment
shall not be deemed to adversely affect in any material respect the interests of
the Certificateholders if the Person requesting the amendment obtains a letter
from each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating.

         In addition, this Agreement may also be amended from time to time (x)
by the Trustee, the Depositor and the Servicer, with the prior written consent
of the Certificate Insurer, and (y) with the consent of the Unaffiliated Seller
unless the Trustee receives an Opinion of Counsel (which Opinion of Counsel
shall not be an expense of the Trustee or the Trust Fund) stating that the
amendment will not adversely affect the Unaffiliated Seller, but (z) without the
consent of the Certificateholders, to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to (i) maintain the
qualification of the Lower Tier REMIC, the Middle Tier REMIC and the Upper Tier
REMIC under the Code, (ii) avoid or minimize the risk of the imposition of any
tax on the Lower Tier REMIC, the Middle Tier REMIC or the Upper Tier REMIC
pursuant to the Code that would be a claim at any time prior to the final
redemption of the Certificates or (iii) comply with any other requirements of
the Code; provided, that the Trustee has been provided an Opinion of Counsel,
which opinion shall be an expense of the party requesting such opinion but in
any case shall not be an expense of the Trustee or the Trust Fund, to the effect
that such action is necessary or helpful to, as applicable, (i) maintain such
qualification, (ii) avoid or minimize the risk of the imposition of such a tax
or (iii) comply with any such requirements of the Code.

         This Agreement may also be amended from time to time (x) by the
Depositor, the Servicer and the Trustee, with the prior written consent of the
Certificate Insurer, (y) with the consent of the Unaffiliated Seller unless the
Trustee receives an Opinion of Counsel (which Opinion of Counsel shall not be an
expense of the Trustee or the Trust Fund) stating that the amendment will not
adversely affect the Unaffiliated Seller, and (z), except as set forth in
Section 3.27, with the consent of the Holders of Certificates evidencing
Percentage Interests aggregating not less than 66-2/3% of each Class of
Certificates (based on the aggregate outstanding principal balance of such class
at such time) affected thereby, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, payments required to be distributed on any Certificate
without the consent of the Holder of such Certificate, (ii) adversely affect in
any material respect the interests of the Holders of any Class of Certificates

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<PAGE>

in a manner other than as described in (i), without the consent of the Holders
of Certificates of such Class evidencing, as to such Class, Percentage Interests
aggregating not less than 66-2/3%, or (iii) reduce the aforesaid percentages of
Certificates the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all such Certificates then outstanding.

         Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC or the Certificateholders or cause any REMIC
to fail to qualify as a REMIC at any time that any Certificates are outstanding.

         Notwithstanding the foregoing provisions of this Section 10.01, with
respect to any amendment that significantly modifies the permitted activities of
the Trustee or the Servicer, any Certificate beneficially owned by the
Depositor, the Unaffiliated Seller or any of their respective Affiliates shall
be deemed not to be outstanding (and shall not be considered when determining
the percentage of Certificateholders consenting or when calculating the total
number of Certificates entitled to consent) for purposes of determining if the
requisite consents of Certificateholders under this Section 10.01 have been
obtained.

         Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section 10.01 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

         Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

         Section 10.02     Recordation of Agreement; Counterparts.
                           --------------------------------------

         This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at its expense, but only upon
receipt of an Opinion of Counsel to the effect that such recordation materially
and beneficially affects the interests of the Certificateholders.

                                       128
<PAGE>

         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

         Section 10.03     Governing Law.
                           -------------

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

         Section 10.04     Intention of Parties.
                           --------------------

         It is the express intent of the parties hereto that the conveyance (i)
of the Mortgage Loans by the Depositor and (ii) of the Trust Fund by the
Depositor to the Trustee each be, and be construed as, an absolute sale thereof.
It is, further, not the intention of the parties that such conveyances be deemed
a pledge thereof. However, in the event that, notwithstanding the intent of the
parties, such assets are held to be the property of the Depositor, as the case
may be, or if for any other reason this Agreement is held or deemed to create a
security interest in either such assets, then (i) this Agreement shall be deemed
to be a security agreement within the meaning of the Uniform Commercial Code of
the State of New York and (ii) the conveyances provided for in this Agreement
shall be deemed to be an assignment and a grant by the Depositor to the Trustee,
for the benefit of the Certificateholders, of a security interest in all of the
assets transferred, whether now owned or hereafter acquired.

         The Depositor for the benefit of the Certificateholders and of the
Certificate Insurer shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this Agreement were deemed
to create a security interest in the Trust Fund, such security interest would be
deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of the Agreement. The
Depositor shall arrange for filing any Uniform Commercial Code continuation
statements in connection with any security interest granted or assigned to the
Trustee for the benefit of the Certificateholders.

         Section 10.05     Notices.
                           -------

         (a)      The Trustee shall use its best efforts to promptly provide
notice to each Rating Agency with respect to each of the following of which it
has actual knowledge:

                  1.       Any material change or amendment to this Agreement;

                  2.       The occurrence of any Event of Default that has not
         been cured;

                  3.       The resignation or termination of the Servicer or the
         Trustee and the appointment of any successor;

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<PAGE>

                  4.       The repurchase or substitution of Mortgage Loans
         pursuant to Section 2.03; and

                  5.       The final payment to Certificateholders.

         (b)      In addition, the Trustee shall promptly furnish to each Rating
Agency copies of the following:

                  1.       Each report to Certificateholders described in
         Section 4.03; and

                  2.       Any notice of a purchase of a Mortgage Loan pursuant
         to Section 2.02, 2.03 or 3.11.

         All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when delivered to (a) in the case of the
Depositor or the Representative, Morgan Stanley ABS Capital I Inc. or Morgan
Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036, Attention:
Michelle Wilke, Esq., (b) in the case of the Servicer, Ocwen Federal Bank FSB,
1675 Palm Beach Lakes Blvd., Suite 10A, West Palm Beach, Florida 33401,
Attention: Secretary, or such other address as may be hereafter furnished to the
parties hereto in writing, (c) in the case of the Trustee to the Corporate Trust
Office, Deutsche Bank National Trust Company, 1761 East St. Andrew Place, Santa
Ana, California 92705-4934, Attention: Trust Administration DC03M3, or such
other address as the Trustee may hereafter furnish to the parties hereto, (d) in
the case of the Unaffiliated Seller, CDC Mortgage Capital, Inc., 9 West 57th
Street, New York, New York 10019, Attention General Counsel, or such other
address as the Unaffiliated Seller may hereafter furnish to the parties hereto,
(e) in the case of each of the Rating Agencies, the address specified therefor
in the definition corresponding to the name of such Rating Agency and (f) in the
case of any Originator, the address specified therefor in the applicable
Mortgage Loan Purchase Agreement. Notices to Certificateholders shall be deemed
given when mailed, first class postage prepaid, to their respective addresses
appearing in the Certificate Register.

         Section 10.06     Severability of Provisions.
                           --------------------------

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

         Section 10.07     Assignment.
                           ----------

         Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Servicer
without the prior written consent of the Trustee, the Certificate Insurer and
Depositor; provided, however, that, subject to Section 3.27, the Servicer may
pledge or sell its interest in any reimbursements for P&I Advances or Servicing
Advances hereunder.

                                       130
<PAGE>

         Section 10.08     Limitation on Rights of Certificateholders.
                           ------------------------------------------

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

         No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as herein provided, and
unless the Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates, and the Certificate Insurer, shall also
have made written request to the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses,
and liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity shall have
neglected or refused to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates shall have any right in any manner whatever
by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb or prejudice the rights of the Holders of any other
of the Certificates, or to obtain or seek to obtain priority over or preference
to any other such Holder or to enforce any right under this Agreement, except in
the manner herein provided and for the common benefit of all Certificateholders.
For the protection and enforcement of the provisions of this Section 10.08, each
and every Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.

         Section 10.09     Inspection and Audit Rights.
                           ---------------------------

         The Servicer agrees that, on reasonable prior notice, it will permit
any representative of the Depositor, the Unaffiliated Seller, the Certificate
Insurer or the Trustee during the Servicer's normal business hours, to examine
all the books of account, records, reports and other papers of the Servicer
relating to the Mortgage Loans, to make copies and extracts therefrom, to cause
such books to be audited by independent certified public accountants selected by
the party conducting the inspection and to discuss its affairs, finances and
accounts relating to the Mortgage Loans with its officers, employees and
independent public accountants (and by this provision the Servicer hereby
authorizes said accountants to discuss with such representative such affairs,

                                       131
<PAGE>

finances and accounts), all at such reasonable times and as often as may be
reasonably requested. Any out-of-pocket expense of the Servicer incident to the
exercise by the Depositor, the Unaffiliated Seller, the Certificate Insurer or
the Trustee of any right under this Section 10.09 shall be borne by the
Servicer.

         Section 10.10     Certificates Nonassessable and Fully Paid.
                           -----------------------------------------

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

         Section 10.11     The Certificate Insurer Default.
                           -------------------------------

         Any right conferred to the Certificate Insurer shall be suspended
during any period in which a Certificate Insurer Default exists. At such time as
the Class A-1 and Class A-3 Certificates are no longer outstanding hereunder,
and no amounts owed to the Certificate Insurer hereunder remain unpaid, the
Certificate Insurer's rights hereunder shall terminate.

         Section 10.12     Third Party Beneficiary.
                           -----------------------

         The parties agree that the Certificate Insurer is intended and shall
have all rights of a third-party beneficiary of this Agreement.

         Section 10.13     Waiver of Jury Trial.
                           --------------------

         EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, WAIVES (TO
THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

         Section 10.14     Limitation of Damages
                           ---------------------

         NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE PARTIES
HERETO AGREE THAT NO PARTY HERETO SHALL BE LIABLE TO ANY OTHER PARTY HERETO FOR
ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER, WHETHER IN CONTRACT,
TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR ANY OTHER LEGAL OR EQUITABLE
PRINCIPLES; PROVIDED THAT, THE FOREGOING PROVISION SHALL NOT LIMIT OR RELIEVE
ANY PARTY HERETO OF ANY OBLIGATION UNDER THIS AGREEMENT TO INDEMNIFY ANY OTHER
PARTY HERETO AGAINST (X) ANY DAMAGES IMPOSED UPON SUCH PARTY BY ANY THIRD PARTY
CLAIM OR ORDER, DECREE OR ACTION OF ANY REGULATORY OR ADMINISTRATIVE BODY, OR
(Y) WITH RESPECT TO ANY LOSSES SUSTAINED OR EXPENSES INCURRED BY OR ON BEHALF OF
THE TRUST (IT BEING UNDERSTOOD THAT TRUST LOSSES CAUSED BY THE SERVICER'S
FAILURE TO PERFORM ITS DUTIES SHALL NOT BE CONSIDERED "CONSEQUENTIAL" OR

                                       132
<PAGE>

"SPECIAL" DAMAGES FOR PURPOSES OF THE LIMITATION PROVIDED ABOVE, AND SHALL BE
COVERED BY THE INDEMNIFICATION PROVIDED HEREIN).

                                  * * * * * * *

                                       133
<PAGE>

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

                                       MORGAN STANLEY ABS CAPITAL I INC.,
                                        as Depositor

                                       By:  /s/ VALERIE KAY
                                            ------------------------------------
                                            Name:  Valerie Kay
                                            Title: Executive Director

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        solely as Trustee and not in its
                                        individual capacity

                                       By:  /s/ JEREMY CONYERS
                                            ------------------------------------
                                            Name:  Jeremy Conyers
                                            Title: Associate

                                       By:  /s/ ALAN SUEDA
                                            ------------------------------------
                                            Name:  Alan Sueda
                                            Title: Associate

                                       OCWEN FEDERAL BANK FSB,
                                        as Servicer

                                       By:  /s/ RICHARD DELGADO
                                            ------------------------------------
                                            Name:  Richard Delgado
                                            Title: Vice President

                                       CDC MORTGAGE CAPITAL INC.,
                                        as Unaffiliated Seller

                                       By:  /s/ ANTHONY MALANGA
                                            ------------------------------------
                                            Name:  Anthony Malanga
                                            Title: Managing Director

                                       By:  /s/ WILLIAM BRANAGH
                                            ------------------------------------
                                            Name:  William Branagh
                                            Title: Managing Director

<PAGE>

                                   SCHEDULE I

                             Mortgage Loan Schedule

                        [On File at Dewey Ballantine LLP]

                                       I-1
<PAGE>

                                   SCHEDULE IA

                        Mortgage Loan Schedule - Group I

                        [On File at Dewey Ballantine LLP]

                                      IA-1
<PAGE>

                                   SCHEDULE IB

                        Mortgage Loan Schedule - Group II

                        [On File at Dewey Ballantine LLP]

                                      IB-1
<PAGE>

                                   SCHEDULE II

                       CDC MORTGAGE CAPITAL TRUST 2003-HE3

                       Mortgage Pass-Through Certificates,
                                 Series 2003-HE3

                 Representations and Warranties of the Servicer
                 ----------------------------------------------

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

         (2)      The Servicer has the full power and authority to service each
Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Pooling and Servicing Agreement
and has duly authorized by all necessary action on the part of the Servicer the
execution, delivery and performance of this Pooling and Servicing Agreement; and
this Pooling and Servicing Agreement, assuming the due authorization, execution
and delivery thereof by the other parties thereto, constitutes a legal, valid
and binding obligation of the Servicer, enforceable against the Servicer in
accordance with its terms, except to the extent that (a) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, receivership and
other similar laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought;

         (3)      The execution and delivery of this Pooling and Servicing
Agreement by the Servicer, the servicing of the Mortgage Loans by the Servicer
hereunder, the consummation by the Servicer of any other of the transactions
herein contemplated, and the fulfillment of or compliance with the terms hereof
are in the ordinary course of business of the Servicer and will not (A) result
in a breach of any term or provision of the organizational documents of the
Servicer or (B) conflict with, result in a breach, violation or acceleration of,
or result in a default under, the terms of any other material agreement or
instrument to which the Servicer is a party or by which it may be bound, or any
statute, order or regulation applicable to the Servicer of any court, regulatory
body, administrative agency or governmental body having jurisdiction over the
Servicer; and the Servicer is not a party to, bound by, or in breach or
violation of any indenture or other agreement or instrument, or subject to or in
violation of any statute, order or regulation of any court, regulatory body,

                                      II-1
<PAGE>

administrative agency or governmental body having jurisdiction over it, which
materially and adversely affects or, to the Servicer's knowledge, would in the
future materially and adversely affect, (x) the ability of the Servicer to
perform its obligations under this Pooling and Servicing Agreement or (y) the
business, operations, financial condition, properties or assets of the Servicer
taken as a whole;

         (4)      The Servicer is an approved seller/servicer for Fannie Mae or
Freddie Mac in good standing;

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

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

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

                                      II-2
<PAGE>

                                  SCHEDULE IIA

             Further Representations and Warranties of the Servicer

         (1)      Mortgage Loan Schedule. With respect to each Mortgage Loan, as
of the applicable Cut-off Date, each of (1) the last Due Date on which a payment
was actually applied to the outstanding principal balance of each Mortgage Loan;
(2) the Stated Principal Balance of each Mortgage Loan, after deduction of
payments of principal due and collected on or before the applicable Cut-off
Date; and (3) the Servicing Transfer Date for each Mortgage Loan, in each case,
as listed on the Mortgage Loan Schedule, is true and correct;

         (2)      Payments Current. Unless otherwise indicated on the related
Mortgage Loan Schedule, with respect to each Mortgage Loan, no Scheduled Payment
is 30 days or more Delinquent as of the Cut-off Date nor has any Payment been 30
days or more Delinquent at any time from and after the Servicing Transfer Date;

         (3)      Original Terms Unmodified. With respect to each Mortgage Loan,
the terms of the Mortgage Note and Mortgage have not been impaired, waived,
altered or modified by the Servicer (or to its knowledge by any other Person) in
any material respect from and after the Servicing Transfer Date;

         (4)      No Satisfaction of Mortgage. With respect to each Mortgage
Loan, since the related Servicing Transfer Date and except for prepayments in
full, the Mortgage has not been satisfied, cancelled, subordinated or rescinded
by the Servicer (or to its knowledge by any other Person), in whole or in part,
and the Mortgaged Property has not been released from the lien of the Mortgage
by the Servicer (or to its knowledge by any other Person), in whole or in part,
nor has any instrument been executed by the Servicer (or to its knowledge by any
other Person) that would effect any such release, cancellation, subordination or
rescission. From and after the Servicing Transfer Date, the Servicer has not
waived the performance by the Mortgagor of any material action, if the
Mortgagor's failure to perform such action would cause the Mortgage Loan to be
in default, nor has the Servicer waived any material default resulting from any
action or inaction by the Mortgagor;

         (5)      No Defaults. With respect to each Mortgage Loan, other than
payments due but not yet 30 days Delinquent, to the Servicer's knowledge, there
is no material default, breach, violation or event which would permit
acceleration existing under the Mortgage or the Mortgage Note;

         (6)      Mortgaged Property Undamaged; No Condemnation Proceedings.
With respect to each Mortgage Loan, to the Servicer's knowledge, there is no
proceeding pending or threatened for the total or partial condemnation of the
Mortgaged Property. To the Servicer's knowledge, the related Mortgaged Property
is undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect adversely the value of the related
Mortgaged Property as security for the Mortgage Loan or the use for which the
premises were intended and each related Mortgaged Property is in good repair;

         (7)      Escrow Payments/Interest Rate Adjustments. With respect to
each Mortgage Loan, since the Servicing Transfer Date, the servicing and
collection practices used by the Servicer with respect to such Mortgage Loan

                                      IIA-1
<PAGE>

have been in all material respects in compliance with Accepted Servicing
Practices, applicable laws and regulations, and have been in all material
respects legal and proper. With respect to escrow deposits and Escrow Payments,
if any, all such deposits and payments received by the Servicer are in the
possession of, or under the control of, the Servicer and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All Escrow Payments have been collected in
full compliance with state and federal law and the provisions of the related
Mortgage Note and Mortgage. From and after the Servicing Transfer Date, all
Mortgage Rate adjustments (if any) have been made in strict compliance with
state and federal law and the terms of the related Mortgage Note;

         (8)      Other Insurance Policies. With respect to each Mortgage Loan,
from and after the Servicing Transfer Date, to the Servicer's knowledge, no
action, inaction or event has occurred and no state of facts exists or has
existed that has resulted or will result in the exclusion from, denial of, or
defense to coverage under any insurance policy related to such Mortgage Loan,
irrespective of the cause of such failure of coverage;

         (9)      No Violation of Environmental Laws. With respect to each
Mortgage Loan, to the Servicer's knowledge, there is no pending action or
proceeding directly involving the related Mortgaged Property in which compliance
with any environmental law, rule or regulation is an issue; to the Servicer's
knowledge, there is no violation of any environmental law, rule or regulation
with respect to the related Mortgaged Property; and

         (10)     Soldiers' and Sailors' Civil Relief Act. With respect to each
Mortgage Loan, no Mortgagor has notified the Servicer, and the Servicer has no
knowledge, of any relief requested or allowed to the Mortgagor under the
Soldiers' and Sailors' Civil Relief Act of 1940 or any similar state or local
law.

                                      IIA-2
<PAGE>

                                  SCHEDULE III

(a)      Due Organization and Authority. The Unaffiliated Seller is a
         corporation duly organized, validly existing and in good standing under
         the laws of the state of New York and has all licenses necessary to
         carry on its business as now being conducted and is licensed, qualified
         and in good standing in each state wherein it owns or leases any
         material properties or where a Mortgaged Property is located, if the
         laws of such state require licensing or qualification in order to
         conduct business of the type conducted by the Unaffiliated Seller, and
         in any event the Unaffiliated Seller is in compliance with the laws of
         any such state to the extent necessary; the Unaffiliated Seller has the
         full corporate power, authority and legal right to execute and deliver
         this Agreement and to perform its obligations hereunder; the execution,
         delivery and performance of this Agreement by the Unaffiliated Seller
         and the consummation of the transactions contemplated hereby have been
         duly and validly authorized; this Agreement and all agreements
         contemplated hereby have been duly executed and delivered and
         constitute the valid, legal, binding and enforceable obligations of the
         Unaffiliated Seller, regardless of whether such enforcement is sought
         in a proceeding in equity or at law; and all requisite corporate action
         has been taken by the Unaffiliated Seller to make this Agreement and
         all agreements contemplated hereby valid and binding upon the
         Unaffiliated Seller in accordance with their terms;

(b)      No Conflicts. Neither the execution and delivery of this Agreement, the
         consummation of the transactions contemplated hereby, nor the
         fulfillment of or compliance with the terms and conditions of this
         Agreement, will conflict with or result in a breach of any of the
         terms, conditions or provisions of the Unaffiliated Seller's charter or
         by-laws or any legal restriction or any agreement or instrument to
         which the Unaffiliated Seller is now a party or by which it is bound,
         or constitute a default or result in an acceleration under any of the
         foregoing, except such unfulfillment, non-compliance or default or
         acceleration does not in the aggregate have a material adverse effect
         on the operation, business, condition (business or otherwise) of the
         Unaffiliated Seller or result in the violation of any law, rule,
         regulation, order, judgment or decree to which the Unaffiliated Seller
         or its property is subject, except such violation does not in the
         aggregate have a material adverse effect on the operation, business,
         condition (business or otherwise) of the Unaffiliated Seller or result
         in the creation or imposition of any lien, charge or encumbrance that
         would have an adverse effect upon any of its properties pursuant to the
         terms of any mortgage, contract, deed of trust or other instrument;

(c)      No Litigation Pending. There is no action, suit, proceeding or
         investigation pending nor, to the Unaffiliated Seller's knowledge,
         threatened against the Unaffiliated Seller, before any court,
         administrative agency or other tribunal asserting the invalidity of
         this Agreement, seeking to prevent the consummation of any of the
         transactions contemplated by this Agreement or which, either in any one
         instance or in the aggregate, may result in any material adverse change
         in the business, operations, financial condition, properties or assets
         of the Unaffiliated Seller, or in any material impairment of the right
         or ability of the Unaffiliated Seller to carry on its business
         substantially as now conducted, or which would draw into question the
         validity of this Agreement or of any action taken or to be taken in
         connection with the obligations of the Unaffiliated Seller contemplated
         herein, or which would be likely to impair materially the ability of
         the Unaffiliated Seller to perform under the terms of this Agreement;

                                      III-1
<PAGE>

(d)      No Consent Required. No consent, approval, authorization or order of,
         or registration or filing with, or notice to any court or governmental
         agency or body including HUD, the FHA or the VA is required for the
         execution, delivery and performance by the Unaffiliated Seller of or
         compliance by the Unaffiliated Seller with this Agreement or the
         consummation of the transactions contemplated by this Agreement, or if
         required, such approval has been obtained prior to the Closing Date;

                                      III-2
<PAGE>

                                    EXHIBIT A

Unless this Certificate is presented by an authorized representative of the
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent
for registration of transfer, exchange, or payment, and any certificate issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
ASSETS.

Certificate No.                          :       [A-1-1/A-2-1/A-3-1/A-4-1/A-5-1/
                                                 M-1-1/M-2-1/M-3-1/B-1-1/B-2-1/
                                                 B-3-1]

Cut-off Date                             :       August 1, 2003

First Distribution Date                  :       September 25, 2003

Initial Certificate Balance of this
Certificate ("Denomination")             :       A-1 $200,000,000
              ------------

                                                 A-2 $110,000

                                                 A-3 $145,000,000

                                                 A-4 $80,000,000

                                                 A-5 $44,765,000

                                                 M-1 $45,311,000

                                                 M-2 $35,321,000

                                                 M-3 $7,849,000

                                                 B-1 $9,276,000

                                                 B-2 $9,276,000

                                                 B-3 $13,202,000

                                       A-1
<PAGE>

Initial Certificate Balances of all

Certificates of this Class               :       A-1 $200,000,000

                                                 A-2 $110,000,000

                                                 A-3 $145,000,000

                                                 A-4 $80,000,000

                                                 A-5 $44,765,000

                                                 M-1 $45,311,000

                                                 M-2 $35,321,000

                                                 M-3 $7,849,000

                                                 B-1 $9,276,000

                                                 B-2 $9,276,000

                                                 B-3 $13,202,000

CUSIP                                    :       A-1 12506Y BL 2

                                                 A-2 12506Y BM 0

                                                 A-3 12506Y BU 2

                                                 A-4 12506Y BV 0

                                                 A-5 12506Y BW 8

                                                 M-1 12506Y BN 8

                                                 M-2 12506Y BP 3

                                                 M-3 12506Y BQ 1

                                                 B-1 12506Y BR 9

                                                 B-2 12506Y BS 7

                                                 B-3 12506Y BT 5

                                       A-2
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3
     [Class A-1] [Class A-2] [Class A-3] [Class A-4] [Class A-5][Class M-1]
           [Class M-2] [Class M-3] [Class B-1] [Class B-2] [Class B-3]

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Principal in respect of this Certificate is distributable monthly as
set forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Unaffiliated Seller, any Originator, the Servicer or the Trustee
referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

         This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement") among Morgan Stanley ABS Capital
I Inc., as depositor (the "Depositor"), Ocwen Federal Bank FSB, as servicer (the
"Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller (the
"Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                      * * *

                                       A-3
<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        not in its individual capacity, but
                                        solely as Trustee

                                       By:______________________________________

Countersigned:

By:_________________________________
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                       A-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE3 Mortgage Pass-Through
Certificates, Series 2003-HE3 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Certificates
of the Class to which this Certificate belongs on such Distribution Date
pursuant to the Agreement. The Record Date applicable to each Distribution Date
is the Business Date immediately preceding such Distribution Date; provided,
however, that for any Definitive Certificates, the Record Date shall be the last
Business Day of the month next preceding the month of such Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes, or such other location specified in the notice to Certificateholders
of such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., as Certificate
Insurer, with the consent of the Holders of Certificates affected by such
amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be

                                       A-5
<PAGE>

conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes, accompanied
by a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Pool Principal Balance, the Servicer
and/or the Class X Certificateholders will have the option to repurchase, in
whole, from the Trust Fund all remaining Mortgage Loans and all property
acquired in respect of the Mortgage Loans at a purchase price determined as
provided in the Agreement. The obligations and responsibilities created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

                                       A-6
<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

         I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:______________________________________________________.

Dated:

                                       _________________________________________
                                        Signature by or on behalf of assignor

                                       A-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of ____________________________________________________________,
_______________________________________________________________________________,
account number _______ or, if mailed by check, to _____________________________,
_______________________________________________________________________________,
Applicable statements should be mailed to _____________________________________,
_______________________________________________________________________________.

         This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.

                                       A-8
<PAGE>

                                    EXHIBIT B

                                   [Reserved]

                                       B-1
<PAGE>

                                    EXHIBIT C

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEROR DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT H TO THE AGREEMENT REFERRED TO HEREIN AND EITHER (I) THE TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE AGREEMENT REFERRED
TO HEREIN OR (II) THE TRUSTEE RECEIVES AN OPINION OF COUNSEL, DELIVERED AT THE
EXPENSE OF THE TRANSFEROR, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT AS PROVIDED IN THE AGREEMENT, NEITHER THIS CERTIFICATE NOR ANY INTEREST
HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE DELIVERS TO THE TRUSTEE A
REPRESENTATION LETTER TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"), OR ANY FEDERAL, STATE OR LOCAL LAW
("SIMILAR LAW") MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE
CODE, OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR ARRANGEMENT OR USING THE
ASSETS OF ANY SUCH PLAN OR ARRANGEMENT TO EFFECT SUCH TRANSFER. ANY PURPORTED
TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE TRANSFER RESTRICTIONS SET FORTH
IN THE AGREEMENT SHALL BE VOID AND OF NO EFFECT.

Certificate No.                          :       1

Cut-off Date                             :       August 1, 2003

First Distribution Date                  :       September 25, 2003

Percentage Interest of this Certificate
("Denomination")                         :       100%

Principal Balance                        :       $100

CUSIP                                    :       N/A

                                       C-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3

                                     Class P

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Distributions in respect of this Certificate are distributable monthly
as set forth herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor, the Unaffiliated Seller,
the Servicer or the Trustee referred to below or any of their respective
affiliates. Neither this Certificate nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

         This certifies that __________________, is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement") among Morgan Stanley ABS Capital
I Inc., as depositor (the "Depositor"), Ocwen Federal Bank FSB, as servicer (the
"Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller (the
"Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         This Certificate does not have a Pass-Through Rate and will be entitled
to distributions only to the extent set forth in the Agreement. In addition, any
distribution of the proceeds of any remaining assets of the Trust will be made
only upon presentment and surrender of this Certificate at the offices
designated by the Trustee for such purpose, or the office or agency maintained
by the Trustee.

         No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and any applicable state securities laws
or is made in accordance with the 1933 Act and such laws. In the event of any
such transfer, the Trustee shall require the transferor to execute a transferor
certificate (in substantially the form attached to the Agreement) and deliver
either (i) a Rule 144A Letter, in either case substantially in the form attached
to the Agreement, or (ii) a written Opinion of Counsel to the Trustee that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from the 1933 Act or is being made pursuant to
the 1933 Act, which Opinion of Counsel shall be an expense of the transferor.

         Except as provided in the Agreement, no transfer of a Certificate of
this Class shall be made unless the Trustee shall have received a representation
letter from the transferee of this Certificate, acceptable to and in form and

                                       C-2
<PAGE>

substance satisfactory to the Trustee, to the effect that such transferee is not
an employee benefit plan or arrangement subject to Title I of ERISA, Section
4975 of the Code or any Similar Law, and is not acting on behalf of any such
plan or arrangement or using the assets of any such plan or arrangement to
effect such transfer. Any purported transfer of a Certificate of this Class in
violation of the transfer restrictions set forth in the Agreement shall be void
and of no effect.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                      * * *

                                       C-3
<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        not in its individual capacity, but
                                        solely as Trustee

                                       By:______________________________________

Countersigned:

By:________________________________
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                       C-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE3 Mortgage Pass-Through
Certificates, Series 2003-HE3 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified on the face hereof, to the Person in whose
name this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., Certificate
Insurer with the consent of the Holders of Certificates affected by such
amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in

                                       C-5
<PAGE>

exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in New York, New York, accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Pool Principal Balance, the Servicer
and/or the Class X Certificateholders will have the option to repurchase, in
whole, from the Trust Fund all remaining Mortgage Loans and all property
acquired in respect of the Mortgage Loans at a purchase price determined as
provided in the Agreement. The obligations and responsibilities created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

                                       C-6
<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

         I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:______________________________________________________.

Dated:

                                       _________________________________________
                                         Signature by or on behalf of assignor

                                       C-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of ____________________________________________________________,
account number _______, or, if mailed by check, to ____________________________,
Applicable statements should be mailed to _____________________________________,
_______________________________________________________________________________.

                  This information is provided by______________________________,
the assignee named above, or __________________________________________________,
as its agent.

                                       C-8
<PAGE>

                                    EXHIBIT D

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS THREE
"RESIDUAL INTERESTS" IN THREE "REAL ESTATE MORTGAGE INVESTMENT CONDUITS," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE A REPRESENTATION LETTER TO THE EFFECT THAT
SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN OR ARRANGEMENT SUBJECT TO TITLE
I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"),
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR
ANY FEDERAL, STATE OR LOCAL LAW ("SIMILAR LAW") MATERIALLY SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE, OR A PERSON ACTING ON BEHALF OF ANY
SUCH PLAN OR ARRANGEMENT OR USING THE ASSETS OF ANY SUCH PLAN OR ARRANGEMENT TO
EFFECT SUCH TRANSFER. ANY PURPORTED TRANSFER OF THIS CERTIFICATE IN VIOLATION OF
THE TRANSFER RESTRICTIONS SET FORTH IN THE AGREEMENT SHALL BE VOID AND OF NO
EFFECT.

Certificate No.                          :       1

Cut-off Date                             :       August 1, 2003

First Distribution Date                  :       September 25, 2003

Percentage Interest of this Certificate
("Denomination")                         :       100%

CUSIP                                    :       N/A

                                       D-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3

                                     Class R

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Distributions in respect of this Certificate is distributable monthly
as set forth herein. This Class R Certificate has no Certificate Balance and is
not entitled to distributions in respect of principal or interest. This
Certificate does not evidence an obligation of, or an interest in, and is not
guaranteed by the Depositor, the Servicer, the Unaffiliated Seller or the
Trustee referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

         This certifies that CDC Mortgage Capital Inc. is the registered owner
of the Percentage Interest specified above of any monthly distributions due to
the Class R Certificates pursuant to a Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement") among Morgan Stanley ABS
Capital I Inc., as depositor (the "Depositor"), Ocwen Federal Bank FSB, as
servicer (the "Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller
(the "Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee
(the "Trustee"). To the extent not defined herein, the capitalized terms used
herein have the meanings assigned in the Agreement. This Certificate is issued
under and is subject to the terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         Any distribution of the proceeds of any remaining assets of the Trust
Fund will be made only upon presentment and surrender of this Class R
Certificate at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in California.

         No transfer of a Class R Certificate shall be made unless the Trustee
shall have received a representation letter from the transferee of this
Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan or
arrangement subject to Title I of ERISA, Section 4975 of the Code or any Similar
Law, and is not acting on behalf of any such plan or arrangement or using the
assets of any such plan or arrangement to effect such transfer. Any purported
transfer of a Class R Certificate in violation of the transfer restrictions set
forth in the Agreement shall be void and of no effect.

         Each Holder of this Class R Certificate shall be deemed by the
acceptance or acquisition an Ownership Interest in this Class R Certificate to
have agreed to be bound by the following provisions, and the rights of each
Person acquiring any Ownership Interest in this Class R Certificate are
expressly subject to the following provisions: (i) each Person holding or
acquiring any Ownership Interest in this Class R Certificate shall be a
Permitted Transferee and shall promptly notify the Trustee of any change or
impending change in its status as a Permitted Transferee, (ii) no Ownership
Interest in this Class R Certificate may be registered on the Closing Date or
thereafter transferred, and the Trustee shall not register the Transfer of this

                                       D-2
<PAGE>

Certificate unless, in addition to the certificates required to be delivered to
the Trustee under Section 5.02(b) of the Agreement, the Trustee shall have been
furnished with a Transfer Affidavit of the initial owner or the proposed
transferee in the form attached as Exhibit H to the Agreement, (iii) each Person
holding or acquiring any Ownership Interest in this Class R Certificate shall
agree (A) to obtain a Transfer Affidavit from any other Person to whom such
Person attempts to Transfer its Ownership Interest this Class R Certificate, (B)
to obtain a Transfer Affidavit from any Person for whom such Person is acting as
nominee, trustee or agent in connection with any Transfer of this Class R
Certificate and (C) not to Transfer the Ownership Interest in this Class R
Certificate or to cause the Transfer of the Ownership Interest in this Class R
Certificate to any other Person if it has actual knowledge that such Person is
not a Permitted Transferee and (iv) any attempted or purported Transfer of the
Ownership Interest in this Class R Certificate in violation of the provisions
herein shall be absolutely null and void and shall vest no rights in the
purported Transferee.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                       D-3
<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        not in its individual capacity, but
                                        solely as Trustee

                                       By:______________________________________

Countersigned:

By:_______________________________
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                       D-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE3 Mortgage Pass-Through
Certificates, Series 2003-HE3 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such day is not a Business Day, the Business
Day immediately following (the "Distribution Date"), commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage Interest evidenced by this
Certificate and the amount required to be distributed to Holders of Certificates
of the Class to which this Certificate belongs on such Distribution Date
pursuant to the Agreement. The Record Date applicable to each Distribution Date
is the last Business Day of the month next preceding the month of such
Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., as Certificate
Insurer with the consent of the Holders of Certificates affected by such
amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in

                                       D-5
<PAGE>

exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in California, accompanied by a
written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Pool Principal Balance, the Servicer
and/or the Class X Certificateholder will have the option to repurchase, in
whole, from the Trust Fund all remaining Mortgage Loans and all property
acquired in respect of the Mortgage Loans at a purchase price determined as
provided in the Agreement. The obligations and responsibilities created by the
Agreement will terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

                                       D-6
<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

         I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:_____________________________________________________.

Dated:

                                       _________________________________________
                                         Signature by or on behalf of assignor

                                       D-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of ____________________________________________________________,
account number _______, or, if mailed by check, to ____________________________,
_______________________________________________________________________________,
Applicable statements should be mailed to _____________________________________,
_______________________________________________________________________________.

         This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.

                                       D-8
<PAGE>

                                    EXHIBIT E

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
OWNERSHIP OF TWO "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEROR DELIVERS TO THE TRUSTEE A TRANSFEROR LETTER IN THE FORM OF
EXHIBIT H TO THE AGREEMENT REFERRED TO HEREIN AND EITHER (I) THE TRUSTEE
RECEIVES A RULE 144A LETTER IN THE FORM OF EXHIBIT I TO THE AGREEMENT REFERRED
TO HEREIN OR (II) THE TRUSTEE RECEIVES AN OPINION OF COUNSEL, DELIVERED AT THE
EXPENSE OF THE TRANSFEROR, THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

EXCEPT AS PROVIDED IN THE AGREEMENT, NEITHER THIS CERTIFICATE NOR ANY INTEREST
HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE DELIVERS TO THE TRUSTEE A
REPRESENTATION LETTER TO THE EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"), OR ANY FEDERAL, STATE OR LOCAL LAW
("SIMILAR LAW") MATERIALLY SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE
CODE, OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR ARRANGEMENT OR USING THE
ASSETS OF ANY SUCH PLAN OR ARRANGEMENT TO EFFECT SUCH TRANSFER. ANY PURPORTED
TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE TRANSFER RESTRICTIONS SET FORTH
IN THE AGREEMENT SHALL BE VOID AND OF NO EFFECT.

Certificate No.                          :       1

Cut-off Date                             :       August 1, 2003

First Distribution Date                  :       September 25, 2003

Percentage Interest of this Certificate
("Denomination")                         :       100%

CUSIP                                    :       N/A

                                       E-1
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.

                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3

                                     Class X

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class.

         Distributions in respect of this Certificate are distributable monthly
as set forth herein. This Certificate does not evidence an obligation of, or an
interest in, and is not guaranteed by the Depositor, the Servicer, the
Unaffiliated Seller or the Trustee referred to below or any of their respective
affiliates. Neither this Certificate nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

         This certifies that _____________________, is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate of the denominations of all
Certificates of the Class to which this Certificate belongs) in certain monthly
distributions pursuant to a Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement") among Morgan Stanley ABS Capital
I Inc., as depositor (the "Depositor"), Ocwen Federal Bank FSB, as servicer (the
"Servicer"), CDC Mortgage Capital Inc., as unaffiliated seller (the
"Unaffiliated Seller") and Deutsche Bank National Trust Company, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

         This Certificate will be entitled to distributions only to the extent
set forth in the Agreement. In addition, any distribution of the proceeds of any
remaining assets of the Trust will be made only upon presentment and surrender
of this Certificate at the offices designated by the Trustee for such purposes
or the office or agency maintained by the Trustee.

         No transfer of a Certificate of this Class shall be made unless such
disposition is exempt from the registration requirements of the Securities Act
of 1933, as amended (the "1933 Act"), and any applicable state securities laws
or is made in accordance with the 1933 Act and such laws. In the event of any
such transfer, the Trustee shall require the transferor to execute a transferor
certificate (in substantially the form attached to the Agreement) and deliver
either (i) a Rule 144A Letter, in either case substantially in the form attached
to the Agreement, or (ii) a written Opinion of Counsel to the Trustee that such
transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from the 1933 Act or is being made pursuant to
the 1933 Act, which Opinion of Counsel shall be an expense of the transferor.

         Except as provided in the Agreement, no transfer of a Certificate of
this Class shall be made unless the Trustee shall have received a representation
letter from the transferee of this Certificate, acceptable to and in form and
substance satisfactory to the Trustee, to the effect that such transferee is not

                                       E-2
<PAGE>

an employee benefit plan or arrangement subject to Title I of ERISA, Section
4975 of the Code or any Similar Law, and is not acting on behalf of any such
plan or arrangement or using the assets of any such plan or arrangement to
effect such transfer. Any purported transfer of a Certificate of this Class in
violation of the transfer restrictions set forth in the Agreement shall be void
and of no effect.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                      * * *

                                       E-3
<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        not in its individual capacity, but
                                        solely as Trustee

                                       By:______________________________________

Countersigned:

By:_______________________________
   Authorized Signatory of
   DEUTSCHE BANK NATIONAL TRUST COMPANY,
   not in its individual capacity,
   but solely as Trustee

                                       E-4
<PAGE>

                        MORGAN STANLEY ABS CAPITAL I INC.
                       CDC Mortgage Capital Trust 2003-HE3
               Mortgage Pass-Through Certificates, Series 2003-HE3

         This Certificate is one of a duly authorized issue of Certificates
designated as CDC Mortgage Capital Trust 2003-HE3 Mortgage Pass-Through
Certificates, Series 2003-HE3 (herein collectively called the "Certificates"),
and representing a beneficial ownership interest in the Trust Fund created by
the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

         Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (the "Distribution Date"), commencing on the
first Distribution Date specified on the face hereof, to the Person in whose
name this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the offices designated by the Trustee for such
purposes or such other location specified in the notice to Certificateholders of
such final distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the parties thereto, and Financial Security Assurance Inc., as Certificate
Insurer with the consent of the Holders of Certificates affected by such
amendment evidencing the requisite Percentage Interest, as provided in the
Agreement. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in

                                       E-5
<PAGE>

exchange therefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the offices designated by the Trustee for such purposes or the
office or agency maintained by the Trustee in New York, New York, accompanied by
a written instrument of transfer in form satisfactory to the Trustee and the
Certificate Registrar duly executed by the holder hereof or such holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations and evidencing the same aggregate
Percentage Interest in the Trust Fund will be issued to the designated
transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Servicer, the Unaffiliated Seller, the Certificate
Insurer and the Trustee and any agent of any of them may treat the Person in
whose name this Certificate is registered as the owner hereof for all purposes,
and no such party shall be affected by any notice to the contrary.

         On any Distribution Date on which the aggregate Stated Principal
Balance of the Mortgage Loans, as of the last day of the related Due Period, is
less than or equal to 10% of the Maximum Principal Balance, the Servicer and/or
the Class X Certificateholders will have the option to repurchase, in whole,
from the Trust Fund all remaining Mortgage Loans and all property acquired in
respect of the Mortgage Loans at a purchase price determined as provided in the
Agreement. The obligations and responsibilities created by the Agreement will
terminate as provided in Section 9.01 of the Agreement.

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

                                       E-6
<PAGE>

                                   ASSIGNMENT
                                   ----------

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

         I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:_____________________________________________________.

Dated:

                                       _________________________________________
                                         Signature by or on behalf of assignor

                                       E-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

         The assignee should include the following for purposes of distribution:

         Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________,
_______________________________________________________________________________,
for the account of ____________________________________________________________,
account number _______, or, if mailed by check, to ____________________________,
_______________________________________________________________________________,
Applicable statements should be mailed to _____________________________________,
_______________________________________________________________________________.

         This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.

                                       E-8
<PAGE>

                                    EXHIBIT F

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                                     [date]

Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036

Ocwen Federal Bank FSB
1675 Palm Beach Lakes Blvd.
West Palm Beach, Florida 33401

CDC Mortgage Capital Inc.
9 West 57th Street, 36th Floor
New York, New York 10019

Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022

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

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

         Re:      Pooling and Servicing Agreement dated as of August 1, 2003
                  among Morgan Stanley ABS Capital I Inc., as Depositor, Ocwen
                  Federal Bank FSB, as Servicer, CDC Mortgage Capital Inc., as
                  Unaffiliated Seller and Deutsche Bank National Trust Company,
                  as Trustee, CDC Mortgage Capital Trust Series 2003-HE3

Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), for each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan listed
in the attached schedule), it has received:

                  (i)      the original Mortgage Note, endorsed as provided in
         the following form: "Pay to the order of ________, without recourse";
         and

                  (ii)     a duly executed assignment of the Mortgage.

         Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.

                                       F-1
<PAGE>

         The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectibility,
insurability, perfection, priority, effectiveness or suitability of any such
Mortgage Loan. Notwithstanding anything herein to the contrary, the Trustee has
made no determination and makes no representations as to whether (i) any
endorsement is sufficient to transfer all right, title and interest of the party
so endorsing, as Noteholder or assignee thereof, in and to that Mortgage Note or
(ii) any assignment is in recordable form or sufficient to effect the assignment
of and transfer to the assignee thereof, under the Mortgage to which the
assignment relates.

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        as Trustee

                                       By:______________________________________
                                          Name:_________________________________
                                          Title:________________________________

                                       F-2
<PAGE>

                                    EXHIBIT G

                     FORM OF FINAL CERTIFICATION OF TRUSTEE

                                     [date]

Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036

Ocwen Federal Bank FSB
1675 Palm Beach Lakes Blvd.
West Palm Beach, Florida 33401

CDC Mortgage Capital Inc.
9 West 57th Street, 36th Floor
New York, New York 10019

Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022

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

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

         Re:      Pooling and Servicing Agreement dated as of August 1, 2003
                  among Morgan Stanley ABS Capital I Inc., as Depositor, Ocwen
                  Federal Bank FSB, as Servicer, CDC Mortgage Capital Inc., as
                  Unaffiliated Seller and Deutsche Bank National Trust Company,
                  as Trustee, CDC Mortgage Capital Trust Series 2003-HE3

Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned, as
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or listed on the
attached Document Exception Report) it has received:

                  (i)      The original Mortgage Note, endorsed in the form
         provided in Section 2.01 of the Pooling and Servicing Agreement, with
         all intervening endorsements showing a complete chain of endorsement
         from the originator to the last endorsee.

                  (ii)     The original recorded Mortgage.

                  (iii)    A duly executed assignment of the Mortgage in the
         form provided in Section 2.01 of the Pooling and Servicing Agreement;
         or, if the Unaffiliated Seller has certified or the Trustee otherwise
         knows that the related Mortgage has not been returned from the

                                       G-1
<PAGE>

         applicable recording office, a copy of the assignment of the Mortgage
         (excluding information to be provided by the recording office).

                  (iv)     The original or duplicate original recorded
         assignment or assignments of the Mortgage showing a complete chain of
         assignment from the originator to the last endorsee.

                  (v)      The original or duplicate lender's title policy and
         all riders thereto or, if such original is unavailable, any one of an
         original title binder, either an original title binder or an original
         or copy of the title commitment, and if copies then certified to be
         true and complete by the title company.

         Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (1), (2) and (18) of
the Mortgage Loan Schedule and items (1), (9) and (17) of the Data Tape
Information accurately reflects information set forth in the Custodial File.

         The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review of the Custodial File
specifically required in the Pooling and Servicing Agreement. The Trustee makes
no representations as to: (i) the validity, legality, sufficiency,
enforceability or genuineness of any of the documents contained in each Mortgage
File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, or
(ii) the collectibility, insurability, perfection, priority, effectiveness or
suitability of any such Mortgage Loan. Notwithstanding anything herein to the
contrary, the Trustee has made no determination and makes no representations as
to whether (i) any endorsement is sufficient to transfer all right, title and
interest of the party so endorsing, as Noteholder or assignee thereof, in and to
that Mortgage Note or (ii) any assignment is in recordable form or sufficient to
effect the assignment of and transfer to the assignee thereof, under the
Mortgage to which the assignment relates.

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                        as Trustee

                                       By:______________________________________
                                          Name:_________________________________
                                          Title:________________________________

                                       G-2
<PAGE>
                                    EXHIBIT H

                               TRANSFER AFFIDAVIT

                MORGAN STANLEY ABS CAPITAL I INC. Trust 2003-HE3,
                       Mortgage Pass-Through Certificates,
                                 Series 2003-HE3

STATE OF                  )
                          ) ss.:
COUNTY OF                 )

                  The undersigned, being first duly sworn, deposes and says as
follows:

                  1.       The undersigned is an officer of ___________________,
the proposed Transferee of an Ownership Interest in a Class R Certificate (the
"Certificate") issued pursuant to the Pooling and Servicing Agreement, (the
"Agreement"), relating to the above-referenced Series, by and among Morgan
Stanley ABS Capital I Inc., as depositor (the "Depositor"), Ocwen Federal Bank
FSB, as servicer, CDC Mortgage Capital Inc., as unaffiliated seller (the
"Unaffiliated Seller") and Deutsche Bank National Trust Company, as Trustee.
Capitalized terms used, but not defined herein or in Exhibit 1 hereto, shall
have the meanings ascribed to such terms in the Agreement. The Transferee has
authorized the undersigned to make this affidavit on behalf of the Transferee
for the benefit of the Depositor and the Trustee.

                  2.       The Transferee is not, as of the date hereof, and
will not be, as of the date of the Transfer, a "disqualified organization"
within the meaning of Section 860E(e)(5) of the Internal Revenue Code of 1986.
The Transferee will endeavor to remain other than a disqualified organization
for so long as it retains its Ownership Interest in the Certificate.

                  3.       The Transferee has historically paid its debts as
they came due and will continue to pay its debts as they come due in the future.

                  4.       The Transferee has no present knowledge or
expectation that it will be unable to pay any United States taxes owed by it or
become insolvent or subject to a bankruptcy proceeding for so long as the
Certificate remains outstanding.

                  5.       The Transferee has been advised of, and understands
that as the holder of a noneconomic residual interest it may incur tax
liabilities in excess of any cash flows generated by the interest. The
Transferee intends to pay such taxes associated with holding the Certificate as
they become due.

                  6.       The Transferee will not cause income from the
Certificate to be attributable to a foreign permanent establishment or fixed
base (within the meaning of an applicable income tax treaty) of the Transferee
or another U.S. taxpayer.

                                      H-1
<PAGE>

                  (1)7.    [A. Formula Test] The Transferee agrees that the
present value of the anticipated tax liabilities associated with holding the
Certificate does not exceed the sum of the present value of any consideration
given to the Transferee to acquire the Certificate, the present value of the
expected future distributions on the Certificate, and the present value of the
anticipated tax savings associated with holding the interest as the REMIC
generates losses. The Transferee agrees that it complied with U.S. Treasury
Regulations Section 1.860E-1(c)(8) in making such representation.

                           The Transferee agrees that it is not a foreign
permanent establishment or fixed base (within the meaning of an applicable
income tax treaty) of the Transferor or another U.S. taxpayer.

                           [B. Asset Test] The Transferee, at the time of the
transfer, and at the close of the Transferee's two fiscal years preceding the
year of the transfer, had gross assets for financial reporting purposes in
excess of $100 million and net assets in excess of $10 million (excluding any
obligation of a person related to the Transferee within the meaning of U.S.
Treasury Regulations Section 1.860E-1(c)(6)(ii) or any other asset if a
principle purpose for holding or acquiring the other asset was to permit the
Transferee to satisfy the above stated minimum asset requirements).

                  The Transferee is an "eligible corporation," as defined in
U.S. Treasury Regulations Section 1.860E-1(c)(6)(i). The Transferee agrees, in
connection with any subsequent transfer of its Ownership Interest in the
Certificate, to transfer its Ownership Interest only to another "eligible
corporation," as defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i),
and to honor the restrictions on subsequent transfers of the Certificate by
transferring its Ownership Interest only in a transaction that satisfies the
requirements of U.S. Treasury Regulations Section 1.860E-1(c)(4)(i), (ii) (iii)
and U.S. Treasury Regulations Section 1.860E-1(c)(5).

                  The Transferee determined the consideration paid to it to
acquire the Certificate in good faith and based on reasonable market assumptions
(including, but not limited to, borrowing and investment rates, prepayment and
loss assumptions, expense and reinvestment assumptions, tax rates and other
factors specific to the Transferee).

                  8.       The Transferee is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate or trust whose income from sources without the United States is
includable in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States.

                  9.       The Transferee's taxpayer identification number is
____________.

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

(1) Insert either section 7A or 7B.

                                      H-2
<PAGE>

                  10.      The Transferee is not an employee benefit plan or
arrangement subject to Title I of ERISA, Section 4975 of the Code or any Similar
Law, and is not acting on behalf of any such plan or arrangement or using the
assets of any such plan or arrangement to effect the Transfer.

                  11.      The Transferee has reviewed the provisions of Section
5.02(c) of the Agreement and understands the legal consequences of the
acquisition of an Ownership Interest in the Certificate, including, without
limitation, the restrictions on subsequent Transfers and the provisions
regarding voiding the Transfer and mandatory sales. The Transferee expressly
agrees to be bound by and to abide by the provisions of Section 5.02(c) of the
Agreement and the restrictions noted on the face of the Certificate. The
Transferee understands and agrees that any breach of any of the representations
included herein shall render the Transfer to the Transferee contemplated hereby
null and void.

                  12.      The Transferee consents to any additional
restrictions or arrangements that shall be deemed necessary upon advice of
counsel to constitute a reasonable arrangement to ensure that the Certificate
will only be owned, directly or indirectly, by a Transferee that is not a
disqualified organization.

                  13.      The Transferee will not transfer its interest in the
Certificate for the purpose of impeding the assessment or collection of any tax.

                  14.      The Transferee will not transfer such Certificate
unless (i) it has received from any subsequent transferee an affidavit in
substantially the same form as this affidavit containing the same
representations set forth herein, and (ii) as of the time of the transfer, it
does not have actual knowledge that such affidavit is false. The Transferee will
deliver such affidavit to the Trustee upon receipt.

                                      * * *

                                      H-3
<PAGE>

                  IN WITNESS WHEREOF, the Transferee has caused this instrument
to be executed on its behalf, pursuant to authority of its Board of Directors,
by its duly authorized officer and its corporate seal to be hereunto affixed,
duly attested, this __ day of ________, 20__.

                                      ------------------------------------------
                                      Print Name of Transferee

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

[Corporate Seal]

ATTEST:

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

                  Personally appeared before me the above-named __________,
known or proved to me to be the same person who executed the foregoing
instrument and to be the ___________ of the Transferee, and acknowledged that he
executed the same as his free act and deed and the free act and deed of the
Transferee.

                  Subscribed and sworn before me this __ day of ________, 20__.

                                        ----------------------------------------
                                        NOTARY PUBLIC

                                        My Commission expires the __ day
                                        of _________, 20__

                                      H-4
<PAGE>

                                    EXHIBIT I

                         FORM OF TRANSFEROR CERTIFICATE

                                                                __________, 20__

Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

                  Re:      CDC Mortgage Capital Trust, Series 2003-HE3, Mortgage
                           Pass-Through Certificates, Series 2003-HE3, Class ___

Ladies and Gentlemen:

                  In connection with our disposition of the above Certificates
we certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being disposed
by us in a transaction that is exempt from the registration requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action which would result in, a violation of Section 5 of the Act and
(c) to the extent we are disposing of a Residual Certificate, we have no
knowledge the Transferee is not a Permitted Transferee.

                                       Very truly yours,

                                       -----------------------------------------
                                       Print Name of Transferor

                                       By:
                                          --------------------------------------
                                                  Authorized Officer

                                      I-1
<PAGE>

                                    EXHIBIT J

                            FORM OF RULE 144A LETTER

                                                              ____________, 20__

Morgan Stanley ABS Capital I Inc.
1585 Broadway
New York, New York 10036
Attention:  Michelle Wilke

Deutsche Bank National Trust Company,
as Trustee,
1761 East St. Andrew Place
Santa Ana, California 92705

                  Re:      CDC Mortgage Capital Trust 2002, Series 2003-HE3,
                           Mortgage Pass-Through Certificates, Series 2003-HE3,
                           Class

Ladies and Gentlemen:

                  In connection with our acquisition of the above Certificates
we certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we have
such knowledge and experience in financial and business matters that we are
capable of evaluating the merits and risks of investments in the Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan or
arrangement that is subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any federal, state or local law
materially similar to the foregoing provisions of ERISA or the Code, and we are
not acting on behalf of any such plan or arrangement or using the assets of any
such plan or arrangement to effect our purchase of the Certificates, (e) we have
not, nor has anyone acting on our behalf offered, transferred, pledged, sold or
otherwise disposed of the Certificates, any interest in the Certificates or any
other similar security to, or solicited any offer to buy or accept a transfer,
pledge or other disposition of the Certificates, any interest in the
Certificates or any other similar security from, or otherwise approached or
negotiated with respect to the Certificates, any interest in the Certificates or
any other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or taken
any other action, that would constitute a distribution of the Certificates under

                                      J-1
<PAGE>

the Securities Act or that would render the disposition of the Certificates a
violation of Section 5 of the Securities Act or require registration pursuant
thereto, nor will act, nor has authorized or will authorize any person to act,
in such manner with respect to the Certificates, (f) to the extent that the
Certificate transferred is a Class X Certificate, we are a bankruptcy-remote
entity and (g) we are a "qualified institutional buyer" as that term is defined
in Rule 144A under the Securities Act and have completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are aware
that the sale to us is being made in reliance on Rule 144A. We are acquiring the
Certificates for our own account or for resale pursuant to Rule 144A and
further, understand that such Certificates may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified institutional buyer
that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or transfer
is being made in reliance on Rule 144A, or (ii) pursuant to another exemption
from registration under the Securities Act.

                                      J-2
<PAGE>

                                                            ANNEX 1 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

                  The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

                  1.       As indicated below, the undersigned is the President,
Chief Financial Officer, Senior Vice President or other executive officer of the
Buyer.

                  2.       In connection with purchases by the Buyer, the Buyer
is a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $_________ in securities (except for
the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A
and (ii) the Buyer satisfies the criteria in the category marked below.

                  _________   Corporation, etc. The Buyer is a corporation
                              (other than a bank, savings and loan association
                              or similar institution), Massachusetts or similar
                              business trust, partnership, or charitable
                              organization described in Section 501(c)(3) of the
                              Internal Revenue Code of 1986, as amended.

                  _________   Bank. The Buyer (a) is a national bank or banking
                              institution organized under the laws of any State,
                              territory or the District of Columbia, the
                              business of which is substantially confined to
                              banking and is supervised by the State or
                              territorial banking commission or similar official
                              or is a foreign bank or equivalent institution,
                              and (b) has an audited net worth of at least
                              $25,000,000 as demonstrated in its latest annual
                              financial statements, a copy of which is attached
                              hereto.

                  _________   Savings and Loan. The Buyer (a) is a savings and
                              loan association, building and loan association,
                              cooperative bank, homestead association or similar
                              institution, which is supervised and examined by a
                              State or Federal authority having supervision over
                              any such institutions or is a foreign savings and
                              loan association or equivalent institution and (b)
                              has an audited net worth of at least $25,000,000
                              as demonstrated in its latest annual financial
                              statements, a copy of which is attached hereto.

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

                                      J-3
<PAGE>

                  _________   Insurance Company. The Buyer is an insurance
                              company whose primary and predominant business
                              activity is the writing of insurance or the
                              reinsuring of risks underwritten by insurance
                              companies and which is subject to supervision by
                              the insurance commissioner or a similar official
                              or agency of a State, territory or the District of
                              Columbia.

                  _________   State or Local Plan. The Buyer is a plan
                              established and maintained by a State, its
                              political subdivisions, or any agency or
                              instrumentality of the State or its political
                              subdivisions, for the benefit of its employees.

                  _________   ERISA Plan. The Buyer is an employee benefit plan
                              within the meaning of Title I of the Employee
                              Retirement Income Security Act of 1974.

                  _________   Investment Advisor. The Buyer is an investment
                              advisor registered under the Investment Advisors
                              Act of 1940.

                  _________   Small Business Investment Company. Buyer is a
                              small business investment company licensed by the
                              U.S. Small Business Administration under Section
                              301(c) or (d) of the Small Business Investment Act
                              of 1958.

                  _________   Business Development Company. Buyer is a business
                              development company as defined in Section
                              202(a)(22) of the Investment Advisors Act of 1940.

                  3.       The term "securities" as used herein does not include
(i) securities of issuers that are affiliated with the Buyer, (ii) securities
that are part of an unsold allotment to or subscription by the Buyer, if the
Buyer is a dealer, (iii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.

                  4.       For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer, the
Buyer used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph, except (i) where the
Buyer reports its securities holdings in its financial statements on the basis
of their market value, and (ii) no current information with respect to the cost
of those securities has been published. If clause (ii) in the preceding sentence
applies, the securities may be valued at market. Further, in determining such
aggregate amount, the Buyer may have included securities owned by subsidiaries
of the Buyer, but only if such subsidiaries are consolidated with the Buyer in
its financial statements prepared in accordance with generally accepted
accounting principles and if the investments of such subsidiaries are managed
under the Buyer's direction. However, such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another enterprise and the
Buyer is not itself a reporting company under the Securities Exchange Act of
1934, as amended.

                                      J-4
<PAGE>

                  5.       The Buyer acknowledges that it is familiar with Rule
144A and understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.

                  6.       Until the date of purchase of the Rule 144A
Securities, the Buyer will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of the Certificates will
constitute a reaffirmation of this certification as of the date of such
purchase. In addition, if the Buyer is a bank or savings and loan is provided
above, the Buyer agrees that it will furnish to such parties updated annual
financial statements promptly after they become available.

                                       -----------------------------------------
                                       Print Name of Transferor

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

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

                                      J-5
<PAGE>

                                                            ANNEX 2 TO EXHIBIT J

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That are Registered Investment Companies]

                  The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

                  1.       As indicated below, the undersigned is the President,
Chief Financial Officer or Senior Vice President of the Buyer or, if the Buyer
is a "qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.

                  2.       In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, as amended and (ii) as marked below, the Buyer alone, or the Buyer's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the Buyer's
most recent fiscal year. For purposes of determining the amount of securities
owned by the Buyer or the Buyer's Family of Investment Companies, the cost of
such securities was used, except (i) where the Buyer or the Buyer's Family of
Investment Companies reports its securities holdings in its financial statements
on the basis of their market value, and (ii) no current information with respect
to the cost of those securities has been published. If clause (ii) in the
preceding sentence applies, the securities may be valued at market.

                  _________   The Buyer owned $______ in securities (other than
                              the excluded securities referred to below) as of
                              the end of the Buyer's most recent fiscal year
                              (such amount being calculated in accordance with
                              Rule 144A).

                  _________   The Buyer is part of a Family of Investment
                              Companies which owned in the aggregate $ ________
                              in securities (other than the excluded securities
                              referred to below) as of the end of the Buyer's
                              most recent fiscal year (such amount being
                              calculated in accordance with Rule 144A).

                  3.       The term "Family of Investment Companies" as used
herein means two or more registered investment companies (or series thereof)
that have the same investment adviser or investment advisers that are affiliated
(by virtue of being majority owned subsidiaries of the same parent or because
one investment adviser is a majority owned subsidiary of the other).

                  4.       The term "securities" as used herein does not include
(i) securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,

                                      J-6
<PAGE>

(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.

                  5.       The Buyer is familiar with Rule 144A and understands
that the parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.

                  6.       Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.

                                       -----------------------------------------
                                       Print Name of Transferor

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

                                       IF AN ADVISER:

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

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

                                      J-7
<PAGE>

                                    EXHIBIT K

                               REQUEST FOR RELEASE
                                  (for Trustee)

To:      [Address]

                  Re:

                  In connection with the administration of the Mortgage Loans
held by you as the Trustee on behalf of the Certificateholders, we request the
release, and acknowledge receipt, of the (Custodial File/[specify documents])
for the Mortgage Loan described below, for the reason indicated.

Mortgagor's Name, Address & Zip Code:
-------------------------------------

Mortgage Loan Number:
---------------------

Send Custodial File to:
-----------------------

Reason for Requesting Documents (check one)
-------------------------------------------

                  _________   1.    Mortgage Loan Paid in Full. (The Company
                              hereby certifies that all amounts received in
                              connection therewith have been credited to the
                              Collection Account as provided in the Pooling and
                              Servicing Agreement.)

                  _________   2.    Mortgage Loan Repurchase Pursuant to
                              Subsection 2.03 of the Pooling and Servicing
                              Agreement. (The Company hereby certifies that the
                              repurchase price has been credited to the
                              Collection Account as provided in the Pooling and
                              Servicing Agreement.)

                  _________   3.    Mortgage Loan Liquidated By
                              _________________. (The Company hereby certifies
                              that all proceeds of foreclosure, insurance,
                              condemnation or other liquidation have been
                              finally received and credited to the Collection
                              Account pursuant to the Pooling and Servicing
                              Agreement.)

                  _________   4.    Mortgage Loan in Foreclosure.

                  _________   5.    Other (explain).

                  If box 1, 2 or 3 above is checked, and if all or part of the
Custodial File was previously released to us, please release to us our previous
request and receipt on file with you, as well as any additional documents in
your possession relating to the specified Mortgage Loan.

                                      K-1
<PAGE>

                  If box 4 or 5 above is checked, upon our return of all of the
above documents to you as the Trustee, please acknowledge your receipt by
signing in the space indicated below, and returning this form.

                                        OCWEN FEDERAL BANK FSB

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

                                      K-2
<PAGE>

                                    EXHIBIT L

                      FORM OF SUBSEQUENT TRANSFER AGREEMENT

                       CDC MORTGAGE CAPITAL TRUST 2003-HE3

                  Pursuant to separate Mortgage Loan Purchase Agreements, Aames
Capital Corporation ("Aames"), Aegis Mortgage Corporation ("Aegis"), Ameriquest
Mortgage Company ("Ameriquest"), BNC Mortgage, Inc. ("BNC"), Chapel Mortgage
Corporation ("Chapel"), Encore Credit Corp. ("Encore"), First Banc Mortgage,
Inc. ("First Banc"), First NLC Financial Services, LLC ("NLC"), Impac Funding
Corporation ("IFC") (and its affiliate, Novelle Financial Services, Inc.
("Novelle")), Master Financial, Inc. ("Master Financial"), People's Choice Home
Loan, Inc. ("People's Choice"), and SIB Mortgage Corp. ("SIB" and together with
Aames, Aegis, Ameriquest, BNC, Chapel, Encore, First Banc, NLC, IFC, Novelle,
Master Financial and People's Choice, the "Originators") have agreed to sell to
CDC Mortgage Capital Inc. (the "Unaffiliated Seller") certain mortgage loans
(each, a "Mortgage Loan"). These Mortgage Loans may in turn be sold by the
Unaffiliated Seller to MORGAN STANLEY ABS CAPITAL I INC. (the "Depositor") and
then sold by the Depositor to the CDC Mortgage Capital Trust 2003-HE3 (the
"Trust Fund"). The Trust Fund was established pursuant to a Pooling and
Servicing Agreement, dated as of August 1, 2003 (the "Pooling and Servicing
Agreement") among the Unaffiliated Seller, the Depositor, Ocwen Federal Bank
FSB, as servicer (the "Servicer") and Deutsche Bank National Trust Company, as
trustee (the "Trustee"). The Pooling and Servicing Agreement permits a
pre-funding feature, allowing for the acquisition by the Trust Fund of
Subsequent Mortgage Loans during the Pre-Funding Period. Representations and
warranties with respect to the Mortgage Loans have been made by the Originators
pursuant to separate Assignment and Recognition Agreements.

                  Capitalized terms used herein and not defined herein have
their respective meanings as set forth in the Pooling and Servicing Agreement.

                  Conveyance of Subsequent Mortgage Loans.
                  ----------------------------------------

                  The Unaffiliated Seller does hereby irrevocably sell,
transfer, assign, set over and otherwise convey to the Depositor, without
recourse (except as otherwise explicitly provided for herein) all of its right,
title and interest in and to the Subsequent Mortgage Loans, exclusive of the
obligations of the Unaffiliated Seller or any other Person with respect to the
Subsequent Mortgage Loans but including specifically, without limitation, the
Mortgages, the Custodial Files and all other documents, materials and properties
appurtenant thereto and the Mortgage Notes, including all interest and principal
collected by the Unaffiliated Seller on or with respect to the Subsequent
Mortgage Loans after the related Subsequent Cut-off Date, together with all of
its right, title and interest in and to the proceeds received after such
Subsequent Cut-off Date of any related insurance policies on behalf of the
Depositor.

                  The Depositor does hereby irrevocably sell, transfer, assign,
set over and otherwise convey to the Trust Fund, without recourse (except as
otherwise explicitly provided for herein) all of its right, title and interest
in and to the Subsequent Mortgage Loans, exclusive of the obligations of the
Depositor or any other Person with respect to the Subsequent Mortgage Loans but

                                      L-1
<PAGE>

including specifically, without limitation, the Mortgages, the Custodial Files
and all other documents, materials and properties appurtenant thereto and the
Mortgage Notes, including all interest and principal collected by the Depositor
on or with respect to the Subsequent Mortgage Loans after the related Subsequent
Cut-off Date, together with all of its right, title and interest in and to the
proceeds received after such Subsequent Cut-off Date of any related insurance
policies on behalf of the Trust Fund.

                  The expenses and costs relating to the delivery of the
Subsequent Mortgage Loans specified in this Subsequent Transfer Agreement and
the Pooling and Servicing Agreement shall be borne by the Unaffiliated Seller.

                  The Unaffiliated Seller hereby affirms the representation and
warranty set forth in Sections 3.01(f), 3.01(h) and 3.03 of the Unaffiliated
Seller's Agreement with respect to the Subsequent Mortgage Loans as of the date
hereof. The Unaffiliated Seller hereby delivers notice and confirms that each of
the conditions set forth in Section 2.01(c) of the Pooling and Servicing
Agreement are satisfied as of the date hereof.

                  The Servicer hereby affirms the representations and warranties
set forth in Schedule IIA to the Pooling and Servicing Agreement with respect to
the Subsequent Mortgage Loans as of the date hereof.

                  Additional terms of the sale are attached hereto as Attachment
A.

                  To the extent permitted by applicable law, this Subsequent
Transfer Agreement, or a memorandum thereof if permitted under applicable law,
is subject to recordation in all appropriate public offices for real property
records in all counties or other comparable jurisdictions in which any or all of
the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Unaffiliated Seller's expense, but only when
accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interests of the Certificateholders or
is necessary for the administration or servicing of the Mortgage Loans.

                  This Agreement shall be construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to the principles of conflicts of laws.

                  This Agreement may be executed in one or more counterparts and
by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.

                  All terms and conditions of the Pooling and Servicing
Agreement are hereby ratified, confirmed and incorporated herein; provided, that
in the event of any conflict the provisions of this Subsequent Transfer
Agreement shall control over the conflicting provisions of the Pooling and
Servicing Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                      L-2
<PAGE>

                                       CDC MORTGAGE CAPITAL INC.,
                                         as Unaffiliated Seller

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

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

                                       MORGAN STANLEY ABS CAPITAL I INC.,
                                         as Depositor

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

                                       OCWEN FEDERAL BANK FSB,
                                         as Servicer

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

                                       DEUTSCHE BANK NATIONAL TRUST COMPANY,
                                         as Trustee

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

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

                                      L-3
<PAGE>

                                    EXHIBIT M

                           FORM OF CERTIFICATION TO BE
                              PROVIDED TO DEPOSITOR
                              ---------------------

Re:      CDC Mortgage Capital Trust 2003-HE3 Mortgage Pass-Through Certificates,
         Series 2003-HE3, issued pursuant to the Pooling and Servicing
         Agreement, dated as of August 1, 2003 (the "Pooling and Servicing
         Agreement"), among Morgan Stanley ABS Capital I Inc., as depositor (the
         "Depositor", CDC Mortgage Capital Inc., as unaffiliated seller,
         Deutsche Bank National Trust Company, as trustee (the "Trustee"), and
         Ocwen Federal Bank FSB, as servicer (the "Servicer").

I, [identify the certifying individual], certify that:

         1.       I have reviewed this annual report on Form 10-K ("Annual
                  Report"), and all reports on Form 8-K containing distribution
                  or servicing reports (collectively with this Annual Report,
                  the "Reports") filed in respect of periods included in the
                  year covered by this Annual Report of the Depositor relating
                  to the above-referenced trust and series of certificates;

         2.       Based on my knowledge, the information in the Reports, taken
                  as a whole, does not contain any untrue statement of a
                  material fact or omit to state a material fact necessary to
                  make the statements made, in light of the circumstances under
                  which such statements were made, not misleading as of the last
                  day of the period covered by this Annual Report;

         3.       Based on my knowledge, the distribution or servicing
                  information required to be provided to the Trustee by the
                  Servicer under the Pooling and Servicing Agreement for
                  inclusion in the Reports is included in these Reports;

         4.       Based on my knowledge and upon the annual compliance statement
                  included in this Annual Report and required to be delivered to
                  the Trustee in accordance with the terms of the Pooling and
                  Servicing Agreement, and except as disclosed in the Reports,
                  the Servicer has fulfilled its obligations under the Pooling
                  and Servicing Agreement; and

                                      M-1
<PAGE>

         5.       The Reports disclose all significant deficiencies relating to
                  the Servicer's compliance with the minimum servicing standards
                  based upon the report provided by an independent public
                  accountant, after conducting a review in compliance with the
                  Uniform Single Attestation Program for Mortgage Bankers or
                  similar procedure, as set forth in the Pooling and Servicing
                  Agreement, that is included in the Reports.

In giving the certifications above, I have reasonably relied on information
provided to me by the following unaffiliated parties: the Trustee and the
Servicer.

Date:    _________________________

__________________________________
[Signature] [Title]

                                      M-2
<PAGE>

                                    EXHIBIT N

                              Annual Certifications

Re: CDC Mortgage Capital Trust 2003-HE3 Mortgage Pass-Through Certificates,
Series 2003-HE3, issued pursuant to the Pooling and Servicing Agreement, dated
as of August 1, 2003 (the "Pooling and Servicing Agreement"), among Morgan
Stanley ABS Capital I Inc., as depositor (the "Depositor," CDC Mortgage Capital
Inc., as unaffiliated seller (the "Unaffiliated Seller"), Deutsche Bank National
Trust Company, as trustee (the "Trustee"), and Ocwen Federal Bank FSB, as
servicer (the "Servicer").

I, [identify the certifying individual], certify to the Depositor and the
Trustee, if applicable, and its officers, directors and affiliates, and with the
knowledge and intent that they will rely upon this certification, that:

         1.       [To be certified by the Trustee] I have reviewed the annual
                  report on Form 10-K for the fiscal year 2003 (the "Annual
                  Report"), and all reports on Form 8-K containing distribution
                  date reports filed in respect of periods included in the year
                  covered by the Annual Report (collectively with this Annual
                  Report, the "Reports"), of the Depositor relating to the
                  above-referenced trust;

         2.       [To be certified by the Trustee] Based on my knowledge, the
                  information in the Reports, taken as a whole, does not contain
                  any untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading as of the last day of the period covered by the
                  Annual Report;

         3.       [To be certified by the Trustee] Based on my knowledge, the
                  distribution or servicing information required to be provided
                  to the Trustee by the Servicer under the Pooling and Servicing
                  Agreement for inclusion in the Reports is included in the
                  Reports;

         4.       [To be certified by the Servicer] I am responsible for
                  reviewing the activities performed by the Servicer under the
                  Pooling and Servicing Agreement during the calendar year
                  immediately preceding the date of this certificate (the
                  "Relevant Year"). Based upon the review required by the
                  Pooling and Servicing Agreement and except as disclosed in the
                  annual compliance statement or the accountant's statement
                  provided pursuant to Section 3.23 of the Pooling and Servicing
                  Agreement, to the best of my knowledge, the Servicer has
                  fulfilled its obligations under the Pooling and Servicing
                  Agreement throughout the Relevant Year; and

         5.       [To be certified by the Servicer] All significant deficiencies
                  relating to the Servicer's compliance with the minimum
                  servicing standards for purposes of the report provided by an
                  independent public accountant, after conducting a review
                  conducted in compliance with the Uniform Single Attestation
                  Program for Mortgage Bankers or similar procedure, as set

                                      N-1
<PAGE>

                  forth in the Pooling and Servicing Agreement, have been
                  disclosed to such accountant and are included in such reports.

Date:    _________________________

__________________________________
[Signature] [Title]

                                      N-2<PAGE>

                             CONFIDENTIAL TREATMENT

                                  Exhibit 10.34
                               Umbrella Agreement

<PAGE>

                                                          CONFIDENTIAL TREATMENT

                               UMBRELLA AGREEMENT
                                     BETWEEN
                       ISLAND PACIFIC SYSTEMS CORPORATION
                                       AND
                                TOYS `R' US, INC.

                  The intent of this agreement is to set forth certain items
that have been agreed to in connection with the "License Agreement for Software
Products" including the Attachments A and exhibits thereto, the "Services
Agreement", and the "Modification Agreement", each being executed by the parties
on the date of this Agreement.

                  Island Pacific Systems Corporation is hereafter called "Island
Pacific" and Toys "R" Us, Inc. is hereafter called "Customer". Island Pacific
agrees to provide and Customer agrees to license the software products as define
in the "License Agreement for Software Products", subject to the following
conditions:

         SCHEDULE FOR ENHANCEMENTS: Island Pacific will use its best efforts to
         meet the following schedule for the initial enhancements (as described
         in Appendix A hereto) to the Software Products being licensed to
         Customer, as provided in the Modification Agreement:

<TABLE>
<CAPTION>
SCHEDULE:
------------------------------------- ---------------------------------- ----------------------------------
                                      DESIGN SPECIFICATIONS COMPLETION   CODE BUILD COMPLETION
------------------------------------- ---------------------------------- ----------------------------------
<S>                                   <C>                                <C>
Phase 1                               [***]                              [***]
------------------------------------- ---------------------------------- ----------------------------------
Phase 2                               [***]                              [***]
------------------------------------- ---------------------------------- ----------------------------------
Anytime modifications                 No later than [***]                [***]
------------------------------------- ---------------------------------- ----------------------------------
Later Modifications                   To be Determined                   To be Determined
------------------------------------- ---------------------------------- ----------------------------------
</TABLE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth below:

         Date:_____________________

                 TOYS "R" US, INC.

                  BY:  ________________________________________
                       BRUNO ROQUEPLO, SENIOR VICE PRESIDENT OF
                       FINANCE AND ADMINISTRATION (CFO)

                  ISLAND PACIFIC SYSTEMS CORPORATION

                  BY:  ________________________________________
                       TODD HAMMETT, CHIEF FINANCIAL OFFICER

[***] = Confidential Treatment Requested

<PAGE>

                                                          CONFIDENTIAL TREATMENT

                                   APPENDIX A

     General Description of components that make up the Initial Enhancements
         (Phase 1, 2, Anytime) to the Island Pacific Software Products

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