Southern Pacific Secured Assets Corp · 8-K · For 6/19/98 · EX-4

Filed On 7/15/98   ·   SEC File 33-91756   ·   Accession Number 882377-98-415

Current Report   ·   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Southern Pacific Secured Assets Corp.                  5     10K 
 2: EX-4        Pooling and Servicing Agreement                      202    711K 

EX-4   ·   Pooling and Servicing Agreement
Exhibit Table of Contents

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

 SOUTHERN PACIFIC SECURED ASSETS CORP.
Company,

 and

SOUTHERN PACIFIC FUNDING CORPORATION
 Master Servicer

 and

NORWEST BANK MINNESOTA, N.A.
 Trustee

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

 POOLING AND SERVICING AGREEMENT

Dated as of June 1, 1998

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

Mortgage Loan Asset-Backed Pass-Through Certificates

 Series 1998-2

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

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                                                                            PAGE
 ARTICLE I

 DEFINITIONS

Section 1.01  CERTAIN DEFINED TERMS...........................................3 
Accepted Servicing Practices..................................................3 
Account ......................................................................3 
Accrual Period ...............................................................3 
Affiliate ....................................................................3 
Agreement ....................................................................3 
Appraised Value ..............................................................3 
Assignment of Mortgage........................................................3 
Authorized Denominations......................................................4 
Available Funds Shortfall.....................................................4 
Balloon Loan .................................................................4 
Balloon Payment ..............................................................4 
Business Day .................................................................4 
Certificate ..................................................................4 
Certificate Account...........................................................4 
Certificateholder or Holder...................................................4 
Certificate Insurance Payments Account........................................5 
Certificate Insurance Policy..................................................5 
Certificate Insurer...........................................................5 
Certificate Insurer Default...................................................5 
Certificate Principal Balance.................................................5 
Certificate Register..........................................................5 
Civil Relief Act .............................................................5 
Civil Relief Act Interest Shortfall...........................................5 
Class A Certificate...........................................................5 
Class A Certificateholder.....................................................6 
Class A-1 Certificate.........................................................6 
Class A-2 Certificate.........................................................6 
Class A-3 Certificate.........................................................6 
Class A-4 Certificate.........................................................6 
Class A-5 Certificate.........................................................6 
Class A-6 Certificate.........................................................6 
Class A-7 Certificate.........................................................6 
Class A-8 Certificate.........................................................6 
Class A-9 Certificate.........................................................7 
Class A-9 Component A.........................................................7 
Class A-9 Component B.........................................................7 

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Class A-9 Component C.........................................................7 
Class A-9 Component D.........................................................7 
Class R Certificate...........................................................7 
Class R-I Certificate.........................................................7 
Class R-II Certificate........................................................8 
Class R Certificateholder.....................................................8 
Closing Date .................................................................8 
Code .........................................................................8 
Collection Account............................................................8 
Commission ...................................................................8 
Company ......................................................................8 
Compensating Interest.........................................................8 
Curtailment ..................................................................8 
Custodian ....................................................................8 
Cut-off Date .................................................................8 
DCR ..........................................................................8 
Debt Service Reduction........................................................8 
Deficient Valuation...........................................................8 
Deleted Mortgage Loan.........................................................8 
Delinquent ...................................................................9 
Depository ...................................................................9 
Direct Participant............................................................9 
Disqualified Organization.....................................................9 
Distribution Date ............................................................9 
Due Date .....................................................................9 
Due Period ...................................................................9 
Eligible Account ............................................................10 
ERISA .......................................................................10 
Event of Default ............................................................10 
FDIC ........................................................................10 
FHLMC .......................................................................10 
Fixed Strip Certificates.....................................................10 
FNMA ........................................................................10 
Foreclosure Profits..........................................................10 
Full Term Fixed Loans........................................................10 
Full Term LIBOR-Rate Loans...................................................10 
GAAP ........................................................................10 
Gross Margin ................................................................11 
Group I Available Funds......................................................11 
Group II Available Funds.....................................................11 
Group I Certificate Account..................................................11 
Group II Certificate Account.................................................11 
Group I Certificate Insurance Policy.........................................11 

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Group II Certificate Insurance Policy........................................11 
Group I Certificates.........................................................11 
Group II Certificates........................................................11 
Group I Class A Available Funds Cap Carry-Forward Amount.....................11 
Group I Class A Available Funds Pass-Through Rate............................12 
Group I Class A Carry-Forward Amount.........................................12 
Group II Class A Carry-Forward Amount........................................12 
Group I Class A Certificates.................................................13 
Group II Class A Certificates................................................13 
Group I Class A Formula Pass-Through Rate....................................13 
Group I Class A Interest Distribution Amount.................................13 
Group II Class A Interest Distribution Amount................................13 
Group I Class A Pass-Through Rate............................................13 
Group II Class A Pass-Through Rate...........................................14 
Group I Class A Principal Distribution Amount................................14 
Group II Class A Principal Distribution Amount...............................15 
Group I Delinquency Amount...................................................16 
Group II Delinquency Amount..................................................16 
Group I Delinquency Percentage...............................................16 
Group II Delinquency Percentage..............................................16 
Group I Excess Subordinated Amount...........................................16 
Group II Excess Subordinated Amount..........................................17 
Group I Fixed Strip Components...............................................17 
Group II Fixed Strip Component...............................................17 
Group I Fixed Strip Effective Rate...........................................17 
Group I Insured Distribution Amount..........................................17 
Group II Insured Distribution Amount.........................................17 
Group I Loans" or "Loan Group I..............................................17 
Group II Loans" or "Loan Group II............................................17 
Lockout Certificates.........................................................17 
Lockout Certificates.........................................................17 
Lockout Certificate Percentage...............................................17 
Lockout Distribution Percentage..............................................18 
Lockout Distribution Percentage..............................................18 
Group I Net Monthly Excess Cashflow..........................................18 
Group II Net Monthly Excess Cashflow.........................................19 
Group I Pool Principal Balance...............................................19 
Group II Pool Principal Balance..............................................19 
Group I Principal Remittance Amount..........................................19 
Group II Principal Remittance Amount.........................................19 
Group I Reimbursement Amount.................................................19 
Group II Reimbursement Amount................................................19 
Group I Required Subordinated Amount.........................................20 

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Group II Required Subordinated Amount........................................20 
Group I Subordinated Amount..................................................21 
Group II Subordinated Amount.................................................21 
Group I Subordination Deficiency Amount......................................21 
Group II Subordination Deficiency Amount.....................................21 
Group I Subordination Deficit................................................21 
Group II Subordination Deficit...............................................21 
Group I Subordination Increase Amount........................................22 
Group II Subordination Increase Amount.......................................22 
Group I Subordination Reduction Amount.......................................22 
Group II Subordination Reduction Amount......................................22 
Index .......................................................................22 
Indirect Participant.........................................................22 
Initial Group I Loan.........................................................22 
Initial Group II Loan........................................................22 
Initial Group I Specified Subordinated Amount................................22 
Initial Group II Specified Subordinated Amount...............................22 
Initial Group I Specified Subordinated Percentage............................22 
Initial Group II Specified Subordinated Percentage...........................23 
Initial Mortgage Loan........................................................23 
Insurance Agreement..........................................................23 
Insurance Proceeds...........................................................23 
Insured Payment .............................................................23 
Interest Determination Date..................................................23 
Intermediate Term Fixed Loans................................................23 
Intermediate Term LIBOR-Rate Loans...........................................23 
Lifetime Cap ................................................................23 
Lifetime Floor ..............................................................23 
Liquidated Loan Loss.........................................................23 
Liquidated Mortgage Loan.....................................................24 
Liquidation Expenses.........................................................24 
Liquidation Proceeds.........................................................24 
Liquidation Report...........................................................24 
Loan Repurchase Price........................................................24 
Loan Type ...................................................................24 
Loan-to-Value Ratio or LTV...................................................24 
London Business Day..........................................................24 
Majority Certificateholders..................................................24 
Master Servicer .............................................................24 
Master Servicer Remittance Amount............................................25 
Master Servicer Remittance Date..............................................25 
Maximum Group II Rate........................................................25 
Monthly Payment .............................................................25 

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Moody's .....................................................................26 
Mortgage ....................................................................26 
Mortgage File ...............................................................26 
Mortgage Impairment Insurance Policy.........................................26 
Mortgage Interest Rate.......................................................26 
Mortgage Loan ...............................................................26 
Mortgage Loan Documents......................................................26 
Mortgage Loan Group..........................................................26 
Mortgage Loan Interest Shortfall.............................................26 
Mortgage Loan Schedule.......................................................27 
Mortgage Note ...............................................................28 
Mortgaged Property...........................................................28 
Mortgagor ...................................................................28 
Net Foreclosure Profits......................................................28 
Net Lifetime Cap ............................................................28 
Net Liquidation Proceeds.....................................................28 
Net Mortgage Interest Rate...................................................29 
Net REO Proceeds ............................................................29 
Nonrecoverable Advances......................................................29 
Non-United States Person.....................................................29 
Notional Amount .............................................................29 
Officer's Certificate........................................................29 
One-Month LIBOR .............................................................29 
Opinion of Counsel...........................................................29 
Original Group I Pool Principal Balance......................................30 
Original Group II Pool Principal Balance.....................................30 
Original Certificate Principal Balance.......................................30 
Original Pool Principal Balance..............................................30 
Outstanding Mortgage Loan....................................................30 
Ownership Interest...........................................................30 
Owner-Occupied Mortgaged Property............................................30 
Percentage Interest..........................................................30 
Periodic Advance ............................................................30 
Periodic Cap ................................................................31 
Permitted Investments........................................................31 
Permitted Transferee.........................................................32 
Person ......................................................................32 
Plan ........................................................................32 
Policy Business Day..........................................................32 
Pool Principal Balance.......................................................32 
Preference Amount ...........................................................32 
Preference Claim ............................................................32 
Premium Amount ..............................................................33 

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Premium Exhibit .............................................................33 
Premium Percentage...........................................................33 
Prepayment Assumption........................................................33 
Prepayment Interest Shortfall................................................33 
Principal Balance ...........................................................33 
Prepayment Period............................................................33 
Principal Prepayment in Full.................................................33 
Purchase Agreement...........................................................34 
Qualified Mortgage...........................................................34 
Qualified Substitute Mortgage Loan...........................................34 
Rate Adjustment Date.........................................................34 
Rating Agency ...............................................................34 
Record Date .................................................................34 
Reference Bank Rate..........................................................34 
Reference Banks   ...........................................................35 
Released Mortgaged Property Proceeds.........................................35 
REMIC .......................................................................35 
REMIC I .....................................................................35 
REMIC I Group II Regular Interests...........................................35 
REMIC I Regular Interest.....................................................35 
REMIC I Regular Interest LT-AY...............................................35 
REMIC I Regular Interest LT-AZ...............................................36 
REMIC I Regular Interest LT-FW...............................................36 
REMIC I Regular Interest LT-FX...............................................36 
REMIC I Regular Interest LT-FY...............................................36 
REMIC I Regular Interest LT-FZ...............................................36 
REMIC I Remittance Rate......................................................36 
REMIC II ....................................................................36 
REMIC Provisions ............................................................37 
REO Acquisition .............................................................37 
REO Disposition .............................................................37 
REO Mortgage Loan ...........................................................37 
REO Proceeds ................................................................37 
REO Property ................................................................37 
Representation Letter........................................................37 
Request for Release..........................................................37 
Reserve Interest Rate........................................................37 
Residential Dwelling.........................................................37 
Responsible Officer..........................................................37 
S&P .........................................................................38 
Seller ......................................................................38 
Servicing Account ...........................................................38 
Servicing Advances...........................................................38 
Servicing Compensation.......................................................38 

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Servicing Fee ...............................................................38 
Servicing Officer ...........................................................38 
Southern Pacific ............................................................38 
Special Deposit .............................................................38 
Startup Day .................................................................38 
Subservicer .................................................................39 
Subservicing Agreement.......................................................39 
Substitution Adjustment......................................................39 
Tax Matters Person...........................................................39 
Tax Return ..................................................................39 
Thirty-Year Fixed Loans......................................................39 
Transfer ....................................................................39 
Transfer Affidavit And Agreement.............................................39 
Transferee ..................................................................39 
Transferor ..................................................................39 
Trustee .....................................................................39 
Trustee Fee .................................................................40 
Trustee Remittance Report....................................................40 
Trust Fund ..................................................................40 
2/28 and 3/27 Loans..........................................................40 
12 Month Loss Amount.........................................................40 
UCC .........................................................................40 
UCC Financing Statement......................................................40 
Uncertificated Balance.......................................................40 
Uncertificated Interest......................................................40 
Underwriters ................................................................40 
Underwriting Guidelines......................................................40 
United States Person.........................................................41 
Unpaid REO Amortization......................................................41 
Voting Rights ...............................................................41 
Section 1.02  PROVISIONS OF GENERAL APPLICATION..............................41 

ARTICLE II

 CONVEYANCE OF MORTGAGE LOANS;
 ORIGINAL ISSUANCE OF CERTIFICATES
 ---------------------------------

Section 2.01   CONVEYANCE OF MORTGAGE LOANS; PRIORITY AND SUBORDINATION OF      
              OWNERSHIP INTERESTS...........................................43
Section 2.02   POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE FILES........44 

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Section 2.03   DELIVERY OF MORTGAGE LOAN DOCUMENTS AND CERTIFICATE INSURANCE    
              POLICY........................................................45
Section 2.04   ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN SUBSTITUTIONS;  
              CERTIFICATION BY TRUSTEE......................................46
Section 2.05   EXECUTION OF CERTIFICATES.....................................48 
Section 2.06   FURTHER ACTION EVIDENCING ASSIGNMENTS.........................48 
Section 2.07   [RESERVED]....................................................49 
Section 2.08   CONVEYANCE OF REMIC I REGULAR INTERESTS; ACCEPTANCE OF           
              REMIC II BY THE TRUSTEE.......................................49
Section 2.09   ISSUANCE OF CLASS R-II CERTIFICATES...........................49 

                 ARTICLE III

                 REPRESENTATIONS, WARRANTIES AND COVENANTS
                 -----------------------------------------

Section 3.01   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER          
              SERVICER......................................................50
Section 3.02   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY......51 
Section 3.03   PURCHASE AND SUBSTITUTION.....................................52 

                ARTICLE IV

                THE CERTIFICATES
                ----------------

Section 4.01   THE CERTIFICATES..............................................55 
Section 4.02   REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.........55 
Section 4.03   MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.............60 
Section 4.04   PERSONS DEEMED OWNERS.........................................60 

 ARTICLE V

ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
--------------------------------------------------

Section 5.01   APPOINTMENT OF THE MASTER SERVICER............................62 
Section 5.02   SUBSERVICING AGREEMENTS BETWEEN THE MASTER SERVICER AND          
              SUBSERVICERS..................................................63

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Section 5.03   COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION         
              ACCOUNT.......................................................64
Section 5.04   PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT.............66 
Section 5.05   PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES.................68 
Section 5.06   MAINTENANCE OF CASUALTY INSURANCE.............................68 
Section 5.07   MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE POLICY...........69 
Section 5.08   FIDELITY BOND; ERRORS AND OMISSIONS POLICY....................69 
Section 5.09   COLLECTION OF TAXES, ASSESSMENTS AND OTHER ITEMS; SERVICING      
              ACCOUNT.......................................................70
Section 5.10   PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION;    
              ADDITIONAL INFORMATION........................................70
Section 5.11   ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.....70 
Section 5.12   REALIZATION UPON DEFAULTED MORTGAGE LOANS.....................71 
Section 5.13   TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES...............74 
Section 5.14   SERVICING FEE; SERVICING COMPENSATION.........................75 
Section 5.15   REPORTS TO THE TRUSTEE AND THE COMPANY; COLLECTION ACCOUNT       
              STATEMENTS....................................................75
Section 5.16   ANNUAL STATEMENT AS TO COMPLIANCE.............................75 
Section 5.17   ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.......76 
Section 5.18   OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS.................76 
Section 5.19   REPORTS TO BE PROVIDED BY THE MASTER SERVICER.................76 
Section 5.20   ADJUSTMENT OF SERVICING COMPENSATION IN RESPECT OF PREPAID       
              MORTGAGE LOANS................................................77
Section 5.21   PERIODIC ADVANCES.............................................77 
Section 5.22   MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES; MERGER OR       
              CONSOLIDATION OF THE MASTER SERVICER..........................78
Section 5.23   ASSIGNMENT OF AGREEMENT BY MASTER SERVICER; MASTER SERVICER      
              NOT TO RESIGN.................................................78
Section 5.24   INFORMATION REPORTS TO BE FILED BY THE MASTER SERVICER........78 

ARTICLE VI

DISTRIBUTIONS AND PAYMENTS
--------------------------

Section 6.01   ESTABLISHMENT OF CERTIFICATE ACCOUNTS; DEPOSITS TO THE           
              CERTIFICATE ACCOUNTS..........................................79
Section 6.02   PERMITTED WITHDRAWALS FROM THE CERTIFICATE ACCOUNTS...........79 
Section 6.03   COLLECTION OF MONEY...........................................80 
Section 6.04   THE CERTIFICATE INSURANCE POLICY..............................80 
Section 6.05   DISTRIBUTIONS.................................................82 
Section 6.06   INVESTMENT OF ACCOUNTS........................................86 

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Section 6.07   REPORTS BY TRUSTEE............................................87 
Section 6.08   ADDITIONAL REPORTS BY TRUSTEE.................................91 
Section 6.09   COMPENSATING INTEREST.........................................91 
Section 6.10   EFFECT OF PAYMENTS BY THE CERTIFICATE INSURER; SUBROGATION....91 
Section 6.11   DISTRIBUTIONS ON THE UNCERTIFICATED REMIC I                      
              REGULAR INTERESTS.............................................92

 ARTICLE VII

 DEFAULT
 -------

Section 7.01   EVENTS OF DEFAULT.............................................93 
Section 7.02   TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR......................95 
Section 7.03   WAIVER OF DEFAULTS............................................97 
Section 7.04   MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD FOR BENEFIT OF      
              THE CERTIFICATE INSURER.......................................97

ARTICLE VIII

 TERMINATION

Section 8.01   TERMINATION...................................................98 
Section 8.02   ADDITIONAL TERMINATION REQUIREMENTS...........................99 
Section 8.03   ACCOUNTING UPON TERMINATION OF MASTER SERVICER...............100 

ARTICLE IX

CONCERNING THE TRUSTEE
----------------------

Section 9.01   DUTIES OF TRUSTEE............................................101 
Section 9.02   CERTAIN MATTERS AFFECTING THE TRUSTEE........................102 
Section 9.03   TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS........104 
Section 9.04   TRUSTEE MAY OWN .............................................104 
Section 9.05   PAYMENT OF TRUSTEE'S FEES....................................105 
Section 9.06   ELIGIBILITY REQUIREMENTS FOR TRUSTEE.........................106 
Section 9.07   RESIGNATION AND REMOVAL OF THE TRUSTEE.......................106 
Section 9.08   SUCCESSOR TRUSTEE............................................107 
Section 9.09   MERGER OR CONSOLIDATION OF TRUSTEE...........................108 

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Section 9.10   APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE................108 
Section 9.11.  LIMITATION OF LIABILITY......................................109 
Section 9.12.  TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF                 
              CERTIFICATES.................................................109
Section 9.13.  SUITS FOR ENFORCEMENTS.......................................109 
Section 9.14.  WAIVER OF INVENTORY, ACCOUNTING AND APPRAISAL REQUIREMENTS...110 

 ARTICLE X

REMIC PROVISIONS
----------------

Section 10.01  REMIC ADMINISTRATION.........................................111 
Section 10.02  PROHIBITED TRANSACTIONS AND ACTIVITIES.......................114 
Section 10.03  MASTER SERVICER AND TRUSTEE INDEMNIFICATION..................115 

ARTICLE XI

MISCELLANEOUS PROVISIONS
------------------------

Section 11.01  LIMITATION ON LIABILITY OF THE COMPANY AND THE                   
              MASTER SERVICER..............................................116
Section 11.02  ACTS OF CERTIFICATEHOLDERS...................................116 
Section 11.03  AMENDMENT....................................................117 
Section 11.04  RECORDATION OF AGREEMENT.....................................118 
Section 11.05  NOTICES......................................................118 
Section 11.06  SEVERABILITY OF PROVISIONS...................................119 
Section 11.07  COUNTERPARTS.................................................119 
Section 11.08  SUCCESSORS AND ASSIGNS.......................................119 
Section 11.09  HEADINGS.....................................................119 
Section 11.10  CERTIFICATE INSURER DEFAULT..................................119 
Section 11.11  THIRD PARTY BENEFICIARY......................................119 
Section 11.12  INTENT OF THE PARTIES........................................120 
Section 11.13  NOTICE TO RATING AGENCIES AND CERTIFICATEHOLDER..............120 
Section 11.14  GOVERNING LAW................................................120 

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LIST OF EXHIBITS

Exhibit A-1    Group I Certificate Insurance Policy                             
Exhibit A-2    Group II Certificate Insurance Policy                            
Exhibit B-1    Form of Class A Certificate                                      
Exhibit B-2    Form of Class R Certificate                                      
Exhibit C      Mortgage File                                                    
Exhibit D-1    Mortgage Loan Schedule for Loan Group I                          
Exhibit D-2    Mortgage Loan Schedule for Loan Group II                         
Exhibit E      Trustee's Acknowledgment of Receipt                              
Exhibit F      Initial Certification of Trustee                                 
Exhibit G      Final Certification of the Trustee                               
Exhibit H      Request for Release of Documents                                 
Exhibit I      Form of Transfer Affidavit and Agreement                         
Exhibit J      Form of Transferor Certificate                                   
Exhibit K      ERISA Letter                                                     
Exhibit L      Reserved                                                         
Exhibit M      Certificate Regarding Prepaid Loans                              
Exhibit N      Reserved                                                         
Exhibit O      Form of Investor Representation Letter                           
Exhibit P      Form of Transferor Representation Letter                         
Exhibit Q      Form of Rule 144A Investor Affidavit                             
Exhibit R      Premium Exhibit                                                  
Exhibit S      Liquidation Report                                               

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         POOLING AND SERVICING AGREEMENT, dated as of June 1, 1998, by and
among SOUTHERN PACIFIC SECURED ASSETS CORP., a California corporation, in its   
capacity as company (the "Company"), SOUTHERN PACIFIC FUNDING CORPORATION, a    
Delaware corporation, in its capacity as master servicer (the "Master           
Servicer"), and NORWEST BANK MINNESOTA, N.A., a national banking association, in
its capacity as trustee (the "Trustee").                                        

PRELIMINARY STATEMENT:

      The Company intends to sell mortgage pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in eight classes     
(each, a "Class"), which in the aggregate will evidence the entire beneficial   
ownership interest in the Trust Fund (as defined herein), consisting primarily  
of the Mortgage Loans (as defined herein). As provided herein, the Trustee will 
make an election to treat the entire segregated pool of assets described in the 
definition of REMIC I (as defined herein) and subject to this Agreement as a    
real estate mortgage investment conduit (a "REMIC") for federal income tax      
purposes and such segregated pool of assets will be designated as "REMIC I." The
Uncertificated REMIC I Regular Interests (as defined herein) will be "regular   
interests" in REMIC I and the Class R-I Certificates will be the sole class of  
"residual interests" in REMIC I for purposes of the REMIC Provisions (as defined
herein) under the federal income tax law.                                       

       The following table irrevocably sets forth the designation, the
REMIC I Remittance Rate, the initial Uncertificated Balance and, solely for     
purposes of satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the     
"latest possible maturity date" for each of the REMIC I Regular Interests. None 
of the REMIC I Regular Interests will be certificated.                          

             Remic I             Initial               Latest Possible
Designation   Remittance Rate   Uncertificated Balance      Maturity Date(1)    
-----------   ---------------   ----------------------      ----------------    
LT-AY        Variable(2)       $324,000,000               June 25, 2028   
LT-AZ        Variable(2)       $162,000,000               June 25, 2028   
LT-FW        Variable(2)       $ 98,229,000               June 25, 2028   
LT-FX        Variable(2)       $ 37,336,000               June 25, 2028   
LT-FY        Variable(2)       $ 12,035,000               June 25, 2028   
LT-FZ        Variable(2)       $ 16,400,000               June 25, 2028   

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

(1)   Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury        
      regulations, the Distribution Date immediately following the maturity date
      for the Mortgage Loan with the latest maturity date has been designated as
 the "latestpossible maturity date" for each REMIC I Regular Interest.

(2)   Calculated in accordance with the definition of "REMIC I Remittance Rate" 
herein.                                                             

          As provided herein, the Trustee will elect to treat the segregated
pool of assets consisting of the REMIC I Regular Interests as a REMIC for       
federal income tax purposes, and such segregated pool of assets will be         
designated as "REMIC II." The Class R-II Certificates will evidence the sole    
class of "residual interests" in REMIC II for purposes of the REMIC Provisions  
under federal income tax law.                                                   

        The Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class
A-6, Class A-7 and Class A-8 Certificates and the Class A-9 Component A, B, C   
and D will be "regular interests" in                                            

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REMIC II, and the Class R-II Certificates will be the sole class of "residual   
interests" therein for purposes of the REMIC Provisions (as defined herein)     
under federal income tax law.                                                   

       The following table sets forth the designation, type, aggregate
Original Certificate Principal Balance (as defined herein), maturity date,      
initial ratings and certain features for each Class of Certificates comprising  
the interests in the Trust Fund created hereunder.                              

                                                        · Enlarge/Download Table

                           Aggregate Original                                                 Initial          
                             Certificate                                 Maturity              Ratings         
Designation   Type        Principal Balance    Features                   Date          S&P     DCR     Moody's
-----------   ----        -----------------    --------                 --------        ---     ---     -------
                                                                                                               
Class A-1    Senior        $  324,000,000      Senior                  July 25, 2029    AAA     AAA     Aaa    
Class A-2    Senior        $  162,000,000      Senior                  July 25, 2029    AAA     AAA     Aaa    
Class A-3    Senior        $  46,398,000       Senior                   May 25, 2013    AAA     AAA     Aaa    
Class A-4    Senior        $  39,685,000       Senior                February 25, 2022  AAA     AAA     Aaa    
Class A-5    Senior        $  12,146,000       Senior                 October 25, 2023  AAA     AAA     Aaa    
Class A-6    Senior        $  37,336,000       Senior                  June 25, 2027    AAA     AAA     Aaa    
Class A-7    Senior        $  12,035,000       Senior                  July 25, 2029    AAA     AAA     Aaa    
Class A-8    Senior        $  16,400,000       Senior                  July 25, 2029    AAA     AAA     Aaa    
Class A-9    Senior        Notional Amount     Senior/Interest Only    June 25, 2001    AAAr    AAA     Aaa    
Class R-I    Subordinate         N/A           Residual                     N/A         N/R     N/R     N/R    
Class R-II   Subordinate         N/A           Residual                     N/A         N/R     N/R     N/R    

         The Group I Loans (as defined herein) have an aggregate Principal
Balance (as defined herein) as of the Cut-off Date (as defined herein) equal to 
$486,124,706.24. The Group II Loans (as defined herein) have an aggregate       
Principal Balance (as defined herein) as of the Cut-off Date equal to           
$163,874,864.96.                                                                

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

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 ARTICLE I

 DEFINITIONS

     Section 1.01 CERTAIN DEFINED TERMS. Whenever used herein, the
following words and phrases, unless the context otherwise requires, shall have  
the following meanings.                                                         

    "Accepted Servicing Practices": The Master Servicer's normal
servicing practices, which in general will conform to the mortgage servicing    
practices of prudent mortgage lending institutions which service for their own  
account mortgage loans of the same type as the Mortgage Loans in the            
jurisdictions in which the related Mortgaged Properties are located.            

        "Account": Any Eligible Account established pursuant to Sections
5.03, 5.09, 6.01 or 6.04 hereof.                                                

         "Accrual Period": With respect to (i) the Class A-1 Certificates,
the "Accrual Period" is the period commencing on the Distribution Date          
immediately preceding the month on which such Distribution Date occurs and      
ending on the calendar day immediately preceding such Distribution Date, except 
with respect to the first Distribution Date, which has an accrual period from   
June 29, 1998 to July 27, 1998, and (ii) with respect to the Group I Lockout,   
Class A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8 and Fixed Strip
Certificates, the "Accrual Period" is the previous calendar month.              

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

        "Agreement": This Pooling and Servicing Agreement, including the
Exhibits hereto, and all amendments hereof and supplements hereto.              

          "Appraised Value": As to any Mortgaged Property, the lesser of (i)
the appraised value of such Mortgaged Property based upon the appraisal made at 
the time of the origination of the related Mortgage Loan, and (ii) the sales    
price of the Mortgaged Property at such time of origination, except in the case 
of a Mortgaged Property securing a refinanced or modified Mortgage Loan as to   
which it is the lesser of the appraised value determined above or the appraised 
value determined in an appraisal at the time of refinancing or modification, as 
the case may be.                                                                

        "Assignment of Mortgage": With respect to each Mortgage Loan, an
assignment of the Mortgage, notice of transfer or equivalent instrument, in     
recordable form, sufficient under the laws of the jurisdiction wherein the      
related Mortgaged Property is located to reflect of record the sale of the      
Mortgage to the Trustee for the benefit of the Certificateholders.              

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         "Authorized Denominations": With respect to each class of Class A
Certificates, (other than the Fixed Strip Certificates) the minimum Percentage  
Interest corresponding to a minimum denomination of $25,000 and integral        
multiples of $1 in excess thereof. With respect to the Fixed Strip Certificates 
a minimum Percentage Interest of 20.00% and integral multiples of 0.01% in      
excess thereof. With respect to each class of Class R Certificates, a minimum   
Percentage Interest of 10.00% and integral multiples of 0.01% in excess thereof.

          "Available Funds Shortfall": With respect to the Group I Loans and
any Distribution Date, an amount equal to the sum of (a) the excess, if any, of 
the Group I Class A Interest Distribution Amount over the Group I Available     
Funds for such Distribution Date (to the extent such difference is not covered  
by payments under Section 6.05(c)(vi)) and (b) the Group I Subordination Deficit
(to the extent not covered by payments pursuant to Section 6.05(c)(vii)). With  
respect to the Group II Loans and any Distribution Date, an amount equal to the 
sum of (a) the excess, if any, of the Group II Class A Interest Distribution    
Amount over the Group II Available Funds for such Distribution Date (to the     
extent such difference is not covered by payments under Section 6.05(b)(vi)) and
(b) the Group II Subordination Deficit (to the extent not covered by payments   
pursuant to Section 6.05(b)(vii)).                                              

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

           "Balloon Payment": With respect to any Balloon Loan, as of any date
of determination, the Monthly Payment payable on the stated maturity date of    
such Mortgage Loan.                                                             

           "Business Day": Any day other than (a) a Saturday or Sunday, or (b)
a day on which banking institutions in the State of California, the State of New
York or the state where the Trustee's corporate trust office is located are     
authorized or obligated by law or executive order to be closed.                 

     "Certificate": Any Class A Certificate or Class R Certificate
executed by the Trustee on behalf of the Trust Fund and authenticated by the    
Trustee.                                                                        

           "Certificate Account": The Group I or Group II Certificate Account,
as applicable.                                                                  

 "Certificateholder or Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that, neither a   
Disqualified Organization nor a Non-United States Person shall be a Holder of a 
Class R Certificate for any purposes hereof and, solely for the purposes of     
giving any consent (except any consent required to be obtained pursuant to      
Section 11.03), waiver, request or demand pursuant to this Agreement, any       
Certificate registered in the name of the Company or the Master Servicer or any 
Affiliate thereof shall be deemed not to be outstanding and the rights to which 
it is entitled shall not be taken into account in determining whether the       
requisite percentage of rights necessary to effect any such consent has been    
obtained, except as otherwise provided in Section 11.03. The Trustee shall be   
entitled to rely upon a certification of the Company or the Master Servicer in  
determining if any Certificates are registered in the name of a respective      
Affiliate. Any Certificates on which payments are made under the Certificate    
Insurance Policy shall be deemed to be outstanding and held by the Certificate  
Insurer to the extent of such payment.                                          

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           "Certificate Insurance Payments Account": The Certificate Insurance
Payments Account established in accordance with Section 6.04(c) hereof and      
maintained by the Trustee.                                                      

           "Certificate Insurance Policy": As the context requires, one of (i)
the Group I and Group II Certificate Insurance Policy collectively or (ii) the  
Group I or Group II Certificate Insurance Policy, as applicable.                

            "Certificate Insurer": MBIA Insurance Corporation, a stock insurance
company organized and created under the laws of the State of New York, and any  
successors thereto.                                                             

     "Certificate Insurer Default": The failure by the Certificate
Insurer to make a payment required under any one of the Group I or Group II     
Certificate Insurance Policies in accordance with its terms.                    

            "Certificate Principal Balance": With respect to each class of Class
A Certificates (other than the Class A-9 Certificates), as determined           
separately, as of any time of determination, the related Original Certificate   
Principal Balance less any amounts distributed in reduction of the Certificate  
Principal Balance thereof pursuant to Section 6.05 on all prior Distribution    
Dates. The Class R Certificates do not have a "Certificate Principal Balance".  

"Certificate Register": As described in Section 4.02(a).

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

  "Civil Relief Act Interest Shortfall": With respect to any
Distribution Date, for any Mortgage Loan as to which there has been a reduction 
in the amount of interest collectible thereon for the most recently ended Due   
Period as a result of the application of the Civil Relief Act, the amount, if   
any, by which (i) interest collectible on such Mortgage Loan during the most    
recently ended calendar month is less than (ii) interest accrued for the related
Accrual Period on the Principal Balance of such Mortgage Loan, calculated at a  
rate equal to the sum of (A)(1) with respect to a Group I Loan, the sum of (a)  
the weighted average of the Group I Class A Pass- Through Rates on the Class A-1
Certificates and the Class A-2 Certificates and (b) the Group I Fixed Strip     
Effective Rate times (x) the related Notional Amount of the Group I Fixed Strip 
Components divided by (y) the aggregate Certificate Principal Balance of the    
Class A-1 Certificates and Class A-2 Certificates or (2) with respect to a Group
II Loan, the sum of (a) the weighted average of the Group II Class A            
Pass-Through Rates on the Class A-3, Class A-4, Class A-5, Class A-6, Class A-7 
and Class A-8 Certificates and (b) the Group II Class A Pass-Through Rate on the
Group II Fixed Strip Certificates times (x) the related Notional Amount of the  
Group II Fixed Strip Component divided by (y) the aggregate Certificate         
Principal Balance of the Class A-3, Class A-4, Class A-5, Class A-6, Class A-7  
and Class A-8 Certificates, in each case for such Distribution Date and (B) the 
per annum rates at which the related Servicing Fee and Trustee Fee accrue and   
the related Premium Percentage.                                                 

         "Class A Certificate": Any one of the Class A-1, Class A-2, Class
A-3, Class A-4, Class A-5, Class A-6, Class A-7, Class A-8 or Class A-9         
Certificates.                                                                   

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       "Class A Certificateholder": A Holder of a Class A Certificate.

           "Class A-1 Certificate": Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing an interest designated as a "regular interest" in REMIC II for   
the purposes of the REMIC Provisions and evidencing an interest primarily in    
Loan Group I.                                                                   

           "Class A-2 Certificate": Any Certificate designated as a "Class A-2
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing an interest designated as a "regular interest" in REMIC II for   
the purposes of the REMIC Provisions and evidencing an interest primarily in    
Loan Group I.                                                                   

           "Class A-3 Certificate": Any Certificate designated as a "Class A-3
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing an interest designated as a "regular interest" in REMIC II for   
the purposes of the REMIC Provisions and evidencing an interest primarily in    
Loan Group II.                                                                  

           "Class A-4 Certificate": Any Certificate designated as a "Class A-4
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing an interest designated as a "regular interest" in REMIC II for   
the purposes of the REMIC Provisions and evidencing an interest primarily in    
Loan Group II.                                                                  

           "Class A-5 Certificate": Any Certificate designated as a "Class A-5
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing an interest designated as a "regular interest" in REMIC II for   
the purposes of the REMIC Provisions and evidencing an interest primarily in    
Loan Group II.                                                                  

           "Class A-6 Certificate": Any Certificate designated as a "Class A-6
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing an interest designated as a "regular interest" in REMIC II for   
the purposes of the REMIC Provisions and evidencing an interest primarily in    
Loan Group II.                                                                  

           "Class A-7 Certificate": Any Certificate designated as a "Class A-7
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing an interest designated as a "regular interest" in REMIC II for   
purposes of the REMIC Provisions and evidencing an interest primarily in Loan   
Group II.                                                                       

           "Class A-8 Certificate": Any Certificate designated as a "Class A-8
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance                                      

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with the procedures set forth herein and an interest designated as a "regular   
interest" in REMIC II for purposes of the REMIC Provisions and evidencing an    
interest primarily in Loan Group                                                
II.                                                                             

           "Class A-9 Certificate": Any Certificate designated as a "Class A-9
Certificate" on the face thereof, in the form of Exhibit B-1 hereto, and        
authenticated by the Trustee in accordance with the procedures set forth herein 
and evidencing four separate interests designated as a "regular interests" in   
REMIC II for purposes of the REMIC Provisions and evidencing an interest in each
Loan Group.                                                                     

            "Class A-9 Component A": With respect to the Class A-9 Certificates,
the component thereof having a Notional Amount as set forth in this Agreement   
and entitled to distributions of interest (but not principal) to the extent set 
forth in this Agreement, being an uncertificated interest representing an       
interest designated as a "regular interest" in REMIC II for purposes of the     
REMIC Provisions. The Class A-9 Component A shall accrue interest at the related
Group I Class A Pass-Through Rate on its related Notional Amount but shall not  
be entitled to any distributions of principal.                                  

            "Class A-9 Component B": With respect to the Class A-9 Certificates,
the component thereof having a Notional Amount as set forth in this Agreement   
and entitled to distributions of interest (but not principal) to the extent set 
forth in this Agreement, being an uncertificated interest representing an       
interest designated as a "regular interest" in REMIC II for purposes of the     
REMIC Provisions. The Class A-9 Component B shall accrue interest at the related
Group I Class A Pass-Through Rate on its related Notional Amount but shall not  
be entitled to any distributions of principal.                                  

            "Class A-9 Component C": With respect to the Class A-9 Certificates,
the component thereof having a Notional Amount as set forth in this Agreement   
and entitled to distributions of interest (but not principal) to the extent set 
forth in this Agreement, being an uncertificated interest representing an       
interest designated as a "regular interest" in REMIC II for purposes of the     
REMIC Provisions. The Class A-9 Component C shall accrue interest at the related
Group I Class A Pass-Through Rate on its related Notional Amount but shall not  
be entitled to any distributions of principal.                                  

            "Class A-9 Component D": With respect to the Class A-9 Certificates,
the component thereof having a Notional Amount as set forth in this Agreement   
and entitled to distributions of interest (but not principal) to the extent set 
forth in this Agreement, being an uncertificated interest representing an       
interest designated as a "regular interest" in REMIC II for purposes of the     
REMIC Provisions. The Class A-9 Component D shall accrue interest at the related
Group II Class A Pass-Through Rate on its related Notional Amount but shall not 
be entitled to any distributions of principal.                                  

     "Class R Certificate": Any one of the Class R-I or Class R-II
Certificates.                                                                   

      "Class R-I Certificate": Any one of the Class R-I Certificates
executed by the Trustee and authenticated by the Trustee substantially in the   
form annexed hereto as Exhibit B-2, subordinate to the Class A Certificates in  
right of payment to the extent set forth herein and                             

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evidencing an interest designated as a "residual interest" in REMIC I for       
purposes of the REMIC Provisions.                                               

        "Class R-II Certificate": Any one of the Class R-II Certificates
executed by the Trustee and authenticated by the Trustee substantially in the   
form annexed hereto as Exhibit B-2, subordinate to the Class A Certificates in  
right of payment to the extent set forth herein and evidencing an interest      
designated as a "residual interest" in REMIC II for purposes of the REMIC       
Provisions.                                                                     

          "Class R Certificateholder": A Holder of a Class R-I or Class R-II
Certificate.                                                                    

"Closing Date": June, 29, 1998.                         

"Code": The Internal Revenue Code of 1986.              

  "Collection Account": The Eligible Account established and
maintained by the Master Servicer pursuant to Section 5.03.                     

"Commission": The Securities and Exchange Commission.   

      "Company": Southern Pacific Secured Assets Corp., a California
corporation, and any successor thereto.                                         

   "Compensating Interest": As defined in Section 6.09 hereof.

      "Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Due Period as part of a payment that is in excess of
the amount of the Monthly Payment due for such Due Period and which is not      
intended to satisfy the Mortgage Loan in full, nor is intended to cure a        
delinquency.                                                                    

"Custodian": As defined in Section 2.02(c).             

           "Cut-off Date": With respect to each Group I Loan or Group II Loan,
the later of (i) May 31, 1998 and (ii) the date of origination of such Mortgage 
Loan.                                                                           

   "DCR": Duff & Phelps Credit Rating Co., or its successor in
interest.                                                                       

      "Debt Service Reduction": With respect to any Mortgage Loan, a
reduction by a court of competent jurisdiction of the Monthly Payment due on    
such Mortgage Loan in a proceeding under the United States Bankruptcy Code,     
except such a reduction that constitutes a Deficient Valuation or 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 United      
States Bankruptcy Code.                                                         

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

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

        "Depository": The Depository Trust Company, 55 Water Street, New
York, New York 10041 and any successor Depository hereafter named. The nominee  
of the initial Depository for purposes of registering those Certificates that   
are to be book-entry Certificates is Cede & Co. The Depository shall at all     
times be a "clearing corporation" as defined in Section 8-102(3) of the Uniform 
Commercial Code of the State of New York and a "clearing agency" registered     
pursuant to the provisions of Section 17A of the Securities Exchange Act of     
1934, as amended.                                                               

        "Direct Participant": Any broker-dealer, bank or other financial
institution for which the Depository holds Class A Certificates from time to    
time as a securities depositary.                                                

            "Disqualified Organization": Any of (i) the United States, any State
or political subdivision thereof, any possession of the United States, or any   
agency or instrumentality of any of the foregoing (other than an instrumentality
which is a corporation if all of its activities are subject to tax and, except  
for the FHLMC, a majority of its board of directors is not selected by such     
governmental unit), (ii) any foreign government, any international organization,
or any agency or instrumentality of any of the foregoing, (iii) any organization
(other than certain farmers' cooperatives described in Section 521 of the Code) 
which is exempt from the tax imposed by Chapter 1 of the Code (unless such      
organization is subject to the tax imposed by Section 511 of the Code on        
unrelated business taxable income), or rural electric and telephone cooperatives
described in Section 1381(a)(2)(C) of the Code, (iv) an "electing large         
partnership" (as described in Section 775 of the Code) and (v) any other Person 
so designated by the Trustee based upon an Opinion of Counsel provided to the   
Trustee that the holding of an ownership interest in a Class R Certificate by   
such Person may cause REMIC I or REMIC II or any Person having an ownership     
interest in any Class of Certificates (other than such Person) to incur         
liability for any federal tax imposed under the Code that would not otherwise be
imposed but for the transfer of an ownership interest in the Class R Certificate
to such Person. The terms "United States", "State" and "international           
organization" shall have the meanings set forth in Section 7701 of the Code.    

          "Distribution Date": The 25th day of any month or if such 25th day
is not a Business Day, the first Business Day immediately following, commencing 
on July 27, 1998.                                                               

         "Due Date": The first day of each calendar month or other date on
which the related Monthly Payment is due, as specified in the related Mortgage  
Note.                                                                           

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        "Due Period": With respect to each Distribution Date, the period
beginning on the opening of business on the second day of the calendar month    
preceding the calendar month in which such Distribution Date occurs, and ending 
at the close of business on the first day of the calendar month in which such   
Distribution Date occurs.                                                       

        "Eligible Account": Either (A) an account or accounts maintained
with an institution (which may include the Trustee, provided such institution   
otherwise meets these requirements) whose deposits are insured by the FDIC, the 
unsecured and uncollateralized debt obligations of which institution shall be   
rated AA or better by S&P and DCR and Aa2 or better by Moody's and in the       
highest short term rating by the Rating Agencies, and which is (i) a federal    
savings and loan association duly organized, validly existing and in good       
standing under the federal banking laws, (ii) an institution duly organized,    
validly existing and in good standing under the applicable banking laws of any  
state, (iii) a national banking association (including the Trustee) duly        
organized, validly existing and in good standing under the federal banking laws,
(iv) a principal subsidiary of a bank holding company, or (v) approved in       
writing by the Certificate Insurer and the Rating Agencies or (B) a trust       
account or accounts maintained with the corporate trust department of a federal 
or state chartered depository institution acceptable to each Rating Agency and  
the Certificate Insurer (the Trustee shall be deemed acceptable, provided that  
the Trustee otherwise meets these requirements), having capital and surplus of  
not less than $50,000,000, acting in its fiduciary capacity.                    

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

          "Event of Default": One or more of the events described in Section
7.01 hereof.                                                                    

           "FDIC": The Federal Deposit Insurance Corporation and any successor
thereto.                                                                        

   "FHLMC": The Federal Home Loan Mortgage Corporation and any
successor thereto.                                                              

"Fixed Strip Certificates": The Class A-9 Certificates. 

"FNMA": Fannie Mae and any successor thereto.           

          "Foreclosure Profits": As to any Distribution Date, the excess, if
any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that      
became a Liquidated Mortgage Loan during the month immediately preceding the    
month of such Distribution Date over (ii) the sum of the unpaid principal       
balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest  
at the applicable Mortgage Interest Rate on the unpaid principal balance thereof
from the Due Date to which interest was last paid by the Mortgagor (or, in the  
case of a Liquidated Mortgage Loan that had been an REO Mortgage Loan, from the 
Due Date to which interest was last deemed to have been paid pursuant to Section
5.12) to the first day of the month following the month in which such Mortgage  
Loan became a Liquidated Mortgage Loan.                                         

        "Full Term Fixed Loans": Group II Loans with an original term to
maturity of 30 years.                                                           

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    "Full Term LIBOR-Rate Loans": Group I Loans with an Index of
Six-Month LIBOR and an adjustment period of six months or an Index of One-Year  
LIBOR and an adjustment period of one year, in each case with an original term  
to maturity of 30 years.                                                        

"GAAP": Generally accepted accounting principles.       

            "Gross Margin": As to each Group I Loan and Group II Loan, the fixed
percentage set forth in the related Mortgage Note and indicated in the related  
Mortgage Loan Schedules as the "Gross Margin," which percentage is added to the 
related Index on each Rate Adjustment Date to determine (subject to rounding,   
the Periodic Cap, Lifetime Floor and the Lifetime Cap) the Mortgage Interest    
Rate on such Mortgage Loan until the next Rate Adjustment Date.                 

 "Group I Available Funds": As defined in Section 6.04(a).

  "Group II Available Funds": As defined in Section 6.04(a).

          "Group I Certificate Account": The Certificate Account established
with respect to the Group I Certificates in accordance with Section 6.01(a)     
hereof and maintained by the Trustee.                                           

           "Group II Certificate Account": The Certificate Account established
with respect to the Group II Certificates in accordance with Section 6.01(a)    
hereof and maintained by the Trustee.                                           

        "Group I Certificate Insurance Policy": The certificate guaranty
insurance policy No. 26897, and all endorsements thereto dated the Closing Date,
issued by the Certificate Insurer for the benefit of the Group I                
Certificateholders, a copy of which is attached hereto as Exhibit A-1.          

         "Group II Certificate Insurance Policy": The certificate guaranty
insurance policy No. 26898, and all endorsements thereto dated the Closing Date,
issued by the Certificate Insurer for the benefit of the Group II               
Certificateholders, a copy of which is attached hereto as Exhibit A- 2.         

         "Group I Certificates": Collectively, the Class A-1 and Class A-2
Certificates, Class A-9 Components A, B and C and Class R-II Certificates.      

        "Group II Certificates": Collectively, the Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7 and Class A-8 Certificates and Class A-9        
Component D.                                                                    

         "Group I Class A Available Funds Cap Carry-Forward Amount": As of
any Distribution Date, an amount equal to (x) the sum of (i) the excess, if any,
of (a) the aggregate amount of interest due on the Class A-1 Certificates on    
each Distribution Date, calculated at the Group I Class A Formula Pass-Through  
Rate applicable to each such Distribution Date over (b) the aggregate amount of 
interest due on the Class A-1 Certificates on such Distribution Dates,          
calculated at the Group I Class A Pass-Through Rate applicable to each such     
Distribution Date for the Class A-1 Certificates, and (ii) the interest accrued 
during the prior Accrual Period on the amount of any Group I Class A Available  
Funds Cap Carry-Forward Amount immediately prior                                

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to such Distribution Date, calculated on the basis of a 360-day year and the    
actual number of days elapsed and using the Group I Class A Formula Pass-Through
Rate applicable to such Distribution Date minus (y) the aggregate of all amounts
distributed to the Class A-1 Certificateholders on all prior Distribution Dates 
pursuant to Section 6.05(b)(xi) hereof.                                         

      "Group I Class A Available Funds Pass-Through Rate": As of any
Distribution Date, the per annum rate equal to (i) a fraction equal to 30       
divided by the number of days in the immediately preceding Accrual Period       
multiplied by (a) the weighted average of the Mortgage Interest Rates of the    
Group I Loans, minus (b) the sum of the rates per annum used to determine the   
Servicing Fee, the Trustee Fee and the Premium Percentage and minus (c) the     
Group I Fixed Strip Effective Rate times a fraction equal to (x) the Notional   
Amount of the Group I Fixed Strip Components divided by (y) the aggregate Group 
I Pool Principal Balance as of the end of the second preceding Due Period (in   
the case of the first Distribution Date, as of the Closing Date), minus (ii)    
commencing on the thirteenth Distribution Date, 0.50% per annum.                

            "Group I Class A Carry-Forward Amount": As of any Distribution Date,
the sum of (a) the amount, if any, by which (i) the Group I Insured Distribution
Amount as of the immediately preceding Distribution Date exceeded (ii) the      
amount actually distributed to the Holders of the Group I Class A Certificates  
on such Distribution Date in respect thereof (including, without limitation, any
Insured Payments paid to the Holders of the Group I Class A Certificates by the 
Certificate Insurer as described in Sections 6.04 and 6.05 hereof) and (b) 30   
days' interest on the amount described in clause (a), calculated at an interest 
rate equal to the sum of (1) the weighted average of the Group I Class A Formula
Pass-Through Rate applicable to the Class A-1 Certificates for such Distribution
Date and the Group I Class A Pass-Through Rates on the Group I Lockout          
Certificates on such Distribution Date, and (2) the Group I Fixed Strip         
Effective Rate times a fraction equal to (x) the aggregate Certificate Principal
Balance of the Group I Lockout Certificates divided by (y) the aggregate        
Certificate Principal Balance of the Group I Class A Certificates, in each case 
as determined immediately prior to such Distribution Date. Any Group I Class A  
Carry-Forward Amount shall be deemed to be allocated first to any related Group 
I Subordination Deficit and second to any related Group I Class A Interest      
Distribution Amount.                                                            

       "Group II Class A Carry-Forward Amount": As of any Distribution
Date, the sum of (a) the amount, if any, by which (i) the Group II Insured      
Distribution Amount as of the immediately preceding Distribution Date exceeded  
(ii) the amount actually distributed to the Holders of the Group II Class A     
Certificates on such Distribution Date in respect thereof (including, without   
limitation, any Insured Payments paid to the Holders of the Group II Class A    
Certificates by the Certificate Insurer as described in Sections 6.04 and 6.05  
hereof) and (b) 30 days' interest on the amount described in clause (a),        
calculated at an interest rate equal to the sum of (1) the weighted average of  
the Group II Class A Pass-Through Rates on the Group II Certificates (other than
the Group II Fixed Strip Component) applicable to such Distribution Date,       
weighted on the basis of the Certificate Principal Balances of the Group II     
Class A Certificates, and (2) the Group II Class A Pass-Through Rate on the     
Group II Fixed Strip Component for such Distribution Date times a fraction equal
to (x) the Notional Amount of the Group II Fixed Strip Certificates divided by  
(y) the aggregate Certificate Principal Balance of the Group II Class A         
Certificates immediately prior to such Distribution Date. Any Group II Class A  
Carry-Forward                                                                   

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Amount shall be deemed to be allocated first to any related Group II            
Subordination Deficit and second to any related Group II Class A Interest       
Distribution Amount.                                                            

       "Group I Class A Certificates": Collectively, the Class A-1 and
Class A-2 Certificates and Class A-9 Components A, B and C.                     

           "Group II Class A Certificates": Collectively, the Class A-3, Class
A-4, Class A-5, Class A-6, Class A-7 and Class A-8 Certificates and Class A-9   
Component D.                                                                    

           "Group I Class A Formula Pass-Through Rate": As of any Distribution
Date, is the lesser of (x) the rate described in clause (i) of the definition of
"Group I Class A Pass-Through Rate" for such Distribution Date and (y) the      
weighted average of the Net Lifetime Caps of the Group I Loans times a fraction 
equal to 30 divided by the number of days in the immediately preceding Accrual  
Period.                                                                         

           "Group I Class A Interest Distribution Amount": With respect to the
Class A-1 or Class A-2 Certificates or Group I Fixed Strip Components for any   
Distribution Date the sum of (i) (a) the aggregate amount of interest accrued   
for the related Accrual Period on the related Certificate Principal Balance (or 
related Notional Amount thereof, in the case of the Group I Fixed Strip         
Components) immediately prior to such Distribution Date at the related Group I  
Class A Pass-Through Rate (based on (x) with respect to the Class A-1           
Certificates, a 360-day year and the actual number of days in the prior calendar
month or (y) with respect to the Class A-2 Certificates and Group I Fixed Strip 
Components, a 360-day year and a 30-day month) minus (b) a pro rata portion of  
the aggregate related Mortgage Loan Interest Shortfall for such Distribution    
Date and (ii) the portion of any related Group I Class A Carry-Forward Amount   
which relates to a shortfall (other than a related Mortgage Loan Interest       
Shortfall) in a distribution of a Group I Class A Interest Distribution Amount  
in respect of such Class A-1 Certificates or Class A-2 Certificates or Group I  
Fixed Strip Components, in each case as of such Distribution Date.              

            "Group II Class A Interest Distribution Amount": With respect to the
Group II Class A Certificates for any Distribution Date the sum of (i) (a) the  
aggregate amount of interest accrued for the related Accrual Period on the      
related Certificate Principal Balance (or related Notional Amount thereof, in   
the case of the Group II Fixed Strip Components) immediately prior to such      
Distribution Date at the related Group II Class A Pass-Through Rate (based on a 
360-day year and a 30-day month) minus (b) a pro rata portion of the aggregate  
related Mortgage Loan Interest Shortfall for such Distribution Date and (ii) the
portion of any related Group II Class A Carry-Forward Amount which relates to a 
shortfall (other than a related Mortgage Loan Interest Shortfall) in a          
distribution of a Group II Class A Interest Distribution Amount in respect of   
such Group II Class A Certificates, in each case as of such Distribution Date.  

          "Group I Class A Pass-Through Rate": With respect to the Class A-1
Certificates, for each Distribution Date, the per annum rate equal to the lesser
of:                                                                             

          (i)   with respect to (a) any Distribution Date which occurs on or
                 prior to the date on which the Pool Principal Balance is less
              than 10% of the Original Pool Principal Balance, One-Month
            LIBOR plus 0.17% or (b) any Distribution Date thereafter
One-Month LIBOR plus 0.34%; and             

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            (ii)  the Group I Class A Available Funds Pass-Through Rate for such
Distribution Date.                          

With respect to the Class A-2 Certificates, 6.28% per annum. With respect to the
Class A-9 Component A, for each Distribution Date, the per annum rate equal to  
1.7% for the first 20 Distribution Dates, 0.00% thereafter. With respect to the 
Class A-9 Component B, for each Distribution Date, the per annum rate equal to  
1.0% for the first 12 Distribution Dates, 0.00% thereafter. With respect to the 
Class A-9 Component C, for each Distribution Date, the per annum rate equal to  
1.0% for the first 6 Distribution Dates, 0.00% thereafter.                      

           "Group II Class A Pass-Through Rate": With respect to the Class A-3
Certificates, 6.52% per annum. With respect to the Class A-4 Certificates, 6.26%
per annum. With respect to the Class A-5 Certificates, 6.30% per annum. With    
respect to the Class A-6 Certificates for the first 36 Distribution Dates, the  
lesser of (i) 6.45% per annum and (ii) the Maximum Group II Rate and for all    
Distribution Dates thereafter, 6.45% per annum. With respect to the Class A-7   
Certificates for the first 36 Distribution Dates, the lesser of (i) 6.74% per   
annum and (ii) the Maximum Group II Rate and for all Distribution Dates         
thereafter, 6.74% per annum. With respect to the Class A-8 Certificates for the 
first 36 Distribution Dates, the lesser of (i) 6.37% per annum and (ii) the     
Maximum Group II Rate and for all Distribution Dates thereafter, 6.37% per      
annum. With respect to the Class A-9 Component D, prior to the 37th Distribution
Date, the per annum rate equal to the weighted average of the Mortgage Interest 
Rates of the Group II Loans, minus the sum of the rates per annum used to       
determine the Servicing Fee and the Trustee Fee and the Premium Percentage.     

            "Group I Class A Principal Distribution Amount": With respect to the
Group I Certificates (other than the Group I Fixed Strip Components) for any    
Distribution Date, the lesser of:                                               

     (a)   the excess of (i) the sum, as of such Distribution Date, of (A) the
        Group I Available Funds and (B) any related Insured Payment over
  (ii) the Group I Class A Interest Distribution Amount; and

(b)   the sum, without duplication, of:                             

           (i)   the portion of any Group I Class A Carry-Forward Amount which
         relates to a shortfall in a distribution of a Group I
Subordination Deficit,                      

       (ii)  all scheduled installments of principal in respect of the
             Group I Loans received or advanced during the related Due
                 Period, together with all unscheduled recoveries of principal
          in respect of the Group I Loans received by the Master
  Servicer during the related Prepayment Period,

 (iii) the Principal Balance of each Group I Loan that was
                  repurchased by the Seller, by an Affiliate of the Seller or by
the Company,                                

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          (iv)  any Substitution Adjustments delivered by the Company on the
                related Master Servicer Remittance Date in connection with a
substitution of a Group I Loan,             

           (v)   the Net Liquidation Proceeds collected by the Master Servicer
              of all Group I Loans during the related Due Period (to the
               extent such Net Liquidation Proceeds related to principal),

      (vi)  the amount of any Group I Subordination Deficit for such
Distribution Date,                          

            (vii) the proceeds received by the Trustee with respect to the Group
                 I Loans from any termination of the Trust Fund (to the extent
such proceeds are related to principal), and

          (viii) the amount of any Group I Subordination Increase Amount for
such Distribution Date;                     

 minus
 -----

          (ix) the amount of any Group I Subordination Reduction Amount for such
Distribution Date.                                

         "Group II Class A Principal Distribution Amount": With respect to
the Group II Certificates (other than the Group II Fixed Strip Components) for  
any Distribution Date, the lesser of:                                           

     (a)   the excess of (i) the sum, as of such Distribution Date, of (A) the
         Group II Available Funds and (B) any related Insured Payment over
   (ii) the Group II Class A Interest Distribution Amount; and

(b)   the sum, without duplication, of:                             

            (i)   the portion of any Group II Class A Carry-Forward Amount which
          relates to a shortfall in a distribution of a Group II
Subordination Deficit,                      

       (ii)  all scheduled installments of principal in respect of the
              Group II Loans received or advanced during the related Due
                 Period, together with all unscheduled recoveries of principal
           in respect of the Group II Loans received by the Master
  Servicer during the related Prepayment Period,

  (iii) the Principal Balance of each Group II Loan that was
                  repurchased by the Seller, by an Affiliate of the Seller or by
the Company,                                

          (iv)  any Substitution Adjustments delivered by the Company on the
                related Master Servicer Remittance Date in connection with a
substitution of a Group II Loan,            

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           (v)   the Net Liquidation Proceeds collected by the Master Servicer
               of all Group II Loans during the related Due Period (to the
               extent such Net Liquidation Proceeds related to principal),

       (vi)  the amount of any Group II Subordination Deficit for such
Distribution Date,                          

            (vii) the proceeds received by the Trustee with respect to the Group
                  II Loans from any termination of the Trust Fund (to the extent
such proceeds are related to principal); and

           (viii) the amount of any Group II Subordination Increase Amount for
such Distribution Date;                     

 minus
 -----

           (ix)  the amount of any Group II Subordination Reduction Amount for
such Distribution Date.                     

            "Group I Delinquency Amount": With respect to any Distribution Date,
the product of the (x) Group I Delinquency Percentage and (y) the Group I Pool  
Principal Balance as of such Distribution Date.                                 

       "Group II Delinquency Amount": With respect to any Distribution
Date, the product of the (x) Group II Delinquency Percentage and (y) the Group  
II Pool Principal Balance as of such Distribution Date.                         

          "Group I Delinquency Percentage": With respect to any Distribution
Date, the rolling three month average of the percentage equivalent of a         
fraction, the numerator of which is (x) the aggregate Principal Balances of all 
Group I Loans which are, without duplication, (i) 90 or more days Delinquent    
(ii) in bankruptcy and 90 days or more Delinquent under the related Mortgage    
Note, (iii) REO Mortgage Loans and (iv) Group I Loans for which foreclosure     
proceedings have commenced and the denominator of which is (y) the Group I Pool 
Principal Balance as of such Distribution Date.                                 

           "Group II Delinquency Percentage": With respect to any Distribution
Date, the rolling three month average of the percentage equivalent of a         
fraction, the numerator of which is (x) the aggregate Principal Balances of all 
Group II Loans which are, without duplication, (i) 90 or more days Delinquent   
(ii) in bankruptcy and 90 days or more Delinquent under the related Mortgage    
Note, (iii) REO Mortgage Loans and (iv) Group II Loans for which foreclosure    
proceedings have commenced and the denominator of which is (y) the Group II Pool
Principal Balance as of such Distribution Date.                                 

 "Group I Excess Subordinated Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Group I Subordinated Amount   
that would exist on such Distribution Date after taking into account all        
distributions to be made on such Distribution Date (exclusive of                

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any reductions thereto attributable to Group I Subordination Reduction Amounts  
on such Distribution Date) over (b) the Group I Required Subordinated Amount for
such Distribution Date.                                                         

  "Group II Excess Subordinated Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Group II Subordinated Amount  
that would exist on such Distribution Date after taking into account all        
distributions to be made on such Distribution Date (exclusive of any reductions 
thereto attributable to Group II Subordination Reduction Amounts on such        
Distribution Date) over (b) the Group II Required Subordinated Amount for such  
Distribution Date.                                                              

           "Group I Fixed Strip Components": Any of the Class A-9 Component A,
B and C.                                                                        

    "Group II Fixed Strip Component": The Class A-9 Component D.

         "Group I Fixed Strip Effective Rate": With respect to the first 6
Distribution Dates, 1.70%. With respect to the 7th through the 12th Distribution
Date, 1.00%. With respect to the 13th through the 20th Distribution Date, 1.00%.
With respect to any Distribution Date after the 20th Distribution Date, 0.00%.  

  "Group I Insured Distribution Amount": With respect to any
Distribution Date, the sum of (a) the Group I Class A Interest Distribution     
Amount with respect to such Distribution Date and (b) the Group I Subordination 
Deficit, if any, as of such Distribution Date.                                  

   "Group II Insured Distribution Amount": With respect to any
Distribution Date, the sum of (a) the Group II Class A Interest Distribution    
Amount with respect to such Distribution Date and (b) the Group II Subordination
Deficit, if any, as of such Distribution Date.                                  

      "Group I Loans" or "Loan Group I": The group of Mortgage Loans
identified on Exhibit D-1 from time to time.                                    

        "Group II Loans" or "Loan Group II": The group of Mortgage Loans
identified on Exhibit D-2 from time to time.                                    

   "Group I Lockout Certificates": The Class A-2 Certificates.

    "Group II Lockout Certificates": The Class A-8 Certificates.

          "Group II Lockout Certificate Percentage": As of each Distribution
Date, the percentage equal to the aggregate Certificate Principal Balance of the
Group II Lockout Certificates divided by the sum of the aggregate Certificate   
Principal Balances of the Group II Class A Certificates.                        

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      "Group I Lockout Distribution Percentage": With respect to any
Distribution Date, the percentage indicated below:                              

         Distribution Date               Lockout Distribution Percentage
         -----------------               -------------------------------

July 1998 through                                                               
March 2000........................... 0%                                        
April 2000 and                                                                  
thereafter........................... 95%                                       

Notwithstanding the foregoing, if the Certificate Principal Balances of the     
Group I Class A Certificates (other than the Group I Lockout Certificates) have 
been reduced to zero, the Group I Lockout Distribution Percentage will be equal 
to 100%.                                                                        

       "Group II Lockout Distribution Percentage": With respect to any
Distribution Date, the percentage indicated below:                              

               Distribution Date         Lockout Distribution Percentage
               -----------------         -------------------------------

July 1998 through                                                               
June 2001............................ 0%                                        
July 2001 through                     45% of the Group II Lockout Certificate   
June 2003............................ Percentage                                
July 2003 through                     80% of the Group II Lockout Certificate   
June 2004............................ Percentage                                
July 2004 through                     100% of the Group II Lockout Certificate  
June 2005............................ Percentage                                
July 2005 and                         the lesser of (x) 100% and (y) 300% of the
thereafter........................... Group II Lockout Certificate Percentage   

Notwithstanding the foregoing, if the Certificate Principal Balances of the     
Group II Class A Certificates (other than the Group II Lockout Certificates)    
have been reduced to zero, the Group II Lockout Distribution Percentage will be 
equal to 100%.                                                                  

           "Group I Net Monthly Excess Cashflow": As of any Distribution Date,
an amount equal to (x) the Group I Available Funds minus (y) the sum of (i) the 
sum of the Group I Class A Interest Distribution Amount and the amount described
in clause (b) of the definition of Group I Class A Principal Distribution Amount
(calculated for this purpose without regard to any Group I Subordination        
Increase Amount, Group I Subordination Reduction Amount, Group I Subordination  
Deficit or portion thereof included therein) and (ii) the Group I Reimbursement 
Amount, if any, for such Distribution Date.                                     

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            "Group II Net Monthly Excess Cashflow": As of any Distribution Date,
an amount equal to (x) the Group II Available Funds minus (y) the sum of (i) the
sum of the Group II Class A Interest Distribution Amount and the amount         
described in clause (b) of the definition of Group II Class A Principal         
Distribution Amount (calculated for this purpose without regard to any Group II 
Subordination Increase Amount, Group II Subordination Reduction Amount, Group II
Subordination Deficit or portion thereof included therein) and (ii) the Group II
Reimbursement Amount, if any, for such Distribution Date.                       

          "Group I Pool Principal Balance": The aggregate Principal Balances
of the Group I Loans in the Trust Fund as of any date of determination.         

           "Group II Pool Principal Balance": The aggregate Principal Balances
of the Group II Loans in the Trust Fund as of any date of determination.        

           "Group I Principal Remittance Amount": As of any Distribution Date,
the sum, without duplication of the amounts specified in clauses (b)(ii) through
(v) and (vii) of the definition of Group I Class A Principal Distribution       
Amount.                                                                         

            "Group II Principal Remittance Amount": As of any Distribution Date,
the sum, without duplication of the amounts specified in clauses (b)(ii) through
(v) and (vii) of the definition of Group II Class A Principal Distribution      
Amount.                                                                         

            "Group I Reimbursement Amount": As of any Distribution Date, the sum
of (a)(i) all Group I Insured Payments (as defined in the Group I Certificate   
Insurance Policy) previously paid by the Certificate Insurer and in each case   
not previously repaid to the Certificate Insurer pursuant to Sections 6.05(b) or
6.05(c) hereof plus (ii) interest accrued on each such Group I Insured Payment  
not previously repaid calculated at a rate equal to the sum of (A) the Group I  
Class A Pass-Through Rate on the Class A-1 Certificates and (B) the Group I     
Class A Pass- Through Rate on the Group I Lockout Certificates and Fixed Strip  
Effective Rate times (x) the Notional Amount of the Group I Fixed Strip         
Components divided by (y) the aggregate Certificate Principal Balance of the    
Group I Class A Certificates from the date such Group I Insured Payment was made
and (b)(i) any amounts then due and owing to the Certificate Insurer under the  
Insurance Agreement, as certified to the Trustee by the Certificate Insurer plus
(ii) interest on such amounts at the Late Payment Rate (as defined in the       
Insurance Agreement). The Certificate Insurer shall notify the Trustee and the  
Company of the amount of any Group I Reimbursement Amount.                      

         "Group II Reimbursement Amount": As of any Distribution Date, the
sum of (a)(i) all Group II Insured Payments (as defined in the Group II         
Certificate Insurance Policy) previously paid by the Certificate Insurer and in 
each case not previously repaid to the Certificate Insurer pursuant to Sections 
6.05(b) or 6.05(c) hereof plus (ii) interest accrued on each such Group II      
Insured Payment not previously repaid calculated at a rate equal to the sum of  
(A) the weighted average of the Group II Class A Pass-Through Rates on the Group
II Class A Certificates (other than the Group II Fixed Strip Certificates) and  
(B) the Group II Class A Pass-Through Rate on the Group II Fixed Strip          
Certificates times (x) the Notional Amount of the Group II Fixed Strip Component
divided by (y) the aggregate Certificate Principal Balance of the Group II Class
A Certificates from the date such Group II Insured Payment was made and (b)(i)  
any amounts then due and owing to the Certificate Insurer under the Insurance   
Agreement, as certified to the Trustee                                          

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by the Certificate Insurer plus (ii) interest on such amounts at the Late       
Payment Rate (as defined in the Insurance Agreement). The Certificate Insurer   
shall notify the Trustee and the Company of the amount of any Group II          
Reimbursement Amount.                                                           

           "Group I Required Subordinated Amount": For each Distribution Date,
the amount determined as follows:                                               

            (a) for any Distribution Date occurring during the period commencing
  on the Closing Date and ending on the later of (x) the date upon which
    principal payments on the Group I Loans in the amount of one-half of the
     Original Group I Pool Principal Balance have been received by the Group I
    Certificateholders and (y) the thirtieth Distribution Date following the
    Closing Date, the greater of: (i) the product of (A) the Initial Group I
Specified Subordinated Percentage and (B) the Original Group I Pool 
   Principal Balance; and (ii) 45% of the Group I Delinquency Amount as of
such Distribution Date:                                             

           (b) for any Distribution Date occurring after the end of the period
     in clause (a) above, the greatest of (i) the product of (x) 2 and (y) the
    Initial Group I Specified Subordinated Percentage times the Group I Pool
   Principal Balance as of such Distribution Date, (ii) 45% of the Group I
      Delinquency Amount; and (iii) 0.75% of the Original Group I Pool Principal
Balance;                                                            

provided, however, for any Distribution Date occurring after the end of the     
period in clause (a) above, if the Group I Delinquency Percentage exceeds 10%,  
the Group I Required Subordinated Amount as calculated in clause (b)(i) above,  
shall be no less than the Group I Required Subordinated Amount as of the        
previous Distribution Date. In addition the Group I Required Subordinated Amount
may be modified by the Company with the consent of the Certificate Insurer.     

            "Group II Required Subordinated Amount": For each Distribution Date,
the amount determined as follows:                                               

            (a) for any Distribution Date occurring during the period commencing
  on the Closing Date and ending on the later of (x) the date upon which
     principal payments on the Group II Loans in the amount of one-half of the
    Original Group II Pool Principal Balance have been received by the Group
   II Certificateholders and (y) the thirtieth Distribution Date following
      the Closing Date, the greater of: (i) the product of (A) the Initial Group
   II Specified Subordinated Percentage and (B) the Original Group II Pool
    Principal Balance; and (ii) 53% of the Group II Delinquency Amount as of
such Distribution Date:                                             

           (b) for any Distribution Date occurring after the end of the period
     in clause (a) above, the greatest of (i) the product of (x) 2 and (y) the
      Initial Group II Specified Subordinated Percentage times the Group II Pool
    Principal Balance as of such Distribution Date, (ii) 53% of the Group II
Delinquency Amount; and (iii) 0.75% of the Original Group II Pool   
Principal Balance;                                                  

provided, however, for any Distribution Date occurring after the end of the     
period in clause (a) above, if the Group II Delinquency Percentage exceeds 10%, 
the Group II Required Subordinated                                              

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Amount as calculated in clause (b)(i) above, shall be no less than the Group II 
Required Subordinated Amount as of the previous Distribution Date. In addition, 
the Group II Required Subordinated Amount may be modified by the Company with   
the consent of the Certificate Insurer.                                         

       "Group I Subordinated Amount": As of any Distribution Date, the
difference, if any, between (a) the Group I Pool Principal Balance as of the    
close of business on the last day of the related Due Period and (b) the         
aggregate Certificate Principal Balance of the Class A-1 Certificates as of such
Distribution Date (after taking into account the payment of the Group I         
Principal Remittance Amount related to such Distribution Date); PROVIDED,       
HOWEVER, that such amount shall not be less than zero.                          

        "Group II Subordinated Amount": As of any Distribution Date, the
difference, if any, between (a) the Group II Pool Principal Balance as of the   
close of business on the last day of the related Due Period and (b) the         
aggregate Certificate Principal Balance of the Group II Class A Certificates as 
of such Distribution Date (after taking into account the payment of the Group II
Principal Remittance Amount related to such Distribution Date); PROVIDED,       
HOWEVER, that such amount shall not be less than zero.                          

      "Group I Subordination Deficiency Amount": With respect to any
Distribution Date, the amount, if any, by which (a) the Group I Required        
Subordinated Amount applicable to such Distribution Date exceeds (b) the Group I
Subordinated Amount applicable to such Distribution Date prior to taking into   
account the payment of any related Group I Subordination Increase Amounts on    
such Distribution Date.                                                         

       "Group II Subordination Deficiency Amount": With respect to any
Distribution Date, the amount, if any, by which (a) the Group II Required       
Subordinated Amount applicable to such Distribution Date exceeds (b) the Group  
II Subordinated Amount applicable to such Distribution Date prior to taking into
account the payment of any related Group II Subordination Increase Amounts on   
such Distribution Date.                                                         

         "Group I Subordination Deficit": As of any Distribution Date, the
amount, if any, by which (a) the sum of the Certificate Principal Balances of   
the Class A-1 Certificates and Class A-2 Certificates (after taking into account
the payment of the Group I Class A Principal Distribution Amount (other than    
payments made with respect thereto pursuant to clause (vi) of the definition of 
Group I Class A Principal Distribution Amount from amounts drawn under the Group
I Certificate Insurance Policy)) on such date exceeds (b) the Group I Pool      
Principal Balance determined as of the end of the immediately preceding Due     
Period.                                                                         

          "Group II Subordination Deficit": As of any Distribution Date, the
amount, if any, by which (a) the aggregate Certificate Principal Balance of the 
Group II Class A Certificates (after taking into account the payment of the     
Group II Class A Principal Distribution Amount (other than payments made with   
respect thereto pursuant to clause (vi) of the definition of Group II Class A   
Principal Distribution Amount from amounts drawn under the Group II Certificate 
Insurance Policy)) on such date exceeds (b) the Group II Pool Principal Balance 
determined as of the end of the immediately preceding Due Period.               

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          "Group I Subordination Increase Amount": With respect to the first
Distribution Date, $0.00. With respect to any Distribution Date thereafter, the 
lesser of (a) the Group I Subordination Deficiency Amount as of such            
Distribution Date (after taking into account the payment of the Group I Class A 
Principal Distribution Amount on such Distribution Date (other than clause      
(viii) thereof)) and (b) the amount of Group I Net Monthly Excess Cashflow on   
such Distribution Date.                                                         

           "Group II Subordination Increase Amount": With respect to the first
Distribution Date, $0.00. With respect to any Distribution Date thereafter, the 
lesser of (a) the Group II Subordination Deficiency Amount as of such           
Distribution Date (after taking into account the payment of the Group II Class A
Principal Distribution Amount on such Distribution Date (other than clause      
(viii) thereof)) and (b) the amount of Group II Net Monthly Excess Cashflow on  
such Distribution Date.                                                         

     "Group I Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Group I Excess      
Subordinated Amount for such Distribution Date and (b) the Group I Principal    
Remittance Amount for the prior Due Period.                                     

      "Group II Subordination Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Group II Excess     
Subordinated Amount for such Distribution Date and (b) the Group II Principal   
Remittance Amount for the prior Due Period.                                     

      "Index": As to any Group I Loan, a rate per annum equal to the
average of the interbank offered rates for six month or one year United States  
dollar deposits in the London market as published in the Western Edition of THE 
WALL STREET JOURNAL, as most recently available as of the first business day    
forty-five, thirty or five days prior to any Rate Adjustment Date, as specified 
in the related Mortgage Note.                                                   

      "Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.                  

          "Initial Group I Loan": A Group I Loan assigned and transferred to
the Trustee on the Closing Date, as listed on the Mortgage Loan Schedule        
attached hereto as Exhibit D-1.                                                 

            "Initial Group II Loan": A Group II Loan assigned and transferred to
the Trustee on the Closing Date, as listed on the Mortgage Loan Schedule        
attached hereto as Exhibit D-2.                                                 

           "Initial Group I Specified Subordinated Amount": An amount equal to
the product of (x) the Initial Group I Specified Subordinated Percentage and (y)
the Original Group I Pool Principal Balance.                                    

            "Initial Group II Specified Subordinated Amount": An amount equal to
the product of (x) the Initial Group II Specified Subordinated Percentage and   
(y) the Original Group II Pool Principal Balance.                               

            "Initial Group I Specified Subordinated Percentage": An amount equal
to 4.40% of the Original Group I Pool Principal Balance.                        

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       "Initial Group II Specified Subordinated Percentage": An amount
equal to 3.95% of the Original Group II Pool Principal Balance.                 

          "Initial Mortgage Loan": Any Initial Group I Loan or Initial Group
II Loan.                                                                        

          "Insurance Agreement": The Insurance Agreement dated as of June 1,
1998 among the Certificate Insurer, the Company, the Master Servicer, the       
Trustee and Southern Pacific Funding Corporation, as such agreement may be      
amended or supplemented in accordance with the provisions thereof.              

         "Insurance Proceeds: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan to the extent such proceeds are not   
applied to the restoration of the related Mortgaged Property or released to the 
related Mortgagor in accordance with Accepted Servicing Practices. "Insurance   
Proceeds" do not include "Insured Payments."                                    

            "Insured Payment": As determined separately for Group I and Group II
Class A Certificates, the sum of (i) with respect to each Distribution Date, the
related Available Funds Shortfall and (ii) any related unpaid Preference Amount.

        "Interest Determination Date": With respect to the first Accrual
Period, the Closing Date. With respect to any respect to any Accrual Period     
thereafter, the second London Business Day preceding the commencement of such   
Accrual Period.                                                                 

        "Intermediate Term Fixed Loans": Group II Loans with an original
term to maturity of 5, 10, 15 or 20 years.                                      

            "Intermediate Term LIBOR-Rate Loans": Group I Loans with an Index of
Six- Month LIBOR and an adjustment period of six months and an original term to 
maturity of 12 or 15 years.                                                     

            "Lifetime Cap": As to any Mortgage Loan in Loan Group I, the maximum
Mortgage Interest Rate set forth in the related Mortgage Note and indicated in  
the Mortgage Loan Schedule, which rate may be applicable to such Mortgage Loan  
at any time during the life of such Mortgage Loan.                              

      "Lifetime Floor": As to any Mortgage Loan in Loan Group I, the
minimum Mortgage Interest Rate set forth in the related Mortgage Note and       
indicated in the Mortgage Loan Schedule, which rate may be applicable to such   
Mortgage Loan at any time during the life of such Mortgage Loan.                

          "Liquidated Loan Loss": With respect to any Distribution Date, the
aggregate of the amount of losses with respect to each Mortgage Loan which      
became a Liquidated Mortgage Loan during the Due Period preceding such          
Distribution Date, equal to the excess, if any, of (i) the unpaid principal     
balance of each such Liquidated Mortgage Loan, plus accrued interest thereon in 
accordance with the amortization schedule at the time applicable thereto at the 
applicable Mortgage Interest Rate from the Due Date as to which interest was    
last paid with respect thereto through the last day of the month in which such  
Mortgage Loan became a                                                          

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Liquidated Mortgage Loan, over (ii) Net Liquidation Proceeds with respect to    
such Liquidated Mortgage Loan.                                                  

         "Liquidated Mortgage Loan": A Mortgage Loan with respect to which
the related Mortgaged Property has been acquired, liquidated and/or foreclosed  
and with respect to which the Master Servicer determines that all Liquidation   
Proceeds which it expects to recover have been recovered.                       

           "Liquidation Expenses": Expenses incurred by the Master Servicer or
any Subservicer in connection with the liquidation of any defaulted Mortgage    
Loan or property acquired in respect thereof (including, without limitation,    
legal fees and expenses, committee or referee fees, and, if applicable,         
brokerage commissions and conveyance taxes), any unreimbursed amount expended by
the Master Servicer pursuant to Sections 5.05, 5.06 and 5.12 respecting the     
related Mortgage Loan and any unreimbursed expenditures for real property taxes 
or for property restoration or preservation of the related Mortgaged Property.  
Liquidation Expenses shall not include any previously incurred expenses in      
respect of an REO Mortgage Loan which have been netted against related REO      
Proceeds.                                                                       

       "Liquidation Proceeds": Amounts received by the Master Servicer
(including Insurance Proceeds) in connection with the liquidation of defaulted  
Mortgage Loans or property acquired in respect thereof, whether through         
foreclosure, sale or otherwise, including payments in connection with such      
Mortgage Loans received from the Mortgagor, other than amounts required to be   
paid to the Mortgagor pursuant to the terms of the applicable Mortgage or to be 
applied otherwise pursuant to law.                                              

      "Liquidation Report": A report in the form set forth hereto as
Exhibit S.                                                                      

"Loan Repurchase Price": As defined in Section 2.04(b). 

          "Loan Type": One of the following types of Mortgage Loans included
in the Trust Fund: (i) 2/28 and 3/27 Loans, (ii) Full Term LIBOR-Rate Loans,    
(iii) Full Term Fixed Loans, (iv) Intermediate Term Fixed Loans and (v) Balloon 
Loans.                                                                          

            "Loan-to-Value Ratio or LTV": With respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the principal    
balance of such Mortgage Loan, as of the date of origination of the Mortgage    
Loan, divided by the Appraised Value of the related Mortgaged Property.         

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

            "Majority Certificateholders": As of any date, the Holder or Holders
of Class A Certificates evidencing an excess of 50% of the Voting Rights of the 
Class A Certificates.                                                           

  "Master Servicer": Southern Pacific Funding Corporation, a
California corporation, or any successor appointed as herein provided.          

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       "Master Servicer Remittance Amount": With respect to any Master
Servicer Remittance Date, an amount equal to the sum of (i) all unscheduled     
collections of principal and interest on the Mortgage Loans (including Principal
Prepayments in Full and Curtailments, Net REO Proceeds and Net Liquidation      
Proceeds, if any) collected by the Master Servicer during the related Prepayment
Period and all scheduled Monthly Payments due on the related Due Date and       
received on or prior to the Business Day preceding such Master Servicer         
Remittance Date, (ii) all Periodic Advances made by the Master Servicer with    
respect to payments due to be received on the Mortgage Loans on the related Due 
Date and (iii) any other amounts required to be placed in the Collection Account
by the Master Servicer pursuant to this Agreement but excluding the following:  

          (a) amounts received on particular Mortgage Loans as late payments
of principal or interest and respecting which the Master Servicer has previously
made an unreimbursed Periodic Advance;                                          

      (b) those portions of each payment of interest on a particular
Mortgage Loan which represent the Servicing Fee;                                

       (c) that portion of Liquidation Proceeds and REO Proceeds which
represents any unpaid Servicing Fee;                                            

     (d) all income from Permitted Investments that is held in the
Collection Account for the account of the Master Servicer;                      

            (e) all amounts in respect of late fees, assumption fees, prepayment
fees and similar fees;                                                          

      (f) certain other amounts which are reimbursable to the Master
Servicer, as provided in this Agreement; and                                    

(g) Net Foreclosure Profits.                            

           "Master Servicer Remittance Date": With respect to any Distribution
Date, the 18th of the month in which such Distribution Date occurs, or if such  
18th day is not a Business Day, the Business Day preceding such 18th day.       

            "Maximum Group II Rate": A rate equal to the weighted average of the
REMIC I Remittance Rates for REMIC I Regular Interest LT-FW, REMIC I Regular    
Interest LT-FX, REMIC I Regular Interest LT-FY and REMIC I Regular Interest     
LT-FZ, weighted on the basis of the Uncertificated Balances of the REMIC I Group
II Regular Interests. For purposes of the calculation of the Maximum Group II   
Rate and for the first 36 Distribution Dates, the REMIC I Remittance Rate for   
REMIC I Regular Interest LT-FZ will be 0%.                                      

     "Monthly Payment": As to any Mortgage Loan (including any REO
Mortgage Loan) and any Due Date, the scheduled payment of principal and interest
due thereon for such Due Date (after adjustment for any Curtailments and        
Deficient Valuations occurring prior to such Due Date but before any adjustment 
to such amortization schedule by reason of any bankruptcy, other                

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than Deficient Valuations or similar proceeding or any moratorium or similar    
waiver or grace period).                                                        

    "Moody's": Moody's Investors Service, Inc., or any successor
thereto.                                                                        

            "Mortgage": The mortgage, deed of trust or other instrument creating
a first lien on the Mortgaged Property.                                         

            "Mortgage File": The mortgage documents listed in Exhibit C attached
hereto pertaining to a particular Mortgage Loan and any additional documents    
required to be added to the Mortgage File pursuant to this Agreement; provided  
that whenever the term "Mortgage File" is used to refer to documents actually   
received by the Trustee, such term shall not be deemed to include such          
additional documents required to be added unless they are actually so added.    

           "Mortgage Impairment Insurance Policy": As defined in Section 5.07.

            "Mortgage Interest Rate": As to any Group I Loan, the per annum rate
at which interest accrues on the unpaid principal balance thereof, as adjusted  
from time to time in accordance with the provisions of the related Mortgage     
Note, which rate is (a) prior to the first related Rate Adjustment Date         
occurring after the Cut-off Date, the initial Mortgage Interest Rate for such   
Mortgage Loan indicated on the Mortgage Loan Schedule and (b) from and after    
such first Rate Adjustment Date, the sum of the related Index applicable to the 
most recent Rate Adjustment Date, and the Gross Margin, rounded as set forth in 
such Mortgage Note, subject to the Periodic Cap, the Lifetime Cap and Lifetime  
Floor set forth in the related Mortgage Note that may be applicable to such     
Mortgage Loan at any time during the life of such Mortgage Loan. As to any Group
II Loan, the fixed per annum rate at which interest accrued on the unpaid       
principal balance thereof, which rate is the Mortgage Interest Rate for such    
Group II Loan indicated on the related Mortgage Loan Schedule.                  

          "Mortgage Loan": An individual mortgage loan which is assigned and
transferred to the Trustee pursuant to this Agreement, together with the rights 
and obligations of a holder thereof and payments thereon and proceeds therefrom 
(other than payments of interest that accrued on each Mortgage Loan up to and   
including the Due Date therefor occurring, with respect to the Mortgage Loans   
prior to the Cut-off Date), the Mortgage Loans originally subject to this       
Agreement being identified on the Mortgage Loan Schedule. As applicable,        
Mortgage Loan shall be deemed to refer to the related REO Property.             

 "Mortgage Loan Documents": As defined in Section 2.03(a).

   "Mortgage Loan Group": The Group I Loans or Group II Loans.
References herein to "Mortgage Loan Group" when used with respect to any        
Certificate shall mean (i) Group I Loans, in the case of the Group I            
Certificates, or (ii) Group II Loans, in the case of the Group II Certificates. 

            "Mortgage Loan Interest Shortfall": With respect to any Distribution
Date, as to the Mortgage Loans in either Loan Group, the sum of (a) any Civil   
Relief Act Interest Shortfalls in respect of such Mortgage Loans for such       
Distribution Date and (b) any related Master Servicer                           

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Default Prepayment Interest Shortfall. A "Master Servicer Default Prepayment    
Interest Shortfall" will only exist on a Distribution Date with respect to which
the Master Servicer has defaulted on its obligations under Sections 5.20 and    
6.09 with respect to Prepayment Interest Shortfalls and on such a Distribution  
Date will equal, for Loan Group I and Loan Group II in the aggregate, the excess
of (i) the aggregate maximum amount of Compensating Interest required pursuant  
to Sections 5.20 and 6.09 to have been paid by the Master Servicer or a         
Subservicer or netted against the Master Servicer's aggregate Servicing Fee for 
such Distribution Date over (ii) the amount of Compensating Interest actually   
paid by the Master Servicer or a Subservicer or actually netted against the     
Master Servicer's aggregate Servicing Fee for such Distribution Date.           

 "Mortgage Loan Schedule": The lists of the Mortgage Loans
transferred to the Trustee on or before the Closing Date as part of the Trust   
Fund and attached hereto as Exhibits D-1, D-2 and D-3 and delivered in computer 
readable format, which list shall set forth at a minimum the following          
information as to each Mortgage Loan:                                           

(i)         the Mortgage Loan identifying number;       

           (ii)        the city, state and zip code of the Mortgaged Property;

(iii)       the type of property;                       

       (iv)        the current Monthly Payment as of the Cut-off Date;

(v)         the original number of months to maturity;  

(vi)        the scheduled maturity date;                

 (vii)       the Principal Balance as of the Cut-off Date;

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

      (ix)        the Mortgage Interest Rate as of the Cut-off Date;

(x)         the Mortgage Interest Rate at origination;  

        (xi)        the Gross Margin (with respect to Group I Loans) and
              the frequency of the adjustment thereof;

           (xii)       the first Rate Adjustment Date (with respect to Group I
Loans) after the Cut-off Date;  

            (xiii)      the first Rate Adjustment Date after origination and the
                        frequency of adjustment (with respect to Group I Loans);

     (xiv)       the Lifetime Cap (with respect to Group I Loans);

       (xv)        the Lifetime Floor (with respect to Group I Loans);

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(xvi)       the Appraised Value;                        

  (xvii)      the stated purpose of the loan at origination;

(xviii)     the type of occupancy at origination;       

            (xix)       the documentation type (as described in the Underwriting
Guidelines);                    

     (xx)        the Periodic Cap (with respect to Group I Loans);

(xxi)       the loan classification (as described in the
Underwriting Guidelines);       

         (xxii)      the related Index (with respect to Group I Loans) and
            the look-back period for such Mortgage Loan;

         (xxiii)     the Servicing Fee with respect to such Mortgage Loan,
  expressed as a rate per annum; and

(xxiv)      the Loan Type.                              

Such schedule may consist of multiple reports that collectively set forth all of
the information required.                                                       

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

         "Mortgaged Property": The underlying property securing a Mortgage
Loan, consisting of a fee simple estate in a single parcel of land improved by a
Residential Dwelling.                                                           

"Mortgagor": The obligor on a Mortgage Note.            

         "Net Foreclosure Profits": As to any Distribution Date, an amount
equal to (i) the aggregate Foreclosure Profits with respect to such Distribution
Date minus (ii) Liquidated Loan Losses with respect to such Distribution Date.  

            "Net Lifetime Cap": With respect to each Mortgage Loan in Loan Group
I at any time of determination, a sum equal to the Lifetime Cap on such Mortgage
Loan minus the sum of the per annum rates used to determine the related         
Servicing Fee and Trustee Fee and the Premium Percentage.                       

       "Net Liquidation Proceeds": As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed    
Periodic Advances and unreimbursed Servicing Advances made by the Master        
Servicer. For all purposes of this Agreement, Net Liquidation Proceeds shall be 
allocated first to accrued and unpaid interest on the related Mortgage Loan and 
then to the unpaid principal balance thereof.                                   

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           "Net Mortgage Interest Rate": With respect to each Mortgage Loan at
any time of determination, a rate equal to (i) the Mortgage Interest Rate on    
such Mortgage Loan minus (ii) the sum of the per annum rates used to determine  
the related Servicing Fee and Trustee Fee and the Premium Percentage. Any       
regular monthly computation of interest at such rate shall be based upon annual 
interest at such rate on the applicable amount divided by twelve.               

            "Net REO Proceeds": As to any REO Mortgage Loan, REO Proceeds net of
any related expenses of the Master Servicer.                                    

         "Nonrecoverable Advances": With respect to any Mortgage Loan, (a)
any Periodic Advance or Servicing Advance previously made and not reimbursed    
from late collections pursuant to Section 5.04(b), or (b) a Periodic Advance or 
Servicing Advance proposed to be made in respect of a Mortgage Loan or REO      
Property either of which, in the good faith business judgment of the Master     
Servicer, as evidenced by an Officer's Certificate delivered to the Certificate 
Insurer and the Trustee would not be ultimately recoverable pursuant to Sections
5.04 and Section 6.02.                                                          

         "Non-United States Person": Any Person other than a United States
Person.                                                                         

           "Notional Amount": As of any Distribution Date, with respect to the
Class A-9 Components A, B and C, an amount equal to the Uncertificated Balance  
of REMIC I Regular Interest LT-AZ. As of any Distribution Date, with respect to 
the Class A-9 Component D, an amount equal to the Uncertificated Balance of     
REMIC I Regular Interest LT-FZ immediately prior to such date.                  

            "Officer's Certificate": A certificate signed by the Chairman of the
Board, the President or a Vice President and the Treasurer, the Secretary or one
of the Assistant Treasurers or Assistant Secretaries of the Seller and/or the   
Master Servicer, or the Company, as required by this Agreement.                 

       "One-Month LIBOR": With respect to any Accrual Period, the rate
determined by the Trustee on the related Interest Determination Date on the     
basis of the offered rates of the Reference Banks for one-month United States   
dollar deposits, as such rates appear on the Telerate Screen Page 3750 as of    
11:00 A.M., London, England time, on the Interest Determination Date. If such   
rate does not appear on such page (or such other page as may replace that page  
on that service, or if such service is no longer offered, such other service for
displaying One-Month LIBOR or comparable rates as may be reasonably selected by 
the Trustee), the rate will be the Reference Bank Rate. If no such quotations   
can be obtained and no Reference Bank Rate is available, One-Month LIBOR will be
One-Month LIBOR applicable to the preceding Distribution Date.                  

            "Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be counsel for the Seller, the Master Servicer, the Trustee, a      
Certificateholder or a Certificateholder's prospective transferee or the        
Certificate Insurer (including except as otherwise provided herein, in-house    
counsel) reasonably acceptable to each addressee of such opinion and experienced
in matters relating to the subject of such opinion; except that any opinion of  
counsel relating to (a) the qualification of REMIC I and REMIC II under the     
REMIC Provisions must be an opinion of counsel who (i) is in fact independent of
the Seller, the Master Servicer and the                                         

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Trustee, (ii) does not have any direct financial interest or any material       
indirect financial interest in the Seller or the Master Servicer or the Trustee 
or in an Affiliate thereof, (iii) is not connected with the Seller or the Master
Servicer or the Trustee as an officer, employee, director or person performing  
similar functions and (iv) is reasonably acceptable to the Certificate Insurer. 

   "Original Group I Pool Principal Balance": The Group I Pool
Principal Balance as of the Cut-off Date, which is $486,124,706.24.             

     "Original Group II Pool Principal Balance": The Group II Pool
Principal Balance as of the Cut-off Date, which is $163,874,864.96.             

           "Original Certificate Principal Balance": As of the Startup Day and
as to the Class A-1 Certificates, $324,000,000, as to the Class A-2             
Certificates, $162,000,000, as to the Class A-3 Certificates, $46,398,000, as to
the Class A-4 Certificates, $39,685,000, as to the Class A-5 Certificates,      
$12,146,000, and as to the Class A-6 Certificates, $37,336,000, and as to the   
Class A-7 Certificates, $12,035,000, and as to the Class A-8 Certificates,      
$16,400,0000. The Fixed Strip Certificates and Class R Certificates do not have 
an Original Certificate Principal Balance.                                      

           "Original Pool Principal Balance": The Pool Principal Balance as of
the Cut-off Date, which is $649,999,571.20.                                     

        "Outstanding Mortgage Loan": As to any Due Date, a Mortgage Loan
(including an REO Mortgage Loan) which was not the subject of a Principal       
Prepayment in Full prior to such Due Date, which did not become a Liquidated    
Mortgage Loan prior to such Due Date, which was not repurchased by the Seller   
prior to such Due Date pursuant to Section 2.04 and which was not repurchased by
an Affiliate of the Seller pursuant to Section 5.18.                            

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

         "Owner-Occupied Mortgaged Property": A Residential Dwelling as to
which (a) the related Mortgagor represented an intent to occupy as such         
Mortgagor's primary, secondary or vacation residence at the origination of the  
Mortgage Loan, and (b) the Seller has no actual knowledge that such Residential 
Dwelling is not so occupied.                                                    

            "Percentage Interest": With respect to a Class A Certificate and any
date of determination, the portion evidenced by such Certificate, expressed as a
percentage rounded to four decimal places, equal to a fraction the numerator of 
which is the initial Authorized Denomination represented by such Certificate and
the denominator of which is the Original Certificate Principal Balance of such  
Certificate. With respect to a Class R Certificate and any date of              
determination, the portion evidenced thereby as stated on the face of such      
Certificate.                                                                    

         "Periodic Advance": The aggregate of the advances with respect to
Mortgage Loans and REO Properties required to be made by the Master Servicer on 
any Master Servicer Remittance Date pursuant to Section 5.21 hereof, the amount 
of any such advances being equal to the sum of: (i) with respect to the Mortgage
Loans (other than Balloon Loans with delinquent                                 

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Balloon Payments as described in clause (iii) below and other than REO          
Properties as described in clauses (ii) and (iv) below), all Monthly Payments   
(net of the related Servicing Fee) on such Mortgage Loans that were delinquent  
as of the close of business on the Business Day preceding the related Master    
Servicer Remittance Date, plus (ii) with respect to each REO Property (other    
than any REO Property relating to a Balloon Loan with a delinquent Balloon      
Payment as described in clause (iv) below), which REO Property was acquired     
during or prior to the related Due Period and as to which an REO Disposition did
not occur during the related Due Period, an amount equal to the Monthly Payment 
(net of the related Servicing Fee) for the most recently ended Due Period for   
the related Mortgage Loan minus the net income from such REO Property           
transferred to the related Certificate Account for such Distribution Date, plus 
(iii) with respect to each Balloon Loan with a delinquent Balloon Payment (other
than any related REO Property as described in clause (iv) below), an amount     
equal to the assumed monthly principal and interest payment (net of the related 
Servicing Fee) that would have been due on the related Due Date based on the    
original principal amortization schedule for such Balloon Loan, plus (iv) with  
respect to each REO Property relating to a Balloon Loan with a delinquent       
Balloon Payment, which REO Property was acquired during or prior to the related 
Due Period and as to which an REO Disposition did not occur during the related  
Due Period, an amount equal to the assumed monthly principal and interest       
payment (net of the related Servicing Fee) that would have been due on the      
related Due Date based on the original principal amortization schedule for the  
related Balloon Loan minus the net income from such REO Property transferred to 
the related Certificate Account for such Distribution Date, minus (v) the amount
of any advance otherwise required for such Distribution Date pursuant to clauses
(i) through (iv) above which the Master Servicer has determined to be a         
Nonrecoverable Advance.                                                         

           "Periodic Cap": With respect to each Group I Loan, the provision in
the related Mortgage Note that provides for an absolute maximum amount by which 
the Mortgage Interest Rate therein may increase or decrease on a Rate Adjustment
Date above or below the Mortgage Interest Rate previously in effect.            

            "Permitted Investments": As used herein, Permitted Investments shall
include the following:                                                          

   (a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the 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 and any obligation of, or guaranties by, FHLMC or FNMA
      (other than senior debt obligations and mortgage pass-through certificates
  guaranteed by FHLMC or FNMA) shall be a Permitted Investment; PROVIDED
     THAT at the time of such investment, such investment is acceptable to the
    Certificate Insurer, but excluding any of such securities whose terms do
      not provide for payment of a fixed dollar amount upon maturity or call for
redemption;                                                         

      (b) federal funds and certificates of deposit, time and demand
 deposits and banker's acceptances issued by any bank or trust company
     incorporated under the laws of the United States or any state thereof and
subject to supervision and examination by federal or state banking  
    authorities, provided that at the time of such investment or contractual
    commitment providing for such investment the short-term debt obligations
of such bank                                                        

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      or trust company at the date of acquisition thereof have been rated in its
highest rating by each Rating Agency;                               

         (c) commercial paper (having original maturities of not more than
180 days) rated in its highest rating by each Rating Agency;        

            (d) investments in money market funds rated in its highest rating by
  both Moody's and S&P, including funds for which the Trustee acts as an
advisor; and                                                        

           (e) investments approved by the Rating Agencies and the Certificate
Insurer in writing delivered to the Trustee;                        

provided that each such Permitted Investment shall be a "permitted investment"  
within the meaning of Section 860G(a)(5) of the Code and that no instrument     
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) both principal
and interest payments derived from obligations underlying such instrument and   
the interest and principal payments with respect to such instrument provided a  
yield to maturity at par greater than 120% of the yield to maturity at par of   
the underlying obligations; and provided, further, that no instrument described 
hereunder may be purchased at a price greater than par.                         

       "Permitted Transferee": Any transferee of a Class R Certificate
other than a Non- United States Person or Disqualified Organization.            

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

            "Plan": Any employee benefit plan and certain other retirement plans
and arrangements, including individual retirement accounts and annuities, and   
Keogh plans, and bank collective investment funds and insurance company general 
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to the prohibited transaction and fiduciary responsibility     
provisions of ERISA and Section 4975 of the Code.                               

           "Policy Business Day": A Business Day as defined in the Certificate
Insurance Policy.                                                               

          "Pool Principal Balance": The sum of the Group I and Group II Pool
Principal Balance as of any date of determination.                              

           "Preference Amount": Any amount previously distributed to a Class A
Certificateholder that is recoverable and sought to be recovered as a voidable  
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy  
Code as amended from time to time, in accordance with a final nonappealable     
order of a court having competent jurisdiction.                                 

"Preference Claim": As defined in Section 6.04(f).      

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            "Premium Amount": As determined separately with respect to the Group
I Loans and Group II Loans, with respect to (i) the first two Distribution      
Dates, $0.00, and (ii) the third Distribution Date and each Distribution Date   
thereafter, the product of 1/12 of the Premium Percentage and the aggregate     
Certificate Principal Balance of the Group I and Group II Class A Certificates, 
as applicable, immediately prior to the related Distribution Date.              

     "Premium Exhibit": The document attached hereto as Exhibit R.

          "Premium Percentage": With respect to any Group I Loan or Group II
Loan, the rate per annum set forth in the Premium Exhibit.                      

"Prepayment Assumption": With respect to (i) the Group I
Certificates, a 140% Prepayment Assumption (i.e. a 100% Prepayment Assumption   
multiplied by 1.40) and (ii) the Group II Certificates, a 120% Prepayment       
Assumption (i.e. a 100% Prepayment Assumption multiplied by 1.20), used solely  
for determining the accrual of original issue discount, market discount and     
premium, if any, on the Certificates for federal income tax purposes. A 100%    
Prepayment Assumption assumes a constant prepayment rate of 4% per annum for the
first month, increasing each month by an additional approximate 1.45454%        
(precisely 16/11 of 1.00%) (expressed as a percentage per annum) until such rate
reaches 20% (on the twelfth month) and remaining level at 20% thereafter.       

         "Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was the subject during the related Prepayment 
Period of a Principal Prepayment in Full or Curtailment, an amount equal to (a) 
30 days' interest on the Principal Balance of such Mortgage Loan or the amount  
of such Curtailment at a per annum rate equal to the Mortgage Interest Rate (or 
at such lower rate as may be in effect for such Mortgage Loan pursuant to       
application of the Civil Relief Act, any Deficient Valuation and/or any Debt    
Service Reduction) minus the rate at which the Servicing Fee is calculated minus
(b) the amount of interest actually remitted by the Mortgagor in connection with
such Principal Prepayment in Full or Curtailment less the Servicing Fee for such
Mortgage Loan in such Prepayment Period.                                        

        "Prepayment Period": With respect to each Distribution Date, the
period beginning on the opening of business on the second business day prior to 
the Master Servicer Remittance Date in the calendar month preceding the calendar
month in which such Distribution Date occurs (and, with respect to the first    
Distribution Date, the period beginning on the first day of the initial Due     
Period), and ending at the close of business on the third Business Day prior to 
the Master Servicer Remittance Date in the calendar month in which such         
Distribution Date occurs.                                                       

           "Principal Balance": As to any Mortgage Loan and Distribution Date,
the principal balance of such Mortgage Loan as of the Due Date preceding such   
date of determination as specified for such Due Date in the amortization        
schedule (before any adjustment to such amortization schedule by reason of any  
bankruptcy (other than Deficient Valuations) or similar proceeding or any       
moratorium or similar waiver or grace period) after giving effect to Principal  
Prepayments in Full or Curtailments received prior to such Due Date, Deficient  
Valuations incurred prior to such Due Date, to any Curtailments applied by the  
Master Servicer in reduction of the unpaid principal balance of such Mortgage   
Loan as of such Due Date and to the payment of principal due on such Due Date   
and irrespective of any delinquency in payment by the related                   

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Mortgagor. The Principal Balance of a Mortgage Loan which becomes a Liquidated  
Mortgage Loan prior to such Due Date shall be zero.                             

        "Principal Prepayment in Full": Any payment or other recovery of
principal on a Mortgage Loan equal to the outstanding principal balance thereof,
received in advance of the final scheduled Due Date which is not intended as an 
advance payment of a scheduled Monthly Payment.                                 

            "Purchase Agreement": The Mortgage Loan Purchase Agreement, dated as
of the date hereof, between the Seller and the Company relating to the sale of  
the Mortgage Loans to the Company.                                              

         "Qualified Mortgage": "Qualified Mortgage" shall have the meaning
set forth from time to time in the definition thereof at Section 860G(a)(3) of  
the Code (or any successor statute thereto).                                    

         "Qualified Substitute Mortgage Loan": A mortgage loan or mortgage
loans substituted for a Deleted Mortgage Loan pursuant to Section 2.04 or 3.03  
hereof, which (a)(i) with respect to a Group I Loan, has or have the same       
interest rate index, a margin over such index and a maximum interest rate at    
least equal to those applicable to the Deleted Mortgage Loan and (ii) with      
respect to a Group II Loan, has the same or greater interest rate, (b) relates  
or relate to a detached one-family residence or to the same type of Residential 
Dwelling as the Deleted Mortgage Loan and in each case has or have the same or a
better lien priority as the Deleted Mortgage Loan and has the same occupancy    
status or is an Owner Occupied Mortgaged Property, (c) matures or mature no     
later than (and not more than one year earlier than) the Deleted Mortgage Loan  
(except during the first 90 days after the Cut-off Date), (d) has or have a     
Loan-to-Value Ratio or Loan-to-Value Ratios at the time of such substitution no 
higher than the Loan-to-Value Ratio of the Deleted Mortgage Loan, (e) has or    
have a principal balance or principal balances (after application of all        
payments received on or prior to the date of substitution) not substantially    
less and not more than the Principal Balance of the Deleted Mortgage Loan as of 
such date, (f) satisfies or satisfy the criteria set forth from time to time in 
the definition of "qualified replacement mortgage" at Section 860G(a)(4) of the 
Code (or any successor statute thereto) and (g) complies or comply as of the    
date of substitution with each representation and warranty set forth in Sections
3.01 and 3.02 of the Purchase Agreement.                                        

            "Rate Adjustment Date": The date on which the Mortgage Interest Rate
is adjusted with respect to each Group I Loan. The first Rate Adjustment Date   
for each Group I Loan is set forth on the Mortgage Loan Schedule.               

"Rating Agency": S&P, DCR or Moody's.                   

       "Record Date": With respect to the first Distribution Date, the
Closing Date. With respect to any Distribution Date thereafter, the close of    
business on the last Business Day of the month immediately preceding the month  
of such Distribution Date.                                                      

     "Reference Bank Rate": With respect to any Accrual Period, as
follows: the arithmetic mean (rounded upwards, if necessary, to the nearest one 
sixteenth of a percent) of the                                                  

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offered rates for United States dollar deposits for one month which are offered 
by the Reference Banks as of 11:00 A.M., London, England time, on the Interest  
Determination Date to prime banks in the London interbank market for a period of
one month in amounts approximately equal to the aggregate outstanding           
Certificate Principal Balance of the Class A-1 Certificates; PROVIDED that at   
least two such Reference Banks provide such rate. If fewer than two offered     
rates appear, the Reference Bank Rate will be the arithmetic mean of the rates  
quoted by one or more major banks in New York City, selected by the Trustee, as 
of 11:00 a.m., New York time, on such date for loans in U.S. Dollars to leading 
European Banks for a period of one month in amounts approximately equal to the  
aggregate outstanding Certificate Principal Balance of the Class A-1            
Certificates. If no such quotations can be obtained, the Reference Bank Rate    
shall be the Reference Bank Rate applicable to the preceding Distribution Date. 

        "Reference Banks": Bankers Trust Company, Barclay's Bank PLC and
National Westminster Bank PLC.                                                  

        "Released Mortgaged Property Proceeds": As to any Mortgage Loan,
proceeds received by the Master Servicer in connection with (a) a taking of an  
entire Mortgaged Property by exercise of the power of eminent domain or         
condemnation or (b) any release of part of the Mortgaged Property from the lien 
of the related Mortgage, whether by partial condemnation, sale or otherwise;    
which are not released to the Mortgagor in accordance with applicable law,      
Accepted Servicing Practices and this Agreement.                                

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

"REMIC I": The segregated pool of assets subject hereto,
constituting the trust created hereby and to be administered hereunder,         
consisting of: (a) such Mortgage Loans as from time to time are subject to this 
Agreement, together with the Mortgage Files relating thereto and all collections
thereon and proceeds thereof after the Cut-off Date, (b) such assets as from    
time to time are identified as deposited in the Certificate Accounts, (c) such  
assets as from time to time are identified as REO Property and collections      
thereon and proceeds thereof, assets that are deposited in the Accounts,        
including amounts on deposit in the Accounts and invested in Permitted          
Investments, (d) the Trustee's rights with respect to the Mortgage Loans under  
all insurance policies required to be maintained pursuant to this Agreement     
(including the Certificate Insurance Policy) and any Insurance Proceeds (and any
proceeds of the Certificate Insurance Policy), (e) Liquidation Proceeds, (f)    
Released Mortgaged Property Proceeds and (g) the representations and warranties 
of the Seller pursuant to the Purchase Agreement.                               

      "REMIC I Group II Regular Interests": REMIC I Regular Interest
LT-FW, REMIC I Regular Interest LT-FX, REMIC I Regular Interest LT-FY and REMIC 
I Regular Interest LT-FZ.                                                       

            "REMIC I Regular Interest": Any of the six separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a  
"regular interest" in REMIC I. Each REMIC I Regular Interest shall accrue       
interest at the related REMIC I Remittance Rate in effect from time to time, and
shall be entitled to distributions of principal, subject to the terms and       
conditions hereof, in an aggregate amount equal to its initial Uncertificated   
Balance as set                                                                  

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forth in the Preliminary Statement hereto. The designations for the respective  
REMIC I Regular Interests are set forth in the Preliminary Statement hereto.    

"REMIC I Regular Interest LT-AY": One of the separate   
non-certificated beneficial ownership interests in REMIC I issued hereunder and 
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-AY     
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the    
terms and conditions hereof, in an aggregate amount equal to its initial        
Uncertificated Balance as set forth in the Preliminary Statement hereto.        

"REMIC I Regular Interest LT-AZ": One of the separate   
non-certificated beneficial ownership interests in REMIC I issued hereunder and 
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-AZI    
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the    
terms and conditions hereof, in an aggregate amount equal to its initial        
Uncertificated Balance as set forth in the Preliminary Statement hereto.        

"REMIC I Regular Interest LT-FW": One of the separate   
non-certificated beneficial ownership interests in REMIC I issued hereunder and 
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-FW     
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the    
terms and conditions hereof, in an aggregate amount equal to its initial        
Uncertificated Balance as set forth in the Preliminary Statement hereto.        

"REMIC I Regular Interest LT-FX": One of the separate   
non-certificated beneficial ownership interests in REMIC I issued hereunder and 
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-FX     
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the    
terms and conditions hereof, in an aggregate amount equal to its initial        
Uncertificated Balance as set forth in the Preliminary Statement hereto.        

"REMIC I Regular Interest LT-FY": One of the separate   
non-certificated beneficial ownership interests in REMIC I issued hereunder and 
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-FY     
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the    
terms and conditions hereof, in an aggregate amount equal to its initial        
Uncertificated Balance as set forth in the Preliminary Statement hereto.        

"REMIC I Regular Interest LT-FZ": One of the separate   
non-certificated beneficial ownership interests in REMIC I issued hereunder and 
designated as a Regular Interest in REMIC I. REMIC I Regular Interest LT-FZ     
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the    
terms and conditions hereof, in an aggregate amount equal to its initial        
Uncertificated Balance as set forth in the Preliminary Statement hereto.        

           "REMIC I Remittance Rate": With respect to REMIC I Regular Interest
LT-AY and LT-AZ, the weighted average of the Net Mortgage Interest Rates on the 
then outstanding                                                                

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Mortgage Loans and REO Properties in Group I. With respect to REMIC I Regular   
Interest LT- FW, REMIC I Regular Interest LT-FX, REMIC I Regular Interest LT-FY 
and REMIC I Regular Interest LT-FZ, the weighted average of the Net Mortgage    
Interest Rates on the then outstanding Mortgage Loans and REO Properties in     
Group II.                                                                       

   "REMIC II": The segregated pool of assets consisting of the
Uncertificated REMIC I Regular Interests conveyed in trust to the Trustee for   
the benefit of the holders of the Class A-1, Class A-2, Class A-3, Class A-4,   
Class A-5, Class A-6, Class A-7, Class A-8, Class A-9 and Class R-II            
Certificates pursuant to Section 2.08, with respect to which a separate REMIC   
election is to be made.                                                         

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

          "REO Acquisition": The acquisition of any REO Property pursuant to
Section 5.12.                                                                   

     "REO Disposition": The final sale by the Master Servicer of a
Mortgaged Property acquired by the Master Servicer in foreclosure or by deed in 
lieu of foreclosure.                                                            

        "REO Mortgage Loan": Any Mortgage Loan which is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage
Note is discharged and the related Mortgaged Property is held as part of the    
Trust Fund.                                                                     

        "REO Proceeds": Proceeds received in respect of any REO Mortgage
Loan (including, without limitations, proceeds from the rental of the related   
Mortgaged Property).                                                            

"REO Property": As described in Section 5.12.           

    "Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A        
Certificates registered in the Certificate Register under the nominee name of   
the Depository.                                                                 

         "Request for Release": A request for release in substantially the
form attached as Exhibit H hereto.                                              

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

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           "Residential Dwelling": A one- to four-family dwelling, a unit in a
planned unit development, a unit in a condominium development, a townhouse or a 
manufactured housing unit which is non-mobile.                                  

         "Responsible Officer": When used with respect to the Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),    
including any Vice President, Senior Trust Officer, Trust Officer, Assistant    
Trust Officer, any Assistant Secretary, any trust officer or any other officer  
of the Trustee customarily performing functions similar to those performed by   
any of the above designated officers and 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. When used with respect to the Seller or
the Master Servicer, the President or any Vice President, Assistant Vice        
President, or any Secretary or Assistant Secretary.                             

    "S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto.                           

         "Seller": Southern Pacific Funding Corporation, or its successor.

           "Servicing Account": The account created and maintained pursuant to
Section 5.09.                                                                   

          "Servicing Advances": All reasonable and customary "out-of-pocket"
costs and expenses relating to a borrower default or delinquency or other       
unanticipated event incurred by the Master Servicer in the performance of its   
servicing obligations, including, but not limited to, the cost of (a) the       
preservation, restoration and protection of the Mortgaged Property including,   
without limitation, taxes and insurance costs, (b) any enforcement or judicial  
proceedings, including (i) foreclosures or (ii) other legal actions that        
potentially affect the existence, validity, priority, or enforceability of the  
Mortgage Loans, (c) the management and liquidation of the REO Property,         
including reasonable fees paid to any independent contractor in connection      
therewith, (d) compliance with the obligations under Sections 5.02 (limited     
solely to the reasonable and customary out-of-pocket expenses of the            
subservicer), 5.05, 5.07, 5.09 or 5.10, all of which reasonable and customary   
out-of-pocket costs and expenses are reimbursable to the Master Servicer to the 
extent provided in Section 5.04(a) and (b).                                     

        "Servicing Compensation": The Servicing Fee and other amounts to
which the Master Servicer is entitled pursuant to Section 5.14.                 

            "Servicing Fee": As to each Mortgage Loan, the annual fee payable to
the Master Servicer and the related Subservicer, if any, as indicated on the    
related Mortgage Loan Schedule. Such fee shall be 0.50% per annum. Such fee     
shall be calculated and payable monthly only from the amounts received in       
respect of interest on such Mortgage Loan and shall be computed on the basis of 
the same principal amount and for the period respecting which any related       
interest payment on a Mortgage Loan is computed. The Servicing Fee includes any 
servicing fees owed or payable to any Subservicer.                              

            "Servicing Officer": Any officer of the Master Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature                                                     

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appear on a list of servicing officers furnished to the Trustee and the         
Certificate Insurer by the Master Servicer, as such list may from time to time  
be amended.                                                                     

   "Southern Pacific": Southern Pacific Funding Corporation, a
California corporation.                                                         

"Special Deposit": As defined in Section 2.01(d).       

     "Startup Day": The day designated as such pursuant to Section
10.01(b) hereof.                                                                

           "Subservicer": Any Person with whom the Master Servicer has entered
into a Subservicing Agreement and who satisfies the requirements set forth in   
Section 5.02(a) hereof in respect of the qualification of a Subservicer.        

           "Subservicing Agreement": Any agreement between the Master Servicer
and any Subservicer relating to subservicing and/or administration of certain   
Mortgage Loans as provided in Section 5.02, a copy of which shall be delivered, 
along with any modifications thereto, to the Trustee and the Certificate        
Insurer.                                                                        

         "Substitution Adjustment": As to any date on which a substitution
occurs pursuant to Sections 2.04 or 3.03, the amount (if any) by which the      
aggregate principal balances (after application of principal payments received  
on or before the date of substitution of any Qualified Substitute Mortgage Loans
as of the date of substitution), are less than the aggregate of the Principal   
Balances of the related Deleted Mortgage Loans.                                 

         "Tax Matters Person": The Person or Persons appointed pursuant to
Section 10.01(c) from time to time to act as the "tax matters person" (within   
the meaning of the REMIC Provisions) of the Trust Fund.                         

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

          "Thirty-Year Fixed Loans": Group II Loans with an original term to
maturity of 30 years.                                                           

  "Transfer": Any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any Ownership Interest in a        
Certificate.                                                                    

          "Transfer Affidavit And Agreement": As defined in Section 4.02(j).

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           "Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.                                                      

           "Transferor": Any Person who is disposing by Transfer any Ownership
Interest in a Certificate.                                                      

    "Trustee": Norwest Bank Minnesota, N.A., or its successor in
interest, or any successor trustee appointed as herein provided.                

          "Trustee Fee": As to any Distribution Date, the fee payable to the
Trustee in respect of its services as Trustee that accrues at a monthly rate    
equal to 1/12 of 0.0075% of the sum of the Principal Balance of each Mortgage   
Loan.                                                                           

"Trustee Remittance Report": As defined in Section 6.07.

"Trust Fund": REMIC I and REMIC II.                     

       "2/28 and 3/27 Loans": Group I Loans with an initial fixed-rate
period of two years or three years.                                             

         "12 Month Loss Amount": With respect to any Distribution Date, an
amount equal to the aggregate of all Liquidation Loan Losses on the Mortgage    
Loans which became Liquidated Mortgage Loans during the 12 preceding Due        
Periods.                                                                        

      "UCC": The Uniform Commercial Code in effect in the applicable
jurisdiction.                                                                   

           "UCC Financing Statement": A financing statement executed and filed
pursuant to the UCC.                                                            

            "Uncertificated Balance": The amount of any REMIC I Regular Interest
outstanding as of any date of determination. As of the Closing Date, the        
Uncertificated Balance of each REMIC I Regular Interest shall equal the amount  
set forth in the Preliminary Statement hereto as its initial uncertificated     
balance. On each Distribution Date, the Uncertificated Balance of each REMIC I  
Regular Interest shall be reduced by all distributions of principal made on such
REMIC I Regular Interest, as applicable, on such Distribution Date pursuant to  
Section 6.12.                                                                   

      "Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I         
Remittance Rate applicable to such REMIC I Regular Interest for such            
Distribution Date, accrued on the Uncertificated Balance thereof immediately    
prior to such Distribution Date. Uncertificated Interest in respect of any REMIC
I Regular Interest LT-FW, REMIC I Regular Interest LT-FX, REMIC I Regular       
Interest LT-FY and REMIC I Regular Interest LT-FZ shall accrue on the basis of a
360-day year consisting of twelve 30-day months. Uncertificated Interest in     
respect of REMIC I Regular Interest LT-AY and LT-AZ shall accrue interest on the
basis of a 360-day year and the actual number of days elapsed. Uncertificated   
Interest with respect to each Distribution Date, as to any REMIC I Regular      
Interest shall be reduced by an amount equal to a PRO RATA portion of the sum of
(a) the aggregate Prepayment Interest Shortfall, if any, for such Distribution  
Date to the extent                                                              

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not covered by Compensating Interest and (b) the aggregate amount of any Relief 
Act Interest Shortfall, if any, for such Distribution Date.                     

   "Underwriters": Lehman Brothers, Inc., Morgan Stanley & Co.
Incorporated, Prudential Securities Incorporated and First Union Capital Markets
Corp.                                                                           

            "Underwriting Guidelines": The underwriting guidelines of the Seller
with respect to the Mortgage Loans as in effect on the Closing Date.            

           "United States Person": A citizen or resident of the United States,
a corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof (except, in the 
case of a partnership, to the extent provided in regulations), or an estate     
whose income is subject to United States federal income tax regardless of its   
source, or a trust if a court within the United States is able to exercise      
primary supervision over the administration of the trust and one or more United 
States persons have the authority to control all substantial decisions of the   
trust. To the extent prescribed in regulations by the Secretary of the Treasury,
which have not yet been issued, a trust which was in existence on August 20,    
1996 (other than a trust treated as owned by the grantor under subpart E of part
I of subchapter J of chapter 1 of the Code), and which was treated as a United  
States person on August 20, 1996 may elect to continue to be treated as a United
States person notwithstanding the previous sentence.                            

      "Unpaid REO Amortization": As to any REO Mortgage Loan and any
month, the aggregate of the installments of principal and accrued interest      
(adjusted to the related Net Mortgage Interest Rate) deemed to be due in such   
month and in any prior months that remain unpaid, calculated in accordance with 
Section 5.12.                                                                   

       "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Class A Certificate. 99.0% of all of the 
Voting Rights shall be allocated among Holders of Class A Certificates, other   
than the Class A-9 Certificates, in proportion to the outstanding Certificate   
Principal Balances of their respective Certificates; and 1% of all Voting Rights
shall be allocated to the Holders of the Class A-9 Certificates, allocated among
the Certificates of each such Class in accordance with their respective         
Percentage Interests.                                                           

          Section 1.02 PROVISIONS OF GENERAL APPLICATION. (a) All accounting
terms not specifically defined herein shall be construed in accordance with     
GAAP.                                                                           

           (b) The terms defined in this Article include the plural as well as
the singular.                                                                   

           (c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles   
and Sections shall be deemed to refer to Articles and Sections of this          
Agreement.                                                                      

      (d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which  
reference is made and all regulations promulgated pursuant to such statutes.    

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        (e) All calculations of interest (other than with respect to the
Mortgage Loans, or as otherwise specifically set forth herein) provided for     
herein shall be made on the basis of a 360- day year and the actual number of   
days elapsed in the related period. All calculations of interest with respect to
any Mortgage Loan provided for herein shall be made in accordance with the terms
of the related Mortgage Note and Mortgage or, if such documents do not specify  
the basis upon which interest accrues thereon, on the basis of a 360-day year   
and the actual number of days elapsed in the related period, to the extent      
permitted by applicable law.                                                    

          (f) Any Mortgage Loan payment is deemed to be received on the date
such payment is actually received by the Master Servicer, provided, however,    
that for purposes of calculating distributions on the Certificates, prepayments 
with respect to any Mortgage Loan are deemed to be received on the date they are
applied in accordance with customary servicing practices consistent with the    
terms of the related Mortgage Note and Mortgage to reduce the outstanding       
principal balance of such Mortgage Loan on which interest accrues.              

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ARTICLE II

 CONVEYANCE OF MORTGAGE LOANS;
 ORIGINAL ISSUANCE OF CERTIFICATES
 ---------------------------------

Section 2.01 CONVEYANCE OF MORTGAGE LOANS; PRIORITY AND 
SUBORDINATION OF OWNERSHIP INTERESTS. (a) The Company does hereby sell,         
transfer, assign, set over and convey to the Trustee without recourse but       
subject to the provisions in this Section 2.01 and the other terms and          
provisions of this Agreement, all of the right, title and interest of the       
Company in and to the Mortgage Loans (other than payment of interest and        
principal due thereon on or before the Cut-off Date), and all other assets      
included or to be included in the Trust Fund for the benefit of the             
Certificateholders and the Certificate Insurer. In connection with such transfer
and assignment, and pursuant to Section 2.06 of the Purchase Agreement, the     
Company does hereby also irrevocably transfer, assign, set over and otherwise   
convey to the Trustee all of its rights under the Purchase Agreement including, 
without limitation, its right to exercise the remedies created by Sections 2.05 
and 3.04 of the Purchase Agreement for breaches of representations and          
warranties, agreements and covenants of the Seller contained in Sections 3.01   
and 3.02 of the Purchase Agreement.                                             

         (b) The rights of the Certificateholders to receive payments with
respect to the Mortgage Loans in respect of the Certificates, and all ownership 
interests of the Certificateholders in such payments, shall be as set forth in  
this Agreement. In this regard, all rights of the Class R Certificateholders to 
receive payments in respect of the Class R Certificates are subject and         
subordinate to the preferential rights of the Class A Certificateholders to     
receive payments in respect of the Class A Certificates and to the Certificate  
Insurer's rights to be reimbursed for Group I and Group II Insured Payments     
together with interest thereon at the rate specified herein or in the Insurance 
Agreement. In accordance with the foregoing, the ownership interest of the Class
R Certificateholders in amounts deposited in the Group I and Group II           
Certificate Account from time to time shall not vest unless and until such      
amounts are distributed in respect of the Class R Certificates in accordance    
with the terms of this Agreement.                                               

           (c) It is intended that the conveyance of the Mortgage Loans by the
Company to the Trustee as provided in this Section be, and be construed as, a   
sale of the Mortgage Loans by the Company to the Trustee for the benefit of the 
Certificateholders. It is, further, not intended that such conveyance be deemed 
a pledge of the Mortgage Loans by the Company to the Trustee to secure a debt or
other obligation of the Company. However, in the event that the Mortgage Loans  
are held to be property of the Company, or if for any reason this Agreement is  
held or deemed to create a security interest in the Mortgage Loans, then it is  
intended that, (a) this Agreement shall also be deemed to be a security         
agreement within the meaning of Articles 8 and 9 of the New York Uniform        
Commercial Code and the Uniform Commercial Code of any other applicable         
jurisdiction; (b) the conveyance provided for in this Section shall be deemed to
be (1) a grant by the Company to the Trustee of a security interest in all of   
the Company's right (including the power to convey title thereto), title and    
interest, whether now owned or hereafter acquired, in and to (A) the Mortgage   
Loans, including the Mortgage Notes, the Mortgages, any related insurance       
policies and all other documents in the related Mortgage Files, (B) all amounts 
payable to the holders of the Mortgage Loans in accordance with the terms       
thereof and (C) all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments,                                               

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securities or other property, including without limitation all amounts from time
to time held or invested in the Certificate Accounts or the Collection Account, 
whether in the form of cash, instruments, securities or other property and (2)  
an assignment by the Company to the Trustee of any security interest in any and 
all of the Seller's right (including the power to convey title thereto), title  
and interest, whether now owned or hereafter acquired, in and to the property   
described in the foregoing clauses (1)(A) through (C) granted by the Seller to  
the Company pursuant to the Purchase Agreement; (c) the possession by the       
Trustee or its agent of Mortgage Notes and such other items of property as      
constitute instruments, money, negotiable documents or chattel paper shall be   
deemed to be "possession by the secured party" or possession by a purchaser or a
person designated by such secured party, for purposes of perfecting the security
interest pursuant to the New York Uniform Commercial Code and the Uniform       
Commercial Code of any other applicable jurisdiction (including, without        
limitation, Sections 9-305, 8-313 or 8-321 thereof); and (d) notifications to   
persons holding such property, and acknowledgments, receipts or confirmations   
from persons holding such property, shall be deemed notifications to, or        
acknowledgments, receipts or confirmations from, financial intermediaries,      
bailees or agents (as applicable) of the Trustee for the purpose of perfecting  
such security interest under applicable law. The Company and, at the written    
direction of the Company, the Seller and the Trustee shall, to the extent       
consistent with this Agreement, take such reasonable actions as may be necessary
to ensure that, if this Agreement were deemed to create a security interest in  
the Mortgage Loans, such security interest would be deemed to be a perfected    
security interest of first priority under applicable law and will be maintained 
as such throughout the term of the Agreement.                                   

        (d) The Master Servicer hereby acknowledges the receipt by it of
cash in an amounts equal to $302,848.12, with respect to Loan Group I and       
$99,823.99, with respect to Loan Group II (together, the "Special Deposit"),    
representing interest at the Net Mortgage Interest Rate for the Due Date in July
1998, for those Mortgage Loans for which the Trustee will not be entitled to    
receive such payment. The Master Servicer shall hold such Special Deposit in the
Collection Account and shall include such Special Deposit in the Group I        
Available Funds and Group II Available Funds, as the case may be for the        
Distribution Date in July 1998. Notwithstanding anything herein to the contrary,
the Special Deposit shall not be an asset of REMIC I or REMIC II. To the extent 
that the Special Deposit constitutes a reserve fund for federal income tax      
purposes, (1) it shall be an outside reserve fund and not an asset of REMIC I or
REMIC II, (2) it shall be owned by the Seller and (3) amounts transferred by    
REMIC I or REMIC II to the Special Deposit shall be treated as transferred to   
the Seller or any successor, all within the meaning of Section 1.860G-2(h) of   
the Treasury Regulations.                                                       

            Section 2.02 POSSESSION OF MORTGAGE FILES; ACCESS TO MORTGAGE FILES.
(a) Upon the issuance of the Certificates, the ownership of each Mortgage Note, 
the Mortgage and the contents of the Mortgage File related to each Initial      
Mortgage Loan is vested in the Trustee for the benefit of the Certificateholders
and the Certificate Insurer.                                                    

           (b) Pursuant to Section 2.04 of the Purchase Agreement, the Company
has delivered or caused to be delivered the Mortgage File related to each       
Initial Mortgage Loan to the Trustee.                                           

        (c) The Trustee may enter into a custodial agreement pursuant to
which the Trustee will appoint a custodian (a "Custodian") to hold the Mortgage 
Files in trust for the benefit                                                  

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of all present and future Certificateholders and the Certificate Insurer;       
provided, however, that the custodian so appointed shall in no event be the     
Company or the Master Servicer or any Person known to a Responsible Officer of  
the Trustee to be an Affiliate of the Company or the Master Servicer. The       
Trustee hereby appoints Norwest Bank Minnesota, N.A. as the initial Custodian.  

           (d) The Custodian shall afford the Company, the Certificate Insurer
and the Master Servicer reasonable access to all records and documentation      
regarding the Mortgage Loans relating to this Agreement, such access being      
afforded at customary charges, upon reasonable request and during normal        
business hours at the offices of the Custodian.                                 

        Section 2.03 DELIVERY OF MORTGAGE LOAN DOCUMENTS AND CERTIFICATE
INSURANCE POLICY. (a) In connection with each conveyance pursuant to Section    
2.01 hereof, the Company has delivered or does hereby agree to deliver or cause 
to be delivered to the Trustee on or before the Closing Date, the Certificate   
Insurance Policy, the Mortgage Loan Schedule and each of the following documents
(the "Mortgage Loan Documents") for each Mortgage Loan sold by the Seller to the
Company and sold by the Company to the Trust Fund on the Closing Date:          

     (i) the original Mortgage Note with all prior and intervening
     endorsements showing a complete chain of endorsements from the originator
   to the Seller, endorsed by the Seller without recourse in the following
    form: "Pay to the order of , without recourse" and signed in the name of
the Seller by an authorized officer;                                

            (ii) the original Mortgage and any related power of attorney of such
Mortgage Loan with evidence of recording thereon;                   

         (iii) an original assignment of the original Mortgage in suitable
   form for recordation in the jurisdiction in which the related Mortgaged
      Property is located, such assignment to be in blank and signed in the name
of the Seller by an authorized officer;                             

        (iv) the original of all intervening assignments of the Mortgage
(with evidence of recording thereon) showing a complete chain of    
assignment from the originator of such Mortgage Loan to the Seller; 

    (v) Any assumption, modification (with evidence of recording
thereon), consolidation or extension agreement; and                 

        (vi) the original policy of title insurance (or a commitment for
title insurance, if the policy is being held by the title insurance 
company pending recordation of the Mortgage);                       

PROVIDED, HOWEVER, that as to certain Mortgages or assignments thereof which    
have been delivered or are being delivered to recording offices for recording   
and have not been returned to the Seller in time to permit their delivery       
hereunder at the time of such transfer, in lieu of delivering such original     
documents, the Company shall deliver to the Trustee a true copy thereof with a  
certification by the Seller on the face of such copy substantially as follows:  
"certified true and correct copy of original which has been transmitted for     
recordation". The Company will cause the Seller to deliver such original        
documents, together with any related policy of title insurance                  

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not previously delivered, on behalf of the Company to the Trustee promptly after
they are received, but in any event no later than 120 days after the Closing    
Date. The Company agrees, at its own expense, to complete each assignment to the
Trustee and to record (or to provide the Trustee with evidence of recordation   
thereof) each assignment referred to in clause (iii) above promptly after the   
Closing Date in the appropriate public office for real property records,        
provided that such assignments are redelivered by the Trustee to the Seller upon
the Seller's written request and at the Seller's expense, unless the Seller (at 
its expense) furnishes to the Trustee, the Certificate Insurer and the Rating   
Agencies an unqualified Opinion of Counsel reasonably acceptable to the Trustee 
to the effect that recordation of such assignment is not necessary under        
applicable state law to preserve the Trustee's interest in the related Mortgage 
Loan against the claim of any subsequent transferee of such Mortgage Loan or any
successor to, or creditor of, the Seller.                                       

           Within a period of 14 days from the Closing Date, the Trustee shall
complete the endorsement of each Mortgage Note with respect to each Mortgage    
Loan sold to the Trust Fund on the Closing Date such that the final endorsement 
appears in the following form:                                                  

"Pay to the order of Norwest Bank Minnesota,            
N.A., as Trustee under that certain Pooling and         
Servicing Agreement dated as of June 1, 1998,           
for Southern Pacific Secured Assets Corp.,              
Mortgage Loan Asset-Backed Pass-Through                 
Certificates, Series 1998-2, without recourse."         

           Within a period of 14 days from the Closing Date, the Trustee shall
also complete each Assignment of Mortgage such that the final Assignment of     
Mortgage appears in the following form:                                         

"Norwest Bank Minnesota, N.A., as Trustee under         
that certain Pooling and Servicing Agreement            
dated as of June 1, 1998, for Southern Pacific          
Secured Assets Corp., Mortgage Loan Asset-              
Backed Pass-Through Certificates, Series                
1998-2."                                                

    (b) In the event that any such original document is required
pursuant to the terms of this Section 2.03 to be a part of a Mortgage File, such
document shall be delivered promptly by the Company to the Trustee. In acting as
custodian of any such original document, the Master Servicer agrees further that
it does not and will not have or assert any beneficial ownership interest in the
Mortgage Loans or the Mortgage Files.                                           

     Section 2.04 ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN
SUBSTITUTIONS; CERTIFICATION BY TRUSTEE. (a) The Trustee agrees to execute and  
deliver to the Company, the Certificate Insurer, the Master Servicer and the    
Seller on or prior to the Closing Date an acknowledgment of receipt of the      
Certificate Insurance Policy and, with respect to each Mortgage Loan sold to the
Trust Fund on the Closing Date, on or prior to the Closing Date, an             
acknowledgement of receipt of the original Mortgage Note (with any exceptions   
noted), in the form attached as Exhibit E hereto and declares that it will hold 
such documents and any amendments, replacements or supplements thereto, as well 
as any other assets included in the definition of Trust Fund and delivered to   
the Trustee, as Trustee in trust upon and subject to the                        

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conditions set forth herein for the benefit of the Certificateholders and the   
Certificate Insurer. The Trustee agrees, for the benefit of the                 
Certificateholders and the Certificate Insurer, to review (or cause to be       
reviewed) each Mortgage File within 45 Business Days after the Closing Date and 
to deliver to the Seller, the Master Servicer, the Company and the Certificate  
Insurer a certification in the form attached hereto as Exhibit F to the effect  
that, as to each Mortgage Loan listed in the related Mortgage Loan Schedule     
(other than any Mortgage Loan paid in full or any Mortgage Loan specifically    
identified in such certification as not covered by such certification), (i) all 
documents required to be delivered to it pursuant to Section 2.03 are in its    
possession, (ii) each such document has been reviewed by it and has not been    
mutilated, damaged, torn or otherwise physically altered (handwritten additions,
changes or corrections shall not constitute physical alteration if initialed by 
the Mortgagor), appears regular on its face and relates to such Mortgage Loan,  
and (iii) based on its examination and only as to the foregoing documents, the  
information set forth on the Mortgage Loan Schedule as to the information set   
forth in (i), (ii), (v), (vi), (x), (xi) and (xiii) of the definition of        
"Mortgage Loan Schedule" set forth herein accurately reflects the information   
set forth in the Mortgage File delivered on such date. The Trustee makes no     
representations as to and shall not be responsible to verify (i) the validity,  
legality, enforceability, sufficiency, due authorization, recordability or      
genuineness of any of the documents contained in each Mortgage File or of any of
the Mortgage Loans or (ii) the collectability, insurability, effectiveness or   
suitability of any such Mortgage Loan.                                          

           Within 90 days following the Closing Date the Trustee shall deliver
(or cause to be delivered) to the Master Servicer, the Seller and the Company a 
final certification in the form attached hereto as Exhibit G 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 not covered by such certification), (i) all documents required 
to be delivered to it pursuant to Section 2.03 are in its possession, (ii) each 
such document has been reviewed by it and has not been mutilated, damaged, torn 
or otherwise physically altered (handwritten additions, changes or corrections  
shall not constitute physical alteration if initialled by the Mortgagor),       
appears regular on its face and relates to such Mortgage Loan, and (iii) based  
on its examination and only as to the foregoing documents, the information set  
forth in (i), (ii), (v), (vi), (x), (xi) and (xiii) of the definition of        
"Mortgage Loan Schedule" set forth herein accurately reflects the information   
set forth in the Mortgage File delivered on such date.                          

           (b) If the Certificate Insurer or the Trustee during the process of
reviewing the Mortgage Files finds any document constituting a part of a        
Mortgage File which is not executed, has not been received, is unrelated to the 
Mortgage Loan identified in the related Mortgage Loan Schedule, or does not     
conform to the requirements of Section 2.03 or the description thereof as set   
forth in the related Mortgage Loan Schedule, the Trustee or the Certificate     
Insurer, as applicable, shall promptly so notify the Master Servicer, the       
Seller, the Certificate Insurer and the Trustee. In performing any such review, 
the Trustee may conclusively rely on the Seller as to the purported genuineness 
of any such document and any signature thereon. It is understood that the scope 
of the Trustee's review of the Mortgage Files is limited solely to confirming   
that the documents listed in Section 2.03 have been executed and received and   
relate to the Mortgage Files identified in the related Mortgage Loan Schedule   
and such documents conform to the standard set forth in clause (ii) of the      
paragraph directly above. The Trustee shall request that the Seller cure any    
such defect within 60 days from the date on which the Seller was notified of    
such defect, and if the Seller does not cure such defect in all material        
respects during such period, request that the                                   

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Seller (i) substitute in lieu of such Mortgage Loan a Qualified Substitute      
Mortgage Loan in the manner and subject to the conditions set forth in Section  
3.03 or (ii) purchase such Mortgage Loan on the next succeeding Master Servicer 
Remittance Date at a purchase price equal to the actual stated principal balance
of such Mortgage Loan as of the date of purchase, plus all accrued and unpaid   
interest on such principal balance computed at the Mortgage Interest Rate, plus 
the amount of any unpaid Servicing Fees, unreimbursed Periodic Advances and     
unreimbursed Servicing Advances made by the Master Servicer with respect to such
Mortgage Loan, which purchase price shall be deposited in the Collection Account
on the same Business Day, after deducting therefrom any amounts received in     
respect of such repurchased Mortgage Loan or Loans and being held in the        
Collection Account for future distribution to the extent such amounts have not  
yet been applied to principal or interest on such Mortgage Loan (the "Loan      
Repurchase Price"). It is understood and agreed that the obligation of the      
Seller to so cure or purchase any Mortgage Loan as to which a material defect in
or omission of a constituent document exists shall constitute the sole remedy   
respecting such defect or omission available to Certificateholders or the       
Trustee on behalf of Certificateholders. In addition, it is understood and      
agreed that the Company has assigned to the Trustee all of its rights under the 
Purchase Agreement and the right to enforce any remedy against the Seller as    
provided in Section 2.05 of the Purchase Agreement. For purposes of calculating 
the amount the Master Servicer is required to remit on the Master Servicer      
Remittance Date following such repurchase or substitution, any Loan Repurchase  
Price or Substitution Adjustment that is paid and deposited in the related      
Collection Account as provided above shall be deemed to have been deposited in  
the related Collection Account in the Due Period preceding such Master Servicer 
Remittance Date.                                                                

         (c) Upon receipt by the Trustee of a certification of a Servicing
Officer of such substitution or purchase and, in the case of a substitution,    
upon receipt of the related Mortgage File, and the deposit of the amounts       
described above in the Collection Account (which certification shall be in the  
form of Exhibit H hereto), the Trustee shall release to the Master Servicer for 
release to the Seller the related Mortgage File and shall execute, without      
recourse, and deliver such instruments of transfer furnished by the Seller as   
may be necessary to transfer such Mortgage Loan to the Seller. The Trustee shall
notify the Certificate Insurer if the Seller fails to repurchase or substitute  
for a Mortgage Loan in accordance with the foregoing.                           

            Section 2.05 EXECUTION OF CERTIFICATES. The Trustee acknowledges the
assignment to it of the Mortgage Loans and the delivery of the Mortgage Files   
relating thereto to it and, concurrently with such delivery, has executed,      
authenticated and delivered to or upon the order of the Company, in exchange for
the Mortgage Loans, the Mortgage Files and the other assets included in the     
definition of Trust Fund, Certificates duly authenticated by the Trustee in     
Authorized Denominations evidencing the entire ownership of the Trust Fund.     

           Section 2.06 FURTHER ACTION EVIDENCING ASSIGNMENTS. (a) The Company
agrees that, from time to time, at the Seller's expense, the Company shall cause
the Seller promptly to execute and deliver all further instruments and          
documents, and take all further action, that may be necessary or appropriate, or
that the Master Servicer or the Trustee may reasonably request, in order to     
perfect, protect or more fully evidence the transfer of ownership of the Trust  
Fund or to enable the Trustee to exercise or enforce any of its rights          
hereunder. Without limiting the generality of the foregoing, the Company will,  
upon the request of the Master Servicer or of the Trustee execute and file (or  
cause to be executed and filed) such real estate filings, financing or          

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continuation statements, or amendments thereto or assignments thereof, and such 
other instruments or notices, as may be necessary or appropriate.               

            (b) The Company hereby grants to the Master Servicer and the Trustee
powers of attorney to execute all documents on its behalf under this Agreement  
and the Purchase Agreement as may be necessary or desirable to effectuate the   
foregoing.                                                                      

Section 2.07 [RESERVED].                                

           Section 2.08 CONVEYANCE OF REMIC I REGULAR INTERESTS; ACCEPTANCE OF
REMIC II BY THE TRUSTEE. The Company, concurrently with the execution and       
delivery hereof, does hereby transfer, assign, set over and otherwise convey to 
the Trustee without recourse all the right, title and interest of the Company in
and to the REMIC I Regular Interests for the benefit of the Certificateholders  
and the Certificate Insurer. The Trustee acknowledges receipt of the REMIC I    
Regular Interests (which are uncertificated) and declares that it holds and will
hold the same in trust for the exclusive use and benefit of all present and     
future Certificateholders and the Certificate Insurer.                          

     Section 2.09 ISSUANCE OF CLASS R-II CERTIFICATES. The Trustee
acknowledges the assignment to it of the REMIC I Regular Interests and,         
concurrently therewith and in exchange therefor, pursuant to the written request
of the Company executed by an officer of the Company, the Trustee has executed, 
authenticated and delivered to or upon the order of the Company, the Class R-II 
Certificates in authorized denominations. The interests evidenced by the Class  
R-II Certificates, together with the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6, Class A-7, Class A-8 Certificates and the Class A-9       
Component A, B, C and D, constitute the entire beneficial ownership interest in 
REMIC II.                                                                       

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ARTICLE III 

 REPRESENTATIONS, WARRANTIES AND COVENANTS
 -----------------------------------------

            Section 3.01 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER
SERVICER. The Master Servicer hereby represents and warrants to the Trustee, the
Company, the Certificate Insurer and the Certificateholders as of the Closing   
Date:                                                                           

           (a) The Master Servicer is a California corporation duly organized,
    validly existing and in good standing under the laws of the state of its
   incorporation and is in compliance with the laws of each state in which
     any Mortgaged Property is located to the extent necessary to enable it to
 perform its obligations under the terms of this Agreement; the Master
      Servicer has the full corporate power and authority to execute and deliver
this Agreement and to perform in accordance herewith; the execution,
     delivery and performance of this Agreement by the Master Servicer and the
   consummation of the transactions contemplated hereby have been duly and
validly authorized; this Agreement evidences the valid, binding and 
      enforceable obligation of the Master Servicer; and all requisite corporate
     action has been taken by the Master Servicer to make this Agreement valid
and binding upon the Master Servicer in accordance with its terms;  

         (b) Neither the execution and delivery of this Agreement, 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 Master Servicer's charter or by-laws or
    any legal restriction or any agreement or instrument to which the Master
    Servicer is now a party or by which it is bound, or constitute a default
     or result in an acceleration under any of the foregoing, or result in the
      violation of any law, rule, regulation, order, judgment or decree to which
    the Master Servicer or its property is subject, or impair the ability of
the Trustee (or the Master Servicer as the agent of the Trustee) to 
     realize on the Mortgage Loans, or impair the value of the Mortgage Loans;

   (c) The Master Servicer is or has applied to be an approved
   seller/servicer of conventional residential mortgage loans for FNMA and
FHLMC;                                                              

         (d) There is no action, suit, proceeding or investigation pending
      or, to the knowledge of the Master Servicer, threatened against the Master
      Servicer 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 Master Servicer, or in any material
     impairment of the right or ability of the Master Servicer to carry on its
    business substantially as now conducted, or of any action taken or to be
taken in connection with the obligations of the Master Servicer     
    contemplated herein, or which would materially impair the ability of the
Master Servicer to perform under the terms of this Agreement;       

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

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Loans or the consummation of the transactions contemplated by this  
   Agreement, or if required, such approval has been obtained prior to the
Closing Date;                                                       

     (f) Neither this Agreement nor any statement, report or other
      document furnished by the Master Servicer pursuant to this Agreement or in
    connection with the transactions contemplated hereby contains any untrue
      statement of material fact regarding the Master Servicer or omits to state
 a material fact necessary to make the statements regarding the Master
Servicer contained herein or therein not misleading; and            

     (g) The Master Servicer covenants that the computer and other
  systems used by the Master Servicer and each Subservicer in connection
  with the servicing the Mortgage Loans either is or will be modified to
      operate in a manner to allow the complete and uninterrupted performance by
the Master Servicer and each Subservicer of all of its obligations  
hereunder or under any Subservicing Agreement, as the case may be.  

It is understood and agreed that the representations and warranties set forth in
this Section 3.01 shall survive the delivery of the respective Mortgage Files to
the Trustee or to a custodian, as the case may be, and inure to the benefit of  
the Trustee, the Certificateholders and the Certificate                         
Insurer.                                                                        

     Section 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANY. The Company hereby represents, warrants and covenants to the Trustee,  
the Certificateholders and the Certificate Insurer that as of the date of this  
Agreement or as of such date specifically provided herein:                      

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

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

         (c) This Agreement has been duly and validly authorized, executed
    and delivered by the Company, all requisite corporate action having been
     taken, and, assuming the due authorization, execution and delivery hereof
      by the Master Servicer and the Trustee, constitutes or will constitute the
      legal, valid and binding agreement of the Company, enforceable against the
   Company 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 Company with this Agreement or the consummation by the Company of any
   of the transactions contemplated hereby, except as have been made on or
prior to the Closing Date;                                          

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     (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
Company, or (B) of any term, condition or provision of any material 
  indenture, deed of trust, contract or other agreement or instrument to
     which the Company 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 Company of any court or governmental authority having
      jurisdiction over the Company 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 Company pending, or to the knowledge of the  
 Company, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Company's 
      reasonable judgment, might materially and adversely affect the performance
      by the Company of its obligations under this Agreement, or the validity or
enforceability of this Agreement; and                               

      (g) The Company 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 would materially and   
adversely affect its performance hereunder.                         

It is understood and agreed that the representations, warranties and covenants  
set forth in this Section 3.02 shall survive delivery of the respective Mortgage
Files to the Trustee or to a custodian, as the case may be, and shall inure to  
the benefit of the Trustee, the Certificateholders                              
and the Certificate Insurer.                                                    

        Section 3.03 PURCHASE AND SUBSTITUTION. (a) It is understood and
agreed that the representations and warranties set forth in Sections 3.01 and   
3.02 of the Purchase Agreement shall survive delivery of the Certificates to the
Certificateholders. Pursuant to the Purchase Agreement, with respect to any     
representation or warranty contained in Sections 3.01 and 3.02 of the Purchase  
Agreement that is made to the best of the Seller's knowledge, if it is          
discovered by the Master Servicer, any Subservicer, the Trustee, the Certificate
Insurer or any Certificateholder that the substance of such representation and  
warranty was inaccurate as of the Closing Date and such inaccuracy materially   
and adversely affects the value of the related Mortgage Loan, then              
notwithstanding the Seller's lack of knowledge with respect to the inaccuracy at
the time the representation or warranty was made, such inaccuracy shall be      
deemed a breach of the applicable representation or warranty. Upon discovery by 
the Seller, the Master Servicer, any Subservicer, the Trustee or the Certificate
Insurer of a breach of any of such representations and warranties which         
materially and adversely affects the value of the Mortgage Loans or the interest
of the Certificateholders or the Certificate Insurer, or which materially and   
adversely affects the interests of the Certificate Insurer or the               
Certificateholders in the related Mortgage Loan in the case of a representation 
and warranty relating to a particular Mortgage Loan (notwithstanding that such  
representation and warranty was made to the Seller's best knowledge), the party 
discovering such                                                                

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breach shall give prompt written notice to the others. Subject to the last      
paragraph of this Section 3.03, within 60 days of the earlier of its discovery  
or its receipt of notice of any breach of a representation or warranty, pursuant
to the Purchase Agreement, the Seller shall be required to (a) promptly cure    
such breach in all material respects, or (b) purchase such Mortgage Loan on the 
next succeeding Master Servicer Remittance Date, in the manner and at the price 
specified in Section 2.04(b), or (c) remove such Mortgage Loan from the Trust   
Fund (in which case it shall become a Deleted Mortgage Loan) and substitute one 
or more Qualified Substitute Mortgage Loans; provided, that, such substitution  
is effected not later than the date which is two years after the Startup Day or 
at such later date, if the Trustee and the Certificate Insurer receive an       
Opinion of Counsel to the effect set forth below in this Section. Pursuant to   
the Purchase Agreement, any such substitution shall be accompanied by payment by
the Seller of the Substitution Adjustment, if any, to be deposited in the       
Collection Account.                                                             

            (b) As to any Deleted Mortgage Loan for which the Seller substitutes
a Qualified Substitute Mortgage Loan or Loans, the Seller shall be required     
pursuant to the Purchase Agreement to effect such substitution by delivering to 
the Trustee a certification in the form attached hereto as Exhibit H, executed  
by a Servicing Officer and the documents described in Sections 2.03(a)(i)-(vi)  
for such Qualified Substitute Mortgage Loan or Loans.                           

           (c) The Master Servicer shall deposit in the Collection Account all
payments received in connection with such Qualified Substitute Mortgage Loan or 
Loans after the date of such substitution. Monthly Payments received with       
respect to Qualified Substitute Mortgage Loans on or before the date of         
substitution will be retained by the Seller. The Trust Fund will own all        
payments received on the Deleted Mortgage Loan on or before the date of         
substitution, and the Seller shall thereafter be entitled to retain all amounts 
subsequently received in respect of such Deleted Mortgage Loan. The Master      
Servicer shall give written notice to the Trustee and the Certificate Insurer   
that such substitution has taken place and shall amend the Mortgage Loan        
Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of 
this Agreement and the substitution of the Qualified Substitute Mortgage Loan.  
Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall  
be subject to the terms of this Agreement in all respects.                      

          (d) It is understood and agreed that the obligations of the Seller
set forth in Sections 2.05 and 3.04 of the Purchase Agreement to cure, purchase 
or substitute for a defective Mortgage Loan as provided in Sections 2.05 and    
3.04 constitute the sole remedies of the Trustee and the Certificateholders     
respecting a breach of the representations and warranties of the Seller set     
forth in Sections 3.01 and 3.02 of the Purchase Agreement. In addition, it is   
understood and agreed that the Company has assigned to the Trustee all of its   
rights under the Purchase Agreement and the right to enforce any remedy against 
the Seller as provided in Section 3.04 of the Purchase Agreement. The Trustee   
shall give prompt written notice to the Certificate Insurer and the Rating      
Agencies of any repurchase or substitution made pursuant to this Section 3.03 or
Section 2.04(b).                                                                

   (e) Upon discovery by the Master Servicer, the Trustee, the
Certificate Insurer or any Certificateholder that any Mortgage Loan does not    
constitute a Qualified Mortgage, the party discovering such fact shall promptly 
(and in any event within five days of the discovery) give written notice thereof
to the other parties. In connection therewith, pursuant to the Purchase         
Agreement, the Seller shall be required to repurchase or substitute a Qualified 
Substitute Mortgage                                                             

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Loan for the affected Mortgage Loan within 90 days of the earlier of such       
discovery by any of the foregoing parties, or the Trustee's or the Seller's     
receipt of notice, in the same manner as it would a Mortgage Loan for a breach  
of representation or warranty contained in Section 3.01 or 3.02 of the Purchase 
Agreement. The Trustee shall reconvey to the Seller the Mortgage Loan to be     
released pursuant hereto in the same manner, and on the same terms and          
conditions, as it would a Mortgage Loan repurchased for breach of a             
representation or warranty contained in Section 3.01 or 3.02 of the Purchase    
Agreement.                                                                      

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ARTICLE IV

THE CERTIFICATES
----------------

Section 4.01 THE CERTIFICATES. The Certificates shall be
substantially in the forms annexed hereto as Exhibits B-1 and B-2. The          
Certificates shall be issued in Authorized Denominations only. All Certificates 
shall be executed by manual or facsimile signature on behalf of the Trustee by  
an authorized officer and authenticated by the manual or facsimile signature of 
an authorized officer. Certificates bearing the signatures of individuals who   
were at the time of the execution of the Certificates the authorized officers of
the Trustee shall bind the Trustee, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the delivery of such          
Certificates or did not hold such offices at the date of such Certificates. All 
Certificates issued hereunder shall be dated the date of their authentication.  

           Section 4.02 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Trustee, as registrar, shall cause to be kept a register (the           
"Certificate Register") in which, subject to such reasonable regulations as it  
may prescribe, the Trustee shall provide for the registration of Certificates   
and the registration of transfer of Certificates. The Trustee is hereby         
appointed registrar for the purpose of registering Certificates and transfers of
Certificates as herein provided. The Certificate Insurer shall be entitled to   
inspect and verify the Certificate Register and the records of the Trustee      
relating to the Certificates during normal business hours upon reasonable       
notice.                                                                         

        (b) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust Fund and entitled to the same benefits under this Agreement as the 
Certificates surrendered upon such registration of transfer or exchange.        

          (c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or 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.                      

            (d) No service charge shall be made to a Holder for any registration
of transfer or exchange of Certificates, but the Trustee may require payment of 
a sum sufficient to cover any tax or other governmental charge that may be      
imposed in connection with any registration of transfer or exchange of          
Certificates; any other expenses in connection with such transfer or exchange   
shall be an expense of the Trust Fund.                                          

            (e) It is intended that the Class A Certificates be registered so as
to participate in a global book-entry system with the Depository, as set forth  
herein. The Class A Certificates shall, except as otherwise provided in the next
paragraph, be initially issued in the form of a single fully registered Class A 
Certificate with a denomination equal to the Original Certificate Principal     
Balance. Upon initial issuance, the ownership of each such Class A Certificate  
shall be registered in the Certificate Register in the name of Cede & Co., or   
any successor thereto, as nominee for the Depository. The Company and the       
Trustee are hereby authorized to execute and deliver the Representation Letter  
with the Depository. With respect to Class A Certificates registered in the     

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Certificate Register in the name of Cede & Co., as nominee of the Depository,   
the Company, each Seller, the Master Servicer, the Trustee and the Certificate  
Insurer shall have no responsibility or obligation to Direct or Indirect        
Participants or beneficial owners for which the Depository holds Class A        
Certificates from time to time as a Depository. Without limiting the immediately
preceding sentence, the Company, each Seller, the Master Servicer, the Trustee  
and the Certificate Insurer shall have no responsibility or obligation with     
respect to (i) the accuracy of the records of the Depository, Cede & Co., or any
Direct or Indirect Participant with respect to any Ownership Interest, (ii) the 
delivery to any Direct or Indirect Participant or any other Person, other than a
Certificateholder, of any notice with respect to the Class A Certificates or    
(iii) the payment to any Direct or Indirect Participant or any other Person,    
other than a Certificateholder, of any amount with respect to any distribution  
of principal or interest on the Class A Certificates. No Person other than a    
Certificateholder shall receive a certificate evidencing such Class A           
Certificate. Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in    
place of Cede & Co., and subject to the provisions hereof with respect to the   
payment of interest by the mailing of checks or drafts to the Certificate       
holders appearing as Certificateholders at the close of business on a Record    
Date, the name "Cede & Co." in this Agreement shall refer to such new nominee of
the Depository.                                                                 

           (f) In the event that (i) the Depository or the Company advises the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the     
Class A Certificates and the Company or the Depository is unable to locate a    
qualified successor or (ii) the Company at its sole option elects to terminate  
the book-entry system through the Depository, the Class A Certificates shall no 
longer be restricted to being registered in the Certificate Register in the name
of Cede & Co. (or a successor nominee) as nominee of the Depository. At that    
time, the Company may determine that the Class A Certificates shall be          
registered in the name of and deposited with a successor depository operating a 
global book-entry system, as may be acceptable to the Company, or such          
depository's agent or designee but, if the Company does not select such         
alternative global book-entry system, then the Class A Certificates may be      
registered in whatever name or names Certificateholders transferring Class A    
Certificates shall designate, in accordance with the provisions hereof;         
provided, however, that any such reregistration shall be at the expense of the  
Company.                                                                        

        (g) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates as the case may be and all notices with respect to    
such Class A Certificates as the case may be shall be made and given,           
respectively, in the manner provided in the Representation Letter.              

            (h) Except as provided in Section 4.02(i), no transfer, sale, pledge
or other disposition of a Class R Certificate shall be made unless such         
transfer, sale, pledge or other disposition is exempt from the registration     
requirements of the Securities Act of 1933, as amended (the "Act"), and any     
applicable state securities laws or is made in accordance with said Act and     
laws. In the event that a transfer of a Class R Certificate is to be made under 
this Section 4.02(h), (i) the Company may direct the Trustee to require an      
Opinion of Counsel acceptable to and in form and substance satisfactory to the  
Trustee and the Company that such transfer shall be made pursuant to an         
exemption, describing the applicable exemption and the basis therefor, from said

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Act and laws or is being made pursuant to said Act and laws, which Opinion of   
Counsel shall not be an expense of the Trustee, the Company or the Master       
Servicer, provided that such Opinion of Counsel will not be required in         
connection with the initial transfer of any such Certificate by the Company or  
any Affiliate thereof, to a non-affiliate of the Company and (ii) the Trustee   
shall require the transferee to execute a representation letter, substantially  
in the form of Exhibit O hereto, and the Trustee shall require the transferor to
execute a representation letter, substantially in the form of Exhibit P hereto, 
each acceptable to and in form and substance satisfactory to the Company and the
Trustee certifying to the Company and the Trustee the facts surrounding such    
transfer, which representation letters shall not be an expense of the Trustee,  
the Company or the Master Servicer, provided that such representation letter    
will not be required in connection with any transfer of any such Certificate by 
the Company to an Affiliate of the Company. Any such Certificateholder desiring 
to effect such transfer shall, and does hereby agree to, indemnify the Trustee, 
the Certificate Insurer, the Company and the Master Servicer against any        
liability that may result if the transfer is not so exempt or is not made in    
accordance with such applicable federal and state laws.                         

            (i) Transfers of Class R Certificates may be made in accordance with
this Section 4.02(i) if the prospective transferee of a Certificate provides the
Trustee and the Company with an investment letter substantially in the form of  
Exhibit Q attached hereto, which investment letter shall not be an expense of   
the Trustee, the Company or the Master Servicer, and which investment letter    
states that, among other things, such transferee is a "qualified institutional  
buyer" as defined under Rule 144A. Such transfers shall be deemed to have       
complied with the requirements of Section 4.02(h) hereof; provided, however,    
that no Transfer of any of the Certificates may be made pursuant to this Section
4.02(i) by the Company. Any such Certificateholder desiring to effect such      
transfer shall, and does hereby agree to, indemnify the Trustee, the Certificate
Insurer, the Company and the Master Servicer against any liability that may     
result if the transfer is not so exempt or is not made in accordance with such  
applicable federal and state laws.                                              

           (j) Each Person who has or who acquires any Ownership Interest in a
Class R Certificate shall be deemed by the acceptance or acquisition of such    
Ownership Interest to have agreed to be bound by the following provisions and to
have irrevocably appointed the Company or its designee as its attorney-in-fact  
to negotiate the terms of any mandatory sale under clause (8) below and to      
execute all instruments of transfer and to do all other things necessary in     
connection with any such sale, and the rights of each Person acquiring any      
Ownership Interest in a Class R Certificate are expressly subject to the        
following provisions:                                                           

        (1) Each Person holding or acquiring any Ownership Interest in a
  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.                                               

     (2) In connection with any proposed Transfer of any Ownership
    Interest in a Class R Certificate, the Trustee shall require delivery to
    it, and shall not register the Transfer of any Class R Certificate until
 its receipt of, an affidavit and agreement (a "Transfer Affidavit and
     Agreement") attached hereto as Exhibit I from the proposed Transferee, in
form and substance satisfactory to the Trustee, representing and    
warranting, among other things, that such Transferee is a Permitted 
      Transferee, that it is not acquiring its Ownership Interest in the Class R
Certificate that is the subject of the proposed Transfer            

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 as a nominee, trustee or agent for any Person that is not a Permitted
  Transferee, that for so long as it retains its Ownership Interest in a
   Class R Certificate, it will endeavor to remain a Permitted Transferee,
      and that it has reviewed the provisions of this Section 4.02(j) and agrees
to be bound by them.                                                

    (3) Notwithstanding the delivery of a Transfer Affidavit and
     Agreement by a proposed Transferee under clause (2) above, if the Trustee
has actual knowledge that the proposed Transferee is not a Permitted
     Transferee, no Transfer of an Ownership Interest in a Class R Certificate
to such proposed Transferee shall be effected.                      

        (4) Each Person holding or acquiring any Ownership Interest in a
   Class R Certificate shall agree (x) to require a Transfer Affidavit and
    Agreement from any other Person to whom such Person attempts to transfer
   its Ownership Interest in a Class R Certificate and (y) not to transfer
     its Ownership Interest unless it provides a Transferor Certificate to the
     Trustee stating that, among other things, it has no actual knowledge that
such other Person is not a Permitted Transferee.                    

       (5) Each Person holding or acquiring an Ownership Interest in a
Class R Certificate, by purchasing an Ownership Interest in such    
Certificate, agrees to give the Trustee written notice that it is a 
   "pass-through interest holder" within the meaning of temporary Treasury
regulation Section 1.67-3T(a)(2)(i)(A) immediately upon acquiring an
   Ownership Interest in a Class R Certificate, if it is, or is holding an
     Ownership Interest in a Class R Certificate on behalf of, a "pass-through
interest holder".                                                   

 (6) The Trustee will register the Transfer of any Class R
 Certificate only if it shall have received the Transfer Affidavit and
   Agreement and all of such other documents as shall have been reasonably
     required by the Trustee as a condition to such registration. In addition,
 no Transfer of a Class R Certificate shall be made unless the Trustee
   shall have received a representation letter from the Transferee of such
    Certificate to the effect that such Transferee is a United States Person
and is not a Disqualified Organization. Transfers of the Class R    
    Certificates to Non-United States Persons and Disqualified Organizations
are prohibited.                                                     

            (7) Any attempted or purported transfer of any Ownership Interest in
     a Class R Certificate in violation of the provisions of this Section 4.02
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 Class R Certificate in violation of the provisions of this Section 4.02,
 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 Class R Certificate. The Trustee shall notify the Company
     upon receipt of written notice or discovery by a Responsible Officer that
 the registration of transfer of a Class R Certificate was not in fact
 permitted by this Section 4.02. Knowledge shall not be imputed to the
      Trustee with respect to an impermissible transfer in the absence of such a
    written notice or discovery by a Responsible Officer of the Trustee. The
     Trustee shall be under no liability to any Person for any registration of
   transfer of a Class R Certificate that is in fact not permitted by this
  Section 4.02 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                              

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so long as the transfer was registered after receipt of the related 
  Transfer Affidavit and Agreement and Transfer Certificate. The Trustee
      shall be entitled, but not obligated to recover from any Holder of a Class
    R 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 Class R 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 Holder of
such Certificate that was a Permitted Transferee.                   

          (8) If any purported transferee shall become a Holder of a Class R
   Certificate in violation of the restrictions in this Section 4.02, then
   the Company or its designee shall have the right, without notice to the
      Holder or any prior Holder of such Class R Certificate, to sell such Class
   R Certificate to a purchaser selected by the Company or its designee on
 such reasonable terms as the Company or its designee may choose. Such
    purchaser may be the Company itself or any Affiliate of the Company. The
      proceeds of such sale, net of commissions, expenses and taxes due, if any,
      will be remitted by the Company to the last preceding purported transferee
  of such Class R Certificate, except that in the event that the Company
      determines that the Holder or any prior Holder of such Class R Certificate
 may be liable for any amount due under this Section 4.02 or any other
 provision of this Agreement, the Company may withhold a corresponding
 amount from such remittance as security for such claim. The terms and
   conditions of any sale under this clause (8) shall be determined in the
      sole discretion of the Company or its designee, and it shall not be liable
    to any Person having an Ownership Interest in a Class R Certificate as a
result of its exercise of such discretion.                          

            (k) The Trustee shall make available to the Internal Revenue Service
and those Persons specified by the REMIC Provisions, all information necessary  
to compute any tax imposed (A) as a result of the transfer of an ownership      
interest in a Class R Certificate to any Person who is a Disqualified           
Organization, including the information regarding "excess inclusions" of such   
Class R Certificates required to be provided to the Internal Revenue Service and
certain Persons as described in Treasury Regulations Sections 1.860D-1(b)(5) and
1.860E-2(a)(5), and (B) as a result of any regulated investment company, real   
estate investment trust, common trust fund, partnership, trust, estate or       
organization described in Section 1381 of the Code that holds an Ownership      
Interest in a Class R Certificate having as among its record holders at any time
any Person who is a Disqualified Organization. The Trustee may charge and shall 
be entitled to reasonable compensation for providing such information as may be 
required from those Persons which may have had a tax imposed upon them as       
specified in clauses (A) and (B) of this paragraph for providing such           
information.                                                                    

           (l) The provisions of Sections 4.02(j) and 4.02(k) may be modified,
added to or eliminated, provided that there shall have been delivered to the    
Trustee and the Certificate Insurer an Opinion of Counsel to the effect that    
such modification of, addition to or elimination of such provisions will not    
cause the Trust Fund to cease to qualify as a REMIC and will not cause (x) the  
Trust Fund to be subject to an entity-level tax caused by the Transfer of any   
Ownership Interest in a Class R Certificate to a Person that is not a Permitted 
Transferee or (y) a Person other than the prospective transferee to be subject  
to a REMIC-related tax caused by the Transfer of an Ownership Interest in a     
Class R Certificate to a Person that is not a Permitted Transferee.             

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            (m) No transfer of any Class R Certificate shall be made to any Plan
subject to ERISA or the Code or to any Person acting, directly or indirectly, on
behalf of any such Plan or acquiring such Certificate with "plan assets" of a   
Plan within the meaning of the Department of Labor ("DOL") regulation           
promulgated at 29 C.F.R. ss.2510.3-101 ("Plan Assets") or otherwise under ERISA 
unless the prospective transferee provides the Trustee with an opinion of       
counsel which establishes to the satisfaction of the Trustee that the purchase  
of such Certificates is permissible under applicable law, will not constitute or
result in any prohibited transaction under ERISA or Section 4975 of the Code and
will not subject the Company, the Master Servicer or the Trustee to any         
obligation or liability (including obligations or liabilities under ERISA or    
Section 4975 of the Code) in addition to those undertaken in this Agreement,    
which opinion of counsel shall not be an expense of the Company, the Master     
Servicer or the Trustee.                                                        

         (n) Subject to the restrictions set forth in this Agreement, upon
surrender for registration of transfer of any Certificate at the office or      
agency of the Trustee located in Minneapolis, Minnesota, the Trustee shall      
execute, authenticate and deliver in the name of the designated transferee or   
transferees, a new Certificate of the same Class and Percentage Interest and    
dated the date of authentication by the Trustee. At the option of the           
Certificateholders, Certificates may be exchanged for other Certificates of     
Authorized Denominations of a like aggregate Percentage Interest, upon surrender
of the Certificates to be exchanged at such office. 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. No service charge shall be made for any transfer or        
exchange of Certificates, but the Trustee may require payment of a sum          
sufficient to cover any tax or governmental charge that may be imposed in       
connection with any transfer or exchange of Certificates. All Certificates      
surrendered for transfer and exchange shall be cancelled by the Trustee.        

          Section 4.03 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 Trustee such security or         
indemnity as may reasonably be required by each of them to save 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,          
authenticate and deliver, in exchange for or in lieu of any such mutilated,     
destroyed, lost or stolen Certificate, a new Certificate of like tenor and      
Percentage Interest, but bearing a number not contemporaneously outstanding.    
Upon the issuance of any new Certificate under this Section 4.03, 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 their fees and  
expenses connected therewith. Any duplicate Certificate issued pursuant to this 
Section 4.03 shall constitute complete and indefeasible evidence of ownership in
the Trust Fund, as if originally issued, whether or not the mutilated,          
destroyed, lost or stolen Certificate shall be found at any time.               

          Section 4.04 PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer and subject to the provisions of       
Section 4.02 and Article X, the Master Servicer, the Company, the Seller, the   
Certificate Insurer and the Trustee may treat the Person in whose name any      
Certificate is registered as the owner of such Certificate for the purpose of   
receiving remittances pursuant to Section 6.05 and for all other purposes       
whatsoever, and the                                                             

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Master Servicer, the Company, the Seller, the Certificate Insurer and the       
Trustee shall not be affected by notice to the contrary.                        

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 ARTICLE V

ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
--------------------------------------------------

     Section 5.01 APPOINTMENT OF THE MASTER SERVICER. (a) Southern
Pacific Funding Corporation agrees to act as the Master Servicer and to perform 
all servicing duties under this Agreement subject to the terms hereof.          

         (b) The Master Servicer shall service and administer the Mortgage
Loans on behalf of the Trustee and shall have full power and authority, acting  
alone or through one or more Subservicers, to do any and all things in          
connection with such servicing and administration which it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Master         
Servicer, in its own name or the name of a Subservicer, may, and is hereby      
authorized and empowered by the Trustee to, execute and deliver, on behalf of   
itself, the Certificateholders and the Trustee or any of them, 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, the insurance policies and accounts related thereto and the properties   
subject to the Mortgages. Upon the execution and delivery of this Agreement, and
from time to time as may be required thereafter, the Trustee shall, upon written
request, execute for the Master Servicer or its Subservicers any powers of      
attorney and such other documents as may be necessary or appropriate to enable  
the Master Servicer to carry out its servicing and administrative duties        
hereunder.                                                                      

     In servicing and administering the Mortgage Loans, the Master
Servicer shall employ procedures consistent with Accepted Servicing Practices   
and in a manner consistent with recovery under any insurance policy required to 
be maintained by the Master Servicer pursuant to this Agreement.                

         The Master Servicer shall make Mortgage Interest Rate and Monthly
Payment adjustments on each Rate Adjustment Date in compliance with applicable  
regulatory adjustable mortgage loan requirements and the Mortgage Notes with    
respect to each Group I Loan and Group II Loan. The Master Servicer shall       
establish procedures to monitor the Rate Adjustment Dates and the Index in order
to assure that it uses the correct Index in determining an interest rate change,
and it will comply with those procedures. In the event the Index is no longer   
available, the Master Servicer shall choose a new comparable Index in accordance
with the provisions hereof, of the applicable Mortgage Note and of Accepted     
Servicing Practices, and shall provide the Mortgagor and the Trustee with notice
of the new Index sufficient under law and the Mortgage Loan Documents. The      
Master Servicer shall execute and deliver all appropriate notices required by   
the applicable adjustable mortgage loan laws and regulations and the Mortgage   
Loan Documents regarding such Mortgage Interest Rate adjustments and payment    
adjustments.                                                                    

        Each adjustment in the Mortgage Interest Rate shall result in an
adjustment to the related Monthly Payment. If the Master Servicer fails to make 
a timely Mortgage Interest Rate or Monthly Payment adjustment, the Master       
Servicer shall use its own funds to satisfy any shortage in the Mortgagor's     
remittance so long as such shortage shall continue; any such amount paid by the 
Master Servicer shall be reimbursable to it from any subsequent amounts         
collected on account of the related Mortgage Loan with respect to such          
adjustments.                                                                    

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        Costs incurred by the Master Servicer in effectuating the timely
payment of taxes and assessments on the property securing a Mortgage Note and   
foreclosure costs may be added by the Master Servicer to the amount owing under 
such Mortgage Note where the terms of such Mortgage Note so permit; PROVIDED,   
HOWEVER, that the addition of any such cost shall not be taken into account for 
purposes of calculating the principal amount of the Mortgage Note and Mortgage  
Loan, the Monthly Payments on the Mortgage Note and Mortgage Loan or            
distributions to be made to Certificateholders. Such costs shall be recoverable 
by the Master Servicer pursuant to Section 5.04.                                

  (c) Subject to Section 5.12, the Master Servicer is hereby
authorized and empowered to execute and deliver on behalf of the Trustee and    
each Certificateholder, all instruments of satisfaction or cancellation, or of  
partial or full release, discharge and all other comparable instruments, with   
respect to the Mortgage Loans and with respect to the Mortgaged Properties. If  
reasonably required by the Master Servicer, each Certificateholder and the      
Trustee shall execute any powers of attorney furnished to the Trustee by the    
Master Servicer and other documents necessary or appropriate to enable the      
Master Servicer to carry out its servicing and administrative duties under this 
Agreement.                                                                      

          (d) On and after such time as the Trustee receives the resignation
of, or notice of the removal of, the Master Servicer from its rights and        
obligations under this Agreement, and with respect to resignation pursuant to   
Section 5.23, after receipt by the Trustee and the Certificate Insurer of the   
Opinion of Counsel required pursuant to Section 5.23, the Trustee or its        
designee approved by the Certificate Insurer (which approval shall not be       
unreasonably withheld) shall assume all of the rights and obligations of the    
Master Servicer, subject to Section 7.02 hereof. The Master Servicer shall, upon
request of the Trustee but at the expense of the Master Servicer, deliver to the
Trustee all documents and records relating to the Mortgage Loans, any other     
instruments or documents as the Trustee may reasonably request to effect the    
efficient transfer of the duties of the Master Servicer and an accounting of    
amounts collected and held by the Master Servicer and otherwise use its best    
efforts to effect the orderly and efficient transfer of servicing rights and    
obligations to the assuming party.                                              

           (e) If the Mortgage relating to a Mortgage Loan did not have a lien
senior on the related Mortgaged Property as of the Cut-Off Date, then the Master
Servicer, in such capacity, may not consent to the placing of a lien senior to  
that of the Mortgage on the related Mortgaged Property.                         

          (f) The Master Servicer shall deliver a list of Servicing Officers
to the Trustee and the Certificate Insurer by the Closing Date.                 

            Section 5.02 SUBSERVICING AGREEMENTS BETWEEN THE MASTER SERVICER AND
SUBSERVICERS. (a) The Master Servicer may, subject to the prior written approval
of the Certificate Insurer, enter into Subservicing Agreements with Subservicers
for the servicing and administration of the Mortgage Loans and for the          
performance of any and all other activities of the Master Servicer hereunder.   
Each Subservicer shall be either (i) a depository institution the accounts of   
which are insured by the FDIC or (ii) another entity that engages in the        
business of originating, acquiring or servicing loans, and in either case shall 
be authorized to transact business in the state or states where the related     
Mortgaged Properties it is to service are situated and in either case shall be a
FNMA-approved mortgage servicer. In addition, each Subservicer will obtain and  
preserve                                                                        

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its qualifications to do business as a foreign corporation in each jurisdiction 
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans 
and to perform or cause to be performed its duties under the related            
Subservicing Agreement. Each Subservicing Agreement shall provide that the      
Subservicer's rights shall terminate at the option of the successor Master      
Servicer and without any termination fee, expense, penalty or other cost upon   
the termination, resignation or other removal of the Master Servicer under this 
Agreement.                                                                      

  (b) Notwithstanding any Subservicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the 
Master Servicer and a Subservicer or reference to actions taken through a       
Subservicer or otherwise, the Master Servicer shall remain obligated and        
primarily liable to the Trustee, Certificateholders and the Certificate Insurer 
for the servicing and administering of the Mortgage Loans in accordance with the
provisions of this Agreement 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 Master Servicer alone were servicing and         
administering the Mortgage Loans. For purposes of this Agreement, the Master    
Servicer shall be deemed to have received payments on Mortgage Loans when the   
Subservicer has received such payments.                                         

          In the event the Master Servicer shall for any reason no longer be
the Master Servicer (including by reason of an Event of Default), the Trustee or
its designee may, at its option, either (i) assume all of the rights and        
obligations of the Master Servicer under each Subservicing Agreement that the   
Master Servicer may have entered into or (ii) notwithstanding anything to the   
contrary contained in each such Subservicing Agreement, terminate the related   
Subservicer without being required to pay any fee, expense, penalty or other    
costs in connection therewith.                                                  

  Section 5.03 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS;
COLLECTION ACCOUNT. (a) The Master Servicer shall make reasonable efforts to    
collect all payments called for under the terms and provisions of the Mortgage  
Loans, and shall, to the extent such procedures shall be consistent with this   
Agreement and any applicable primary mortgage insurance policy, follow such     
collection procedures as shall constitute Accepted Servicing Practices.         
Consistent with the foregoing, the Master Servicer may in its discretion (i)    
waive any prepayment charge, assumption fee, late payment charge or other charge
in connection with a Mortgage Loan, (ii) arrange a schedule, running for no more
than 180 days after the Due Date for payment of any installment on any Mortgage 
Note, for the liquidation of delinquent items or (iii) if at any time a Mortgage
Loan is three payments delinquent, allow the borrower to make one of his        
payments one month after the final payment date of such Mortgage Loan, if such  
borrower makes two of the delinquent payments at such time. Any provision of    
this agreement to the contrary notwithstanding, the Master Servicer shall not   
agree to the modification or waiver of any provision of a Mortgage Loan at a    
time when such Mortgage Loan is not in default or such default is not reasonably
foreseeable, if such modification or waiver would be treated as a taxable       
exchange under Section 1001 of the Code, unless such exchange would not be      
considered a "prohibited transaction" under the REMIC Provisions.               

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           The Master Servicer shall establish and maintain in the name of the
Trustee the Collection Account, in trust for the benefit of the                 
Certificateholders and the Certificate Insurer. The Collection Account shall be 
established and maintained as an Eligible Account.                              

           The Master Servicer shall deposit in the Collection Account (i) any
amounts representing Monthly Payments on the Mortgage Loans due or to be applied
as of a date after June 1, 1998, (ii) any amounts representing Monthly Payments 
on the Initial Mortgage Loans due or to be applied as of a date on or before the
Cut-off Date (except for any interest accrued prior to June 1, 1998 and except  
for any principal received by the Company prior to the Cut-off Date the receipt 
of which is reflected on the Mortgage Loan Schedule) and (iii) thereafter, on a 
daily basis within two Business Days of receipt (except as otherwise permitted  
herein), the following payments and collections received or made by it (other   
than any amounts in respect of principal of or interest on the Mortgage Loans   
which, under clauses (i) and (ii) above, are not required to be deposited in the
Collection Account):                                                            

      (i) all payments received after the Cut-off Date on account of
  principal on the Mortgage Loans and all Principal Prepayments in Full,
   Curtailments and all Net REO Proceeds collected after the Cut-off Date;

       (ii) all payments received after the Cut-off Date on account of
interest on the Mortgage Loans (other than payments of interest that
accrued on each Mortgage Loan up to and including the Cut-off Date);

(iii) all Net Liquidation Proceeds;                     

(iv) all Insurance Proceeds;                            

(v) all Released Mortgaged Property Proceeds;           

         (vi) any amounts payable in connection with the repurchase of any
   Mortgage Loan and the amount of any Substitution Adjustment pursuant to
Sections 2.04 and 3.03; and                                         

  (vii) any amount expressly required to be deposited in the
Collection Account in accordance with certain provisions of this    
Agreement, including, without limitation Sections 2.04(b), 2.04(c), 
3.03(a), 3.03(c), 5.06, 5.07 and 5.18 of this Agreement;            

PROVIDED, HOWEVER, that the Master Servicer shall be entitled, at its election, 
either (a) to withhold and to pay to itself the applicable Servicing Fee from   
any payment on account of interest or other recovery (including Net REO         
Proceeds) as received and prior to deposit of such payments in the Collection   
Account or (b) to withdraw the applicable Servicing Fee from the Collection     
Account after the entire payment or recovery has been deposited therein;        
provided, further, that with respect to any payment of interest received by the 
Master Servicer in respect of a Mortgage Loan (whether paid by the Mortgagor or 
received as Liquidation Proceeds, Insurance Proceeds or otherwise) which is less
than the full amount of interest then due with respect to such Mortgage Loan,   
only that portion of such payment that bears the same relationship to the total 
amount of such payment of interest as the rate used to determine the Servicing  
Fee bears to the Mortgage                                                       

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Interest Rate borne by such Mortgage Loan shall be allocated to the Servicing   
Fee with respect to such Mortgage Loan. All other amounts shall be deposited in 
the Collection Account not later than the second Business Day following the day 
of receipt and posting by the Master Servicer.                                  

          The Master Servicer may invest the funds in the Collection Account
only in Permitted Investments. No Permitted Investment shall be sold or disposed
of at a gain prior to maturity unless the Master Servicer has obtained an       
Opinion of Counsel (at the Master Servicer's expense) that such sale or         
disposition will not cause the Trust Fund to be subject to the tax on income    
from prohibited transactions imposed by Section 860F(a)(1) of the Code,         
otherwise subject the Trust Fund to tax or cause the Trust Fund to fail to      
qualify as a REMIC. All income (other than any gain from a sale or disposition  
of the type referred to in the preceding sentence) realized from any such       
Permitted Investment shall be for the benefit of the Master Servicer as         
additional servicing compensation. The amount of any losses incurred in respect 
of any such investments shall be deposited in the Collection Account by the     
Master Servicer out of its own funds immediately as realized.                   

        The foregoing requirements for deposit in the Collection Account
shall be exclusive, it being understood and agreed that, without limiting the   
generality of the foregoing, payments in the nature of those described in the   
last paragraph of Section 5.14 and payments in the nature of prepayment charges,
late payment charges or assumption fees need not be deposited by the Master     
Servicer in the Collection Account. If the Master Servicer deposits 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. All funds deposited by the Master Servicer in  
the Collection Account shall be held in the Collection Account for the account  
of the Trustee in trust for the Certificateholders until disbursed in accordance
with Section 6.01 or withdrawn in accordance with Section 5.04.                 

         (b) Prior to the time of their required deposit in the Collection
Account, all amounts required to be deposited therein may be deposited in an    
account in the name of Master Servicer, provided that such account is an        
Eligible Account. All such funds shall be held by the Master Servicer in trust  
for the benefit of the Certificateholders and the Certificate Insurer pursuant  
to the terms hereof.                                                            

          (c) The Collection Account may, upon written notice by the Trustee
to the Certificate Insurer, be transferred to a different depository so long as 
such transfer is to an Eligible Account.                                        

           Section 5.04 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT. The
Master Servicer may, from time to time, make withdrawals from the Collection    
Account for the following purposes, without duplication:                        

         (a) to reimburse itself for any accrued unpaid Servicing Fees and
 for unreimbursed Periodic Advances and Servicing Advances. The Master
Servicer's right to reimbursement for unpaid Servicing Fees and     
   unreimbursed Servicing Advances shall be limited to late collections on
the related Mortgage Loan, including Liquidation Proceeds, Released 
     Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as
 may be collected by the Master Servicer from the related Mortgagor or
otherwise relating to the                                           

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     Mortgage Loan in respect of which such unreimbursed amounts are owed. The
Master Servicer's right to reimbursement for unreimbursed Periodic  
     Advances shall be limited to late collections on any Mortgage Loan and to
   Liquidation Proceeds, Released Mortgage Property Proceeds and Insurance
Proceeds on related Mortgage Loans;                                 

      (b) to reimburse itself for any Periodic Advances or Servicing
     Advances determined in good faith to have become Nonrecoverable Advances,
   such reimbursement to be made from any funds in the Collection Account;

    (c) to withdraw any amount received from a Mortgagor that is
recoverable and sought to be recovered as a voidable preference by a
  trustee in bankruptcy pursuant to the United States Bankruptcy Code in
    accordance with a final, nonappealable order of a court having competent
jurisdiction;                                                       

          (d) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein;                          

         (e) to pay itself Servicing Compensation pursuant to Section 5.14
    hereof to the extent not retained or paid pursuant to Section 5.03, 5.04
or 5.14;                                                            

      (f) to pay to the Seller with respect to each Mortgage Loan or
      property acquired in respect thereof that has been repurchased or replaced
     pursuant to Section 2.04 or 3.03 or to pay to itself with respect to each
Mortgage Loan or property acquired in respect thereof that has been 
   purchased pursuant to Section 8.01 all amounts received thereon and not
     required to be distributed as of the date on which the related repurchase
or purchase price or Principal Balance, as the case may be, was     
determined;                                                         

       (g) to pay to the Seller with respect to each Mortgage Loan the
      amount of interest accrued and unpaid on such Mortgage Loan on the Cut-off
Date;                                                               

     (h) to make deposits to the Certificate Accounts (which shall
  include the Trustee Fee) in the amounts and in the manner provided for
herein;                                                             

            (i) to pay itself any interest earned on or investment income earned
with respect to funds in the Collection Account;                    

         (j) to reimburse itself or the Company pursuant to Section 11.01;
and                                                                 

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

         The Master Servicer shall keep and maintain a separate accounting
for each Mortgage Loan for the purpose of accounting for withdrawals from the   
Collection Account pursuant to subclause (a).                                   

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        Section 5.05 PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES. With
respect to each Mortgage Loan, the Master Servicer shall maintain accurate      
records reflecting casualty insurance coverage.                                 

          With respect to each Mortgage Loan as to which the Master Servicer
maintains escrow accounts, the Master Servicer shall maintain accurate records  
reflecting the status of ground rents, taxes, assessments, water rates and other
charges which are or may become a lien upon the Mortgaged Property and the      
status of primary mortgage guaranty insurance premiums, if any, and casualty    
insurance coverage and shall obtain, from time to time, all bills for the       
payment of such charges (including renewal premiums) and shall effect payment   
thereof prior to the applicable penalty or termination date and at a time       
appropriate for securing maximum discounts allowable, employing for such purpose
deposits of the Mortgagor in any escrow account which shall have been estimated 
and accumulated by the Master Servicer in amounts sufficient for such purposes, 
as allowed under the terms of the Mortgage or applicable law. To the extent that
a Mortgage does not provide for escrow payments, the Master Servicer shall, if  
it has received notice of a default or deficiency, monitor such payments to     
determine if they are made by the Mortgagor.                                    

           Section 5.06 MAINTENANCE OF CASUALTY INSURANCE. The Master Servicer
shall cause to be maintained for each Mortgage Loan a casualty insurance policy 
with extended coverage issued by a generally acceptable insurer in an amount    
which is not less than the full insurable value of the Mortgaged Property       
securing such Mortgage Loan or the unpaid principal balance of such Mortgage    
Loan, whichever is less; provided, however, that such insurance may not be less 
than the minimum amount required to fully compensate for any loss or damage on a
replacement cost basis. If, upon origination of the Mortgage Loan, the          
improvements on the Mortgaged Property were in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood     
hazards (and such flood insurance has been made available) the Master Servicer  
will cause to be maintained any existing flood insurance policy meeting the     
requirements of the current guidelines of the Federal Insurance Administration  
with a generally acceptable insurance carrier, in an amount representing        
coverage not less than the lesser of (i) the unpaid principal balance of the    
Mortgage Loan and (ii) the maximum amount of insurance which was available under
the Flood Disaster Protection Act of 1973. The Master Servicer shall also       
maintain similar fire insurance coverage and, if applicable, flood insurance on 
property acquired upon foreclosure, or by deed in lieu of foreclosure, of any   
Mortgage Loan in an amount which is at least equal to the lesser of (i) the full
insurable value of the improvements which are a part of such property and (ii)  
the principal balance owing on such Mortgage Loan at the time of such           
foreclosure or grant of deed in lieu of foreclosure; provided, however, that    
such insurance may not be less than the minimum amount required to fully        
compensate for any loss or damage on a replacement cost basis. It is understood 
and agreed that such insurance shall be with insurers approved by the Master    
Servicer and 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.   
Pursuant to Section 5.03, any amounts collected by the Master Servicer under any
insurance policies maintained pursuant to this Section 5.06 (other than amounts 
to be applied to the restoration or repair of the related Mortgaged Property or 
released to the Mortgagor in accordance with Accepted Servicing Practices) shall
be deposited into the Collection Account, subject to withdrawal pursuant to     
Section 5.04. Any cost incurred by the Master Servicer in maintaining any such  
insurance shall be added                                                        

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to the amount owing under the Mortgage Loan where the terms of the Mortgage Loan
so permit; provided, however, that the addition of any such cost shall not be   
taken into account for purposes of calculating the principal amount of the      
Mortgage Note or Mortgage Loan, the Monthly Payments on the Mortgage Note or the
distributions to be made to the Certificateholders. Such costs shall be         
recoverable by the Master Servicer pursuant to Section 5.04. In the event that  
the Master Servicer shall obtain and maintain a blanket policy issued by an     
insurer that is acceptable to FNMA or FHLMC, insuring against hazard losses on  
all of the Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligation as set forth in the first sentence of this Section 5.06, it being    
understood and agreed that such policy may contain a deductible clause, in which
case the Master Servicer shall, in the event that there shall not have been     
maintained on the related mortgaged or acquired property an insurance policy    
complying with the first sentence of this Section 5.06 and there shall have been
a loss which would have been covered by such a policy had it been maintained, be
required to deposit from its own funds into the Collection Account the amount   
not otherwise payable under the blanket policy because of such deductible       
clause.                                                                         

            Section 5.07 MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE POLICY. In
the event that the Master Servicer shall obtain and maintain a blanket policy   
(the "Mortgage Impairment Insurance Policy") with an insurer either (i) having a
General Policy rating of A:VIII or better in Best's Key Rating Guide or (ii)    
approved in writing by the Certificate Insurer, such approval not to be         
unreasonably withheld, insuring against fire and hazards of extended coverage on
all of the Mortgage Loans, then, to the extent such policy names the Master     
Servicer as loss payee and provides coverage in an amount equal to the aggregate
unpaid principal balance on the Mortgage Loans without co-insurance, and        
otherwise complies with the requirements of Section 5.06, the Master Servicer   
shall be deemed conclusively to have satisfied its obligations with respect to  
fire and hazard insurance coverage under Section 5.06, it being understood and  
agreed that such blanket policy may contain a deductible clause, in which case  
the Master Servicer shall, in the event that there shall not have been          
maintained on the related Mortgaged Property a policy complying with Section    
5.06, and there shall have been a loss which would have been covered by such    
policy, deposit in the Collection Account the difference, if any, between the   
amount that would have been payable under a policy complying with Section 5.06  
and the amount paid under such blanket policy. Upon the written request of the  
Certificate Insurer, the Trustee or any Certificateholder, the Master Servicer  
shall cause to be delivered to the Certificate Insurer, the Trustee or such     
Certificateholder, as the case may be, a certified true copy of such policy. The
Master Servicer agrees to prepare and present, on behalf of itself, the Trustee,
the Certificate Insurer and Certificateholders, claims under any such policy in 
a timely fashion in accordance with the terms of such policy.                   

        Section 5.08 FIDELITY BOND; ERRORS AND OMISSIONS POLICY. (a) The
Master Servicer shall maintain with a responsible company, and at its own       
expense, a blanket fidelity bond (a "Fidelity Bond") and an errors and omissions
insurance policy (an "Errors and Omissions Policy"), in a minimum amount        
acceptable to FNMA or FHLMC or, if Southern Pacific is the Master Servicer or if
the Trustee is the successor Master Servicer, in an amount generally maintained 
by prudent mortgage loan servicers having servicing portfolios of a similar     
size.                                                                           

          (b) The Master Servicer shall be deemed to have complied with this
provision if one of its respective Affiliates has such a Fidelity Bond and      
Errors and Omissions Policy and, by the terms of such fidelity bond and errors  
and omission policy, the coverage afforded thereunder                           

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extends to the Master Servicer. The Master Servicer shall cause each and every  
Subservicer for it to maintain a policy of insurance covering errors and        
omissions and a fidelity bond which would meet the requirements of Section      
5.08(a). If Southern Pacific is not the Master Servicer and the Trustee is not  
the successor Master Servicer, any such Fidelity Bond and Errors and Omissions  
Policy shall not be cancelled or modified in a materially adverse manner without
10 days prior written notice to the Certificate Insurer.                        

      Section 5.09 COLLECTION OF TAXES, ASSESSMENTS AND OTHER ITEMS;
SERVICING ACCOUNT. In addition to the Collection Account, the Master Servicer   
shall establish and maintain a Servicing Account, which shall be an Eligible    
Account, and shall deposit therein all payments by Mortgagors for taxes,        
assessments, primary mortgage or hazard insurance premiums or comparable items. 
Withdrawals from the Servicing Account may be made to effect payment of taxes,  
assessments, primary mortgage or hazard insurance premiums or comparable items, 
to reimburse the Master Servicer out of related collections for any advances    
made in the nature of any of the foregoing, to refund to any Mortgagors any sums
determined to be overages, or to pay any interest owed to Mortgagors on such    
account to the extent required by law or to clear and terminate the Servicing   
Account at the termination of this Agreement upon the termination of the Trust  
Fund. The Master Servicer shall advance the payments referred to in the first   
sentence of this Section 5.09 that are not timely paid by the Mortgagors on the 
date when the tax, premium or other cost for which such payment is intended is  
due, but the Master Servicer shall be required to so advance only to the extent 
that such advances, in the good faith judgment of the Master Servicer, will be  
recoverable by the Master Servicer pursuant to Section 5.04 out of Liquidation  
Proceeds, Insurance Proceeds or otherwise.                                      

      Section 5.10 PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION; ADDITIONAL INFORMATION. The Trustee shall prepare or cause to be    
prepared for filing with the Commission (other than the Current Report on Form  
8-K to be filed by the Company in connection with computational materials and   
the initial Current Report on Form 8-K to be filed by the Company in connection 
with the issuance of the Certificates) any and all reports, statements and      
information respecting the Trust Fund and/or the Certificates required to be    
filed with the Commission pursuant to the Securities Exchange Act of 1934, as   
amended, and shall solicit any and all proxies of the Certificateholders        
whenever such proxies are required to be solicited, pursuant to the Securities  
Exchange Act of 1934, as amended. The Company shall promptly file, and exercise 
its reasonable best efforts to obtain a favorable response to, no-action        
requests with, or other appropriate exemptive relief from, the Commission       
seeking the usual and customary exemption from such reporting requirements      
granted to issuers of securities similar to the Certificates. Fees and expenses 
incurred by the Trustee in connection with this Section shall not be            
reimbursable from the Trust Fund.                                               

          The Master Servicer and the Company each agree to promptly furnish
to the Trustee, from time to time upon request, such further information,       
reports and financial statements within their respective control related to this
Agreement and the Mortgage Loans as the Trustee reasonably deems appropriate to 
prepare and file all necessary reports with the Commission.                     

   Section 5.11 ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION
AGREEMENTS. In any case in which a Mortgaged Property is about to be conveyed by
the Mortgagor (whether by absolute conveyance or by contract of sale, and       
whether or not the Mortgagor remains liable                                     

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thereon) and the Master Servicer has knowledge of such prospective conveyance,  
the Master Servicer shall effect assumptions in accordance with the terms of any
due-on-sale provision contained in the related Mortgage Note or Mortgage. The   
Master Servicer shall enforce any due-on-sale provision contained in such       
Mortgage Note or Mortgage to the extent the requirements thereunder for an      
assumption of the Mortgage Loan have not been satisfied to the extent permitted 
under the terms of the related Mortgage Note, unless such provision is not      
exercisable under applicable law and governmental regulations or in the Master  
Servicer's judgment, such exercise is reasonably likely to result in legal      
action by the Mortgagor, or such conveyance is in connection with a permitted   
assumption of the related Mortgage Loan. Subject to the foregoing, the Master   
Servicer is authorized to take or enter into an assumption agreement from or    
with the Person to whom such property is about to be conveyed, pursuant to which
such person becomes liable under the related Mortgage Note and, unless          
prohibited by applicable state law, the Mortgagor remains liable thereon,       
provided that the Mortgage Interest Rate with respect to such Mortgage Loan     
shall remain unchanged. The Master Servicer is also authorized, to release the  
original Mortgagor from liability upon the Mortgage Loan and substitute the new 
Mortgagor as obligor thereon. In connection with such assumption or             
substitution, the Master Servicer shall apply such underwriting standards and   
follow such practices and procedures as shall be normal and usual for mortgage  
loans similar to the Mortgage Loans and as it applies to mortgage loans owned   
solely by it. The Master Servicer shall notify the Trustee that any such        
assumption or substitution agreement has been completed by forwarding to the    
Trustee the original copy of such assumption or substitution agreement, which   
copy shall be added by the Trustee 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. In connection  
with any such assumption or substitution agreement, the Mortgage Interest Rate  
of the related Mortgage Note and the payment terms shall not be changed. Any fee
collected by the Master Servicer for entering into an assumption or substitution
of liability agreement will be retained by the Master Servicer as servicing     
compensation.                                                                   

         Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the Master Servicer shall not be deemed to be in default, breach
or any other violation of its obligations hereunder by reason of any conveyance 
by the Mortgagor of the property subject to the Mortgage or any assumption of a 
Mortgage Loan by operation of law which the Master Servicer in good faith       
determines it may be restricted by law from preventing, for any reason          
whatsoever, or if the exercise of such right would impair or threaten to impair 
any recovery under any applicable insurance policy or, in the Master Servicer's 
judgment, be reasonably likely to result in legal action by the Mortgagor.      

Section 5.12 REALIZATION UPON DEFAULTED MORTGAGE LOANS. 

         (a) Except as provided in the last two paragraphs of this Section
5.12(a), the Master Servicer shall foreclose upon or otherwise comparably       
convert the ownership of properties securing such of the Mortgage Loans as come 
into and continue in default and as to which no satisfactory arrangements can be
made for collection of delinquent payments pursuant to Section 5.03. In         
connection with such foreclosure or other conversion, the Master Servicer shall 
follow Accepted Servicing Practices. The foregoing is subject to the proviso    
that the Master Servicer shall not be required to expend its own funds in       
connection with any foreclosure or to restore any damaged property unless it    
shall determine that (i) such foreclosure and/or restoration will increase      

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the proceeds of liquidation of the Mortgage Loan to Certificateholders after    
reimbursement to itself for such expenses and (ii) such expenses will be        
recoverable to it through Liquidation Proceeds (respecting which it shall have  
priority for purposes of withdrawal from the Collection Account pursuant to     
Section 5.04) or otherwise. The Master Servicer shall be entitled to            
reimbursement of the Servicing Fee and other amounts due it, if any, to the     
extent, but only to the extent, that withdrawals from the Collection Account    
with respect thereto are permitted under Section 5.04.                          

        The Master Servicer may foreclose against the Mortgaged Property
securing a defaulted Mortgage Loan either by foreclosure, by sale or by strict  
foreclosure, and in the event a deficiency judgment is available against the    
Mortgagor or any other person, may proceed for the deficiency.                  

        In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure (an "REO Property"), the deed or  
certificate of sale shall be issued to the Master Servicer on behalf of the     
Trustee in the name of the Trustee, as trustee on behalf of the                 
Certificateholders. Notwithstanding any such acquisition of title and           
cancellation of the related Mortgage Loan, such Mortgage Loan shall be          
considered to be a Mortgage Loan held in the Trust Fund until such time as the  
related Mortgaged Property shall be sold and such Mortgage Loan becomes a       
Liquidated Mortgage Loan. Consistent with the foregoing, for purposes of all    
calculations hereunder, so long as such Mortgage Loan shall be considered to be 
an Outstanding Mortgage Loan:                                                   

           (i) It shall be assumed that, notwithstanding that the indebtedness
   evidenced by the related Mortgage Note shall have been discharged, such
     Mortgage Note and the related amortization schedule in effect at the time
 of any such acquisition of title (after giving effect to any previous
      Curtailments and before any adjustment thereto by reason of any bankruptcy
      or similar proceeding or any moratorium or similar waiver or grace period)
    remain in effect, except that such schedule shall be adjusted to reflect
     the application of Net REO Proceeds received in any month pursuant to the
succeeding clause.                                                  

           (ii) Net REO Proceeds received in any month shall be deemed to have
been received first in payment of the accrued interest that remained
   unpaid on the date that such Mortgage Loan became an REO Mortgage Loan,
  with the excess thereof, if any, being deemed to have been received in
    respect of the delinquent principal installments that remained unpaid on
  such date. Thereafter, Net REO Proceeds received in any month shall be
    applied to the payment of installments of principal and accrued interest
     on such Mortgage Loan deemed to be due and payable in accordance with the
   terms of such Mortgage Note and such amortization schedule. If such Net
     REO Proceeds exceed the then Unpaid REO Amortization, the excess shall be
treated as a Curtailment received in respect of such Mortgage Loan. 

         (iii) Only that portion of Net REO Proceeds allocable to interest
    that bears the same relationship to the total amount of Net REO Proceeds
allocable to interest as the rate of the Servicing Fee bears to the 
    Mortgage Interest Rate borne by such Mortgage Loan shall be allocated to
the Servicing Fee with respect thereto.                             

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           In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or reasonably foreseeable   
default on a Mortgage Loan, such Mortgaged Property shall be disposed of by or  
on behalf of the Trust Fund before the end of the third taxable year following  
the taxable year in which the acquisition by the Trust Fund took place unless   
(a) the Master Servicer shall have provided to the Trustee an Opinion of Counsel
(at the expense of the Trust Fund) to the effect that the holding by the Trust  
Fund of such Mortgaged Property subsequent to three years after the year of its 
acquisition (and specifying the period beyond such three-year period for which  
the Mortgaged Property may be held) will not cause the Trust Fund to be subject 
to the tax on prohibited transactions imposed by Section 860F(a)(1) of the Code,
otherwise subject the Trust Fund to tax or cause the Trust Fund to fail to      
qualify as a REMIC at any time that any Certificates are outstanding, or (b) the
Master Servicer (at the Trust Fund's expense) shall have applied for, at least  
60 days prior to the expiration of such three-year period, an extension of such 
three-year period in the manner contemplated by Section 856(e)(3) of the Code,  
in which case the three-year period shall be extended by the applicable period. 
The Master Servicer shall further ensure that the Mortgaged Property is         
administered so that it constitutes "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code at all times, that the sale of such property does
not result in the receipt by the Trust Fund of any income from non-permitted    
assets as described in Section 860F(a)(2)(B) of the Code, and that the Trust    
Fund does not derive any "net income from foreclosure property" within the      
meaning of Section 860G(c)(2) of the Code with respect to such property.        

         Any REO Disposition shall be for cash only (unless changes in the
REMIC Provisions made subsequent to the Startup Day allow a sale for other      
consideration).                                                                 

           In lieu of foreclosing upon any defaulted Mortgage Loan, the Master
Servicer may, in its discretion, permit the assumption of such Mortgage Loan if,
in the Master Servicer's judgment, such default is unlikely to be cured and if  
the assuming borrower satisfies the Master Servicer's underwriting guidelines   
with respect to mortgage loans owned by the Master Servicer. In connection with 
any such assumption, the Mortgage Interest Rate of the related Mortgage Note and
the payment terms shall not be changed. Any fee collected by the Master Servicer
for entering into an assumption agreement will be retained by the Master        
Servicer as servicing compensation. Alternatively, the Master Servicer may      
encourage the refinancing of any defaulted Mortgage Loan by the Mortgagor.      

       Notwithstanding the foregoing, prior to instituting foreclosure
proceedings or accepting a deed-in-lieu of foreclosure with respect to any      
Mortgaged Property, the Master Servicer shall make, or cause to be made,        
inspection of the Mortgaged Property in accordance with the Accepted Servicing  
Practices and, with respect to environmental hazards, such procedures are as    
required by the provisions of the Federal National Mortgage Association's       
selling and servicing guide applicable to single-family homes and in effect on  
the date hereof. The Master Servicer shall be entitled to rely upon the results 
of any such inspection made by others. In cases where the inspection reveals    
that such Mortgaged Property is potentially contaminated with or affected by    
hazardous wastes or hazardous substances, the Master Servicer shall promptly    
give written notice of such fact to the Certificate Insurer, the Trustee and    
each Class A Certificateholder. The Master Servicer shall not commence          
foreclosure proceedings or accept a deed-in-lieu of foreclosure for Mortgaged   
Property with respect to this paragraph without obtaining the written consent of
the Certificate Insurer.                                                        

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          Section 5.13 TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES. Upon
the payment in full of any Mortgage Loan, or the receipt by the Master Servicer 
of a notification that payment in full will be escrowed in a manner customary   
for such purposes, the Master Servicer shall immediately notify the Trustee in  
the form of a Request for Release in the form attached hereto as Exhibit H      
(which request shall include a statement to the effect that all amounts received
in connection with such payment which are required to be deposited in the       
Collection Account pursuant to Section 5.03 have been or shall be so deposited) 
of a Servicing Officer and shall request delivery to it of the Mortgage File.   
Upon receipt of such Request for Release, the Trustee, or the Custodian on its  
behalf, shall promptly release the related Mortgage File to the Master Servicer.
Upon any such payment in full, the Master Servicer is authorized to give, as    
agent for the Trustee and the mortgagee under the Mortgage which secured the    
Mortgage Loan, an instrument of satisfaction (or Assignment of Mortgage without 
recourse) regarding the property subject to such Mortgage, which instrument of  
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of such payment, it being  
understood and agreed that no expenses incurred in connection with such         
instrument of satisfaction or assignment, as the case may be, shall be          
chargeable to the Collection Account. In connection therewith, the Trustee shall
execute and return to the Master Servicer any required power of attorney        
provided to the Trustee by the Master Servicer and other required documentation 
in accordance with Section 5.01(c). From time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan and in accordance with Accepted   
Servicing Practices, the Trustee shall, upon request of the Master Servicer and 
delivery to the Trustee of a Request for Release signed by a Servicing Officer, 
release, or cause the Custodian to release, the related Mortgage File to the    
Master Servicer and shall execute such documents as shall be necessary to the   
prosecution of any such proceedings. Such Request for Release shall obligate the
Master Servicer to return the Mortgage File to the Trustee when the need        
therefor by the Master Servicer no longer exists unless the Mortgage Loan shall 
be liquidated, in which case, upon receipt of a certificate of a Servicing      
Officer similar to the Request for Release hereinabove specified, the Mortgage  
File shall be delivered by the Trustee to the Master Servicer.                  

        Each Request for Release may be delivered to the Trustee (i) via
mail or courier, (ii) via facsimile or (iii) by such other means, including,    
without limitation, electronic or computer readable medium, as the Master       
Servicer and the Trustee shall mutually agree. The Trustee shall promptly       
release the related Mortgage File(s) within five (5) to seven (7) Business Days 
of receipt of a properly completed Request for Release pursuant to clauses (i), 
(ii) or (iii) above shall be authorization to the Trustee to release such       
Mortgage Files, provided the Trustee has determined that such Request for       
Release has been executed, with respect to clauses (i) or (ii) above, or        
approved, with respect to clause (iii) above, by an authorized Servicing Officer
of the Master Servicer, and so long as the Trustee complies with its duties and 
obligations under this Agreement. If the Trustee is unable to release the       
Mortgage Files within the time frames previously specified, the Trustee shall   
immediately notify the Master Servicer indicating the reason for such delay, but
in no event shall such notification be later than five Business Days after      
receipt of a Request for Release. If the Master Servicer is required to pay     
penalties or damages due to the Trustee's negligent failure to release the      
related Mortgage File or the Trustee's negligent failure to execute and release 
documents in a timely manner, the Trustee shall be liable for such penalties or 
damages.                                                                        

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           On each day that the Master Servicer remits to the Trustee Requests
for Releases pursuant to clauses (ii) or (iii) above, the Master Servicer shall 
also submit to the Trustee a summary of the total amount of such Requests for   
Releases requested on such day by the same method as described in such clauses  
(ii) and (iii) above.                                                           

      Section 5.14 SERVICING FEE; SERVICING COMPENSATION. The Master
Servicer shall be entitled, at its election, either (a) to pay itself the       
Servicing Fee out of any Mortgagor payment on account of interest or Net REO    
Proceeds prior to the deposit of such payment in the Collection Account or (b)  
to withdraw from the Collection Account such Servicing Fee pursuant to Section  
5.04. The Master Servicer shall also be entitled, at its election, either (a) to
pay itself the Servicing Fee in respect of each delinquent Mortgage Loan out of 
Liquidation Proceeds in respect of such Mortgage Loan or other recoveries with  
respect thereto to the extent permitted in Section 5.03(a) to withdraw from the 
Collection Account the Servicing Fee in respect of each such Mortgage Loan to   
the extent of such Liquidation Proceeds or other recoveries, to the extent      
permitted by Section 5.04.                                                      

      Servicing compensation in the form of Net Foreclosure Profits,
prepayment penalties, assumption fees, late payment charges, tax service fees,  
fees for statement of account or payoff of the Mortgage Loan (to the extent     
permitted by applicable law) or otherwise shall be retained by the Master       
Servicer and are not required to be deposited in the Collection Account. The    
aggregate Servicing Fee is reserved for the administration of the Trust Fund    
and, in the event of replacement of the Master Servicer as servicer of the      
Mortgage Loans, for the payment of other expenses related to such replacement.  
The aggregate Servicing Fee shall be offset as provided in Section 5.20. The    
Master Servicer shall be required to pay all expenses incurred by it in         
connection with its servicing activities hereunder (including maintenance of the
hazard insurance required by Section 5.05) and shall not be entitled to         
reimbursement therefor except as specifically provided herein.                  

       Section 5.15 REPORTS TO THE TRUSTEE AND THE COMPANY; COLLECTION
ACCOUNT STATEMENTS. Not later than 15 days after each Distribution Date, the    
Master Servicer shall provide to the Trustee and the Company a statement,       
certified by a Servicing Officer, setting forth the status of the Collection    
Account as of the close of business on the last day of the immediately preceding
calendar month, stating that all distributions required by this Agreement to be 
made by the Master Servicer on behalf of the Trustee have been made (or if any  
required distribution has not been made by the Master Servicer, specifying the  
nature and status thereof) and showing, for the period covered by such          
statement, the aggregate of deposits into and withdrawals from the Collection   
Account for each category of deposit specified in Section 5.03 and each category
of withdrawal specified in Section 5.04 and the aggregate of deposits into the  
Certificate Accounts as specified in Section 6.01(c). Such statement shall also 
state the aggregate unpaid principal balance of all the Mortgage Loans as of the
close of business on the last day of the month preceding the month in which such
Distribution Date occurs. Copies of such statement shall be provided by the     
Trustee to any Certificateholder upon request.                                  

           Section 5.16 ANNUAL STATEMENT AS TO COMPLIANCE. The Master Servicer
will deliver to the Trustee, the Certificate Insurer and the Rating Agencies on 
or before June 30th of each year, beginning with June 30, 1999, an Officers'    
Certificate stating as to each signer thereof, that (i) a review of the         
activities of the Master Servicer during the preceding calendar year and of     

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its performance under this Agreement has been made under such officer's         
supervision, and (ii) to the best of such officer's knowledge, based on such    
review, the Master Servicer has fulfilled all its obligations under this        
Agreement throughout such year, or if there has been a default in the           
fulfillment of any such obligation, specifying each such default known to such  
officer and the nature and status thereof. Such Officers' Certificate shall be  
accompanied by the statement described in Section 5.17 of this Agreement. Copies
of such statement shall, upon request, be provided to any Certificateholder by  
the Master Servicer, or by the Trustee at the Master Servicer's expense if the  
Master Servicer shall fail to provide such copies.                              

     Section 5.17 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING
REPORT. On or before March 30th of every year, beginning with March 30, 1999,   
the Master Servicer, at its expense, shall cause a firm of nationally recognized
independent public accountants to furnish a statement to the Trustee, the       
Certificate Insurer and the Rating Agencies to the effect that, on the basis of 
an examination of certain documents and records relating to the servicing of the
mortgage loans being serviced by the Master Servicer under pooling and servicing
agreements similar to this Agreement, conducted substantially in compliance with
the Uniform Single Attestation Program for Mortgage Bankers, such firm is of the
opinion that such servicing has been conducted in compliance with this          
Agreement. Copies of such statement shall, upon written request, be provided to 
Certificateholders by the Master Servicer, or by the Trustee at the Master      
Servicer's expense if the Master Servicer shall fail to provide such copies. For
purposes of such statement, such firm may conclusively presume that any pooling 
and servicing agreement which governs mortgage pass-through certificates offered
by the Company (or any predecessor or successor thereto) in a registration      
statement under the Securities Act of 1933, as amended, is similar to this      
Agreement, unless such other pooling and servicing agreement expressly states   
otherwise.                                                                      

       Section 5.18 OPTIONAL PURCHASE OF DEFAULTED MORTGAGE LOANS. Any
Affiliate of the Seller, in its sole discretion, shall have the right to elect  
(by written notice sent to the Master Servicer, the Trustee and the Certificate 
Insurer), but shall not be obligated, to purchase for its own account from the  
Trust Fund any Mortgage Loan which is 90 days or more Delinquent in the manner  
and at the price specified in Section 2.04(b). The purchase price for any       
Mortgage Loan purchased hereunder shall be deposited in the Collection Account  
and the Trustee, upon receipt of such deposit, shall release or cause to be     
released to the purchaser of such Mortgage Loan the related Mortgage File and   
shall execute and deliver such instruments of transfer or assignment prepared by
the purchaser of such Mortgage Loan, in each case without recourse, as shall be 
necessary to vest in the purchaser of such Mortgage Loan any Mortgage Loan      
released pursuant hereto and the purchaser of such Mortgage Loan shall succeed  
to all the Trustee's right, title and interest in and to such Mortgage Loan and 
all security and documents related thereto. Such assignment shall be an         
assignment outright and not for security. The purchaser of such Mortgage Loan   
shall thereupon own such Mortgage Loan, and all security and documents, free of 
any further obligation to the Trustee or the Certificateholders with respect    
thereto.                                                                        

       Section 5.19 REPORTS TO BE PROVIDED BY THE MASTER SERVICER. The
Master Servicer agrees to make available on a reasonable basis to the           
Certificate Insurer a knowledgeable financial or accounting officer for the     
purpose of answering reasonable questions respecting recent developments        
affecting the Master Servicer or the financial statements of the Master Servicer
and to permit the Certificate Insurer to inspect the Master Servicer's servicing
facilities during normal business hours for the purpose of satisfying the       
Certificate Insurer that the Master Servicer has the                            

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ability to service the Mortgage Loans in accordance with this Agreement. With   
respect to the liquidation of a Mortgage Loan or disposition of an REO Property,
upon the determination by the Master Servicer that all Liquidation Proceeds     
which it expects to recover with respect to such Mortgage Loan or REO Property  
have been recovered, the Master Servicer shall promptly deliver to the          
Certificate Insurer a related Liquidation Report with respect to such Mortgage  
Loan.                                                                           

       Section 5.20 ADJUSTMENT OF SERVICING COMPENSATION IN RESPECT OF
PREPAID MORTGAGE LOANS. The aggregate amount of the Servicing Fees that the     
Master Servicer and any Subservicer shall be entitled to receive with respect to
all of the Mortgage Loans and each Distribution Date shall be offset on such    
Distribution Date by an amount equal to the aggregate Prepayment Interest       
Shortfall with respect to all Mortgage Loans which were subjects of Principal   
Prepayments in Full or Curtailments during the month preceding the month of such
Distribution Date. The amount of any offset against the aggregate Servicing Fee 
with respect to any Distribution Date under this Section 5.20 shall be limited  
to the aggregate amount of the Servicing Fees otherwise payable to the Master   
Servicer and any Subservicer (without adjustment on account of Prepayment       
Interest Shortfalls) with respect to (i) scheduled payments having the Due Date 
occurring in the month of such Distribution Date received by the Master Servicer
or any Subservicer prior to the Master Servicer Remittance Date, and (ii)       
Principal Prepayments in Full, Curtailments and Liquidation Proceeds received in
the month preceding the month in which such Distribution Date occurs, and the   
rights of the Certificateholders to the offset of the aggregate Prepayment      
Interest Shortfalls shall not be cumulative.                                    

  Section 5.21 PERIODIC ADVANCES. If, on any Master Servicer
Remittance Date, the Master Servicer determines that any Monthly Payments due on
the Due Date immediately preceding such Master Servicer Remittance Date have not
been received as of the close of business on the Business Day preceding such    
Master Servicer Remittance Date, the Master Servicer shall determine the amount 
of any Periodic Advance required to be made with respect to the related         
Distribution Date. The Master Servicer shall, on the Master Servicer Remittance 
Date, deliver in a computer-readable form (including electronic transmission) to
the Trustee indicating the payment status of each Mortgage Loan as of the       
Business Day prior to such Master Servicer Remittance Date. The Master Servicer 
shall include in the amount to be deposited in the related Certificate Account  
on such Master Servicer Remittance Date an amount equal to the Periodic Advance,
if any, which deposit may be made in whole or in part from funds in the         
Collection Account being held for future distribution or withdrawal on or in    
connection with Distribution Dates in subsequent months. Any funds being held   
for future distribution to Certificateholders and so used shall be replaced by  
the Master Servicer from its own funds by deposit in the related Certificate    
Account on or before the Business Day preceding any such future Master Servicer 
Remittance Date to the extent that funds in the related Certificate Account on  
such Master Servicer Remittance Date shall be less than payments to             
Certificateholders required to be made on such date.                            

       The Master Servicer shall designate on its records the specific
Mortgage Loans and related installments (or portions thereof) as to which such  
Periodic Advance shall be deemed to have been made, such determination being    
conclusive for purposes of withdrawals from the Collection Account pursuant to  
Section 5.04.                                                                   

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            Section 5.22 MAINTENANCE OF CORPORATE EXISTENCE AND LICENSES; MERGER
OR CONSOLIDATION OF THE MASTER SERVICER. (a) The Master Servicer will keep in   
full effect its existence, rights and franchises as a corporation, will obtain  
and preserve its qualification to do business as a foreign corporation in each  
jurisdiction necessary to protect the validity and enforceability of this       
Agreement or any of the Mortgage Loans and to perform its duties under this     
Agreement and will otherwise operate its business so as to cause the            
representations and warranties under Section 3.01 to be true and correct at all 
times under this Agreement.                                                     

      (b) Any Person into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or       
consolidation to which the Master Servicer shall be a party, or any Person      
succeeding to the business of the Master Servicer, shall be an established      
mortgage loan servicing institution acceptable to the Certificate Insurer that  
has a net worth of at least $15,000,000, and in all events shall be the         
successor of the Master Servicer 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. The Master Servicer shall send notice of any such     
merger or consolidation to the Trustee and the Certificate Insurer.             

       Section 5.23 ASSIGNMENT OF AGREEMENT BY MASTER SERVICER; MASTER
SERVICER NOT TO RESIGN. The Master Servicer shall not assign this Agreement or  
resign from the obligations and duties hereby imposed on it except by mutual    
consent of the Certificate Insurer and the Trustee or upon the determination    
that the Master Servicer's duties hereunder are no longer permissible under     
applicable law and that such incapacity cannot be cured by the Master Servicer  
without incurring, in the reasonable judgment of the Certificate Insurer,       
unreasonable expense. Any such determination that the Master Servicer's duties  
hereunder are no longer permissible under applicable law permitting the         
resignation of the Master Servicer shall be evidenced by a written Opinion of   
Counsel (who may be counsel for the Master Servicer) to such effect delivered to
the Trustee, the Seller, the Company and the Certificate Insurer. No such       
resignation shall become effective until the Trustee or a successor appointed in
accordance with the terms of this Agreement has assumed the Master Servicer's   
responsibilities and obligations hereunder in accordance with Section 7.02. The 
Master Servicer shall provide the Trustee, the Rating Agencies and the          
Certificate Insurer with 30 days prior written notice of its intention to resign
pursuant to this Section 5.23. In the event the Master Servicer wishes to resign
from its obligations hereunder, the Holder of the Class R-II Certificates shall 
have the right to select a new Master Servicer, with the consent of the         
Certificate Insurer and the Rating Agencies.                                    

            Section 5.24 INFORMATION REPORTS TO BE FILED BY THE MASTER SERVICER.
The Master Servicer shall file (or cause any Subservicers to file) information  
returns with respect to the receipt of mortgage interest received in a trade or 
business, reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property as   
required by Sections 6050H, 6050J and 6050P of the Code, respectively. Copies of
such information returns shall also be sent to the Trustee.                     

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ARTICLE VI

DISTRIBUTIONS AND PAYMENTS
--------------------------

           Section 6.01 ESTABLISHMENT OF CERTIFICATE ACCOUNTS; DEPOSITS TO THE
CERTIFICATE ACCOUNTS. (a) The Trustee shall establish and maintain two separate 
Certificate Accounts which shall be Eligible Accounts and shall be titled "Group
I Certificate Account, Norwest Bank Minnesota, N.A., as trustee for the         
registered holders of Southern Pacific Secured Assets Corp., Mortgage Loan      
Asset-Backed Pass-Through Certificates, Series 1998-2" and "Group II Certificate
Account, Norwest Bank Minnesota, N.A., as trustee for the registered holders of 
Southern Pacific Secured Assets Corp., Mortgage Loan Asset-Backed Pass-Through  
Certificates, Series 1998-2 "                                                   

            (b) From the period from each Master Servicer Remittance Date to the
Business Day prior to each Distribution Date, the Master Servicer may direct the
Trustee in writing to invest the funds in the Certificate Accounts only in      
Permitted Investments. From the Business Day prior to each Distribution Date to 
such Distribution Date, the Trustee shall invest the funds in the Certificate   
Accounts only in Permitted Investments. No Permitted Investment shall be sold or
disposed of at a gain prior to maturity unless the Master Servicer or Trustee,  
as applicable, has received an Opinion of Counsel (at the Master Servicer's or  
Trustee's expense, as applicable) that such sale or disposition will not cause  
the Trust Fund to be subject to the tax on income from prohibited transactions  
imposed by Section 860F(a)(1) of the Code, otherwise subject REMIC I or REMIC II
to tax or cause either REMIC I or REMIC II to fail to qualify as a REMIC. All   
net income (other than any gain from a sale or disposition of the type referred 
to in the preceding sentence) realized from any such Permitted Investment shall 
be for the benefit of the Master Servicer or Trustee, as applicable, as         
additional compensation. The amount of any losses incurred in respect of any    
such Permitted Investments held therein which is in excess of the income and    
gain thereon shall be deposited in the related Certificate Account by the Master
Servicer or Trustee, as applicable, out of its own funds immediately as         
realized.                                                                       

        (c) On each Master Servicer Remittance Date, the Master Servicer
shall cause to be deposited in the Group I and Group II Certificate Account,    
from funds on deposit in the Collection Account, an amount equal to the related 
Master Servicer Remittance Amount with respect to Loan Group I and Loan Group   
II, respectively.                                                               

         Section 6.02 PERMITTED WITHDRAWALS FROM THE CERTIFICATE ACCOUNTS.
The Trustee shall withdraw or cause to be withdrawn funds from the Certificate  
Accounts for the following purposes:                                            

  (a) to effect the distributions described in Section 6.05;

      (b) to pay to the Seller with respect to each Mortgage Loan or
      property acquired in respect thereof that has been repurchased or replaced
  pursuant to Section 2.04 or 3.03 or to pay to the Master Servicer with
      respect to each Mortgage Loan or property acquired in respect thereof that
  has been purchased all amounts received thereon and not required to be
  distributed as of the date on which the related repurchase or purchase
price or Principal Balance was determined;                          

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           (c) on the Business Day prior to each Distribution Date, to pay the
   Master Servicer any interest earned on or investment income earned with
respect to funds in the Certificate Accounts up to the Business Day 
immediately prior to such Distribution Date;                        

           (d) on each Distribution Date, to pay itself any interest earned on
or investment income earned with respect to funds in the Certificate
      Accounts from the Business Day immediately prior to such Distribution Date
to such Distribution Date;                                          

         (e) to return to the Collection Account any amount deposited in a
Certificate Account that was not required to be deposited therein;  

       (f) to make reimbursements to itself in accordance with Section
9.05; and                                                           

            (g) to clear and terminate the Certificate Accounts upon termination
of any of the Trust Fund pursuant to Article VIII.                  

     The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Accounts pursuant to each of subclauses (a)    
through (f) listed above.                                                       

       Section 6.03 COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of all money and    
other property payable to or receivable by the Trustee pursuant to this         
Agreement, including (a) all payments due on the Mortgage Loans in accordance   
with the respective terms and conditions of such Mortgage Loans and required to 
be paid over to the Trustee by the Master Servicer or by any Subservicer and (b)
Insured Payments. The Trustee shall hold all such money and property received by
it, as part of the Trust Fund and shall apply it as provided in this Agreement. 

     Section 6.04 THE CERTIFICATE INSURANCE POLICY. (a) Within two
Business Days after each Master Servicer Remittance Date the Trustee shall      
determine with respect to the immediately following Distribution Date the amount
to be on deposit in the Certificate Accounts on such Distribution Date as a     
result of the Master Servicer's remittance of the Master Servicer Remittance    
Amount on the related Master Servicer Remittance Date plus the amount of any    
amounts deposited into the Certificate Accounts, less the amounts described in  
clause (f) of Section 6.02 to be withdrawn on such Distribution Date and clauses
(i) through (ii) of Section 6.05(b) or 6.05(c) for the related Distribution     
Date, and not including the amount of any Insured Payment which is required to  
be deposited in the related Certificate Account for such Distribution Date. The 
amounts described in the preceding sentence, as determined separately with      
respect to the Group I Loans and Group II Loans, with respect to each           
Distribution Date are the "Group I Available Funds" and "Group II Available     
Funds" for such Distribution Date.                                              

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

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           (c) The Trustee shall establish a separate Eligible Account for the
benefit of Holders of the Certificates and the Certificate Insurer referred to  
herein as the "Certificate Insurance Payments Account" over which the Trustee   
shall have exclusive control and sole right of withdrawal. The Trustee shall    
deposit upon receipt any amount paid under the Certificate Insurance Policy in  
the Certificate Insurance Payments Account and distribute such amount only for  
purposes of payment to Certificateholders of the Group I or Group II Insured    
Distribution Amount for which a claim was made and such amount may not be       
applied to satisfy any costs, expenses or liabilities of the Master Servicer,   
the Trustee or the Trust Fund. Amounts paid under the Certificate Insurance     
Policy, to the extent needed to pay the Group I or Group II Insured Distribution
Amount shall be transferred by the Trustee from the Certificate Insurance       
Payments Account to the related Certificate Account on the related Distribution 
Date and disbursed by the Trustee to Certificateholders in accordance with      
Section 6.05. It shall not be necessary for payments made under the Certificate 
Insurance Policy to be made by checks or wire transfers separate from other     
amounts distributed pursuant to Section 6.05. However, the amount of any payment
of principal or of interest on the Certificates to be paid from funds           
transferred from the Certificate Insurance Payments Account shall be noted as   
provided in paragraph (d) below. Funds held in the Certificate Insurance        
Payments Account shall not be invested. Any funds remaining in the Certificate  
Insurance Payments Account on the first Policy 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 Policy       
Business Day.                                                                   

      (d) The Trustee Remittance Report shall indicate the amount of
interest and principal paid in respect of the Group I and Group II Class A      
Certificates from moneys received under the Certificate Insurance Policy.       

          (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                  
Certificateholders of the affected Certificates that, in the event any          
Certificateholder's Insured Payment is so recovered, such Certificateholder 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    
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 Certificates.  
Each Certificateholder, by its purchase of Certificates, the Master 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 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,                                                                         

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supersedeas or performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Certificate Insurer shall be subrogated to, and
each Certificateholder, the Master Servicer and the Trustee hereby delegate and 
assign to the Certificate Insurer, to the fullest extent permitted by law, the  
rights of the Master Servicer, the Trustee and each 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.                      

            Section 6.05 DISTRIBUTIONS. (a) No later than 12:00 noon Minneapolis
time on each Master Servicer Remittance Date, the Master Servicer shall deliver 
to the Trustee a report in computer-readable form (including electronic         
transmission, provided that a portion of such report relating to certain        
delinquency information may be delivered in hard copy form rather than          
computer-readable form) containing such information as to each Mortgage Loan as 
of such date and such other information as the Trustee shall reasonably require.

      (b) With respect to funds deposited in the Group I Certificate
Account, on each Distribution Date, the Trustee shall make the following        
allocations, disbursements and transfers in the following order of priority, and
each such allocation, transfer and disbursement shall be treated as having      
occurred only after all preceding allocations, transfers and disbursements have 
occurred:                                                                       

        (i) commencing with the Distribution Date occurring in September
    1998, to the Certificate Insurer, the Premium Amount with respect to the
Group I Loans;                                                      

           (ii) to the Trustee, an amount equal to the Trustee's Fees then due
to it with respect to the Group I Loans;                            

          (iii) to the Certificate Insurer the lesser of (x) an amount equal
to (i) the amount then on deposit in the Group I Certificate Account
      remaining after the foregoing distributions minus (ii) the Group I Insured
  Distribution Amount for such Distribution Date and (y) the outstanding
Group I Reimbursement Amount, if any, as of such Distribution Date; 

            (iv) from amounts then on deposit in the Group I Certificate Account
(including any Group I Insured Payments), to the Group I Class A    
Certificateholders an amount equal to the Group I Class A Interest  
   Distribution Amount, with such amount distributed first, to the Group I
     Fixed Strip Components and second, pro rata to the Class A-1 Certificates
      and to the Class A-2 Certificates and up to an amount equal to the related
Group I Class A Interest Distribution Amount payable thereon;       

           (v) from amounts then on deposit in the Group I Certificate Account
(including any Group I Insured Payments), to the Group I Class A    
     Certificateholders an amount equal to the lesser of (a) the Group I Class
     A Principal Distribution Amount and (b) the amount remaining in the Group
     I Certificate Account after distributions pursuant to clauses (i) through
(iv) above, in the manner described below;                          

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    (vi) from amounts then on deposit in the Group I Certificate
    Account, to the Group II Class A Certificateholders, on any Distribution
   Date when following distributions to be made on such date, the Group II
Available Funds would be less than the Group II Class A Interest    
Distribution Amount, an amount equal to such difference;            

     (vii) from amounts then on deposit in the Group I Certificate
      Account, to the Group II Class A Certificateholders (other than the Holder
    of the Group II Fixed Strip Component), on any Distribution Date where a
 Group II Subordination Deficit exists (following payments pursuant to
Section 6.05(c)(v)), an amount equal to such Group II Subordination 
Deficit;                                                            

      (viii) from amounts then on deposit in the Group I Certificate
  Account, to the Certificate Insurer, an amount equal to the sum of the
     outstanding Group II Reimbursement Amount remaining unpaid and the amount
    of any Insured Payment made to the Group II Class A Certificates on such
Distribution Date;                                                  

    (ix) from amounts then on deposit in the Group I Certificate
      Account, to the Group II Class A Certificateholders (other than the Holder
  of the Group II Fixed Strip Component), on any Distribution Date when,
      following distributions to be made on such date, the Group II Subordinated
   Amount would be less than the Group II Required Subordinated Amount, an
amount equal to such difference;                                    

            (x) from amounts then on deposit in the Group I Certificate Account,
 to the Trustee, without duplication, an amount equal to any costs and
expenses owed to the Trustee as described in Section 9.05(b) of this
     Agreement in excess of $75,000 in aggregate in any calendar year and only
that portion of such amounts in excess of $75,000;                  

    (xi) from amounts then on deposit in the Group I Certificate
      Account, to the Group I Class A Certificateholders the amount equal to the
      lesser of (i) any amount then remaining in the Group I Certificate Account
after distributions to clauses (i) through (viii) above and (ii) the
    aggregate Group I Class A Available Funds Cap Carry-Forward Amount shall
     be paid to the Group I Class A Certificateholders on account of the Group
I Class A Available Funds Cap Carry-Forward Amount, if any;         

     (xii) from amounts then on deposit in the Group I Certificate
Account, to the Holders of the Class R-II Certificates, the amount  
remaining on such Distribution Date, if any.                        

Notwithstanding clause (v) above, the aggregate amounts distributed on all      
Distribution Dates to the Holders of the Class A-1 Certificates or Class A-2    
Certificates on account of the Group I Class A Principal Distribution Amount    
shall not exceed the Original Group I Certificate Principal Balance of the Class
A-1 Certificates or Class A-2 Certificates.                                     

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          Distributions of the Group I Class A Principal Distribution Amount
and amounts allocated pursuant to Section 6.05(c)(vii) and (ix) will be         
distributed as follows:                                                         

    (i) first, to the Class A-2 Certificates the Group I Lockout
 Distribution Percentage of the Group I Class A Principal Distribution
   Amount in reduction of the Certificate Principal Balance thereof, until
such Certificate Principal Balance has been reduced to zero;        

       (ii) second, to the Class A-1 Certificates, in reduction of the
   Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero; and                               

      (iii) third, to the Class A-2 Certificates in reduction of the
   Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero;                                   

provided, however, that if on any Distribution Date a Certificate Insurer       
Default and a Group I Subordination Deficit exists, the Group I Class A         
Principal Distribution Amount will be distrib uted to the Group I Class A       
Certificates on a pro rata basis based on the Certificate Principal Balances    
thereof, in reduction of the Certificate Principal Balances thereof, until the  
Certificate Principal Balances thereof have been reduced to zero.               

       (c) With respect to funds deposited in the Group II Certificate
Account, on each Distribution Date, the Trustee shall make the following        
allocations, disbursements and transfers in the following order of priority, and
each such allocation, transfer and disbursement shall be treated as having      
occurred only after all preceding allocations, transfers and disbursements have 
occurred:                                                                       

        (i) commencing with the Distribution Date occurring in September
    1998, to the Certificate Insurer, the Premium Amount with respect to the
Group II Loans;                                                     

           (ii) to the Trustee, an amount equal to the Trustee's Fees then due
to it with respect to the Group II Loans;                           

          (iii) to the Certificate Insurer the lesser of (x) an amount equal
 to (i) the amount then on deposit in the Group II Certificate Account
remaining after the foregoing distributions minus (ii) the Group II 
Insured Distribution Amount for such Distribution Date and (y) the  
      outstanding Group II Reimbursement Amount, if any, as of such Distribution
Date;                                                               

     (iv) from amounts then on deposit in the Group II Certificate
     Account (including any Group II Insured Payments), an amount equal to the
      Group II Class A Interest Distribution Amount allocated among the Group II
Class A Certificates in the manner described below;                 

            (v) from amounts then on deposit in the Group II Certificate Account
(including any Group II Insured Payments), to the Group II Class A  
Certificateholders (other than the                                  

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    Group II Fixed Strip Component) an amount equal to the lesser of (a) the
Group II Class A Principal Distribution Amount and (b) the amount   
      remaining in the Group II Certificate Account after distributions pursuant
to clauses (i) through (iv) above, allocated in the manner described
below.                                                              

     (vi) from amounts then on deposit in the Group II Certificate
   Account, to the Group I Class A Certificateholders, on any Distribution
   Date when, following distributions to be made on such date, the Group I
Available Funds would be less than the Group I Class A Interest     
Distribution Amount, an amount equal to such difference;            

      (vii) from amounts then on deposit in the Group II Certificate
     Account, to the Group I Class A Certificateholders (other than the Holder
 of the Group I Fixed Strip Components), on any Distribution Date when
where a Group I Subordination Deficit exists (after making payments 
pursuant to Section 6.05(b)(v)), an amount equal to such Group I    
Subordination Deficit;                                              

       (viii) from amounts then on deposit in the Group II Certificate
  Account, to the Certificate Insurer, an amount equal to the sum of the
     outstanding Group I Reimbursement Amount remaining unpaid and any Insured
 Payment made with respect to the Group I Class A Certificates on such
Distribution Date;                                                  

     (ix) from amounts then on deposit in the Group II Certificate
     Account, to the Group I Class A Certificateholders (other than the Holder
  of the Group I Fixed Strip Components), on any Distribution Date when,
     following distributions to be made on such date, the Group I Subordinated
  Amount would be less than the Group I Required Subordinated Amount, an
amount equal to such difference;                                    

    (x) from amounts then on deposit in the Group II Certificate
      Account, to the Trustee, without duplication, an amount equal to any costs
    and expenses owed to the Trustee as described in Section 9.05(b) of this
     Agreement in excess of $75,000 in aggregate in any calendar year and only
that portion of such amounts in excess of $75,000;                  

     (xi) from amounts then on deposit in the Group II Certificate
      Account, to the Group I Class A Certificateholders the amount equal to the
lesser of (i) any amount then remaining in the Group II Certificate 
    Account after distributions to clauses (i) through (viii) above and (ii)
  the aggregate Group I Class A Available Funds Cap Carry-Forward Amount
     shall be paid to the Group I Class A Certificateholders on account of the
Group I Class A Available Funds Cap Carry-Forward Amount, if any;   

      (xii) from amounts then on deposit in the Group II Certificate
Account, to the Holders of the Class R-II Certificates, the amount  
remaining on such Distribution Date, if any.                        

Notwithstanding clause (v) above, the aggregate amounts distributed on all      
Distribution Dates to the Holders of the Group II Class A Certificates on       
account of the Group II Class A Principal Distribution Amount shall not exceed  
the Original Group II Certificate Principal Balance for the                     
Group II Class A Certificates.                                                  

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  The Group II Class A Interest Distribution Amount shall be
distributed first, to the Group II Fixed Strip Component, in an amount equal to 
the related Group II Class A Interest Distribution Amount payable thereon, and  
second, to the remaining Group II Class A Certificates on a pro rata basis in   
proportion to the related Group II Class A Interest Distribution Amount payable 
thereon.                                                                        

           Distributions of the Group II Class A Principal Distribution Amount
and amounts allocated pursuant to Section 6.05(b)(vii) and (ix) will be         
distributed as follows:                                                         

     (i) first, to the Group II Lockout Certificates, the Group II
Lockout Distribution Percentage of the Group II Class A Principal   
  Distribution Amount, in reduction of the Certificate Principal Balance
 thereof, until such Certificate Principal Balance has been reduced to
zero;                                                               

       (ii) second, to the Class A-3 Certificates, in reduction of the
   Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero;                                   

       (iii) third, to the Class A-4 Certificates, in reduction of the
   Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero;                                   

       (iv) fourth, to the Class A-5 Certificates, in reduction of the
   Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero;                                   

     (v) fifth, to the Class A-6 Certificates, in reduction of the
   Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero;                                   

      (vi) sixth, to the Class A-7 Certificates, in reduction of the
   Certificate Principal Balance thereof, until such Certificate Principal
Balance has been reduced to zero; and                               

          (v) seventh, to the Group II Lockout Certificates, in reduction of
the Certificate Principal Balance thereof, until such Certificate   
Principal Balance has been reduced to zero;                         

provided, however, that if on any Distribution Date a Certificate Insurer       
Default and a Group II Subordination Deficit exists, the Group II Class A       
Principal Distribution Amount will be distrib uted to the Group II Class A      
Certificates on a pro rata basis based on the Certificate Principal Balances    
thereof, in reduction of the Certificate Principal Balances thereof, until the  
Certificate Principal Balances thereof have been reduced to zero.               

       Section 6.06 INVESTMENT OF ACCOUNTS. (a) So long as no Event of
Default shall have occurred and be continuing, and consistent with any          
requirements of the Code, all or a portion of any Account (other than the       
Certificate Insurance Payments Account) held by the Trustee shall be invested   
and reinvested by the Trustee, as directed in writing by the Master Servicer    
(with respect to the Certificate Accounts up to the Business Day prior to each  
Distribution Date) or the Trustee (with respect to the Certificate Accounts from
the Business Day prior to each Distribution Date to such Distribution Date) or  
the Company in one or more Permitted Investments                                

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bearing interest or sold at a discount. If an Event of Default shall have       
occurred and be continuing or if the Master Servicer or the Company does not    
provide investment directions, the Trustee shall invest all Accounts in         
Permitted Investments described in paragraph (d) of the definition of Permitted 
Investments. No such investment in any Account shall mature later than the      
Business Day immediately preceding the next Distribution Date (except that if   
such Permitted Investment is an obligation of the Trustee, then such Permitted  
Investment shall mature not later than such Distribution Date).                 

            (b) If any amounts are needed for disbursement from any Account held
by the Trustee and sufficient uninvested funds are not available to make such   
disbursement, the Trustee shall cause to be sold or otherwise converted to cash 
a sufficient amount of the investments in such Account. The Trustee shall not be
liable for any investment loss or other charge resulting therefrom unless the   
Trustee's failure to perform in accordance with this Section 6.06 is the cause  
of such loss or charge.                                                         

            (c) Subject to Section 9.01 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any investment loss on any Permitted Investments included therein
other than with respect to the investment of funds in the Certificate Accounts  
from the Business Day prior to each Distribution Date to such Distribution Date,
and except to the extent that the Trustee is the obligor and has defaulted      
thereon or as provided in subsection (b) of this Section 6.06.                  

     (d) So long as no Event of Default shall have occurred and be
continuing, all net income and gain realized from investment of, and all        
earnings on, funds deposited in any Account shall be for the benefit of the     
Master Servicer as compensation (in addition to the Servicing Fee) and the      
benefit of the Trustee as compensation (in addition to the Trustee Fee). The    
Master Servicer and the Trustee shall deposit in each Account, from its own     
funds, the amount of any loss incurred in respect of any Permitted Investment   
held therein which is in excess of the income and gain thereon immediately upon 
realization of such loss, without any right to reimbursement therefor; provided,
however, that the Master Servicer shall only be responsible for the             
reimbursement of losses in the Certificate Accounts up until the Business Day   
prior to each Distribution Date, and the Trustee shall only be responsible for  
the reimbursement of losses from the Business Day prior to each Distribution    
Date to such Distribution Date.                                                 

          Section 6.07 REPORTS BY TRUSTEE. (a) On each Distribution Date the
Trustee shall provide to each Holder, to the Master Servicer, to the Certificate
Insurer, to the Underwriters, to the Company and to the Rating Agencies a       
written report (the "Trustee Remittance Report"), based solely on information   
provided by the Master Servicer and containing the following information:       

        (i) the amount of the distribution with respect to each class of
Certificates;                                                       

     (ii) the amount of such distributions allocable to principal,
      separately identifying the aggregate amount of any Prepayments in Full and
      Curtailments or other unscheduled recoveries of principal included therein
and separately identifying any Subordination Increase Amounts;      

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            (iii) the amount of such distributions allocable to interest and the
 calculation thereof separately identifying the amount of any Periodic
Advances;                                                           

           (iv) the Certificate Principal Balance of each class of the Class A
Certificates (other than the Fixed Strip Certificates) as of such   
      Distribution Date, together with the principal amount of each class of the
 Class A Certificates (based on a Certificate in an original principal
      amount of $1,000) then outstanding and the Notional Amount of each Group I
 Fixed Strip Component and Group II Fixed Strip Component of the Fixed
  Strip Certificates, in each case after giving effect to any payment of
principal on such Distribution Date;                                

         (v) the amount of any Group I Insured Payment or Group II Insured
Payment included in the amounts distributed to the Class A          
Certificateholders on such Distribution Date;                       

          (vi) the Group I and Group II Required Subordinated Amount and the
  Group I and Group II Subordinated Amount as of such Distribution Date;

    (vii) the total of any Substitution Adjustments and any Loan
Repurchase Price amounts included in such distribution;             

          (viii) the amounts, if any, of any Liquidation Loan Losses for the
  related Due Period and the cumulative amount of Liquidated Loan Losses
from the Closing Date;                                              

     (ix) the number of Mortgage Loans and the aggregate Principal
Balance of Mortgage Loans purchased pursuant to Section 5.18 for the
      related Distribution Date and since the closing date the cumulative number
 and Principal Balance of Mortgage Loans purchased pursuant to Section
5.18.                                                               

            (x) the number of Mortgage Loans and the aggregate Principal Balance
    of Mortgage Loans purchased or substituted for pursuant to Sections 3.03
   and 2.04 for the related Distribution Date and, since the closing date,
      the cumulative number and Principal Balance of Mortgage Loans purchased or
substituted for pursuant to Sections 3.03 and 2.04;                 

          (xi) the applicable Group I or Group II Class A Pass-Through Rate,
   as applicable, for each class of Class A Certificates (and each Group I
Fixed Strip Component of the Class A-9 Certificates) for such       
distribution; and                                                   

    (xii) the amount, if any, of any Group I Available Funds Cap
Carry-Forward Amount.                                               

Items (i), (ii) and (iii) above shall, with respect to the Class A Certificates,
be presented on the basis of a Certificate having a $1,000 denomination. In     
addition, by January 31 of each calendar year following any year during which   
the Certificates are outstanding, the Trustee shall furnish a report to each    
Holder of record if so requested in writing at any time during each calendar    
year                                                                            

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as to the aggregate of amounts reported pursuant to (i), (ii) and (iii) with    
respect to the Certificates for such calendar year.                             

            (b) All distributions made to the Class A Certificateholders and the
Class R Certificateholders as a Class on each Distribution Date will be made on 
a PRO RATA basis among the Certificateholders of such Class on the next         
preceding Record Date based on the Percentage Interest represented by their     
respective Certificates, and shall be made by wire transfer of immediately      
available funds to the account of such Certificateholder at a bank or other     
entity having appropriate facilities therefor, if, in the case of a Class A     
Certificateholder, such Certificateholder shall own of record Certificates of   
the same Class which have denominations aggregating at least $5,000,000 (or,    
with respect to the Fixed Strip Certificates, a Percentage Interest in excess of
20.00%) appearing in the Certificate Register and shall have provided complete  
wiring instructions by the Record Date, and otherwise by check mailed to the    
address of such Certificateholder appearing in the Certificate Register.        

   (c) In addition, on each Distribution Date the Trustee will
distribute to each Holder, to the Certificate Insurer, to the Underwriters, to  
the Master Servicer, to the Company and to the Rating Agencies, together with   
the information described in subsection (a) preceding, the following information
with respect to the Group I Loans and Group II Loans as of the close of business
on the last Business Day of the prior calendar month, which is hereby required  
to be prepared by the Master Servicer and furnished to the Trustee for such     
purpose on or prior to the related Master Servicer Remittance Date (such        
information to be provided for the Group I Loans and Group II Loans separately):

          (i) the total number of Mortgage Loans and the aggregate Principal
Balances thereof, together with the number and aggregate principal  
      balances of such Mortgage Loans and the percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the aggregate Principal
     Balances of such Mortgage Loans to the aggregate Principal Balance of all
   Mortgage Loans (A) 30-59 days Delinquent, (B) 60-89 days Delinquent and
(C) 90 or more days Delinquent;                                     

           (ii) the total number of Mortgage Loans and the aggregate Principal
Balances thereof, together with the number and aggregate principal  
      balances of such Mortgage Loans and the percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of the aggregate Principal
     Balances of such Mortgage Loans to the aggregate Principal Balance of all
   Mortgage Loans (A) 30-59 days Delinquent, (B) 60-89 days Delinquent and
    (C) 90 or more days Delinquent, other than, in each case, Mortgage Loans
included in the following clauses (iii), (iv) and (v);              

         (iii) the number and aggregate Principal Balances of all Mortgage
  Loans and percentage (based on the aggregate Principal Balances of the
      Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans
   to the aggregate Principal Balance of all Mortgage Loans in foreclosure
proceedings and the number and aggregate Principal Balances of all  
    Mortgage Loans and percentage (based on the aggregate Principal Balances
     of the Mortgage Loans) of any such Mortgage Loans which are also included
      in any of the statistics described in the foregoing clauses (i)(A), (i)(B)
and (i)(C);                                                         

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        (iv) the number and aggregate Principal Balances of all Mortgage
  Loans and percentage (based on the aggregate Principal Balances of the
      Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans
to the aggregate Principal Balance of all Mortgage Loans relating to
Mortgagors in bankruptcy proceedings and the number and aggregate   
 Principal Balances of all Mortgage Loans and percentage (based on the
    aggregate Principal Balances of the Mortgage Loans) of any such Mortgage
   Loans which are also included in any of the statistics described in the
foregoing clauses (i)(A), (i)(B) and (i)(C);                        

       (v) the number and aggregate Principal Balances of all Mortgage
  Loans and percentage (based on the aggregate Principal Balances of the
      Mortgage Loans) of the aggregate Principal Balances of such Mortgage Loans
    to the aggregate Principal Balance of all Mortgage Loans relating to REO
      Properties and the number and aggregate Principal Balances of all Mortgage
  Loans and percentage (based on the aggregate Principal Balances of the
     Mortgage Loans) of any such Mortgage Loans which are also included in any
  of the statistics described in the foregoing clause (i)(A), (i)(B) and
(i)(C);                                                             

           (vi) the weighted average Mortgage Interest Rate as of the Due Date
occurring in the Due Period related to such Distribution Date;      

           (vii) the weighted average remaining term to stated maturity of all
Mortgage Loans; and                                                 

(viii) the book value of any REO Property.              

        (d) If and to the extent that the Trustee receives the following
information with respect to the Group I Loans and Group II Loans for any Due    
Period, the Trustee will provide a copy of such information to the Company:     

(i)   the amount of principal and interest paid;        

(ii)  the weighted average Mortgage Interest Rate;      

(iii)the weighted average Net Mortgage Interest Rate;   

(iv)  the weighted average maturity date;               

           (v)   the number of such Loan Type at the beginning of the calendar
month;                                      

          (vi)  the number of such Loan Type which paid off during the prior
calendar month;                             

            (vii) the number of such Loan Type at the end of the calendar month;

            (viii) the aggregate Principal Balance at the beginning of the prior
calendar month;                             

(ix)  the amount of scheduled principal payments;       

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(x)   the amount of Principal Prepayments;              

     (xi)  the aggregate Principal Balance at the end of the prior
calendar month;                             

(xii) the gross amount of interest paid;                

          (xiii) the amount of Realized Losses for the prior calendar month;

        (xiv) the cumulative amount of Realized Losses since the Cut-off
Date; and                                   

           (xv)  the information in Section 6.07(c)(i) though (v) with respect
to such Loan Type.                          

Such information may be provided in electronic format by means acceptable to the
Trustee, the Master Servicer and the Company.                                   

         Section 6.08 ADDITIONAL REPORTS BY TRUSTEE. (a) The Trustee shall
report to the Company, the Master Servicer and the Certificate Insurer with     
respect to the amount then held in each Account (including investment earnings  
accrued or scheduled to accrue) held by the Trustee and the identity of the     
investments included therein, as the Company, the Master Servicer or the        
Certificate Insurer may from time to time request in writing.                   

         (b) From time to time, at the request of the Certificate Insurer,
the Trustee shall report to the Certificate Insurer with respect to its actual  
knowledge, without independent investigation, of any breach of any of the       
representations or warranties relating to individual Mortgage Loans set forth in
the Purchase Agreement or in Section 3.01 or 3.02 hereof.                       

          (c) On each Distribution Date, the Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") Certificate Factors for each class of     
Certificates as of such Distribution Date, using a format and media mutually    
acceptable to the Trustee and Bloomberg.                                        

       Section 6.09 COMPENSATING INTEREST. Not later than the close of
business on the third Business Day prior to the Distribution Date, the Master   
Servicer or any Subservicer shall remit to the Trustee (without right or        
reimbursement therefor) for deposit into the related Certificate Account an     
amount equal to the lesser of (a) the aggregate of the Prepayment Interest      
Shortfalls for the related Distribution Date resulting from Principal           
Prepayments in Full and Curtailments during the related Due Period and (b) its  
aggregate Servicing Fees payable in the related Due Period and shall not have   
the right to reimbursement therefor (the "Compensating Interest").              

   Section 6.10 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 Certificates which is made   
with moneys received pursuant to the terms of the Certificate Insurance Policy  
shall not be considered payment of the Certificates from the Trust Fund. The    
Company, the Master Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Company, the Master Servicer or the 
Trustee (a) to the extent the Certificate Insurer                               

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makes payments, directly or indirectly, on account of principal of or interest  
on the Class A Certificates to the Holders of such Certificates, the Certificate
Insurer will be fully subrogated to, and each Certificateholder, the Master     
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 Certificateholders in respect of securities law          
violations arising from the offer and sale of the Class A Certificates, and (b) 
the Certificate Insurer shall be paid such amounts but only from the sources and
in the manner provided herein for the payment of such amounts. The Trustee and  
the Master 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.        

        Section 6.11 DISTRIBUTIONS ON THE UNCERTIFICATED REMIC I REGULAR
INTERESTS.                                                                      

    (a) On each Distribution Date, the following amounts, in the
following order of priority, shall be distributed by REMIC I to REMIC II on     
account of the REMIC I Regular Interests or withdrawn from the Certificate      
Account:                                                                        

        (i) to the Holders of REMIC I Regular Interests, PRO RATA, in an
amount equal to (A) the Uncertificated Interest for such
            Distribution Date, plus (B) any amounts in respect thereof remaining
unpaid from previous Distribution Dates; and            

       [(ii)(x) on each Distribution Date, with respect to the Group I
    Loans, all principal received on the Group I Loans under the
          definition of Principal Remittance Amount shall be paid to REMIC I
        Regular Interest LT-AY until its Uncertificated Balance has been
           reduced to zero and then shall be paid the REMIC I Regular Interest
        LT-AZ until its Uncertificated Balance has been reduced to zero;
and]                                                    

                [(y) on each Distribution Date, with respect to the Group II
     Loans, all principal received on the Group II Loans under the
          definition of Principal Remittance Amount shall be paid to REMIC I
        Regular Interest LT-FY until its Uncertificated Balance has been
           reduced to zero and then shall be paid the REMIC I Regular Interest
         LT-FZ until its Uncertificated Balance has been reduced to zero.]

          (b) Notwithstanding the deemed distributions on the Uncertificated
REMIC I Regular Interests described in this Section 6.11, distributions of funds
from the Certificate Account shall be made only in accordance with Section 6.05.

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 ARTICLE VII

 DEFAULT
 -------

        Section 7.01 EVENTS OF DEFAULT. (a) "Event of Default", wherever
used herein, means any one of the following events:                             

          (i) any failure by the Master Servicer to remit to the Trustee any
      payment, other than a Servicing Advance, required to be made by the Master
     Servicer under the terms of this Agreement which continues unremedied for
     five Business Days after the date upon which such payment was required to
be made;                                                            

    (ii) the failure by the Master Servicer to make any required
   Servicing Advance which failure continues unremedied for a period of 30
      days after the date on which written notice of such failure, requiring the
    same to be remedied, shall have been given to the Master Servicer by the
      Trustee or to the Master Servicer and the Trustee by any Certificateholder
or the Certificate Insurer;                                         

            (iii) any failure on the part of the Master Servicer duly to observe
or perform in any material respect any other of the covenants or    
      agreements on the part of the Master Servicer contained in this Agreement,
      or the failure of any representation and warranty made pursuant to Section
     3.01 to be true and correct which continues unremedied for a period of 30
days (or 15 days in the case of a failure to pay the premium for any
     insurance policy which is required to be maintained under this Agreement)
      after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Master Servicer by the 
   Company or the Trustee or to the Master Servicer and the Trustee by any
Certificateholder or the Certificate Insurer;                       

            (iv) a decree or order of a court or agency or supervisory authority
  having jurisdiction in an involuntary case under any present or future
federal or state bankruptcy, insolvency or similar law or for the   
     appointment of a conservator or receiver or liquidator in any insolvency,
  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 Master Servicer and such decree or order
     shall have remained in force, undischarged or unstayed for a period of 60
days;                                                               

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

            (vi) the Master Servicer shall admit in writing its inability to pay
  its debts 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;                                                        

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        (vii) on any Distribution Date the average Sixty-Day Delinquency
     Ratio, for each of the three (or one or two, in the case of the first and
    second Distribution Dates) immediately preceding Due Periods, exceeds 5%
   with respect to the first through the sixth Distribution Dates, 8% with
 respect to the seventh through the twelfth Distribution Dates and 13%
thereafter. The "Sixty-Day Delinquency Ratio" with respect to any   
  Distribution Date means a fraction, expressed as a percentage, (a) the
  numerator of which is the aggregate Principal Balances of all Mortgage
     Loans that are 60 or more days Delinquent, in foreclosure or converted to
 REO Property as of the last day of the related Due Period and (b) the
    denominator of which is the Pool Principal Balance as of the last day of
the related Due Period;                                             

          (viii) if on any Distribution Date occurring in March of any year,
  commencing in June 1999, the 12 Month Loss Amount exceeds 2.25% of the
      average Pool Principal Balance as of the close of business on the last day
of each of the twelve preceding Due Periods; or                     

           (ix) if (a) on any Distribution Date occurring before July 1, 1999,
    the aggregate Liquidated Loan Losses since the Cut-off Date exceed 0.75%
      of the Original Pool Principal Balance, (b) on any Distribution Date on or
     after July 1, 1999 and before July 1, 2000, the aggregate Liquidated Loan
     Losses since the Cut-off Date exceed 1.50% of the Original Pool Principal
     Balance, (c) on any Distribution Date on or after July 1, 2000 and before
     July 1, 2001, the aggregate Liquidated Loan Losses since the Cut-off Date
exceed 2.25% of the Original Pool Principal Balance, (d) on any     
   Distribution Date on or after July 1, 2001 and before July 1, 2002, the
   aggregate Liquidated Loan Losses since the Cut-off Date exceed 3.00% of
      the Original Pool Principal Balance, or (e) on any Distribution Date on or
      after July 1, 2002, the aggregate Liquidated Loan Losses since the Cut-off
Date exceed 3.50% of the Original Pool Principal Balance.           

         (b) If an Event of Default described in this Section shall occur,
then, and in each and every such case, so long as such Event of Default shall   
not have been remedied: with respect to clauses (i), (ii), (iii), (iv), (v) and 
(vi) above, the Trustee shall, but only at the direction of the Certificate     
Insurer or the Majority Certificateholders and with the prior written consent of
the Certificate Insurer, by notice in writing to the Master Servicer and a      
Responsible Officer of the Trustee, and in addition to whatever rights such     
Certificateholders may have at law or equity to damages, including injunctive   
relief and specific performance, terminate all the rights and obligations of the
Master Servicer under this Agreement and in and to the Mortgage Loans and the   
proceeds thereof, as servicer; and with respect to clauses (vii)-(ix) above, the
Trustee shall, but only at the direction of the Certificate Insurer, after      
notice in writing to the Master Servicer and a Responsible Officer of the       
Trustee, terminate all the rights and obligations of the Master Servicer under  
this Agreement and in and to the Mortgage Loans and the proceeds thereof, as    
servicer. Upon receipt by the Master Servicer of such written notice, all       
authority and power of the Master Servicer under this Agreement, whether with   
respect to the Mortgage Loans or otherwise, shall, subject to Section 7.02, pass
to and be vested in the Trustee, or its designee approved by the Certificate    
Insurer, and the Trustee is hereby authorized and empowered to execute and      
deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise, at 
the expense of the Master Servicer, any and all documents and other instruments 
and do or cause to be done all other acts or things necessary or appropriate to 
effect the purposes of such notice of                                           

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termination, including, but not limited to, the transfer and endorsement or     
assignment of the Mortgage Loans and related documents. The Master Servicer     
agrees to cooperate with the Trustee in effecting the termination of the Master 
Servicer's responsibilities and rights hereunder, including, without limitation,
the transfer to the Trustee or its designee for administration by it of all     
amounts which shall at the time be credited by the Master Servicer to the       
Collection Account or thereafter received with respect to the Mortgage Loans.   
The Trustee shall promptly notify the Certificate Insurer and the Rating        
Agencies of the occurrence of an Event of Default.                              

       In the event the Master Servicer is terminated pursuant to this
Section 7.01, the Trustee shall notify the Holder of the Class R-II             
Certificates. Such Holder of the Class R-II Certificates shall have the right to
select a new Master Servicer, with the consent of the Certificate Insurer and   
the Rating Agencies; provided, however, that pending the appointment of a new   
Master Servicer, the Trustee shall act as Master Servicer as described in       
Section 7.02 below.                                                             

         Section 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a) On and
after the time the Master Servicer receives a notice of termination pursuant to 
Section 7.01, or the Trustee receives the resignation of the Master Servicer    
evidenced by an Opinion of Counsel pursuant to Section 5.23, or the Master      
Servicer is removed as Master Servicer pursuant to Article VII, in which event  
the Trustee shall promptly notify the Rating Agencies, except as otherwise      
provided in Section 7.01, the Trustee shall be the successor in all respects to 
the Master Servicer in its capacity as master servicer under this Agreement and 
the transactions set forth or provided for herein and shall be subject to all   
the responsibilities, duties and liabilities relating thereto placed on the     
Master Servicer by the terms and provisions hereof arising on or after the date 
of succession; provided, however, that the Trustee shall not be liable for any  
actions or the representations and warranties of any master servicer prior to it
and including, without limitation, the obligations of the Master Servicer set   
forth in Sections 2.04 and 3.03. The Trustee, as successor master servicer,     
shall be obligated to pay Compensating Interest pursuant to Section 6.09 in any 
event and to make advances pursuant to Section 5.21 unless, and only to the     
extent the Trustee as successor master servicer determines reasonably and in    
good faith that such advances would not be recoverable pursuant to Sections     
5.04(a), or 5.04(j), such determination to be evidenced by a certification of a 
Responsible Officer of the Trustee, as successor master servicer delivered to   
the Certificate Insurer.                                                        

      (b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if the Majority     
Certificateholders with the consent of the Certificate Insurer or the           
Certificate Insurer so requests in writing to the Trustee, appoint, pursuant to 
the provisions set forth in paragraph (c) below, or petition a court of         
competent jurisdiction to appoint, any established mortgage loan servicing      
institution acceptable to the Certificate Insurer that has a net worth of not   
less than $15,000,000 as the successor to the Master Servicer hereunder in the  
assumption of all or any part of the responsibilities, duties or liabilities of 
the Master Servicer hereunder.                                                  

         (c) In the event the Trustee is the successor master servicer, it
shall be entitled to Servicing Compensation (including the Servicing Fee as     
adjusted pursuant to the definition thereof) and other funds pursuant to Section
5.14 hereof as the Master Servicer. In the event the Trustee is unable or       
unwilling to act as successor master servicer, the Trustee shall solicit, by    
public announcement, bids from housing and home finance institutions, banks and 
mortgage servicing                                                              

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institutions meeting the qualifications set forth above. Such public            
announcement shall specify that the successor master servicer shall be entitled 
to the full amount of the aggregate Servicing Fees hereunder as servicing       
compensation, together with the other Servicing Compensation. Within thirty days
after any such public announcement, the Trustee shall negotiate and effect the  
sale, transfer and assignment of the servicing rights and responsibilities      
hereunder to the qualified party submitting the highest qualifying bid. The     
Trustee shall deduct from any sum received by the Trustee from the successor to 
the Master Servicer in respect of such sale, transfer and assignment all costs  
and expenses of any public announcement and of any sale, transfer and assignment
of the servicing rights and responsibilities hereunder and the amount of any    
unreimbursed Servicing Advances and Periodic Advances owed to the Trustee. After
such deductions, the remainder of such sum shall be paid by the Trustee to the  
Master Servicer at the time of such sale, transfer and assignment to the Master 
Servicer's successor.                                                           

  (d) The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such    
succession. The Master Servicer agrees to cooperate with the Trustee and any    
successor master servicer in effecting the termination of the Master Servicer's 
servicing responsibilities and rights hereunder and shall promptly provide the  
Trustee or such successor master servicer, as applicable, at the Master         
Servicer's cost and expense, all documents and records reasonably requested by  
it to enable it to assume the Master Servicer's functions hereunder and shall   
promptly also transfer to the Trustee or such successor master servicer, as     
applicable, all amounts that then have been or should have been deposited in the
Collection Account by the Master Servicer or that are thereafter received with  
respect to the Mortgage Loans. Any collections received by the Master Servicer  
after such removal or resignation shall be endorsed by it to the Trustee and    
remitted directly to the Trustee or, at the direction of the Trustee, to the    
successor master servicer. Neither the Trustee nor any other successor master   
servicer shall be held liable by reason of any failure to make, or any delay in 
making, any distribution hereunder or any portion thereof caused by (i) the     
failure of the Master Servicer to deliver, or any delay in delivering, cash,    
documents or records to it, or (ii) restrictions imposed by any regulatory      
authority having jurisdiction over the Master Servicer hereunder. No appointment
of a successor to the Master Servicer hereunder shall be effective until the    
Trustee and the Certificate Insurer shall have consented in writing thereto, and
written notice of such proposed appointment shall have been provided by the     
Trustee to the Certificate Insurer and to each Certificateholder. The Trustee   
shall not resign as servicer until a successor master servicer reasonably       
acceptable to the Certificate Insurer has been appointed.                       

     (e) Pending appointment of a successor to the Master Servicer
hereunder, the Trustee shall 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 that permitted the Master Servicer pursuant  
to Section 5.14, together with other Servicing Compensation. The Master         
Servicer, the Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession.        

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        Section 7.03 WAIVER OF DEFAULTS. The Majority Certificateholders
may, on behalf of all Certificateholders, and subject to the consent of the     
Certificate Insurer (so long as no Certificate Insurer Default has occurred and 
is continuing), waive any events permitting removal of the Master Servicer as   
servicer pursuant to this Article VII; provided, however, that the Majority     
Certificateholders may not waive a default in making a required distribution on 
a Certificate without the consent of the holder of such Certificate. Upon any   
waiver of a past default, such default shall cease to exist, and any Event of   
Default arising therefrom shall be deemed to have been remedied for every       
purpose of this Agreement. No such waiver shall extend to any subsequent or     
other default or impair any right consequent thereto except to the extent       
expressly so waived. Notice of any such waiver shall be given by the Trustee to 
the Rating Agencies.                                                            

     Section 7.04 MORTGAGE LOANS, TRUST FUND AND ACCOUNTS HELD FOR
BENEFIT OF THE CERTIFICATE INSURER. (a) The Trustee shall hold the Trust Fund   
and the Mortgage 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. Unless a Certificate Insurer Default has occurred and is   
continuing, the Trustee shall cooperate in all reasonable 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 and the      
Certificates unless, as stated in an Opinion of Counsel addressed to the Trustee
and the Certificate Insurer (which Opinion of Counsel shall not be an expense of
the Trustee or the Trust Fund), such action is adverse to the interests of the  
Certificateholders or diminishes the rights of the Certificateholders or imposes
additional burdens or restrictions on the Certificateholders.                   

            (b) The Master 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.                                                

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ARTICLE VIII

 TERMINATION
 -----------

   Section 8.01 TERMINATION. (a) Subject to Section 8.02, this
Agreement shall terminate upon notice to the Trustee of either: (i) the         
disposition of all funds with respect to the last Mortgage Loan and the         
remittance of all funds due hereunder and the payment of all amounts due and    
payable to the Certificate Insurer and the Trustee or (ii) mutual consent of the
Master Servicer, the Certificate Insurer and all Certificateholders in writing; 
PROVIDED, HOWEVER, that in no event shall the Trust established by this         
Agreement terminate later than twenty-one years after the death of the last     
surviving lineal descendant of Joseph P. Kennedy, late Ambassador of the United 
States to the Court of St. James's, alive as of the date hereof.                

        (b) In addition, subject to Section 8.02, the Holder of a 50.01%
Percentage Interest or greater of the Class R-II Certificates or the Master     
Servicer (or the Certificate Insurer, if Southern Pacific Funding Corporation is
removed as Master Servicer) may, at its option and at its sole cost and expense,
terminate this Agreement on any date on which the related Pool Principal Balance
is less than 10%, if the holder of the Class R-II Certificates exercises this   
option, or is less than 5%, if the Master Servicer or the Certificate Insurer   
exercises this option, of the Original Pool Principal Balance, by purchasing, on
the next succeeding Distribution Date, all of the outstanding Mortgage Loans and
REO Properties at a price (the "Termination Price") equal to the sum of (i) 100%
of the Principal Balance of each such outstanding Mortgage Loan and each REO    
Property; (ii) the aggregate amount of accrued and unpaid interest on such      
Mortgage Loans through the related due period and 30 days' interest on such     
Mortgage Loans at a rate equal to the related Mortgage Interest Rate (net of the
Servicing Fee if the Master Servicer exercises this option) with respect to such
Mortgage Loan; (iii) any unreimbursed amounts due to the Certificate Insurer    
under this Agreement or the Insurance Agreement; (iv) the amount of any unpaid  
Servicing Fees and unreimbursed Servicing Advances made by the Master Servicer  
with respect to the related Mortgage Loans; (v) any excess of the actual stated 
principal balance of each such Mortgage Loan and REO Property over the Principal
Balance thereof, the aggregate amount of accrued and unpaid interest on such    
excess through the related due period and 30 days' interest on such excess at a 
rate equal to the related Mortgage Interest Rate with respect to each related   
Mortgage Loan; and (vi) the amount of any unpaid Servicing Fees, unreimbursed   
Servicing Advances and unreimbursed Periodic Advances not included in clauses   
(i) to (v) above. Any such purchase shall be accomplished by deposit into the   
related Certificate Account of the Termination Price. From the Termination Price
so deposited, the Trustee shall reimburse the Master Servicer for the amount of 
any unpaid Servicing Fees, unreimbursed Periodic Advances and unreimbursed      
Servicing Advances made by the Master Servicer with respect to the related      
Mortgage Loans. No such termination is permitted without the prior written      
consent of the Certificate Insurer (i) if it would result in a draw on the      
Certificate Insurance Policy or (ii) unless the Master Servicer shall have      
delivered to the Certificate Insurer an opinion of counsel reasonably           
satisfactory to the Certificate Insurer stating that no amounts paid hereunder  
are subject to recapture as preferential transfers under the United States      
Bankruptcy Code, 11 U.S.C. ss.ss. 101 ET SEQ., as amended.                      

            (c) If on any Distribution Date, the Master Servicer determines that
there are no outstanding Mortgage Loans and no other funds or assets in the     
Trust Fund other than funds in                                                  

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the related Certificate Account, the Master Servicer shall notify the Trustee   
and the Trustee shall send a final distribution notice promptly to the related  
Certificateholders in accordance with                                           
paragraph (d) below.                                                            

            (d) Notice of any termination, specifying the Distribution Date upon
which the Trust Fund will terminate and that the Certificateholders shall       
surrender their Certificates to the Trustee for payment of the final            
distribution and cancellation, shall be given promptly by the Trustee by letter 
to the Certificateholders mailed during the month of such final distribution    
before the Master Servicer Remittance Date in such month, specifying (i) the    
Distribution Date upon which final payment of the Certificates will be made upon
presentation and surrender of the Certificates at the office of the Trustee     
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is not applicable,   
payments being made only upon presentation and surrender of the Certificates at 
the office of the Trustee therein specified. The obligations of the Certificate 
Insurer hereunder shall terminate upon the deposit by the Master Servicer with  
the Trustee of a sum sufficient to purchase all of the Mortgage Loans and REO   
Properties in the Trust Fund as set forth above and when the aggregate          
Certificate Principal Balance of the Certificates has been reduced to zero.     

           (e) In the event that all Certificateholders do not surrender their
Certificates for cancellation within six months after the time 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 of the 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 subject    
hereto. If within nine months after the second notice all the Certificates shall
not have been surrendered for cancellation, the Holders of the Class R-II       
Certificates shall be entitled to all unclaimed funds and other assets which    
remain subject hereto and the Trustee upon transfer of such funds shall be      
discharged of any responsibility for such funds and the Certificateholders shall
look only to such Holders of the Class R-II Certificates for payment. Such funds
shall remain uninvested.                                                        

          Section 8.02 ADDITIONAL TERMINATION REQUIREMENTS. (a) In the event
that the Holder of a 50.01% Percentage Interest or greater of the Class R-II    
Certificates, Master Servicer or Certificate Insurer (any of which, an          
"Exercising Party") exercises its purchase option with respect to the Trust Fund
as provided in Section 8.01, REMIC I and REMIC II as the case may be, shall be  
terminated in accordance with the following additional requirements, unless the 
Trustee has been furnished with an Opinion of Counsel (which Opinion of Counsel 
shall not be an expense of the Trustee or the Trust Fund) to the effect that the
failure of REMIC I and REMIC II to comply with the requirements of this Section 
8.02 will not (i) result in the imposition of taxes on "prohibited transactions"
of either REMIC I or REMIC II as defined in Section 860F of the Code or (ii)    
cause either REMIC I or REMIC II to fail to qualify as a REMIC at any time that 
any Class A Certificates are outstanding:                                       

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       (i) The Trustee shall establish a 90-day liquidation period for
REMIC I and REMIC II and specify the first day of such period in a  
statement attached to the Trust Fund's final Tax Return pursuant to 
   Treasury Regulation Section 1.860F-1. The Trustee shall satisfy all the
    requirements of a qualified liquidation for REMIC I and REMIC II, as the
case may be, under Section 860F of the Code and any regulations     
     thereunder, as evidenced by an Opinion of Counsel obtained at the expense
of the Exercising Party;                                            

          (ii) During such 90-day liquidation period, and at or prior to the
      time of making of the final payment on the Certificates, the Trustee shall
sell all of the assets of the Trust Fund for cash; and              

   (iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
      distributed or credited, to the Holders of the Class R-II Certificates all
     cash on hand in the Trust Fund (other than cash retained to meet claims),
and REMIC I and REMIC II shall terminate at that time.              

        (b) By their acceptance of the Class R Certificates, the Holders
thereof hereby agree to authorize the Trustee to specify the 90-day liquidation 
period for the Trust Fund, which authorization shall be binding upon all        
successor Class R Certificateholders.                                           

         Section 8.03 ACCOUNTING UPON TERMINATION OF MASTER SERVICER. Upon
termination of the Master Servicer, the Master Servicer shall, at its expense:  

    (a) deliver to its successor or, if none shall yet have been
appointed, to the Trustee, the funds in any Account;                            

    (b) deliver to its successor or, if none shall yet have been
appointed, to the Trustee all of the Mortgage Files and related documents and   
statements held by it hereunder and a Mortgage Loan portfolio computer tape;    

    (c) deliver to its successor or, if none shall yet have been
appointed, to the Trustee and, upon request, to the Certificateholders a full   
accounting of all funds, including a statement showing the Monthly Payments     
collected by it and a statement of monies held in trust by it for the payments  
or charges with respect to the Mortgage Loans; and                              

     (d) execute and deliver such instruments and perform all acts
reasonably requested in order to effect the orderly and efficient transfer of   
servicing of the Mortgage Loans to its successor and to more fully and          
definitively vest in such successor all rights, powers, duties,                 
responsibilities, obligations and liabilities of the "Master Servicer" under    
this Agreement.                                                                 

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ARTICLE IX

CONCERNING THE TRUSTEE
----------------------

            Section 9.01 DUTIES OF TRUSTEE. T