REMODELERS INVESTMENT CORP, S-3, 1995-12-22

REMODELERS INVESTMENT CORP
S-3, 1995-12-22

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<PAGE>

As filed with the Securities and Exchange Commission on December 22, 1995
Registration No. 33-_______
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

REMODELERS INVESTMENT CORPORATION
(Exact name of registrant as specified in governing instruments)

NEVADA 75-2596063
(State of incorporation) (I.R.S. Employer Identification No.)

16901 DALLAS PARKWAY RONALD M. MANKOFF
SUITE 200 16901 DALLAS PARKWAY, SUITE 200
DALLAS, TEXAS 75248 DALLAS, TEXAS 75248
(214) 380-5995 (214) 380-5995
(Address of principal (Name and address of agent for service)
executive offices)

Copies to:
MICHAEL THIMMIG
ANDREWS & KURTH L.L.P.
4400 THANKSGIVING TOWER
1601 ELM STREET
DALLAS, TEXAS 75201
(214) 979-4400

Approximate date of commencement of proposed sale to public. FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS DETERMINED
BY MARKET CONDITIONS AND PURSUANT TO RULE 415.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. /X/

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
_____________

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
BEING REGISTERED REGISTERED PER UNIT* OFFERING PRICE REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset-Backed Certificates $1,000,000 100% $1,000,000 $344.83
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
* Estimated solely for purposes of calculating the registration fee.
_____________

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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

<PAGE>

CROSS REFERENCE SHEET

ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS LOCATION IN PROSPECTUS SUPPLEMENT
----------------------- ---------------------- ---------------------------------
<C> <S> <C> <C>
1. Forepart of Registration Statement Forepart of Registration Outside Front Cover Page
and Outside Front Cover Page of Statement; Outside Front Cover
Prospectus Page

2. Inside Front and Outside Back Inside Front Cover Page; Outside Back Cover Page
Cover Pages of Prospectus

3. Summary Information, Risk Factors Summary of Terms, Available Summary of Terms of the
and Ratio of Earnings to Fixed Information; Risk Factors Certificates; Risk Factors
Charges

4. Use of Proceeds Use of Proceeds Use of Proceeds

5. Determination of Offering Price * *

6. Dilution * *

7. Selling Security Holders * *

8. Plan of Distribution Plan of Distribution Underwriting

9. Description of Securities to be Outside Front Cover Page; Outside Front Cover Page;
Registered Summary of Terms; Description Summary of Terms, Description
of the Certificates, Assets of the Certificates, The
Underlying the Certificates; Mortgage Loan Pool; The
Credit Enhancement; Servicing Guaranty Policy; Certain Yield,
of the Mortgage Loans and Prepayment and Weighted
Contracts; The Pooling and Average Life Considerations;
Servicing Agreement; The Description of Book Entry
Trustee; ERISA Considerations; Procedures; ERISA
Certain Federal Income Tax Considerations, Certain Federal
Consequences; State Tax Income Tax Consequences
Consequences

10. Interests of Named Experts and Legal Matters Legal Matters; Experts
Counsel

11. Material Changes * *

12. Incorporation of Certain Information Incorporation of Certain *
by Reference Documents by Reference

</TABLE>
______________________
* Answer negative or item inapplicable.

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.

PROSPECTUS SUPPLEMENT SUBJECT TO COMPLETION; DATED DECEMBER __, 1995
- ---------------------
(TO PROSPECTUS DATED ___________, 199__)

$_______________

REMODELERS HOME LOAN ASSET-BACKED CERTIFICATES, SERIES 199__-__
REMODELERS INVESTMENT CORPORATION
(Depositor)
REMODELERS NATIONAL FUNDING CORP.
(Transferor and Servicer)

The Remodelers Home Loan Asset-Backed Certificates, Series
199__-__ (the "SERIES 199__-__"), will consist of the following
classes: (i) the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates and the Class A-4
Certificates (collectively, the "SENIOR CERTIFICATES", (ii) the
Class B Certificates (the "CLASS B CERTIFICATES") and (iii) the
Class R Certificates (the "CLASS R CERTIFICATES", and together
with the Class B Certificates, the "SUBORDINATED CERTIFICATES").
The Senior Certificates and the Subordinated Certificates are
collectively referred to herein as the "Certificates". Only the
Senior Certificates are offered hereby. It is a condition to the
issuance of the Senior Certificates that the each be rated
"_____" by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. ("STANDARD & POOR'S") and "_____" by Moody's Investors Service
("MOODY'S").

The Class A-1, Class A-2, Class A-3 and Class A-4 Certificates will have
initial aggregate principal balances of the approximate dollar amounts
set forth below for each such Class, respectively (the "ORIGINAL CLASS
PRINCIPAL BALANCES"), which in the aggregate, together with the Original
Class Principal Balances of the Class B Certificates, will equal ____% of
the sum of the outstanding principal balances of the Initial Mortgage
Loans as of the _____________, 199__ Cut-Off Date of approximately
$_____________, plus the amount deposited into the Pre-Funding Account as
described herein of approximately $___________. Each of the Senior
Certificates will be insured under a Certificate Guaranty Insurance
Policy (the "GUARANTY POLICY") issued by _________________________ (the
"CERTIFICATE INSURER") as described herein under "The Guaranty Policy",
but the Subordinated Certificates will not be so guaranteed.(continued on
next page)
____________________

SEE "RISK FACTORS" BEGINNING ON PAGE __ HEREIN FOR A DESCRIPTION OF
CERTAIN RISKS AND OTHER FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE CERTIFICATES.
____________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Original Certificate Assumed Final
Class Principal Interest Distribution
Balance Rate Date(1)
-------------- ----------- -------------
<S> <C> <C> <C>
Class A-1 $
Class A-2
Class A-3
Class A-4
</TABLE>

The Senior Certificates are being offered by the Underwriter from time
to time in negotiated transactions or otherwise at varying prices to be
determined, in each case, at the time of sale. Proceeds from the sale of
the Senior Certificates will be approximately ____% of the Original
Principal Balance of the Senior Certificates sold, before deducting
certain expenses. The Senior Certificates are offered subject to sale by
the Depositor and receipt and acceptance by the Underwriter, and subject
to the Underwriter's right to reject any order in whole or in part. It
is expected that delivery of each Class of the Senior Certificates will
be made in book-entry form only through the facilities of The Depository
Trust Company on or about ______________, 199__

[UNDERWRITER]

THE DATE OF THIS PROSPECTUS SUPPLEMENT IS ____________, 199__

<PAGE>

The Certificates will evidence in the aggregate the entire beneficial
ownership interest in a trust fund (the "TRUST FUND"), to be formed
pursuant to a Pooling and Servicing Agreement dated as of _____________,
199__ (the "POOLING AND SERVICING AGREEMENT"), between Remodelers
Investment Corporation, a Nevada corporation, as depositor (the
"DEPOSITOR"), Remodelers National Funding Corp., a Texas corporation, as
transferor and servicer (in its capacity as such, the "TRANSFEROR" or the
"SERVICER", respectively), and _______________________________, as
trustee (the "TRUSTEE"). The Trust Fund will consist primarily of
certain fixed-rate, fully amortizing property improvement and/or home
equity loans conveyed to the Trust Fund on or before the Closing Date
(the "INITIAL MORTGAGE LOANS"), any additional property improvement
and/or home equity loans conveyed to the Trust Fund during the Funding
Period, as described herein (the "SUBSEQUENT MORTGAGE LOANS", and
together with the Initial Mortgage Loans, the "MORTGAGE LOANS"), funds on
deposit in a trust account to acquire such Subsequent Mortgage Loans (the
"PRE-FUNDING ACCOUNT") and certain other property. All such Mortgage
Loans will be secured by liens (substantially all of which are junior
liens) on the related real properties. Approximately _____% of the
Initial Mortgage Loans (by outstanding principal balance) will be
conventional (i.e., not insured or guaranteed by a governmental agency)
property improvement and/or home equity loans ("CONVENTIONAL MORTGAGE
LOANS"), and approximately ____% of the Initial Mortgage Loans (by
outstanding principal balance) will be property improvement loans that
will be partially insured ("TITLE I MORTGAGE LOANS") by the Federal
Housing Administration (the "FHA") of the United States Department of
Housing and Urban Development ("HUD"), subject to the satisfaction of
certain regulatory requirements as described herein, pursuant to Title I
of the National Housing Act of 1934, as amended. The Mortgage Loans will
not be covered by any mortgage guaranty insurance, any special hazard
insurance, any fraud insurance or any insurance covering certain losses
resulting from mortgagor bankruptcy proceedings, except that the Title I
Mortgage Loans will be partially insured by the FHA.

Distributions on the Certificates will be made on the 20th day of each
month, or, if such day is not a business day, then on the next business
day, commencing on ______________, 199__ (each, a "DISTRIBUTION DATE").
On each Distribution Date, holders of the Certificates will be entitled
to receive, from and to the extent that funds are available therefor in
the Certificate Account, distributions with respect to interest and
principal calculated as described herein. See "Description of the
Certificates" herein.

As described herein, a "real estate mortgage investment conduit"
("REMIC") election will be made with respect to the Trust Fund (other
than the Pre-Funding Account and the Capitalized Interest Account) for
federal income tax purposes. The Senior Certificates constitute "regular
interests" in the REMIC. See "Certain Federal Income Tax Consequences"
herein.

The yield to maturity on the Senior Certificates will depend on (i) the
rate and timing of principal reductions of the Class Principal Balances
for the Senior Certificates from the receipt of payments of principal and
interest on and other principal reductions of the Mortgage Loans
(including scheduled payments, prepayments, delinquencies, recognition of
defaults and allocation of losses by the Servicer, and substitutions and
repurchases by the Transferor and the Depositor), substantially all of
which may be prepaid at any time without penalty, (ii) any principal
reductions of the Class Principal Balances of the Senior Certificates
from amounts remaining on deposit in the Pre-Funding Account after the
termination of the Funding Period, and (iii) the price paid for the
Senior Certificates by the holders thereof. Potential investors should
carefully consider the associated risks. See "Risk Factors -- Yield and
Prepayment Considerations," and "Certain Yield, Prepayment and Weighted
Average Life Considerations" in the accompanying prospectus.

THE SENIOR CERTIFICATES REPRESENT AN INTEREST IN THE TRUST FUND ONLY
AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR, THE
TRANSFEROR, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES.
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENT
ON THE SENIOR CERTIFICATES. NEITHER THE SENIOR CERTIFICATES NOR ANY OF
THE MORTGAGE LOANS ARE GUARANTEED BY, THE DEPOSITOR, THE TRANSFEROR, THE
SERVICER, THE TRUSTEE, ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.
However, the Title I Mortgage Loans will be partially insured by the FHA
and the Senior Certificates will be insured under the Guaranty Policy
issued by the Certificate Insurer. The obligations of the FHA with
respect to the insurance concerning the Title I Mortgage Loans will not
be unlimited or unconditional obligations of the FHA, but will be limited
by the amount of insurance coverage available to reimburse for losses on
the Title I Mortgage Loans pursuant to, and will be conditioned upon
compliance with, the regulations and rules of the FHA under the Title I
Program as described herein. The FHA insurance coverage available for
the Title I Mortgage Loans may not be sufficient to reimburse all
insurable losses on the Title I Mortgage Loans. See "Risk Factors -- No
Assurance of Adequacy of Credit Enhancement" and "The Title I Program --
General" herein and in the accompanying prospectus.
____________________

This Prospectus Supplement does not contain complete information about
the offering of the Senior Certificates. Additional information is
contained in the Prospectus and purchasers are urged to read both the
Prospectus and this Prospectus Supplement. Sales of the Senior
Certificates may not be consummated unless the purchaser has received
both the Prospectus and this Prospectus Supplement.

S-2

<PAGE>

SUMMARY OF TERMS OF THE CERTIFICATES

This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement (this
"Prospectus Supplement"). Capitalized terms not otherwise defined herein
have the respective meanings given to them in the Prospectus. See "Index
of Principal Terms" herein for the location of the definitions of certain
capitalized terms.

Securities Offered. . . The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates and the
Class A-4 Certificates (collectively, the "CLASS
A CERTIFICATES" or the "SENIOR CERTIFICATES") of
the Remodelers Home Loan Asset-Backed
Certificates, Series 199__-__ (the
"CERTIFICATES"). Only the Senior Certificates
are offered hereby. The Certificates also
include the Class B Certificates and the Class R
Certificates (collectively, the "SUBORDINATED
CERTIFICATES") which are not being offered
hereby.

The Certificates will represent an undivided
beneficial ownership interest in a trust fund
(the "TRUST FUND"), created pursuant to a
Pooling and Servicing Agreement dated as of
__________________, 199__ (the "POOLING AND
SERVICING AGREEMENT"), between Remodelers
Investment Corporation, as depositor, Remodelers
National Funding Corp., as transferor and
servicer, and _______________________________, as
trustee. The Trust Fund will consist primarily
of: a pool of certain property improvement
and/or home equity loans conveyed to the Trust
Fund on or before the Closing Date (the "INITIAL
MORTGAGE LOANS"); any additional property
improvement and/or home equity loans conveyed to
the Trust Fund during the Funding Period (the
"SUBSEQUENT MORTGAGE LOANS", and together with
the Initial Mortgage Loans, the "MORTGAGE
LOANS"); except as specified below, payments in
respect of the Mortgage Loans received after
__________________, 199__, in the case of the
Initial Mortgage Loans, and the related cut-off
date for any Subsequent Mortgage Loans (in each
case, a "Cut-Off Date"); amounts on deposit in
the Pre-Funding Account and the Capitalized
Interest Account (as defined herein) until the
end of the Funding Period; and certain other
property. The Transferor will retain accrued
interest at the respective Mortgage Loan Rates
on the principal amount of the Initial Mortgage
Loans up to the Closing Date and of the
Subsequent Mortgage Loans up to the related
Subsequent Transfer Date. The Trust Fund will
include the unpaid principal balance of each
Mortgage Loan as of the related Cut-Off Date
(the "CUT-OFF DATE PRINCIPAL BALANCE"). The
"PRINCIPAL BALANCE" of a Mortgage Loan on any
day is equal to its related Cut-Off Date
Principal Balance, minus all principal
reductions credited against the Principal
Balance of such Mortgage Loan since such Cut-Off
Date, including any net loan losses recorded by
the Servicer. With respect to any date, the
"POOL PRINCIPAL BALANCE" will be equal to the
aggregate of the Principal Balances of all
Mortgage Loans as of such date.

On the Closing Date, the "INITIAL POOL PRINCIPAL
BALANCE" will be equal to the aggregate
Principal Balances of the Initial Mortgage Loans
as of __________________, 199__, the related
Cut-Off Date, which is expected to equal
approximately $_____________. On the Closing
Date, the "ASSUMED POOL PRINCIPAL BALANCE" will
be equal to the sum of the Initial Pool
Principal Balance, plus the Pre-Funding Account
Deposit, which sum is expected to equal
approximately $_______________.

Each of the Senior Certificates will be insured
under a Guaranty Policy issued by the
Certificate Insurer as described herein under
"The Guaranty Policy", but the Subordinated
Certificates will not be so guaranteed.

Senior Certificates. . $_______________ Original Class Principal
Balance of Class A-1 Certificates with a ____%
Certificate Interest Rate and an Assumed Final
Distribution Date in _____________, 20__.

S-3

<PAGE>

$_______________ Original Class Principal
Balance of Class A-2 Certificates with a ____%
Certificate Interest Rate and an Assumed Final
Distribution Date in ______________, 20__.

$_______________ Original Class Principal
Balance of Class A-3 Certificates with a ____%
Certificate Interest Rate and an Assumed Final
Distribution Date in _______________ 20__.

$_______________ Original Class Principal
Balance of Class A-4 Certificates with a ____%
Certificate Interest Rate and an Assumed Final
Distribution Date in _______________ 20__.

The "ASSUMED FINAL DISTRIBUTION DATES" for each
Class of Senior Certificates set forth above are
merely estimates of the final Distribution Dates
and are based upon the assumption that the
aggregate Cut-Off Date Principal Balances of the
Subsequent Mortgage Loans conveyed to the Trust
Fund equals the Pre-Funding Account Deposit,
that such Subsequent Mortgage Loans are all
delivered to the Trust Fund on the Closing Date
and that the Mortgage Loans amortize with no
prepayments, delinquencies, liquidations,
substitutions or repurchases thereof and that
the Excess Spread (as defined below) is
distributed in reduction of the Class Principal
Balances of the Class A Certificates until the
Class A Overcollateralization Level (as defined
below) has been met. The actual maturity of any
Class of Senior Certificates may be
substantially earlier, and in certain instances
could be later, than the Assumed Final
Distribution Date of such Class set forth above.
See "Risk Factors -- Yield and Prepayment
Considerations" in the accompanying Prospectus.

Form, Denomination
and Registration. . . The Senior Certificates will initially be issued
only in book-entry form. Persons acquiring
beneficial ownership interests in any Class of
Senior Certificates (each a "BENEFICIAL OWNER")
will hold their Certificates through the book
entry facilities of The Depository Trust Company
("DTC"). So long as each Class of Senior
Certificates is in book-entry form, each such
Class of Senior Certificates will be evidenced
by one or more certificates registered in the
name of the nominee of DTC. The interests of
such Beneficial Owners will be represented by
book-entries on the records of DTC and
participating members thereof. No Beneficial
Owners will be entitled to receive a definitive
certificate representing such person's interest,
except in the event that Definitive Certificates
(as defined herein) are issued under the limited
circumstances described herein. All references
in this Prospectus Supplement to any Class of
Senior Certificates reflect the rights of
Beneficial Owners only as such rights may be
exercised through DTC and its participating
members for so long as such Class of Senior
Certificates are held by DTC. See "Description
of Book Entry Procedures" herein. Beneficial
ownership interests in each Class of Senior
Certificates will be issued only in minimum
denominations of $250,000 and integral multiples
of $5,000 in excess thereof; provided, however,
that one or more beneficial ownership interests
in each Class of Senior Certificates may be
issued in a different denomination such that the
aggregate initial principal balance of such
Class of Senior Certificates will equal the
Original Class Principal Balance of such Class.

Transferor and
Servicer . . . . . . Remodelers National Funding Corp. ("RNFC", or in
its capacity as the transferor of the Mortgage
Loans to the Depositor, the "TRANSFEROR", or in
its capacity as the servicer of the Mortgage
Loans, the "SERVICER") is a Texas corporation
and is a wholly-owned subsidiary of RAC
Financial Group, Inc., a Nevada corporation
("RAC").

Depositor . . . . . . . Remodelers Investment Corporation, a Nevada
corporation (the "DEPOSITOR") is a limited
purpose finance corporation and is a wholly
owned subsidiary of RAC.

S-4

<PAGE>

Trustee . . . . . . . . ________________________ (the "TRUSTEE").

Custodian . . . . . . . ________________________ or another person which
the Servicer and the Trustee agree upon as
custodian.

The Mortgage Loan
Pool. . . . . . . . . The "MORTGAGE LOAN POOL" will consist of the
collective pool of the Initial Mortgage Loans
together with any Subsequent Mortgage Loans
conveyed to the Trust Fund after the Closing
Date. All of the Mortgage Loans will be fixed
rate, fully-amortizing property improvement
and/or home equity loans, that will be evidenced
by promissory notes, retail installment sales
contracts, or other evidences of indebtedness
(the "NOTES") and will be secured by mortgages,
deeds of trust or other similar security
instruments (the "MORTGAGES") creating a lien or
security interest on single family (one-to-four
unit) residences, units in planned unit
developments, units in condominium developments
and town homes (the "MORTGAGED PROPERTIES").
Substantially all of these Mortgages will be
junior (i.e., second, third, etc.) in priority
to one or more senior liens on the related
Mortgaged Properties, which consist primarily of
owner occupied single family residences. The
Mortgage Loans have scheduled monthly payment
dates throughout a month. A majority of the
Mortgage Loans will not be insured or guaranteed
by a governmental agency (the "CONVENTIONAL
MORTGAGE LOANS"); while the remainder of the
Mortgage Loans will be partially insured to the
extent described herein by the FHA under the
Title I Program (the "TITLE I MORTGAGE LOANS").

The statistical information presented in this
Prospectus Supplement regarding the Mortgage
Loan Pool is based only on the Initial Mortgage
Loans proposed to be included in the Mortgage
Loan Pool as of the date of this Prospectus
Supplement, and does not take into account any
Subsequent Mortgage Loans that may be added to
the Mortgage Loan Pool during the Funding Period
through application of amounts in the Pre-
Funding Account. In addition, prior to the
Closing Date, the Transferor may remove any of
the Initial Mortgage Loans intended for
inclusion in the Mortgage Loan Pool, substitute
comparable loans therefor, or add comparable
loans thereto; however, the aggregate principal
balance of Initial Mortgage Loans so removed,
replaced or added will not exceed 5.0% of the
Initial Pool Principal Balance. If, prior to the
Closing Date, mortgage loans are removed from or
added to the Mortgage Loan Pool as described
herein, an amount equal to the aggregate
principal balances of such mortgage loans will
be added to or deducted from, respectively, the
Pre-Funding Account Deposit on the Closing Date.
As a result of the foregoing, the statistical
information presented herein regarding the
Initial Mortgage Loans proposed to be included
in the Mortgage Loan Pool as of the date of this
Prospectus Supplement may vary in certain
respects from comparable information based on
the actual composition of the Mortgage Loan Pool
at the Closing Date or any Subsequent Transfer
Date. The Initial Mortgage Loans included in
the Mortgage Loan Pool will consist of
approximately ___________ loans, having an
Initial Pool Principal Balance of approximately
$_______________. See "The Mortgage Loan Pool"
herein and in the attached Prospectus.

The Depositor and the Transferor each have the
option (1) to remove Mortgage Loans and
substitute Qualified Substitute Mortgage Loans
(as defined in the Pooling and Servicing
Agreement, generally loans that are similar in
terms to the replaced loans) during the three
month period beginning on the Closing Date up to
an aggregate amount of not more than __%,
without Certificate Insurer approval, and __%,
with Certificate Insurer approval, of the
aggregate Cut-Off Date Principal Balances of the
Mortgage Loans, and (2) to repurchase any
Mortgage Loan incident to the foreclosure,
default or imminent default thereof at any time
after the Closing Date.

S-5

<PAGE>

Acquisition and
Origination of
Mortgage Loans . . . Generally, the Mortgage Loans will have been
originated or acquired by the Transferor or
SFAC, its affiliate, in one of four ways: (i)
the indirect origination and purchase of retail
installment sales contracts from a network of
independent contractors or dealers
professionally installing property improvements
("indirect originations"); (ii) the origination
of loans directly to consumers, including
solicitations through direct mail and
telemarketing ("direct originations"); (iii) the
wholesale purchase of loans, on a flow basis,
originated by other unaffiliated lenders, as
correspondents ("correspondent originations");
or (iv) the purchase, on a bulk basis, of loan
portfolios originated by other unaffiliated
lenders ("portfolio acquisitions"). All of the
Mortgage Loans will be acquired by the
Transferor and sold by the Transferor to the
Depositor, who in turn will convey such Mortgage
Loans to the Trust Fund. The Transferor will
retain accrued interest at the respective
Mortgage Loan Rates on the principal amount of
the Initial Mortgage Loans up to the Closing
Date and the Subsequent Mortgage Loans up to the
related Subsequent Transfer Date, respectively.
See "Risk Factors -- Underwriting Standards and
Potential Delinquencies" and "The Mortgage Loan
Pool" herein.

Pre-Funding Account;
Forward Purchase
Commitment . . . . . On the Closing Date, the Depositor will direct
that a portion of the sales proceeds from the
Senior Certificates, in the amount of
approximately $_______________ (the "PRE-FUNDING
ACCOUNT DEPOSIT"), be deposited in an Eligible
Account (the "PRE-FUNDING ACCOUNT") maintained by
and in the name of the Trustee for the purchase
of Subsequent Mortgage Loans after the Closing
Date. The Pre-Funding Account Deposit will be
increased or decreased by an amount equal to the
aggregate of the principal balances of any
mortgage loans removed from or added to,
respectively, the Mortgage Loan Pool prior to the
Closing Date as described herein, provided that
any such increase or decrease will not exceed
____% of the Initial Pool Principal Balance. See
"The Mortgage Loan Pool" herein. During the
period (the "FUNDING PERIOD") from the Closing
Date until the earlier of (i) the date on which
the amount on deposit in the Pre-Funding Account
is reduced below $_____________ and (ii)
__________________, 199__ the amount on deposit
in the Pre-Funding Account will be reduced by the
amount used to purchase Subsequent Mortgage Loans
after the Closing Date in accordance with the
applicable provisions of the Pooling and
Servicing Agreement; provided that the Funding
Period will be subject to an earlier termination
if insufficient funds are on deposit in the
Capitalized Interest Account on any Determination
Date to cover any interest shortfall for
distributions to the Class A Certificates and the
Class B Certificates on the immediately following
Distribution Date. Subsequent Mortgage Loans
purchased by and added to the Trust Fund on any
Subsequent Transfer Date (as defined below) must
satisfy the criteria set forth in the Pooling and
Servicing Agreement and must be approved by the
Certificate Insurer. Assuming that the aggregate
Cut-Off Date Principal Balances of all Subsequent
Mortgage Loans conveyed to the Trust Fund equals
the Pre-Funding Account Deposit, then it is
expected that the Assumed Pool Principal Balance
will consist of approximately ____% to ____%
Conventional Mortgage Loans and approximately
____% to ____% Title I Mortgage Loans. Any date
on which such Subsequent Mortgage Loans will be
conveyed by the Depositor to the Trust Fund after
the Closing Date is a "SUBSEQUENT TRANSFER DATE."

S-6

<PAGE>

Account Deposit, and it is not currently anticipated
that there will be any material amount of principal
distributions from amounts remaining on deposit
in the Pre-Funding Account in reduction of the Class
Principal Balances of the Senior Certificates, no
assurance can be given that such a distribution with
respect to the Senior Certificates will not occur on
the Distribution Date following the Due Period in
which the Funding Period ends. In any event, it
is unlikely that the Transferor will be able to
deliver Subsequent Mortgage Loans after the
Closing Date with aggregate principal balances
that exactly equal the Pre-Funding Account
Deposit, and the portion of the Pre-Funding
Account Deposit remaining at the end of the
Funding Period, if any, will be distributed in
reduction of the Class Principal Balance of each
Class of Senior Certificates, on a pro rata
basis, on the Distribution Date following the
Due Period in which such Funding Period ends.
See "Risk Factors -- Subsequent Mortgage Loans
and the Pre-Funding Account" and "Description of
the Certificates -- Pre-Funding Account" herein.

Capitalized Interest
Account . . . . . . On the Closing Date, the Depositor will direct
that a portion of the sales proceeds from the
Senior Certificates, in an amount no less than
$_______________ (the "CAPITALIZED INTEREST
ACCOUNT DEPOSIT"), be deposited in an Eligible
Account maintained by and in the name of the
Trustee (the "CAPITALIZED INTEREST ACCOUNT").
The amount on deposit in the Capitalized Interest
Account will be specifically allocated to cover
shortfalls in interest on the Class A
Certificates and the Class B Certificates that
may arise as a result of the utilization of the
Pre-Funding Account for the purchase by the Trust
Fund of Subsequent Mortgage Loans after the
Closing Date and will be so applied by the
Trustee for the distribution of interest to
Certificateholders. Any amounts remaining in the
Capitalized Interest Account on any Determination
Date, that are not required to cover the
anticipated interest shortfall described above,
will be distributed to the Depositor, including
any net reinvestment income thereon. See
"Description of the Certificates -- Capitalized
Interest Account" herein.

Closing Date. . . . . . On or about __________________, 199__.

Cut-Off Date. . . . . . __________________, 199__ for the Initial
Mortgage Loans, and the cut-off date specified
in the Subsequent Transfer Agreement for the
Subsequent Mortgage Loans.

Distribution Dates. . . The 20th day of each month or, if such day is
not a business day, then the next succeeding
business day, commencing __________________,
199__.

Determination Date. . . The 5th business day prior to each Distribution
Date.

Record Date . . . . . . The last business day of the month immediately
preceding the month in which each Distribution
Date occurs.

Interest
Distributions on
Senior Certificates. . On each Distribution Date, the holders of each
Class of Senior Certificates will be entitled to
receive thirty days" accrued interest (except
with respect to the first Distribution Date,
______ days" accrued interest) at the respective
Certificate Interest Rate for such Class on the
then outstanding Class Principal Balance of such
Class. To the extent that funds are available
in the Certificate Account (after taking into
account all prior distributions therefrom), the
accrued interest for each Class will be
distributed to the Certificateholders in the
following order of priority: (i) the Senior
Certificateholders, on a pro-rata basis to each
Class thereof, and (ii) the Class B
Certificateholders. Interest on the Senior
Certificates will accrue on the basis of a 360-
day year consisting of twelve 30-day months.
The "CLASS PRINCIPAL BALANCE" of each Class of
Certificates will equal, as of any date of
determination, the Original Class Principal
Balance of such Class reduced by the sum of all
principal amounts previously

S-7

<PAGE>

distributed to Certificateholders of such Class on
all previous Distribution Dates, other than any
amounts that constitute mortgagor payments that are
recovered from the Certificateholders of such Class
as voidable preferences by a trustee in bankruptcy,
and as further reduced by all losses or write-
offs, if any, previously allocated to the
holders of such Class of Certificates on all
previous Distribution Dates. SEE "Description
of the Certificates -- Distributions on the
Senior Certificates" and "-- Subordination and
Allocation of Losses".

Principal
Distributions on
Senior Certificates. . On each Distribution Date, the holders of the
Senior Certificates will be entitled to receive
distributions of principal, as more fully
described herein, in an amount equal to the sum
of: (i) scheduled principal payments received by
the Servicer during the calendar month
immediately preceding such Distribution Date
(commencing on __________________, 199__ for the
first Distribution Date) (each such period, the
"DUE PERIOD"), (ii) all partial and full
principal prepayments received by the Servicer
during the Due Period, (iii) the amount
attributable to the principal portion of any
proceeds received from the liquidation of any
defaulted Mortgage Loan during the Due Period,
including any proceeds received from the payment
of FHA insurance claims which have been
submitted to the FHA for reimbursement of losses
on Title I Mortgage Loans ("FHA CLAIMS"), and
(iv) such other amounts as described under
"Description of the Certificates --
Distributions on the Senior Certificates"
herein, including the principal portion of any
net loan losses allocable to the Senior
Certificates. As described in "Description of
the Certificates -- Distributions on the Senior
Certificates", additional amounts may be
distributed as principal to the holders of the
Senior Certificates from the distribution of any
funds remaining in the Pre-Funding Account after
the termination of the Funding Period and from
the distribution of Excess Spread, if any, on
any Distribution Date until the Required Class A
Overcollateralization Level is achieved with
respect to the Senior Certificates. On each
Distribution Date, to the extent that funds are
available in the Certificate Account (after
taking into account all prior distributions
therefrom), the amount of principal to which the
Certificates are entitled will be distributed as
follows: (i) to the holders of each Class of
the Class A Certificates, sequentially among the
Classes of the Class A Certificates in the order
of their respective Class designations until the
Class Principal Balance for each such Class has
been reduced to zero; and (ii) to the holders of
the Class B Certificates until the Class
Principal Balance for such Class has been
reduced to zero. All distributions of principal
with respect to the Certificates of a particular
Class will be applied on a pro rata basis among
all the Certificates of such Class. See
"Description of the Certificates --
Distributions on the Senior Certificates"
herein.

Credit Enhancement. . . Credit enhancement with respect to the Senior
Certificates will be provided primarily by the
Guaranty Policy. Additional credit enhancement
with respect to the Senior Certificates that
will be utilized prior to the Guaranty
Policy will be provided by (i) the
overcollateralization and subordination with
respect to the Subordinated Certificates from
the portion of the Pool Principal Balance
attributable to the Subordinated Certificates
and from the acceleration of the principal
amortization of the Senior Certificates with
Excess Spread as described herein; and (ii) with
respect to the Title I Mortgage Loans, the
proceeds received from the payment of FHA
Claims. No reserve fund or spread account will
be established as part of the Trust Fund for the
Senior Certificates.

The Guaranty Policy . . The Depositor will obtain in the name of the
Trustee a Certificate Guaranty Insurance Policy
(the "GUARANTY POLICY") from
________________________________ (the
"CERTIFICATE INSURER"), pursuant to which the
Certificate Insurer will irrevocably and
unconditionally guaranty payment on each
Distribution Date to the Trustee, for the
benefit of the holders of the Senior
Certificates, of the related Interest Remittance

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<PAGE>

Amount and the related Principal Remittance
Amount then payable on each such Class. Only
the Senior Certificates will be insured by the
Guaranty Policy. The Subordinated Certificates
will not be guaranteed by or benefit from such
Guaranty Policy.

So long as (i) there does not exist a continuing
failure by the Certificate Insurer to make a
required payment under the Guaranty Policy and
(ii) certain bankruptcy-related events specified
in the Pooling and Servicing Agreement have not
occurred with respect to the Certificate Insurer
(any of the events described in (i) and (ii), a
"CERTIFICATE INSURER DEFAULT"), the Certificate
Insurer will have the right to exercise certain
rights of the holders of the Senior Certificates
under the Pooling and Servicing Agreement
without any consent of such holders, and such
Certificateholders may exercise their rights
only with the prior written consent of the
Certificate Insurer. Prior to a Certificate
Insurer Default, certain rights and actions of
the Majority Certificateholders will require the
consent of the Certificate Insurer. See
"Description of the Certificates -- Servicing"
herein. In addition, on each Distribution Date,
after the holders of the Senior Certificates
have been paid all amounts to which they are
entitled, the Certificate Insurer will be
entitled to be reimbursed for any unreimbursed
Guaranteed Payments under the Guaranty Policy
together with interest thereon at the rate
specified in the Insurance Agreement (the
"CERTIFICATE INSURER REIMBURSEMENT AMOUNT") and
any accrued and unpaid Certificate Guaranty
Insurance Premiums. In connection with each
Guaranteed Payment on a Senior Certificate, the
Trustee, as attorney-in-fact for the holder
thereof, will be required to assign to the
Certificate Insurer the rights of such
Certificateholder with respect to such Senior
Certificate, to the extent of such Guaranteed
Payments, including, without limitation, in
respect of any amounts due to such
Certificateholder as a result of a securities
law violation arising from the offer and sale of
such Senior Certificates. In the event of any
Certificate Insurer Reimbursement Amount
attributable to the Senior Certificates, the
holders of the Class B Certificates will not be
entitled to receive distributions of interest
and/or principal, as applicable, and the holders
of the Class R Certificates will not be entitled
to receive distributions of any remaining
amounts available in the Certificate Account
(after making all prior distributions), until
the Certificate Insurer has been distributed
such Certificate Insurer Reimbursement Amount in
full. See "The Guaranty Policy" herein.

The Certificate Insurer's obligation under the
Guaranty Policy shall be discharged to the
extent Guaranteed Payments are received by the
Trustee, whether or not such Guaranteed Payments
are properly applied by the Trustee. See "The
Guaranty Policy." The Guaranty Policy is
noncancellable for any reason. The Guaranty
Policy does not guarantee any specified rate of
prepayments, nor does the Guaranty Policy
provide funds to redeem any of the Senior
Certificates on any specified date. The
Certificate Insurer is described in "The
Guaranty Policy" herein.

Class A
Overcollateral-
ization . . . . . . . On the Closing Date, the "INITIAL CLASS A
OVERCOLLATERALIZATION" which provides credit
enhancement for the Senior Certificates will
equal the excess of the Assumed Pool Principal
Balance over the Original Class Principal Balance
of all Classes of Senior Certificates, which
excess will equal the Original Class Principal
Balance of the Class B Certificates of
$_______________, or approximately ___% of the
Assumed Pool Principal Balance. As of each
Determination Date occurring after termination of
the Funding Period, the "CLASS A
OVERCOLLATERALIZATION" will equal the excess of
the Pool Principal Balance over the Class
Principal Balance of all Classes of Senior
Certificates. An additional
overcollateralization feature has been designed
to accelerate the principal amortization of the
Senior Certificates relative to the principal
amortization of the Mortgage Loans thereby
increasing the Class A Overcollateralization.
This will be accomplished by distributing to the
Senior Certificateholders in the manner described
below any remaining amounts available in the
Certificate Account on each Distribution Date
(after making all prior distributions) that would
otherwise be made to the holders

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<PAGE>

of the Class R Certificates (the "EXCESS SPREAD").
See "Description of the Certificates -- Distributions
on the Senior Certificates". Until the Class A
Overcollateralization equals or exceeds the
Required Class A Overcollateralization Level,
distributions of Excess Spread, if any, on a
Distribution Date that would otherwise be made to
the holders of the Senior Certificates will be
made as an additional distribution of principal
to the holders of the Senior Certificates,
sequentially among the Classes of the Senior
Certificates in order of their respective Class
designations.

The Pooling and Servicing Agreement sets forth
the Required Class A Overcollateralization Level
and provides that, subject to certain floors,
caps and triggers, the Required Class A
Overcollateralization Level may increase or
decrease over time. On the Closing Date,
assuming that the Assumed Pool Principal Balance
has the same characteristics as the Initial Pool
Principal Balance, the Required Class A
Overcollateralization Level would be equal to
$______________, which is _____% of the Assumed
Pool Principal Balance. An increase in the
Required Class A Overcollateralization Level
will result if the delinquency or default
experience on the Mortgage Loans exceeds certain
levels set forth in the Pooling and Servicing
Agreement. If such an increase occurs, then to
the extent that Excess Spread is available, the
principal amortization of the Senior
Certificates would be accelerated by the
distribution of such Excess Spread to the Senior
Certificateholders until the Required Class A
Overcollateralization Level is achieved. The
Required Class A Overcollateralization Level may
be decreased under certain circumstances, and in
any event if the Class A Overcollateralization
is equal to or greater than the Required Class A
Overcollateralization Level (a "CLASS R
DISTRIBUTION TRIGGER"), then the rate of
principal amortization of the Senior
Certificates would slow from the cessation of
the Excess Spread distributions to the Senior
Certificateholders. See "Description of the
Certificates -- Class A Overcollateralization"
herein.

While the distribution of Excess Spread to
holders of the Senior Certificates in the manner
specified above has been designed to produce and
maintain a given level of overcollateralization
with respect to the Senior Certificates, there
can be no assurance that Excess Spread will be
generated in sufficient amounts to ensure that
such overcollateralization level will be
achieved or maintained at all times. Net losses
on Liquidated Mortgage Loans will be allocated
first to reduce the principal imputed to the
Class R Certificates, if any, and then to reduce
the Class Principal Balance of the Class B
Certificates, thereby reducing the Class A
Overcollateralization. See "Description of the
Certificates -- Subordination and Allocation of
Losses" and "Risk Factors -- No Assurance of
Adequacy of Credit Enhancement" herein.

Subordination . . . . . The rights of the holders of the Class B
Certificates to receive distributions from
amounts available in the Certificate Account
(after making all prior distributions therefrom)
on each Distribution Date will be subordinated,
to the extent described herein, to such rights
of the holders of the Senior Certificates. This
subordination is intended to enhance the
likelihood of regular receipt by the holders of
the Senior Certificates of the full amount of
interest and principal distributions due to such
holders and to afford such holders protection
against losses on the Mortgage Loans. The
rights of the holders of the Class R
Certificates to receive distributions of Excess
Spread on each Distribution Date following the
Class R Distribution Trigger will be
subordinated to rights of the holders of the
Class A Certificates and the Class B
Certificates. This subordination is intended to
enhance the likelihood of regular receipt by the
holders of the Class A Certificates and Class B
Certificates of the full amount of interest and
principal distributions due to such holders and
to afford all such holders protection against
losses on the Mortgage Loans. SEE "Description
of the Certificates -- Subordination and
Allocation of Losses" herein.

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<PAGE>

FHA Title I Program . . Sections 1 and 2(a) of the National Housing Act
of 1934, as amended, authorize the Title I
coinsurance program (the "TITLE I PROGRAM")
under which the FHA has promulgated certain
regulations, rules and procedures (the "FHA
REGULATIONS") for the insurance of loans
thereunder. Under the Title I Program, approved
lenders ("TITLE I LENDERS") may obtain insurance
payments against approximately 90% of certain
losses incurred with respect to eligible Title I
loans that have been originated and serviced in
accordance with the FHA Regulations, up to the
amount in such Title I Lender's FHA insurance
coverage reserve account (such account, an "FHA
RESERVE") as further described below and subject
to the FHA Regulations. Under the Title I
Program, the FHA maintains an FHA Reserve for
each Title I Lender and the amount therein is
limited to a maximum of 10% of the amount
disbursed, advanced or expended by the Title I
Lender in originating or purchasing each
eligible loan registered with the FHA for Title
I insurance, with certain adjustments permitted
or required by the FHA Regulations. See "The
Title I Program" herein.

The FHA will recognize the Depositor as the
owner of the Title I Mortgage Loans for purposes
of the related FHA insurance coverage. The FHA
will not recognize the Trust Fund or the
Certificateholders as the owners of the Title I
Mortgage Loans, or any portion thereof, and the
Certificateholders will not be entitled to
submit FHA Claims to the FHA, but will be
dependent upon the Depositor and any FHA Claims
Administrator to submit, process and administer
FHA Claims with respect to the Title I Mortgage
Loans. Accordingly, the Trust Fund and the
Certificateholders will have no direct right to
receive insurance payments from the FHA. SEE
"Risk Factors -- No Assurance of Adequacy of
Credit Enhancement" and "The Title I Program --
No Rights of Certificateholders Against the FHA"
herein.

FHA Insurance on
the Title I Mortgage
Loans . . . . . . . . As further described herein, the Transferor will
transfer the FHA insurance coverage for the Title
I Mortgage Loans to the Depositor for the benefit
of the Certificateholders. Due to the FHA
procedures for transferring FHA insurance
coverage from one Title I Lender to another, the
insurance coverage for the Title I Mortgage Loans
will not be effectively transferred from the
Transferor to the Depositor by the Closing Date;
rather, the FHA insurance coverage for the Title
I Mortgage Loans will be transferred to the
Depositor's FHA Reserve (the final amount of such
transferred coverage as acknowledged by the FHA
is herein called the "FHA INSURANCE AMOUNT") on
subsequent dates (each, a "TRANSFER DATE"), that
will occur as promptly as practical after the
Closing Date for any such loans that are Initial
Mortgage Loans and the related Subsequent
Transfer Date for any such loans that are
Subsequent Mortgage Loans. See "The Title I
Program -- General" herein.

The obligation of the FHA to reimburse losses in
the portfolio of Title I loans owned by a Title
I Lender is limited to the insurance coverage in
such Title I Lender's FHA Reserve, which
insurance coverage generally is not maintained
on a loan-by-loan basis. Thus, if a Title I
Lender's FHA Reserve were to be depleted, all
Title I Mortgage Loans held by such Title I
Lender would become effectively uninsured. The
Depositor's FHA Reserve, which will include the
FHA Insurance Amount for Series 199__-__,
[currently includes insurance coverage in
respect of other Title I loans included in the
prior issuances effected by the Depositor of
Asset-Backed Certificates (the "PRIOR SERIES")
and] may subsequently include insurance coverage
in respect of other Title I loans that are
included in future issuances effected by the
Depositor of one or more series of similar
certificates (together with the Prior Series,
the "ADDITIONAL SERIES"). The FHA Insurance
Amount for the Series 199__-__ will be
commingled in the Depositor's FHA Reserve with
the insurance coverage relating to any Title I
loans included in any Additional Series. On
each Transfer Date, the Depositor will record on
its books and records the FHA Insurance Amount
for the Title I Mortgage Loans

S-11

<PAGE>

whose transfer to the Depositor has been acknowledged
by the FHA on such date, separately from insurance
coverage attributable to Title I loans for any
Additional Series. Promptly after the final Transfer
Date, the Depositor (or the FHA Claims Administrator)
is required to certify to the Rating Agencies, the
Certificate Insurer and the Trustee as to the
actual FHA Insurance Amount transferred to the
Trustee's FHA Reserve. See "The Title I Program --
General" herein. The Depositor and any FHA Claims
Administrator will not submit any FHA Claim in respect
of a Title I Mortgage Loan to the FHA on behalf of the
Trust Fund if the FHA Insurance Amount, as shown on
the records of the Depositor relating to the Series
199__-__, is insufficient to reimburse such FHA Claim.
In addition, the Depositor has agreed that neither
it nor any FHA Claims Administrator will submit
any FHA claims in respect of any Title I loans
included in any Additional Series where such
claims would reduce the FHA Insurance Amount.

THE FHA INSURANCE AMOUNT TO BE TRANSFERRED FROM
THE TRANSFEROR"S FHA RESERVE TO THE DEPOSITOR"S
FHA RESERVE IN RESPECT OF THE TITLE I MORTGAGE
LOANS IS EXPECTED TO EQUAL NOT LESS THAN _____%
OF THE CUT-OFF DATE PRINCIPAL BALANCES OF THE
TITLE I MORTGAGE LOANS THAT ARE EXPECTED TO BE
CONVEYED TO THE TRUST FUND, INCLUDING ANY
SUBSEQUENT MORTGAGE LOANS. IF THE FHA INSURANCE
AMOUNT SO TRANSFERRED IS LESS THAN _____% OF THE
CUT-OFF DATE PRINCIPAL BALANCES OF THE TITLE I
MORTGAGE LOANS THAT ARE ACTUALLY CONVEYED TO THE
TRUST FUND, THEN THE AMOUNT OF THE REQUIRED
CLASS A OVERCOLLATERALIZATION LEVEL WILL BE
INCREASED BY A MINIMUM OF 90% OF THE AMOUNT OF
SUCH SHORTFALL.

Since the FHA Insurance Amount for the Title I
Mortgage Loans is limited as described herein,
and since the adequacy of such FHA Insurance
Amount is dependent upon future events,
including reductions for the payment of FHA
Claims, no assurance can be given that the FHA
Insurance Amount is or will be adequate to cover
90% of all potential losses on the Title I
Mortgage Loans or that the Title I Mortgage
Loans will qualify for the payment of FHA
Claims. SEE "Risk Factors -- No Assurance of
Adequacy of Credit Enhancement" herein.

FHA Claims
Administrator. . . . . The Depositor and Trustee, on behalf of the
Certificateholders, will enter into an FHA Claims
Administration Agreement on the Closing Date (the
"FHA CLAIMS ADMINISTRATION AGREEMENT") with the
Servicer to administer, process and submit all
FHA Claims in the name and on behalf of the
Depositor and to monitor the FHA Insurance Amount
for the Title I Mortgage Loans (in such capacity,
the Servicer, and any successor acting in such
capacity, the "FHA CLAIMS ADMINISTRATOR"). SEE
"The Transferor and Servicer" herein. The
Servicer will not receive any additional fees or
compensation for serving as such (other than the
Servicing Fee).

Servicing of the
Mortgage Loans . . . . The Servicer will perform the mortgage loan
servicing functions with respect to the Mortgage
Loans pursuant to the Pooling and Servicing
Agreement. The Servicer may have subcontracted
its servicing obligations and duties with
respect to certain Mortgage Loans to certain
unaffiliated lenders from whom the Transferor
purchased such Mortgage Loans, pursuant to a
subservicing agreement between the Servicer and
such lender (each such lender, in this capacity,
a "SUBSERVICER"). However, the Servicer will
not be relieved of its servicing obligations and
duties with respect to these Mortgage Loans.

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<PAGE>

The Servicer will be entitled to a fee, payable
monthly on each Distribution Date, equal to one-
twelfth of 1.0% per annum on the Pool Principal
Balance (as adjusted for Liquidated Mortgage
Loans) as of the first day of the immediately
preceding Due Period (the "SERVICING FEE"), but
with respect to the first Distribution Date such
monthly fee shall be pro rated based on _______
days for __________________ 199__. The Servicer
will be responsible for paying the subservicing
fees, payable monthly, to each Subservicer for
the servicing of the Mortgage Loans being
subserviced pursuant to a subservicing
agreement.

FHA Insurance
Premium and Fees of
Certificate Insurer,
Trustee, and
Custodian. . . . . . . On each Distribution Date, prior to
distributions on the Certificates, amounts
available in the Certificate Account will be
distributed to deposit a portion of the FHA
Insurance premium into the FHA Insurance Premium
Account (the "FHA INSURANCE PREMIUM DEPOSIT
AMOUNT") and to pay the following periodic Trust
Fund fees: (1) the Certificate Insurer premium
(the "CERTIFICATE GUARANTY INSURANCE PREMIUM");
(2) the Trustee fee; and (3) the Custodian fee
for custody of the Trustee's Mortgage Loan Files
(the "CUSTODIAN FEE"); provided, however, that
with respect to the first Distribution Date the
payment of all such monthly fees will be
prorated based on _____ days for ___________
199__. See "Description of the Certificates --
Distributions on the Senior Certificates"
herein.

Optional Termination. . On any Distribution Date after which the Class
Principal Balance of the Senior Certificates
then outstanding is less than 10% of the sum of
the Initial Pool Principal Balance and the
aggregate Cut-Off Date Principal Balance of the
Subsequent Mortgage Loans conveyed to the Trust
Fund, the Servicer may, at its option, terminate
the Pooling and Servicing Agreement by
purchasing from the Trust Fund all of the
Mortgage Loans and REO Properties (as defined in
the Pooling and Servicing Agreement) at a price
(the "TERMINATION PRICE") equal to the sum of
(i) Pool Principal Balance, plus (ii) the sum of
thirty days" accrued interest on the Pool
Principal Balance computed at the weighted
average Mortgage Loan Rate for the Mortgage
Loans (including REO Properties) then
outstanding, plus (iii) any accrued and unpaid
interest on the Class A Certificates and Class B
Certificates as of the immediately preceding
Distribution Date. The Servicer will pay the
unpaid fees and expenses, if any, of the
Trustee, the Certificate Insurer, the Custodian
and the Servicer in connection with such
optional termination.

Certain Federal
Income Tax
Consequences . . . . . For a discussion of certain tax matters, see
"Certain Federal Income Tax Consequences" herein
and in the accompanying Prospectus.

Ratings . . . . . . . . It is a condition to the initial issuance of the
Senior Certificates that the Class A-1
Certificates, the Class A-2 Certificates, Class
A-3 Certificates and the Class A-4 Certificates
each be rated "_____" by Standard & Poor's and
"_____" by Moody's. Standard & Poor's and
Moody's are sometimes referred to herein,
collectively, as the "RATING AGENCIES". A
security rating does not address the frequency
of principal prepayments or the corresponding
effect on yield to investors. Neither the
Depositor, the Transferor, the Servicer, the
Trustee, the Certificate Insurer nor any other
person is obligated to maintain the rating on
any Senior Certificate. See "Ratings" herein.

ERISA Considerations. . For a discussion of certain ERISA
Considerations, see "ERISA Considerations" in
the accompanying Prospectus.

Legal Investment. . . . For a discussion of certain legal investment
consideration, see "Legal Investment Matters" in
the accompanying Prospectus.

S-13

<PAGE>

RISK FACTORS

Prospective investors in the Senior Certificates should consider the
following factors in connection with the purchase of a Senior
Certificate. Unless the context indicates to the contrary, any numerical
or statistical information presented is based upon the characteristics of
the Initial Mortgage Loans proposed to be included in the Mortgage Loan
Pool as of the date of this Prospectus Supplement.

UNDERWRITING STANDARDS AND POTENTIAL DELINQUENCIES

All of the Initial Mortgage Loans were less than 60 days late in
their scheduled monthly payments of principal and interest as of the
__________________, 199__ Cut-Off Date; however, approximately _____% of
the Initial Pool Principal Balance consists of Initial Mortgage Loans
that have a first scheduled monthly payment due date occurring after
__________________, 199__; therefore, it was not possible for such
Initial Mortgage Loans to have had a scheduled monthly payment that was
60 days or more late as of the __________________, 199__ Cut-Off Date.

Generally, the underwriting standards of the Transferor and SFAC,
which are substantially similar for Title I Mortgage Loans and
Conventional Mortgage Loans, are more stringent than the minimum
standards established under FHA Regulations. See "The Transferor and
Servicer -- Underwriting Criteria". However, the underwriting standards
of the Transferor and SFAC are less stringent than the underwriting
guidelines of FNMA or FHLMC for first lien, single family mortgage loans.
Because the Mortgage Loans are primarily secured by junior liens having
relatively smaller principal balances than first lien, single family
mortgage loans and because the borrowers are typically less creditworthy
or financially sophisticated with respect to their ability to obtain
financing at lower interest rates, the Mortgage Loans are likely to
experience higher (and in some cases, substantially higher) rates of
delinquencies and defaults that result in more severe losses in relation
to the outstanding principal balances thereof, than would be the case
with mortgage loans that have been underwritten in accordance with the
underwriting guidelines of FNMA or FHLMC for first lien, single family
mortgage loans. IN THE EVENT OF A DELINQUENCY OR A DEFAULT WITH RESPECT
TO A MORTGAGE LOAN, NEITHER THE SERVICER NOR ANY SUBSERVICER WILL HAVE AN
OBLIGATION TO ADVANCE SCHEDULED MONTHLY PAYMENTS OF PRINCIPAL AND
INTEREST WITH RESPECT TO SUCH MORTGAGE LOAN.

Pursuant to the underwriting standards of the Transferor and SFAC
and any other lender originating the Mortgage Loans, the primary
consideration in underwriting the Mortgage Loans is an assessment of the
creditworthiness of the related borrower. No assurance can be given that
the creditworthiness of a borrower will not deteriorate as a result of
future circumstances, which deterioration may result in a delinquency or
default by such borrower on the related Mortgage Loan. The value and
adequacy of the related Mortgaged Properties as collateral in relation to
the amount of the Mortgage Loans, together with the amount of all liens
senior to the liens of the Mortgage Loans, are not a primary
consideration, and with respect to certain Title I Mortgage Loans may not
be considered at all, in underwriting these types of junior lien Mortgage
Loans. Accordingly, there can be no assurance that any proceeds will be
recovered from the foreclosure and liquidation of the related Mortgaged
Property, or that an FHA insurance claim will not be rejected, in the
event a borrower defaults with respect to a Mortgage Loan.

As of January 1, 1996, the FHA Regulations require a Title I Lender
to maintain an internal quality control program with respect to the
underwriting and origination of Title I loans insured under the Title I
Program. Although, the Transferor and SFAC had implemented internal
quality control programs prior to January 1, 1996, the Transferor may
have acquired certain Mortgage Loans that were originated prior to such
date from unaffiliated lenders that did not have internal quality control
programs at the time such Mortgage Loans were originated.

NO ASSURANCE OF ADEQUACY OF CREDIT ENHANCEMENT

Credit enhancement with respect to the Senior Certificates will be
provided by the Guaranty Policy. Additional credit enhancement with
respect to the Senior Certificates that will be utilized prior to the
Guaranty Policy will be provided by (i) the overcollateralization and
subordination with respect to the Class B Certificates and Class R
Certificates from the portion of the Pool Principal Balance attributable
to the Class B Certificates and Class R Certificates and from the
acceleration of the principal amortization of the Class A Certificates,
as described herein; and (ii) with respect to the Title I Mortgage Loans,
the proceeds received from the payment of FHA Claims. If, as a result of
the underwriting and origination standards of the applicable originating
lender, including the Transferor or SFAC, or as a result of any other
circumstances, the Mortgage Loans experience higher rates of
delinquencies and defaults than initially anticipated in connection with
the rating of the Senior Certificates, there can be no assurance that the
amounts available from such additional credit enhancement will be
adequate to cover any delays or shortfalls on

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the amounts otherwise distributable on the Senior Certificates which result
from such delinquencies and defaults. If the amounts available from such
additional credit enhancement are inadequate, then the holders of the Senior
Certificates will bear the risk of any delays and losses resulting from such
delinquencies and defaults on the Mortgage Loans, unless such delays or
losses are covered by the Guaranty Policy and paid by the Certificate
Insurer. No reserve fund or spread account will be established as part of
the Trust Fund for the Senior Certificates.

While the distribution of Excess Spread to the Senior Certificateholders
in the manner specified herein has been designed to produce and maintain a
given level of overcollateralization with respect to the Senior Certificates,
there can be no assurance that Excess Spread will be generated in sufficient
amounts to ensure that such overcollateralization level will be achieved or
maintained at all times. Net losses on Liquidated Mortgage Loans will be
allocated first to reduce the principal imputed to the Class R Certificates,
if any, and the Class Principal Balance of the Class B Certificates, thereby
reducing the Class A Overcollateralization. See "Description of the
Certificates --Subordination and Allocation of Losses" herein.

CERTIFICATE INSURER AND RATINGS OF SENIOR CERTIFICATES. The rating
of the Senior Certificates depends primarily on an assessment by the
Rating Agencies of the claims-paying ability of the Certificate Insurer.
Any reduction in a rating assigned to the claims-paying ability of the
Certificate Insurer below the rating initially given to the Senior
Certificates may result in a reduction in the rating of the Senior
Certificates or any Class thereof. The rating by the Rating Agencies of
the Senior Certificates is not a recommendation to purchase, hold or sell
the Senior Certificates, because such rating does not comment as to their
market price or suitability for a particular investor. There is no
assurance that the ratings will remain in place for any given period of
time or that the ratings will not be lowered or withdrawn by the Rating
Agencies. In general, the ratings address credit risk and do not address
the likelihood of prepayments.

PROPOSED LEGISLATION AFFECTING FHA. In August 1995, bills were
introduced in both houses of the United States Congress that would, among
other things, abolish the Department of Housing and Urban Development
("HUD"), reduce federal spending for housing and community development
activities and eliminate the Title I Program. As a result of the proposed
legislation that would abolish HUD, if enacted, and the November and
December 1995 budget legislation impasse between Congress and the
President, no assurance can be given that the Title I Program will
continue in existence or that HUD will continue to receive sufficient
funding for the operation of the Title I Program. The elimination of the
Title I Program or a significant reduction in its authorized funding will
have, in all likelihood, a material adverse affect on the FHA Insurance
for the Title I Mortgage Loans, which could include, without limitation,
delays in transferring the FHA Insurance to the Depositor's FHA Reserve,
delays in the processing and payment of FHA Claims or the termination or
reduction of the FHA Insurance for the Title I Mortgage Loans.

ADDITIONAL RISKS ASSOCIATED WITH MORTGAGE LOANS

SERVICING OF MORTGAGE LOANS BY SERVICER. The Servicer and each
Subservicer will be required to create and hold all records pertaining to
such activities for the benefit of the Trustee. The Majority
Certificateholders or the Trustee, with the consent of the Certificate
Insurer, or the Certificate Insurer may remove the Servicer upon the
Servicer's failure to remedy an Event of Default under the Pooling and
Servicing Agreement, in which event a successor servicer will be
appointed pursuant to the terms of the Pooling and Servicer Agreement.
Absent such a transfer, the holders of Senior Certificates will be
dependent upon the Servicer to adequately and timely perform its
servicing obligations and remit to the Trustee all payments of principal
and interest received on the Mortgage Loans, and with respect to Mortgage
Loans being serviced by a Subservicer, the Servicer will be dependent
upon such Subservicer to adequately and timely perform its servicing
obligations and remit to the Servicer all payments of principal and
interest received on these Mortgage Loans. The payments of principal and
interest on the Mortgage Loans are the primary source of funds for the
distributions due to the holders of Senior Certificates. See "The
Transferor and Servicer -- Servicing and FHA Claims Experience" herein.

LIMITED HISTORICAL DATA. Since January 1995, RNFC, the Transferor
and Servicer, and SFAC have substantially increased the volume of Title I
loans and conventional junior lien loans that they have originated,
purchased, sold and/or serviced, and thus, RNFC and SFAC have limited
historical experience with respect to the performance, including the
delinquency and loss experience and the rate of prepayments of Title I
loans and conventional junior lien loans, with respect to their entire
portfolio of loans and in particular with respect to such increased
volume of loans. Accordingly, RNFC's delinquency experience and loan
loss and liquidation experience set forth under "The Transferor and
Servicer -- Servicing and FHA Claims Experience" herein may not be
indicative of the performance of the Mortgage Loans included in the
Mortgage Loan Pool.

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GEOGRAPHIC CONCENTRATION. Approximately _____% and _____% of the
Initial Pool Principal Balance will consist of Mortgage Loans that are
secured by Mortgaged Properties located in the States of ____________ and
____________, respectively. Because of the relative geographic
concentration of the Mortgage Loans within these States, delinquencies
and losses on the Mortgage Loans may be higher than would be the case if
the Mortgage Loans were more geographically diversified. For example,
certain of the Mortgaged Properties may be more susceptible to certain
types of special hazards that are not covered by any casualty insurance,
such as earthquakes, floods and other natural disasters and major civil
disturbances, than residential properties located in other parts of the
country. [In addition, with respect to those Mortgage Loans secured by
Mortgaged Properties located in the State of California, the California
residential real estate market has experienced a sustained decline over
the last several years. In general, declines in the California
residential real estate market may adversely affect the values of the
Mortgaged Properties securing such Mortgage Loans such that the principal
balances of such Mortgage Loans, together with any senior mortgage loans
on such Mortgaged Properties, will equal or exceed the value of such
Mortgaged Properties. In addition, adverse economic conditions in
California (which may or may not affect real property values) may affect
the timely payment by borrowers of scheduled payments of principal and
interest on such Mortgage Loans and, accordingly, the actual rates of
delinquencies, foreclosures and losses on such Mortgage Loans could be
higher than those currently experienced in the mortgage lending industry
in general.]

REPURCHASE OR REPLACEMENT OF DEFECTIVE MORTGAGE LOANS BY TRANSFEROR

Pursuant to the Pooling and Servicing Agreement, the Transferor has
agreed to cure in all material respects any breach of the Transferor's
representations and warranties set forth in the Pooling and Servicing
Agreement with respect to the Mortgage Loans, which breach materially and
adversely affects the value of the Mortgage Loans or the interest of the
Certificateholders. If the Transferor cannot cure such breach within a
specified period of time, the Transferor is required to repurchase the
affected Mortgage Loans from the Trust Fund or substitute other loans for
the affected Mortgage Loans. Although a significant portion of the
Mortgage Loans will have been acquired from unaffiliated correspondent
lenders, the Transferor will make the representations and warranties for
all such Mortgage Loans. To the extent that the Transferor has obtained
any representations and warranties from such unaffiliated correspondent
lenders, the Transferor, and the Trustee as the successor to the
Transferor's rights with respect thereto, will have an additional party
that is liable for the repurchase of any Mortgage Loan in breach of the
applicable representations and warranties made by such party. A summary
description of the Transferor's representations and warranties is set
forth under "The Pooling and Servicing Agreement -- Assignment of
Mortgage Loans" in the Prospectus. In addition, the Transferor is
required to repurchase from the Trust Fund any Title I Mortgage Loan, for
which the related FHA insurance coverage has not been transferred from
the Transferor's FHA Reserve to the Trustee's FHA Reserve within 120 days
after the Closing Date (in the case of the Initial Mortgage Loans) or
each Subsequent Transfer Date (in the case of Subsequent Mortgage Loans)
or within such longer period as may be approved by the Certificate
Insurer, or any Title I Mortgage Loan for which an FHA Claim has been
denied and a representation or warranty of the Transferor has been
breached.

No assurance can be given that, at any particular time, the
Transferor will be capable, financially or otherwise, of repurchasing or
replacing defective Mortgage Loans in the manner described above, or
that, at any particular time, any unaffiliated lender from whom the
Transferor obtained the defective Mortgage Loans will be capable,
financially or otherwise, of repurchasing any defective Mortgage Loans
from the Transferor. If the Transferor repurchases, or is obligated to
repurchase, defective mortgage loans from any Additional Series, the
financial ability of the Transferor to repurchase defective Mortgage
Loans from this Series may be adversely affected. In addition, other
events relating to the Transferor and its mortgage banking operations can
occur that would adversely affect the financial ability of the Transferor
to repurchase defective Mortgage Loans from this Series, including
without limitation the sale or other disposition of all or any
significant portion of its assets. If the Transferor is unable to
repurchase or replace a defective Mortgage Loan, and if applicable, such
unaffiliated lender is unable to repurchase or replace a defective
Mortgage Loan it sold to the Transferor, then the Servicer, on behalf of
the Trust Fund, will pursue other customary and reasonable efforts, if
any, to recover the maximum amount possible with respect to such Mortgage
Loan, and any resulting loss will be borne by the Certificateholders to
the extent that such loss is not otherwise covered by amounts available
from the credit enhancement provided for the Senior Certificates,
including the Guaranty Policy. See "Risk Factors -- No Assurance of
Adequacy of Credit Enhancement" and "The Transferor and Servicer" herein.

YIELD AND PREPAYMENT CONSIDERATIONS

SUBSEQUENT MORTGAGE LOANS AND THE PRE-FUNDING ACCOUNT. Any
conveyance of Subsequent Mortgage Loans after the Closing Date will be
subject to the conditions and terms set forth in the Pooling and
Servicing Agreement. SEE "The Mortgage Loan Pool -- Conveyance of
Subsequent Mortgage Loans" herein. If, by the end of the Funding Period,
amounts on deposit in the Pre-Funding Account have not been fully applied
to the purchase of Subsequent Mortgage Loans, then on the business day
immediately

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preceding the next Distribution Date, such remaining amounts
(net of reinvestment income which is required to be transferred to the
Capitalized Interest Account) will be transferred to the Certificate
Account and applied to reduce the Class Principal Balances of the Senior
Certificates, on a pro rata basis. No assurance can be given that the
Transferor will originate and deliver any Subsequent Mortgage Loans to
the Depositor, for delivery thereby to the Trust Fund, that will satisfy
the requirements of the delivery thereof under the Pooling and Servicing
Agreement or that will be approved by the Certificate Insurer for
inclusion in the Trust Fund. If pro rata principal distributions are
made on the Senior Certificates as a result of funds remaining on deposit
in the Pre-Funding Account after the termination of the Funding Period,
interest will not accrue on such principal distributions during the 20-
day period that will elapse between the end of the monthly accrual period
immediately preceding the Distribution Date on which such principal
distributions will be made and such Distribution Date. See "Certain
Yield, Prepayment and Weighted Average Life Considerations -- General"
herein.

YIELD AND PREPAYMENTS. The extent to which the yield to maturity of
a Senior Certificate may vary from the anticipated yield will depend upon
the degree to which it is purchased at a premium or discount, and the
degree to which the timing of distributions to holders thereof is
sensitive to scheduled payments, prepayments, liquidations, defaults and
purchases of Mortgage Loans and to the distribution of Excess Spread and
amounts remaining on deposit in the Pre-Funding Account after the Funding
Period ends. In the case of any Senior Certificate purchased at a
discount, an investor should consider the risk that a slower than
anticipated rate of distributions of principal payments to the holders of
the Senior Certificates (including without limitation prepayments on the
Mortgage Loans) could result in an actual yield to such investor that is
lower than the anticipated yield and, in the case of any Senior
Certificate purchased at a premium, the risk that a faster than
anticipated rate of distributions of principal payments to the holders of
the Senior Certificates (including without limitation prepayments on the
Mortgage Loans) could result in an actual yield to such investor that is
lower than the anticipated yield. Further, in the event of excessive
prepayments, liquidations, repurchases and purchases of the Mortgage
Loans or distributions from the Pre-Funding Account, there can be no
assurance that Certificateholders will be able to reinvest such
distributions in securities having comparable yields. See "Certain
Yield, Prepayment and Weighted Average Life Considerations" herein.

THE STATUS OF THE TRUST FUND'S INTEREST IN THE MORTGAGE LOANS

The Depositor will agree in the Pooling and Servicing Agreement that
the transfer of the Mortgage Loans to the Trust Fund is intended as a
valid sale and transfer of the Mortgage Loans to the Trustee for the
benefit of the Certificateholders. However, if the Mortgage Loans are
held to be property of the Depositor or if for any reason the Pooling and
Servicing Agreement is held to create a security interest in the Mortgage
Loans, the Depositor will agree in the Pooling and Servicing Agreement
that such transfer shall be treated as the grant of a security interest
in the Mortgage Loans to the Trust Fund. Also, the Depositor will
warrant that if the transfer of the Mortgage Loans by it is deemed to be
a grant of a security interest in the Mortgage Loans, the Trustee will
have a perfected first-priority security interest therein. The Depositor
is required to take all actions that are required under law to protect
the Trust Fund's security interest in the Mortgage Loans. If the
transfer of the Mortgage Loans to the Trust Fund is deemed to create a
security interest therein, a tax or government lien on property of the
Depositor arising before the Mortgage Loans came into existence may have
priority over the Trusts Fund's interest in such Mortgage Loans.

The Depositor believes that upon the sale of the Senior Certificates
to an independent third party for fair value and without recourse, such
sale will constitute an absolute and unconditional sale of such Senior
Certificates and the interest in the Mortgage Loans evidenced thereby.
However, in the event of the bankruptcy of the Depositor or the
Transferor at a time when either of them or any affiliate thereof holds
all or a substantial portion of the Class B Certificates or the Class R
Certificates, a trustee in bankruptcy could attempt to recharacterize the
sale of the Mortgage Loans as a borrowing by the Depositor or the
Transferor or any such affiliate, with the result that Certificateholders
are deemed to be creditors of the Depositor or the Transferor or such
affiliate, secured by a pledge of the Mortgage Loans. If such an attempt
were successful, a trustee in bankruptcy could elect to accelerate
payment of the Senior Certificates and liquidate the Mortgage Loans with
the holders of the Senior Certificates entitled to the then outstanding
principal amount thereof together with accrued interest, as the case may
be, to the extent of the value of the Mortgage Loans at such time. If
such value were less than outstanding principal balance of the Senior
Certificates, a principal deficiency could occur. Thus, the holders of
Senior Certificates could lose the right to future payments of interest,
might suffer reinvestment loss in a lower interest rate environment and
could suffer a loss of principal and interest to the extent that such
loss is not otherwise covered by amounts available from the credit
enhancement provided for the Senior Certificates, including the Guaranty
Policy.

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<PAGE>

USE OF PROCEEDS

The proceeds from the sale of the Senior Certificates, net of
certain expenses, will be used by the Depositor as consideration for the
purchase of the Initial Mortgage Loans from the Transferor and to fund
the Pre-Funding Account Deposit and the Capitalized Interest Account
Deposit. The Transferor in turn will use all or a substantial portion of
such proceeds from the sale of the Initial Mortgage Loans to repay
certain indebtedness in the form of one or more warehouse financing
arrangements, which have been utilized to finance the acquisition of such
Initial Mortgage Loans and are secured by such Initial Mortgage Loans,
and to pay the Transferor for portions of loan principal not covered
under a warehouse arrangement and loans not warehoused. See "Method of
Distribution" herein.

THE MORTGAGE LOAN POOL

GENERAL

The "MORTGAGE LOAN POOL" will consist of the collective pool of the
Initial Mortgage Loans together with any Subsequent Mortgage Loans
conveyed to the Trust Fund after the Closing Date. All of the Mortgage
Loans will be evidenced by promissory notes, retail installment sales
contracts or other evidences of indebtedness (the "NOTES") and will be
secured by mortgages, deeds of trust or other similar security
instruments (the "MORTGAGES") creating a lien or security interest on
single family (one-to-four unit) residences, units in planned unit
developments, units in condominium developments and town homes (the
"MORTGAGED PROPERTIES") located in various states. Substantially all of
these Mortgages will be junior in priority to one or more senior liens on
the related Mortgaged Properties, which consist primarily of owner-
occupied single family residences. The indebtedness secured by the
related senior liens will not be included in the Mortgage Loan Pool.
Certain of the Mortgage Loans will be partially insured to the extent
described herein (and subject to the conditions described herein) by the
FHA under the Title I Program (the "TITLE I MORTGAGE LOANS"); while all
of the other Mortgage Loans will not be insured or guaranteed by a
governmental agency (the "CONVENTIONAL MORTGAGE LOANS"). The Mortgage
Loans have scheduled monthly payment dates throughout a month. No
Mortgage Loan provides for deferred interest or negative amortization.
There will not be any commercial or multifamily loans included in the
Mortgage Loan Pool.

Generally, the Mortgage Loans will have been originated or acquired
by the Transferor or SFAC, its affiliate, in one of four ways: (i) the
indirect origination and purchase of retail installment sales contracts
from a network of independent contractors or dealers professionally
installing the property improvements ("indirect originations"); (ii) the
origination of loans directly to consumers, including but not limited to
solicitations through direct mail and telemarketing ("direct
originations"); (iii) the wholesale purchase of loans, on a flow basis,
originated by other unaffiliated lenders, as correspondents
("correspondent originations"); or (iv) the purchase, on a bulk basis, of
loan portfolios originated by other unaffiliated lenders ("portfolio
acquisitions"). A substantial percentage (no less than ___%) of the
Mortgage Loans that consist of indirect originations, direct originations
and (other than Title I Mortgage Loans) correspondent purchases, will
have been underwritten (in the case of originations) and reunderwritten
(in the case of purchases), to determine whether such Mortgage Loans
comply with the underwriting standards of the Transferor or SFAC, as
applicable. However, all of the Mortgage Loans that consist of portfolio
acquisitions and, in the case of Title I Mortgage Loan correspondent
purchases, will have been reunderwritten or reviewed only on a limited
sample basis (approximately __% to __%) for compliance with the
Transferor's underwriting standards. For a description of the
underwriting criteria applicable to the Mortgage Loans, see "The
Transferor and Servicer -- Underwriting Criteria" herein. All of the
Mortgage Loans will be acquired by the Transferor and sold by the
Transferor to the Depositor, and pursuant to the Pooling and Servicing
Agreement, the Depositor will sell, convey, transfer and assign the
Mortgage Loans to the Trustee for the benefit of the Certificateholders.
With respect to the Initial Mortgage Loans and the Subsequent Mortgage
Loans, the Transferor will retain accrued interest at the respective
Mortgage Loan Rates on the principal amount of the Initial Mortgage Loans
up to the Closing Date and of the Subsequent Mortgage Loans up to the
related Transfer Date, respectively.

In addition to the Mortgage Loans from indirect originations and
direct originations, the Mortgage Loans may include correspondent
originations from unaffiliated lenders, including Initial Mortgage Loans
from correspondent purchases from the two largest unaffiliated lenders
that will constitute approximately ____% and ____%, respectively, of the
Initial Pool Principal Balance. The Mortgage Loans may include portfolio
acquisitions from unaffiliated lenders, however, the Mortgage Loans from
portfolio acquisitions from any individual unaffiliated lender will not
constitute more than ___% of the aggregate Cut-Off Date Principal
Balances of the Mortgage Loans.

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CERTAIN INFORMATION WITH RESPECT TO THE INITIAL MORTGAGE LOANS

The following is a brief description of certain terms of the Initial
Mortgage Loans proposed to be included in the Mortgage Loan Pool as of
the date of this Prospectus Supplement. Unless otherwise indicated, this
description does not take into account any Subsequent Mortgage Loans that
may be added to the Mortgage Loan Pool during the Funding Period through
the application of amounts on deposit in the Pre-Funding Account. Prior
to the Closing Date, the Transferor may remove any of the Initial
Mortgage Loans intended for inclusion in the Mortgage Pool, substitute
comparable loans therefor, or add comparable loans thereto; however, the
aggregate principal balance of Initial Mortgage Loans so removed,
replaced or added cannot exceed ____% of the Initial Pool Principal
Balance. To the extent that, prior to the Closing Date, mortgage loans
are removed from or added to the Mortgage Loan Pool, an amount equal to
the aggregate principal balances of such mortgage loans, will be added to
or deducted from, respectively, the Pre-Funding Account Deposit on the
Closing Date. As a result, the statistical information presented below
regarding the Initial Mortgage Loans proposed to be included in the
Mortgage Loan Pool as of the date of this Prospectus Supplement may vary
in certain respects from comparable information based on the actual
composition of the Mortgage Loan Pool at the Closing Date. In addition,
after the __________________, 199__ Cut-Off Date the actual Mortgage Loan
Pool may vary from the description below due to a number of factors,
including prepayments after the __________________, 199__ Cut-Off Date or
the purchase of any Subsequent Mortgage Loans after the Closing Date.
SEE "-- Conveyance of Subsequent Mortgage Loans" below. A schedule of
the Initial Mortgage Loans included in the Mortgage Loan Pool as of the
Closing Date will be attached to the Pooling and Servicing Agreement
delivered to the Trustee upon delivery of the Certificates.

Assuming that the aggregate Cut-Off Date Principal Balances of the
Subsequent Mortgage Loans conveyed to the Trust Fund equals the Pre-
Funding Account Deposit, then it is expected that approximately ____% to
____% of the Assumed Pool Principal Balance will consist of Title I
Mortgage Loans, and approximately ____% to ____% of the Assumed Pool
Principal Balance will consist of Conventional Mortgage Loans.

The Initial Mortgage Loans included in the initial Mortgage Loan
Pool will consist of approximately _______ loans having an Initial Pool
Principal Balance of approximately $___________. Approximately ____% of
the Initial Pool Principal Balance will consist of Title I Mortgage
Loans, and approximately ____% of the Initial Pool Principal Balance will
consist of Conventional Mortgage Loans. With respect to the Initial
Mortgage Loans, approximately ____% of the Title I Mortgage Loans will
have been originated within the last 6 months; approximately ____% will
have been originated more than 6 months but less than 24 months prior to
the date hereof; approximately ____% of the Conventional Mortgage Loans
will have been originated within the last 6 months and approximately
____% of the Conventional Mortgage Loans will have been originated more
than 6 months but less than 24 months prior to the date hereof. Certain
characteristics of the Initial Mortgage Loans included in the Mortgage
Loan Pool, as of the __________________, 199__ Cut-Off Date, are set
forth in the tables below.

PORTFOLIO SUMMARY BY LOAN TYPE

[Insert Table]

MORTGAGE LOAN RATE

[Insert Table]

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<PAGE>

LOAN GRADE CLASSIFICATIONS

[Insert Table]

GEOGRAPHIC CONCENTRATION

[Insert Table]

CUT-OFF DATE LOAN PRINCIPAL BALANCES

[Insert Table]

REMAINING TERM TO MATURITY

[Insert Table]

MONTHS SINCE ORIGINATION

[Insert Table]

The weighted average Mortgage Loan Rate of the Initial Mortgage
Loans will be approximately _____% per annum. All Initial Mortgage Loans
will have interest rates of at least ___% per annum but not more than
___% per annum. The Initial Mortgage Loans will have an average
outstanding principal balance as of the __________________, 199__ Cut-Off
Date of approximately $_____________. The Initial Mortgage Loans will
have had an average outstanding principal balance at origination of
approximately $_____________. All of the Initial Mortgage Loans will
have been originated after __________________, 199__, and prior to
__________________, 199__. None of the Initial Mortgage Loans will have
a scheduled maturity later than __________________, 20__. The weighted
average remaining term to maturity of the Initial Mortgage Loans as of
the __________________, 199__ Cut-Off Date was approximately ____ months.

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<PAGE>

CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS

Any conveyance of Subsequent Mortgage Loans after the Closing Date is
subject to the following conditions, among others: (i) each Subsequent
Mortgage Loan purchased after the Closing Date must satisfy the
representations and warranties contained in the Subsequent Transfer Agreement
to be entered into by the Transferor, the Trustee and the Depositor (the
"SUBSEQUENT TRANSFER AGREEMENT") and in the Pooling and Servicing Agreement;
(ii) the Transferor will not select such Subsequent Mortgage Loans in a
manner that it believes is adverse to the interests of the
Certificateholders; (iii) as of the related Cut-Off Date, all of the Mortgage
Loans in the Mortgage Loan Pool at that time, including the Subsequent
Mortgage Loans purchased after the Closing Date will satisfy the criteria set
forth in the Pooling and Servicing Agreement; and (iv) the Subsequent
Mortgage Loans purchased after the Closing Date, will have been approved by
the Certificate Insurer. The Subsequent Mortgage Loans on an aggregate
basis, will have characteristics similar to the characteristics of the pool
of Initial Mortgage Loans as described herein. Following the transfer of such
Subsequent Mortgage Loans to the Mortgage Loan Pool, the aggregate
characteristics of the Mortgage Loans then held in the Mortgage Loan Pool
may, and likely will, vary from those of the Initial Mortgage Loans included
in the Initial Mortgage Loan Pool. SEE "Special Considerations -- The
Mortgage Loans and the Pre-Funding Account" herein.

Under the Pooling and Servicing Agreement the obligation of the Trust
Fund to purchase Subsequent Mortgage Loans on a Subsequent Transfer Date for
assignment to the Mortgage Loan Pool is subject to the following
requirements: (i) generally such Subsequent Mortgage Loans may not be 30 or
more days contractually delinquent as of the related Subsequent Cut-Off Date,
(ii) the original term to stated maturity of such Subsequent Mortgage Loans
may not exceed 20 years; (iii) generally each such Subsequent Mortgage Loan
will have an interest rate of not less than ______%, and a scheduled maturity
no later than 20___; (iv) such Subsequent Mortgage Loans will be underwritten
or re-underwritten, as applicable, in accordance with the criteria set forth
under "The Transferor and Servicer -- Underwriting Criteria" herein or
originated in a manner similar to the Initial Mortgage Loans; and (v)
following the purchase of such Subsequent Mortgage Loans by the Trust Fund,
the Mortgage Loans included in the Mortgage Loan Pool (including the
Subsequent Mortgage Loans purchased by the Trust Fund after the Closing Date)
(a) will have a weighted average Mortgage Interest Rate of at least _____%,
in the case of Title I Mortgage Loans, and ______%, in the case of
Conventional Mortgage Loans; (b) will have weighted average term to maturity
as of __________________, 199__ of approximately ___ to ___ months; and (c)
will not include Mortgage Loans from portfolio acquisitions from any
individual unaffiliated lender that would exceed 10% of the aggregate Cut-Off
Date Principal Balances of the Mortgage Loans.

THE GUARANTY POLICY

The following discussion under this heading of "The Guaranty Policy"
will only be applicable to holders of the Senior Certificates. The following
information has been furnished by the Certificate Insurer for use herein.

The Certificate Insurer, in consideration of the payment of the premium
due under and subject to the terms of the Guaranty Policy, will
unconditionally and irrevocably guarantee to any holder of the Senior
Certificates that an amount equal to each full and complete Guaranteed
Payment for such Senior Certificates will be received by the Trustee or its
successor on behalf of such holder from the Certificate Insurer for
distribution by the Trustee to each such holder of such holder's
proportionate share of such Guaranteed Payment. The Certificate Insurer's
obligations under the Guaranty Policy with respect to a particular Guaranteed
Payment for the Senior Certificates shall be finally and completely
discharged to the extent funds equal to the applicable Guaranteed Payment are
received from the Certificate Insurer by the Trustee, whether or not such
funds are properly applied by the Trustee. Guaranteed Payments shall be made
only at the time set forth in the Guaranty Policy and no accelerated
Guaranteed Payments shall be made regardless of any acceleration of the
Senior Certificates, unless such acceleration is at the sole option of the
Certificate Insurer.

Notwithstanding the foregoing paragraph, the Guaranty Policy does not
cover shortfalls, if any, attributable to the liability of the Trust Fund,
the Servicer or the Trustee for withholding taxes, if any (including interest
and penalties in respect of any such liability).

The Certificate Insurer will pay any Guaranteed Payment for the Senior
Certificates that is a Preference Amount (as defined below) on the Business
Day following receipt on a Business Day by the Fiscal Agent (as defined
below) of (i) a certified copy of the order of a bankruptcy court requiring
the return of a preference payment, (ii) an opinion of counsel satisfactory
to the Certificate Insurer that such order is final and not subject to
appeal, (iii) an assignment in such form as is reasonably required by the
Certificate Insurer irrevocably assigning to the Certificate Insurer all
rights and claims of each holder of such Senior Certificates relating to or

S-21

<PAGE>

arising under such Class of Certificates against the debtor which made such
preference payment or otherwise with respect to such preference payment and
(iv) appropriate instruments to effect the appointment of the Certificate
Insurer as agent for each holder of such Senior Certificates in any legal
proceeding related to such preference payment, such instruments being in a
form satisfactory to the Certificate Insurer, provided that if such documents
are received after 12:00 noon New York City time on such Business Day, they
will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the
final order of the court exercising jurisdiction on behalf of each holder of
such Senior Certificates and not to any such holder directly unless such
holder has returned principal or interest paid on such Senior Certificates to
such receiver or trustee in bankruptcy, in which case such payment shall be
disbursed to such holder.

The Certificate Insurer will pay any other amount payable under the
Guaranty Policy no later than 12:00 noon New York City time on the later of
(i) the Distribution Date on which the related Interest Remittance Amount or
Principal Remittance Amount for the Senior Certificates is due or (ii) the
Business Day following receipt in New York, New York on a Business Day by
_________________________________, as Fiscal Agent for the Certificate
Insurer or any successor fiscal agent appointed by the Certificate Insurer
(the "FISCAL AGENT"), of a Notice (as defined below); provided that if such
Notice is received after 12:00 noon New York City time on such Business Day,
it will be deemed to be received on the following Business Day. If any such
Notice received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making a claim under the Guaranty Policy it
shall be deemed not to have been received by the Fiscal Agent for purposes of
this paragraph, and the Certificate Insurer or the Fiscal Agent, as the case
may be, shall promptly so advise the Trustee and the Trustee may submit an
amended Notice.

Guaranteed Payments for a Senior Certificate due under the Guaranty
Policy, unless otherwise stated herein, will be disbursed by the Fiscal Agent
to the Trustee on behalf of the holders of such Class of Certificates by wire
transfer of immediately available funds in the amount of such Guaranteed
Payment less, in respect of Guaranteed Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such Guaranteed
Payment and legally available therefor.

The Fiscal Agent is the agent of the Certificate Insurer only and the
Fiscal Agent shall in no event be liable to any holders of any Senior
Certificates for any acts of the Fiscal Agent or any failure of the
Certificate Insurer to deposit or cause to be deposited sufficient funds to
make payments due under the Guaranty Policy.

Moody's rates the claims paying ability of the Certificate Insurer
"____". Standard & Poor's rates the claims paying ability of the Certificate
Insurer "____". Fitch Investors Service, L.P. rates the claims paying
ability of the Certificate Insurer "____". Each such rating of the
Certificate Insurer should be evaluated independently. Any further
explanation of the significance of the above ratings may be obtained only
from the applicable rating agency.

The above ratings are not recommendations to buy, sell or hold any Class
of the Senior Certificates, and such ratings may be subject to revision or
withdrawal at any time by the rating agencies. Any downward revision or
withdrawal of any of the above ratings may have an adverse effect on the
market price of any Senior Certificates. The Certificate Insurer does not
guaranty the market price of any Senior Certificates nor does it guaranty
that the ratings on any Senior Certificates will not be down-graded or
withdrawn.

As used herein under the heading, "The Guaranty Policy", the following
terms shall have the following meanings:

"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee is located are authorized or obligated
by law or executive order to close.

"SENIOR CERTIFICATEHOLDER" means (for purposes of the Guaranty Policy)
each registered holder of a Senior Certificate (other than the Trust Fund,
the Depositor, the Servicer, or any Subservicer) who, on the applicable
Distribution Date, is entitled to receive payment on such Senior Certificate
pursuant to its terms.

"DEFICIENCY AMOUNT" means (for purposes of the Guaranty Policy) and as
of any Distribution Date, the amount by which the sum of the Interest
Remittance Amount and Principal Remittance Amount for the Senior Certificates
exceeds the Amount Available for distribution on such Senior Certificates for
such Distribution Date. SEE "Description of Certificates -- Distributions on
Senior Certificates" herein.

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<PAGE>

"GUARANTEED PAYMENTS" means with respect to the Guaranty Policy for the
Senior Certificates (i) as of any Distribution Date, any Deficiency Amount
and (ii) any unpaid Preference Amount.

"INSURANCE AGREEMENT" means the Insurance and Indemnification Agreement
dated as of _______________, 199__, between the Certificate Insurer, as
insurer, Remodelers Investment Corporation, as Depositor, Remodelers National
Funding Corp., as Servicer, FHA Claims Administrator and Transferor, and
________________________, as contract holder and Trustee.

"NOTICE" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy, substantially in the form of Exhibit A attached to
the Guaranty Policy, the original of which is subsequently delivered by
registered or certified mail, from the Trustee specifying the Guaranteed
Payment which shall be due and owing on the applicable Distribution Date.

"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement dated as of __________________, 199__ between Remodelers National
Funding Corp., a Texas corporation, as Transferor and Servicer, Remodelers
Investment Corporation, as Depositor, and ___________________________, as
Trustee, without regard to any amendment or supplement thereto.

"PREFERENCE AMOUNT" means any amount previously distributed to any
holder of a Senior Certificate with respect to such Senior Certificates that
is recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code (11
U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.

Capitalized terms used in the Guaranty Policy and not otherwise defined
in such Guaranty Policy shall have the respective meanings set forth in the
Pooling and Servicing Agreement as of the date of execution of the Guaranty
Policy, without giving effect to any subsequent amendment or modification to
the Pooling and Servicing Agreement unless such amendment or modification has
been approved in writing by the Certificate Insurer in accordance with the
terms of the Pooling and Servicing Agreement.

Any notice under the Guaranty Policy or service of process on the Fiscal
Agent of the Certificate Insurer may be made at the address listed below for
the Fiscal Agent of the Certificate Insurer or such other address as the
Certificate Insurer shall specify in writing to the Trustee. The notice
address of the Fiscal Agent is _________________, or such other address as
the Fiscal Agent and the Certificate Insurer shall specify to the Trustee in
writing.

The Guaranty Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof. The insurance provided by the
Guaranty Policy is not covered by the Property/Casualty Insurance Security
Fund specified in Article 76 of the New York Insurance Law. The Guaranty
Policy is not cancelable for any reason. The premium on the Guaranty Policy
is not refundable for any reason including payment, or provision being made
for payment, prior to maturity of the Senior Certificates.

THE CERTIFICATE INSURER

The following information has been supplied by the Certificate Insurer
for inclusion herein.

The Certificate Insurer is domiciled in the State of _______________ and
licensed to do business in all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico.

All information regarding the Certificate Insurer, including the
financial statements of the Certificate Insurer for the year ended December
31, 199__, prepared in accordance with generally accepted accounting
principles and included in the Annual Report on Form 10-K of
________________________ for the year ended December 31, 199__ (available
from the Certificate Insurer upon request or from the Securities and Exchange
Commission), is hereby incorporated by reference into this Prospectus
Supplement and shall be deemed to be a part hereof. Any statement contained
in a document incorporated by reference herein shall be modified or
superseded for purposes of this Prospectus Supplement to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus
Supplement.

S-23

<PAGE>

The tables below present selected financial information of the
Certificate Insurer determined in accordance with statutory accounting
practices prescribed or permitted by insurance regulatory authorities ("SAP")
and generally accepted accounting principles ("GAAP"):

<TABLE>
<CAPTION>
SAP GAAP
-------------------------- --------------------------
December 31 September 30 December 31 September 30
199__ 199__ 199__ 199__
----------- ------------ ----------- ------------
(millions) (millions)
(Audited) (Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Admitted Assets. . . .$ $ Assets. . . . . . . . .$ $
Liabilities. . . . . . Liabilities . . . . . .
Capital and Surplus. . Shareholder's Equity. .
</TABLE>

Copies of the Certificate Insurer's 1994 year-end audited financial
statements prepared in accordance with statutory accounting practices are
available from the Certificate Insurer. A copy of the Annual Report on Form
10-K of _____________________________ is available from the Certificate
Insurer or the Securities and Exchange Commission. The address of the
Certificate Insurer is ________________________________.

The Certificate Insurer does not accept any responsibility for the
accuracy or completeness of this Prospectus Supplement or any information or
disclosure contained herein, or omitted herefrom, other than with respect to
the accuracy of the information regarding the Guaranty Policy and the
Certificate Insurer set forth under the heading "The Guaranty Policy" and the
subheading "The Certificate Insurer" and the accuracy of the information with
respect to the Certificate Insurer that is incorporated by reference herein.
The foregoing information set forth herein under the heading "The Guaranty
Policy" regarding the Guaranty Policy and the Certificate Insurer (including
the data in the foregoing tables) has been provided by the Certificate
Insurer and has not been reviewed or verified by the Transferor, the
Servicer, the Depositor, the Trustee or the Underwriter. Accordingly, no
representations are made by such parties (other than the Certificate Insurer)
as to the accuracy or completeness of such foregoing information.

THE DEPOSITOR

Remodelers Investment Corporation (the "DEPOSITOR") is a Nevada
corporation organized in 1995 and is a wholly owned subsidiary of RAC. The
Depositor was formed as a limited purpose finance company to effect the
securitization of conventional (i.e., not insured or guaranteed by a
governmental agency) property improvement and/or home equity loans, property
improvement and manufactured housing loans partially insured by the FHA under
the Title I Program, and other types of assets.

The Transferor will sell, convey, transfer and assign all of its right,
title and interest in and to the Mortgage Loans to the Depositor. In turn,
the Depositor will sell, convey, transfer and assign the Mortgage Loans to
the Trustee for the benefit of the Trust Fund.

THE TRANSFEROR AND SERVICER

GENERAL

Remodelers National Funding Corp. ("RNFC"), the Transferor and Servicer,
is a Texas corporation organized in 1986, and is a wholly owned subsidiary of
RAC. RAC has recently filed a registration statement with the Securities and
Exchange Commission for an initial public offering of its common stock. RNFC
received its Title I contract of insurance in October of 1986 and since that
time has been primarily engaged in the business of originating, purchasing,
underwriting, selling and servicing home improvement and/or home equity
loans, including loans insured under the Title I Program. Based in Austin,
Texas, RNFC presently maintains a staff of approximately 200 employees,
including 11 experienced collectors responsible for delinquent and defaulted
loans. As of September 30, 1995, RNFC administered and serviced
approximately 21,000 loans representing approximately $238.6 million in
principal balance (including loans subserviced by others). SFA: State
Financial Acceptance Corporation ("SFAC") is a wholly owned subsidiary of
RAC, and thus, an affiliate of RNFC. SFAC is primarily engaged in the
business of originating, purchasing, underwriting, selling and servicing
conventional junior lien loans. SEE "The Mortgage Loan Pool" herein.

S-24

<PAGE>

As of June 30, 1995, the RAC Consolidated Financial Statements, as
audited, which included RAC and its two subsidiaries, RNFC and SFAC, set
forth total assets of $38,504,169, total liabilities of $30,763,211 and total
stockholders" equity of $7,740,958, and for the nine months ended September
30, 1995 set forth net income of $4,866,823. As of October 4, 1994, the RAC
Consolidated Balance Sheet, as audited, which included RAC, RNFC and SFAC,
set forth total assets of $11,953,591, total liabilities of $9,352,591 and
total stockholders" equity of $2,601,000. In light of the RAC's rapid
growth, the historical financial performance of RAC may be of limited
relevance in predicting future performance. Any credit or other problems
associated with the large number of loans originated in the recent past will
not become apparent until sometime in the future. Consequently, RAC's
historical results of operations may be of limited relevance to an investor
seeking to predict the future financial condition of RAC and its two
subsidiaries, RNFC and SFAC.

Since January 1995, RNFC, the Transferor and Servicer, and SFAC have
substantially increased the volume of Title I loans and conventional junior
lien loans that they have originated, purchased, sold and/or serviced, and
thus, RNFC and SFAC have limited historical experience with respect to the
performance, including the delinquency and loss experience and the rate of
prepayments of Title I loans and conventional junior lien loans, with respect
to their entire portfolio of loans and in particular with respect to such
increased volume of loans. Accordingly, RNFC's delinquency experience and
loan loss and liquidation experience set forth under "The Transferor and
Servicer -- Servicing and FHA Claims Experience" herein may not be indicative
of the performance of the Mortgage Loans included in the Mortgage Loan Pool.

RNFC, as the Servicer, will service the Mortgage Loans pursuant to the
Pooling and Servicing Agreement and be entitled to the Servicing Fee and
additional servicing compensation for serving as the Servicer. SEE
"Description of Certificates -- Servicing" herein. In addition, on the
Closing Date RNFC will contract with the Depositor and Trustee to act as FHA
Claims Administrator pursuant to the FHA Claims Administration Agreement.
The FHA Claims Administrator, as agent and attorney-in-fact for the
Depositor, will handle all aspects of administering, processing and
submitting FHA Claims with respect to the Title I Mortgage Loans, on behalf
and in the name of the Depositor and will monitor the FHA Insurance with
respect to the Title I Mortgage Loans. RNFC will not be entitled to any
fees, in addition to the servicing fees described herein, with respect to
serving as FHA Claims Administrator on behalf of the Depositor and Trustee.

LIQUIDITY

As a result of the Transferor's increasing volume of loan originations
and purchases, and its expanding securitization activities, the Transferor
has operated, and expects to continue to operate, on a negative operating
cash flow basis. The Transferor requires substantial capital to fund its
operations. Consequently, the Transferor's operations are affected by the
availability of financing and the terms thereof. Currently, the Transferor
funds substantially all of its operations, including its loan originations
and purchases, through its lending arrangements with certain third parties,
including warehouse and term credit facilities. There can be no assurance
that as the Transferor's existing lending arrangements mature, the Transferor
will have access to the financing necessary for its operations or that such
financing will be available to the Transferor on favorable terms. To the
extent the Transferor is unable to arrange new warehouse and/or term credit
facilities, the Transferor may have to curtail loan origination and
purchasing activities, which could have a material adverse effect on the
Transferor's financial condition and, in turn, its ability to service the
Mortgage Loans and to repurchase any defective Mortgage Loans. RAC, the
parent of the Transferor, has recently filed a registration statement with
the Securities and Exchange Commission for an initial public offering of its
common stock. If RAC is successful in completing a public offering of its
common stock, then a significant portion of the net proceeds from such
offering would be available as an additional source to provide funding for
the Transferor's operations; however, there can be no assurance that such
offering will occur.

UNDERWRITING CRITERIA

The Transferor believes that all Title I Mortgage Loans underwritten by
it will have been underwritten pursuant to the underwriting requirements of
the FHA and the Transferor's own underwriting requirements. The Transferor
and SFAC, an affiliate of the Transferor, believe that all Conventional
Mortgage Loans underwritten will have been underwritten pursuant to the
Transferor's and SFAC's own underwriting requirements. Generally, the
underwriting standards of the Transferor and SFAC, which are substantially
similar for both Title I Mortgage Loans and Conventional Mortgage Loans, are
more stringent than those of the FHA. The Transferor and SFAC rely
principally on the creditworthiness of the borrower, and to a lesser extent
on the underlying collateral, for repayment of the Title I Mortgage Loans and
the Conventional Mortgage Loans.

The Transferor's underwriting requirements provide a number of
guidelines to assist underwriters in the credit review and decision process.
The Transferor's underwriting requirements provide for the evaluation of a
loan applicant's creditworthiness

S-25

<PAGE>

through the use of a consumer credit report, verification of employment and a
review of the debt service-to-income ratio of the applicant, which ratio
generally may not exceed 45% of the applicant's gross income. Income is
verified through various means, including without limitation applicant
interviews, written verifications with employers, review of pay stubs or tax
returns. The borrower must demonstrate sufficient levels of disposable income
to satisfy debt repayment requirements. In accordance with these standards,
for Title I Mortgage Loans originated prior to August 1994, an appraisal of
the Mortgaged Property was obtained in connection with originating Mortgage
Loans with an original principal balance in excess of $15,000. After August
1994, appraisals are only required if the original principal balance exceeded
$15,000 and the home was not owner-occupied or the owner had occupied the
home for less than six months. No title insurance naming the Transferor or
SFAC as insured was purchased for any Mortgage Loan. Certain FHA guidelines
with respect to Title I Mortgage Loans are described under "The Title I
Program -- Title I Underwriting Requirements" in the attached Prospectus.

Generally, the Title I Mortgage Loans and Conventional Mortgage Loans
originated or purchased by the Transferor or SFAC will have been made to
borrowers that typically have limited access to consumer financing for a
variety of reasons, such as high levels of debt service-to-income,
unfavorable past credit experience, insufficient home equity value, lower
income or a limited credit history. With respect to the loans originated or
purchased by the Transferor and SFAC, the collection of loan payments from
the related borrowers is subject to various risks from these borrowers,
including without limitation the risk that a borrower will not satisfy their
debt service payments, including payments of interest and principal on the
loan, and that the realizable value of the related mortgaged property will
not be sufficient to repay the outstanding interest and principal owed on the
loan. The Transferor and SFAC use their own credit evaluation criteria to
classify the borrowers of loans by risk class as "A" through "D" grade
credits. For fiscal 1995, approximately 76% of the conventional loans
originated or purchased by SFAC were classified as "B" grade credits or
better, and approximately 62% of the Title I loans originated or purchased by
the Transferor were classified as "B" grade credits or better.

REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS

The Transferor is required (i) within 60 days after discovery or notice
thereof to cure in all material respects any breach of the representations or
warranties made with respect to a Mortgage Loan which materially and
adversely affects the interest of the Certificateholders, or (ii) on the
Determination Date next succeeding the end of such 60 day period, to
repurchase the affected Mortgage Loan in the manner set forth in the Pooling
and Servicing Agreement. In lieu of repurchasing a defective Mortgage Loan,
the Transferor may replace such Mortgage Loan with one or more Qualified
Substitute Mortgage Loans (as defined in the Pooling and Servicing Agreement,
generally, a loan that is similar to the defective Mortgage Loan in terms of
interest rate, maturity, principal balance, insurance coverage and security)
plus accrued interest thereon. If the aggregate outstanding principal balance
of the Qualified Substitute Mortgage Loan(s) is less than the outstanding
principal balance of the defective Mortgage Loan(s) plus accrued interest
thereon, the Transferor shall also remit for distribution to the
Certificateholders an amount equal to such shortfall. The Transferor is also
required to repurchase any Title I Mortgage Loan, the FHA Insurance Amount in
respect of which has not been transferred on the books and records of the FHA
from the Transferor to the Trustee within 120 days after the Closing Date, in
the case of Initial Mortgage Loans, and the Subsequent Transfer Date, in the
case of Subsequent Mortgage Loans, or within such longer period as may be
approved by the Certificate Insurer.

No assurance can be given that, at any particular time, the Transferor
will be capable, financially or otherwise, of repurchasing defective Mortgage
Loans or substituting Mortgage Loans for defective Mortgage Loans in the
manner described above. If the Transferor repurchases, or is obligated to
repurchase, defective mortgage loans from any Additional Series, the
financial ability of the Transferor to repurchase defective Mortgage Loans
from this Series may be adversely affected. In addition, other events
relating to the Transferor and its mortgage banking operations can occur that
would adversely affect the financial ability of the Transferor to repurchase
defective Mortgage Loans from this Series, including without limitation the
sale or other disposition of all or any significant portion of its assets.
If the Transferor is unable to repurchase or replace a defective Mortgage
Loan, the Servicer, on behalf of the Trust Fund, will pursue other customary
and reasonable efforts, if any, to recover the maximum amount possible with
respect to such Mortgage Loan. If the Servicer is unable to collect all
amounts due to the Trust Fund with respect to such Mortgage Loan, the
resulting loss will be borne by the Certificateholders to the extent that
such loss is not otherwise covered by amounts available from the credit
enhancement provided for the Senior Certificates. SEE "The Transferor and
Servicer -- General" and "Risk Factors -- Repurchase or Replacement of
Defective Loans by Transferor" herein and in the accompanying Prospectus.

The Depositor and the Transferor each have the option (1) to remove
Mortgage Loans and substitute Qualified Substitute Mortgage Loans (as defined
in the Pooling and Servicing Agreement; generally loans that are similar in
terms to the replaced loans) during the three month period beginning on the
Closing Date up to an aggregate amount of not more than __%, without
Certificate Insurer approval, and ___%, with Certificate Insurer approval, of
the aggregate Cut-Off Date Principal Balances of the Mortgage

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<PAGE>

Loans, and (2) to repurchase any Mortgage Loan incident to the foreclosure,
default or imminent default thereof at any time after the Closing Date.

SERVICING AND FHA CLAIMS EXPERIENCE

The following table sets forth delinquency and default experience with
respect to loans from the prior series of similar asset-backed certificates
issued in private placement transactions in which the Transferor acted as
both the transferor and servicer, including loans serviced by the Servicer
and loans serviced by a subservicer.

DELINQUENCY AND DEFAULT EXPERIENCE FOR THE TRANSFEROR'S
PRIOR SECURITIZATION TRANSACTIONS
AS OF , 199
<TABLE>
<CAPTION>

DAYS DELINQUENT 1994-1 1995-1 1995-2 1995-3
------ ------ ------ ------
<S> <C> <C> <C> <C>
Current . . . . . . . $ % $ % $ % $ %

30-59 . . . . . . . . $ % $ % $ % $ %

60-89 . . . . . . . . $ % $ % $ % $ %

90+ . . . . . . . . . $ % $ % $ % $ %

Total delinquencies
(30+) . . . . . . . $ % $ % $ % $ %

Defaults. . . . . . . $ % % % %
- -------------------------------------------------------------------
FHA Claims Pending. . $

FHA Claims Paid . . . $

FHA Claims Denied . . $
</TABLE>

The delinquency and FHA claims experience information contained in the
preceding table have been calculated on the basis of the indicated loans
being serviced as of the end of the indicated periods. However, because the
amount of loans originated or purchased has increased over these periods as a
result of new originations and loan purchases, the amount of loans serviced
as of the end of any indicated period will include many loans which will not
have been outstanding long enough to give rise to some or all of the
indicated periods of delinquency or to have resulted in defaults or FHA
claims. In the absence of additions of newly originated and purchased loans
to the amount of loans serviced, the delinquency percentages indicated above
would be higher and could be substantially higher. In addition, because
certain of the related borrowers for loans originated or purchased by the
Transferor may be less creditworthy and have a higher risk of credit default,
as of any future date the actual rates of delinquencies, defaults and losses
on the loans serviced by the Servicer or a subservicer, including the
Mortgage Loans, could be higher and under adverse economic conditions could
be substantially higher, than those rates indicated in the preceding table or
the rates that are then being experienced in the consumer finance industry in
general. An economic recession could result in decreases in the financial
strength of borrowers and decreases in collateral values. If the real estate
market and economy decline, further increases in delinquencies, defaults,
losses and FHA claims may be experienced. Any sustained period of increased
rates of delinquencies, defaults and losses on loans being serviced by the
Servicer could have a material adverse effect on the Servicer's financial
condition, and, in turn, its ability to service the Mortgage Loans and, in
its capacity as the Transferor, to repurchase defective Mortgage Loans.

On ______________, 199__, approximately ___% (by dollar volume) of the
Servicer's entire loan servicing portfolio consisted of loans securitized by
the Servicer in its capacity as the Transferor and sold to grantor trusts in
connection with the prior series of similar certificates issued in private
placement transactions. The applicable pooling and servicing agreement for
each of these trusts provides that the trustee of the related trust may
terminate the Servicer's servicing rights if the related loan delinquency or
loss experience exceeds certain standards. On __________________, 199__,
none of the trusts had loan delinquency or loss experience (as set forth in
the preceding table) which exceeded the applicable standards, and thus, no
servicing rights have been

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<PAGE>

terminated under the related pooling and servicing agreements. However, there
can be no assurance that the future loan delinquency and loss experience for
any of these trusts will not exceed the applicable standard in the future,
and if such standard is exceeded that the servicing rights of the Servicer
will not be terminated.

CERTAIN YIELD, PREPAYMENT AND
WEIGHTED AVERAGE LIFE CONSIDERATIONS

GENERAL

Each Mortgage Loan bears simple interest at a fixed rate of interest
(the "MORTGAGE LOAN RATE"). The interest portion of each monthly payment on
a Mortgage Loan is calculated as the product of one-twelfth of the Mortgage
Loan Rate and the principal balance thereof immediately prior to the monthly
payment date.

The effective yield to the holders of each Class of the Senior
Certificates will be slightly lower than the yield otherwise produced by the
applicable Certificate Interest Rate because, while interest will accrue
during each Due Period (a calendar month consisting of thirty days, except
for the first Due Period) up to the last day of such Due Period, the
distribution of such interest will not be made until the Distribution Date
occurring in the following Due Period. SEE "Description of the
Certificates--Distributions on the Senior Certificates" herein. This delay
will result in funds being passed through to the Certificateholders
approximately 20 days after the end of the monthly accrual period, during
which 20-day period no interest will accrue on such funds. This payment
structure could have particularly severe consequences if significant pro rata
principal distributions are made on the Senior Certificates as a result of a
substantial amount of funds remaining on deposit in the Pre-Funding Account
after the termination of the Funding Period, because interest will not accrue
on such principal distributions during the 20-day period that will elapse
between the end of the Due Period immediately preceding the Distribution Date
on which such principal distributions will be made and such Distribution
Date. As discussed in greater detail below greater than anticipated
distributions of principal can also affect the yield on Senior Certificates
purchased at a price greater or less than par.

The rate of principal payments on the Senior Certificates, the aggregate
amount of each interest payment on the Senior Certificates and the yield to
maturity on the Senior Certificates will be directly related to and affected
by the rate and timing of principal reductions on the Mortgage Loans. The
principal reductions on such Mortgage Loans may be in the form of scheduled
amortization payments or unscheduled payments or reductions, which may
include prepayments, repurchases and liquidations or write-offs due to
default, casualty, insurance or other dispositions. In addition, the Servicer
may, at its option, purchase from the Trust Fund all of the outstanding
Mortgage Loans and REO Properties, and thus effect the early retirement of
the Senior Certificates, on any Distribution Date following the Determination
Date on which the Pool Principal Balance is less than 10% of the sum of the
Initial Pool Principal Balance, plus the aggregate Cut-Off Date Principal
Balance of the Subsequent Mortgage Loans conveyed to the Trust Fund. SEE
"Description of the Certificates--Termination" herein.

The "WEIGHTED AVERAGE LIFE" of a Senior Certificate refers to the
average amount of time that will elapse from the __________________, 199__
Cut-Off Date to the date each dollar in respect of principal of such Senior
Certificate is repaid. The weighted average life of the Senior Certificates
will be influenced by, among other factors, the rate at which principal
reductions occur on the Mortgage Loans and the rate at which Excess Spread is
distributed to holders of the Senior Certificates as described herein. If
substantial principal prepayments on the Mortgage Loans are received from
unscheduled prepayments, liquidations or repurchases, then the distributions
to the holders of the Senior Certificates resulting from such prepayments may
significantly shorten the actual average life of the Senior Certificates than
would otherwise be the case. If the Mortgage Loans experience delinquencies
and defaults in the payment of principal, then the holders of the Senior
Certificates will similarly experience a delay in the receipt of principal
distributions attributable to such delinquencies and defaults which in
certain instances may result in a longer actual average life of the Senior
Certificates than would otherwise be the case. However, to the extent that
the Principal Balances from Liquidated Mortgage Loans are included in the
principal distributions on the Senior Certificate as a result of
delinquencies and defaults on the Mortgage Loans and as a result of loss
allocations having reduced the Class A Overcollateralization to zero, then
the holders of the Senior Certificate will experience an acceleration in the
receipt of principal distributions which in certain instances may result in a
shorter actual average life of the Senior Certificates than would otherwise
be the case. Interest shortfalls on the Mortgage Loans due to principal
prepayments in full and curtailments and any resulting shortfall in amounts
distributable on the Senior Certificates will be covered to the extent of
amounts available from the credit enhancement provided for the Senior
Certificates. SEE "Risk Factors -- No Assurance of Adequacy of Credit
Enhancement" herein.

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<PAGE>
The rate and timing of principal reductions on the Mortgage Loans
will be influenced by a variety of economic, geographic, social and other
factors. For example, these factors may include changes in borrowers'
housing needs, job transfers, unemployment, the borrowers' net equity in
the mortgaged properties, servicing decisions, homeowner mobility, the
existence and enforceability of "due-on-sale" clauses, seasoning of
loans, market interest rates for home improvement and home equity loans
and the availability of funds for such loans. The Mortgage Loans
generally may be prepaid in full or in part at any time without penalty.
As with fixed rate obligations generally, the rate of prepayment on a
pool of loans is affected by prevailing market interest rates for loans
of a comparable term and risk level. If prevailing interest rates were
to fall significantly below the respective Mortgage Loan Rates on the
Mortgage Loans, the rate of prepayment (and refinancing) would be
expected to increase. Conversely, if prevailing interest rates were to
rise significantly above the respective Mortgage Loan Rates on the
Mortgage Loans, the rate of prepayment on the Mortgage Loans would be
expected to decrease. In addition, depending on prevailing market
interest rates, the future outlook for market interest rates and economic
conditions generally, some borrowers may sell or refinance mortgaged
properties in order to realize their equity in the mortgaged properties,
to meet cash flow needs or to make other investments. The Depositor and
the Transferor make no representations as to the particular factors that
will affect the prepayment of the Mortgage Loans, as to the relative
importance of such factors, or as to the percentage of the principal
balance of the Mortgage Loans that will be paid as of any date.

Greater than anticipated distributions of principal to holders of
the Senior Certificates will increase the yield on Senior Certificates
purchased at a price less than par but will decrease the yield on Senior
Certificates purchased at a price greater than par, which distributions
of principal may be attributable to scheduled payments and prepayments of
principal on the Mortgage Loans, to Excess Spread and to amounts
remaining on deposit in the Pre-Funding Account after the Funding Period
ends. The effect on an investor's yield due to distributions of
principal to the holders of the Senior Certificates (including without
limitation prepayments on the Mortgage Loans) occurring at a rate that is
faster (or slower) than the rate anticipated by the investor during any
period following the issuance of the Senior Certificates will not be
entirely offset by a subsequent like reduction (or increase) in the rate
of such distributions of principal during any subsequent period.

The rate of delinquencies and defaults on the Mortgage Loans, and
the recoveries, if any, on defaulted Mortgage Loans and foreclosed
properties, will also affect the rate and timing of principal payments on
the Mortgage Loans, and accordingly, the weighted average life of the
Senior Certificates, and could cause a delay in the payment of principal
or a slower rate of principal amortization to the holders of Senior
Certificates. Alternatively, the occurrence of delinquencies and
defaults on the Mortgage Loans could result in an increase in principal
payments or more rapid rate of principal amortization of the Senior
Certificates as a result of the inclusion of the Principal Balances from
Liquidated Mortgage Loans in the amounts distributable to the holders of
the Senior Certificates as a result of loss allocations having reduced
the Class A Overcollateralization to zero. Certain factors may influence
such delinquencies and defaults, including origination and underwriting
standards, loan-to-value ratios and delinquency history. In general,
defaults on residential mortgage loans are expected to occur with greater
frequency in their early years, although little data is available with
respect to the rate of default on junior lien mortgage loans. The rate
of default on Mortgage Loans with high loan-to-value ratios or secured by
junior liens may be higher than that of mortgage loans with lower loan-
to-value ratios or secured by first liens on comparable properties.
Furthermore, the rate and timing of prepayments, defaults and
liquidations on the Mortgage Loans will be affected by the general
economic condition of the region of the country in which the related
Mortgaged Properties are located. See "The Mortgage Loan Pool" herein.
The risk of delinquencies and loss is greater and voluntary principal
prepayments are less likely in regions where a weak or deteriorating
economy exists, as may be evidenced by, among other factors, increasing
unemployment or falling property values.

Because principal distributions are paid to certain Classes of
Senior Certificates before other Classes, holders of the Classes having a
later priority of principal distribution bear a greater risk of losses
from delinquencies and defaults on the Mortgage Loans than holders of
Classes having earlier priorities for payment of principal. Holders of
the Class B Certificates will bear a greater risk of losses than holders
of the Class A Certificates; and holders of Class R Certificates will
bear a greater risk of losses than holders of the Class A Certificates
and the Class B Certificates. SEE "Description of the Certificates --
Subordination and Allocation of Losses" herein. Nevertheless, even if
losses are allocated to any Class A Certificates, the holders of such
Class will be distributed the full amount of the interest and principal
distributions due such holders to the extent that Guaranteed Payments
therefor are made under the Guaranty Policy.

Although certain data have been published with respect to the
historical prepayment experience of certain residential mortgage loans,
such mortgage loans may differ in material respects from the Mortgage
Loans and such data may not be reflective of conditions applicable to the
Mortgage Loans. No prepayment history is generally available with
respect to the Mortgage Loans or mortgage loans similar thereto, and
there can be no assurance that the Mortgage Loans will achieve or fail to
achieve any particular rate of principal prepayment. A number of factors
suggest that the prepayment experience of the Mortgage Loan Pool may be

S-29

<PAGE>

significantly different from that of a pool of conventional first lien,
single family mortgage loans with equivalent interest rates and
maturities. One such factor is that the principal balance of the average
Mortgage Loan is smaller than that of the average conventional first lien
mortgage loan. A smaller principal balance may be easier for a borrower
to prepay than a larger balance and, therefore, a higher prepayment rate
may result for the Mortgage Loan Pool than for a pool of first lien
mortgage loans, irrespective of the relative average interest rates and
the general interest rate environment. In addition, in order to
refinance a first lien mortgage loan, the borrower must generally repay
any junior liens. However, a small principal balance may make
refinancing a Mortgage Loan at a lower interest rate less attractive to
the borrower as the perceived impact to the borrower of lower interest
rates on the size of the monthly payment may not be significant. Other
factors that might be expected to affect the prepayment rate of the
Mortgage Loan Pool include general economic conditions, the amounts of
and interest rates on underlying senior mortgage loans, and the tendency
of borrowers to use real property mortgage loans as long-term financing
for home purchase and junior liens as shorter-term financing for a
variety of purposes, which may include the direct or indirect financing
of home improvement, education expenses, debt consolidation and purchases
of consumer durables such as automobiles. Accordingly, the Mortgage
Loans may experience a higher rate of prepayment than first lien mortgage
loans.

EXCESS SPREAD DISTRIBUTIONS

An overcollateralization feature has been designed to accelerate the
principal amortization of the Senior Certificates relative to the
principal amortization of the Mortgage Loans. Until the Class A
Overcollateralization equals or exceeds the Required Class A
Overcollateralization Level, distributions of Excess Spread, if any, on a
Distribution Date that would otherwise be made to holders of the Class R
Certificates will be made as additional distributions of principal to the
holders of the Senior Certificates, sequentially among the Classes of
Senior Certificates in order of their respective Class designations. If
purchased at a premium or a discount, the yield to maturity on a Senior
Certificate will be affected by the rate at which Excess Spread is
distributed to the Senior Certificateholders in reduction of the Class
Principal Balance of such Classes. If the actual rate of such Excess
Spread distributions on the Senior Certificates is slower than the rate
anticipated by an investor who purchases a Senior Certificate at a
discount, the actual yield to such investor will be lower than such
investor's anticipated yield. If the actual rate of Excess Spread
distributions is faster than the rate anticipated by an investor who
purchases a Senior Certificate at a premium, the actual yield to such
investor will be lower than such investor's anticipated yield. The
amount of Excess Spread on any Distribution Date will be affected by the
actual amount of interest received, collected or recovered in respect of
the Mortgage Loans during the related Due Period.

REINVESTMENT RISK

The reinvestment risk with respect to an investment in the Senior
Certificates will be affected by the rate and timing of principal
payments (including prepayments) in relation to the prevailing interest
rates at the time of receipt of such principal payments. For example,
during periods of falling interest rates holders of the Senior
Certificates are likely to receive an increased amount of principal
payments from the Mortgage Loans at a time when such holders may be
unable to reinvest such payments in investments having a yield and rating
comparable to the Senior Certificates. Conversely, during periods of
rising interest rates holders of Senior Certificates are likely to
receive a decreased amount of principal prepayments from the Mortgage
Loans at a time when such holders may have an opportunity to reinvest
such payments in investments having a higher yield than, and a comparable
rating to, the Senior Certificates.

WEIGHTED AVERAGE LIFE OF THE SENIOR CERTIFICATES

The following information is given solely to illustrate the effect
of prepayments of the Mortgage Loans on the estimated weighted average
lives of the Senior Certificates under certain stated assumptions and is
not a prediction of the prepayment rate that might actually be
experienced by the Mortgage Loans. Weighted average life refers to the
average amount of time that will elapse from the date of delivery of a
security until each dollar of principal of such security will be repaid
to the investor. The weighted average life of the Senior Certificates
will be influenced by the rate at which principal of the Mortgage Loans
is paid, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes reductions
of principal resulting from unscheduled full or partial prepayments,
refinancings, liquidations and write-offs due to defaults, casualties or
other dispositions and repurchases by or on behalf of the Transferor or
the Depositor) and the rate at which Excess Spread is distributed to
holders of the Senior Certificates as described herein.

Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus
Supplement is a Constant Prepayment Rate ("CPR"). The CPR represents an
assumed constant annual rate of prepayment each month, expressed as a per
annum percentage of the scheduled principal balance of the pool of
mortgage loans for

S-30

<PAGE>

that month. As used in the tables on pages ___and ___, the column headed
"0%" assumes that none of the Mortgage Loans is prepaid before maturity. The
columns headed "0%", "5%", "10%", "13%", "15%", "17%", "20%", "25%" and "30%"
assume that prepayments on the Mortgage Loans are made at CPRs of 0%, 5%,
10%, 13%, 15%, 17%, 20%, 25% and 30%, respectively. Neither the Transferor
nor the Depositor make any representations about the appropriateness of the
CPR model.

MODELING ASSUMPTIONS. For purposes of preparing the tables on
pages ___and ___, the following assumptions (the "MODELING ASSUMPTIONS")
have been made.

(i) the Mortgage Loan Pool consists of hypothetical mortgage
loans having an aggregate outstanding principal balance of
%_____________, Mortgage Loan Rate of _____%, and a remaining term
to stated maturity (in months) of ____;

(ii) all scheduled principal payments on such mortgage loans
are timely received on the first day of a Due Period, which will
begin on the first day of each month and end on the thirtieth day of
the month, with the first Due Period commencing in _______________
199__, and no delinquencies or losses occur on such mortgage loans;

(iii) the scheduled payments on the mortgage loans have
been calculated on the outstanding principal balance (prior to
giving effect to prepayments), the Mortgage Loan Rate and the
remaining term to stated maturity such that the mortgage loans will
fully amortize by their remaining term to stated maturity;

(iv) all scheduled payments of interest and principal have
been made through __________________, 199__;

(v) the mortgage loans in the Mortgage Loan Pool prepay
monthly at the specified percentages of CPR and NO OPTIONAL
TERMINATION of the Certificates occurs;

(vi) the Closing Date for the Certificates is
__________________, 199__ and each year will consist of 360 days;

(vii) cash distributions are received by the
Certificateholders on the 20th day of each month, commencing in
_______________ 199__; and

(viii) the Required Class A Overcollateralization Level is
$_______________ and will not be reduced;

(ix) the applicable Certificate Insurer Guaranty Premium for
each Class of Senior Certificates has been added to the Certificate
Interest Rate for each such Class of Senior Certificates, and the
Certificate Interest Rate for the Class B Certificates is __%;

(x) the Mortgage Loan Rate for the mortgage loans is net of
the aggregate of the FHA Insurance Premium, the Trustee's fee, the
Custodian's fee, the Servicing Fee and the REMIC Administration Fee,
which total ____% (___ basis points) on a per annum basis; and

(xi) no reinvestment income from any Trust Fund account is
earned and available for distribution.

The tables on the following two pages indicate at the specified
percentages of CPR the corresponding weighted average life of each Class
of Senior Certificates.

S-31

<PAGE>

ASSUMING FULL DELIVERY OF SUBSEQUENT MORTGAGE LOANS
---------------------------------------------------
PERCENT OF ORIGINAL CLASS PRINCIPAL BALANCE OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF CPR (1)

<TABLE>
<CAPTION>
Class A-1 Class A-2
----------------------------------------- -----------------------------------------
Distribution Date 0% 5% 10% 13% 15% 17% 20% 25% 30% 0% 5% 10% 13% 15% 17% 20% 25% 30%
- ------------------- -- -- --- --- --- --- --- --- --- -- -- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance
_________ 1996 . . .
_________ 1997 . . .
_________ 1998 . . .
_________ 1999 . . .
_________ 2000 . . .
_________ 2001 . . .
_________ 2002 . . .
_________ 2003 . . .
_________ 2004 . . .
_________ 2005 . . .
_________ 2006 . . .
_________ 2007 . . .
_________ 2008 . . .
_________ 2009 . . .
_________ 2010 . . .
_________ 2011 . . .
_________ 2012 . . .
_________ 2013 . . .
_________ 2014 . . .
_________ 2015 . . .
_________ 2016 . . .
_________ 2017 . . .
_________ 2018 . . .

Weighted Average
Life (2):
No Optional
Termination: . . .

</TABLE>

__________________

(1) The percentages in this table have been rounded to the nearest whole
number.
(2) The weighted average life of a Certificate is determined by (a)
multiplying the amount of each distribution of principal thereof by
the number of years from the date of issuance to the related
Distribution Date, (b) summing the results and (c) dividing the sum
by the aggregate distributions of principal referred to in clause
(a) and rounding to two decimal places.

S-32

<PAGE>

ASSUMING FULL DELIVERY OF SUBSEQUENT MORTGAGE LOANS
---------------------------------------------------
PERCENT OF ORIGINAL CLASS PRINCIPAL BALANCE OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF CPR (1)

<TABLE>
<CAPTION>
Class A-3 Class A-4
----------------------------------------- -----------------------------------------
Distribution Date 0% 5% 10% 13% 15% 17% 20% 25% 30% 0% 5% 10% 13% 15% 17% 20% 25% 30%
- ------------------- -- -- --- --- --- --- --- --- --- -- -- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance. . .
November 1996 . . .
November 1997 . . .
November 1998 . . .
November 1999 . . .
November 2000 . . .
November 2001 . . .
November 2002 . . .
November 2003 . . .
November 2004 . . .
November 2005 . . .
November 2006 . . .
November 2007 . . .
November 2008 . . .
November 2009 . . .
November 2010 . . .
November 2011 . . .
November 2012 . . .
November 2013 . . .
November 2014 . . .
November 2015 . . .
November 2016 . . .
November 2017 . . .
November 2018 . . .
Weighted Average
Life (2):
No Optional
Termination: . .

</TABLE>
________________

(1) The percentages in this table have been rounded to the nearest
whole number.

(2) The weighted average life of a Certificate is determined by (a)
multiplying the amount of each distribution of principal thereof
by the number of years from the date of issuance to the related
Distribution Date, (b) summing the results and (c) dividing the
sum by the aggregate distributions of principal referred to in
clause (a) and rounding to two decimal places.

These tables have been prepared based on the Modeling Assumptions (including
the assumptions regarding the characteristics and performance of the Mortgage
Loans which may differ from the actual characteristics and performance
thereof) and should be read in conjunction therewith.

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<PAGE>

It is unlikely that the Mortgage Loans will prepay at a constant
rate or that all of the Mortgage Loans will prepay at the same rate.
Moreover, the Mortgage Loans actually included in the Mortgage Loan Pool
will not conform to the assumptions made as to the characteristics of
such Mortgage Loans in preparing the above tables. In fact, the
characteristics of the Mortgage Loans will differ in many respects from
such assumed characteristics. SEE "The Mortgage Loan Pool" herein. To
the extent that the Mortgage Loans actually included in the Mortgage Loan
Pool have characteristics that differ from those assumed in preparing the
tables, the Senior Certificates are likely to have weighted average lives
that are shorter or longer than those indicated.

DESCRIPTION OF THE CERTIFICATES

GENERAL

The Remodelers Home Loan Asset-Backed Certificates, Series 199__-__,
will consist of the Class A-1 Certificates, the Class A-2 Certificates,
the Class A-3 Certificates, the Class A-4 Certificates, the Class B
Certificates and the Class R Certificates (each, a "CLASS"). Only the
Class A-1, Class A-2, Class A-3 and Class A-4 Certificates (collectively,
the "CLASS A CERTIFICATES" or the "SENIOR CERTIFICATES") are offered
hereby.

On the 20th day of each month, commencing __________________, 199__,
or, if such day is not a business day, the first business day immediately
following (each such date, a "DISTRIBUTION DATE"), the Trustee or its
designee will distribute to the persons in whose names the Senior
Certificates of each Class are registered on the last day of the month
immediately preceding the month of the related Distribution Date (the
"RECORD DATE"), the portion of the aggregate distribution to be made to
the Certificateholders of such Class to which such holder is entitled, as
described below. Prior to Book Entry Termination, distributions on the
Book Entry Certificates will be made to Beneficial Owners only through
DTC and its DTC Participants. See "Description of Book Entry Procedures"
herein.

Beneficial ownership interests in each Class of Senior Certificates
will be issued in minimum denominations of $250,000 and integral
multiples of $5,000 in excess thereof; provided, however, that one or
more beneficial ownership interests in each Class of Senior Certificates
may be issued in a different denomination such that the aggregate initial
principal balance of all Certificates of such Class shall equal the
Original Class Principal Balance of such Class.

The Certificates represent fractional undivided beneficial ownership
interests in the Trust Fund created and held pursuant to the Pooling and
Servicing Agreement. The Trust Fund consists of (i) the Initial Mortgage
Loans and any Subsequent Mortgage Loans conveyed to the Trust Fund and
all proceeds thereof, (ii) such assets as from time to time are
identified as REO Properties, (iii) such assets as from time to time are
deposited in the Collection Account, the Certificate Account, and the FHA
Insurance Premium Account or invested in certain types of permitted
instruments, (iv) funds deposited and held in the Pre-Funding Account and
the Capitalized Interest Account or invested in certain types of
permitted instruments until the end of the Funding Period, (v) the
Trustee's rights under all insurance policies, if any, with respect to
the Mortgage Loans required to be maintained under the Pooling and
Servicing Agreement and any Insurance Proceeds, (vi) the Trustee's rights
under the FHA Insurance applicable to the Title I Mortgage Loans,
including the right to make FHA Claims and the right to direct any FHA
Claims Administrator, as agent and attorney-in-fact on behalf of the
Trustee, to make FHA Claims, subject to the terms of the Pooling and
Servicing Agreement, (vii) the Guaranty Policy for the Senior
Certificates, (viii) Net Liquidation Proceeds, FHA Insurance Proceeds,
Guaranty Policy Proceeds and Released Mortgaged Property Proceeds and
(ix) all right, title and interest of the Transferor in and to the
obligations of any seller pursuant to a loan sale agreement under which
any Mortgage Loans were purchased by the Transferor.

COLLECTION ACCOUNT AND CERTIFICATE ACCOUNT

The Servicer is required to use its best efforts to deposit in an
Eligible Account (the "COLLECTION ACCOUNT"), within one business day and
in any event to deposit within two business days of receipt, all payments
received after each Cut-Off Date on account of principal and interest on
the related Mortgage Loans, all Net Liquidation Proceeds, Insurance
Proceeds, FHA Insurance Proceeds, Released Mortgaged Property Proceeds,
any amounts payable in connection with the repurchase or substitution of
any Mortgage Loan and any amount required to be deposited in the
Collection Account in connection with the termination of the Pooling and
Servicing Agreement. The foregoing requirements for deposit in the
Collection Account shall be exclusive of payments on account of principal
and interest on the Mortgage Loans collected on or before the applicable
Cut-Off Date. The Servicer may make withdrawals from the Collection
Account only for the purposes specified in the Pooling and Servicing
Agreement. The Collection Account may be maintained at any depository
institution which satisfies the requirements set forth in the definition
of Eligible Account in the Pooling and Servicing Agreement. Initially,
the Collection Account will be maintained with
______________________________________. On the business day prior to
each Distribution Date, the Servicer is required to transfer from the
Collection Account to the Trustee

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<PAGE>

the Available Remittance Amount for deposit in an Eligible Account (the
"CERTIFICATE ACCOUNT") established and maintained by the Trustee.

Any Subservicer will also maintain a collection account to deposit
all payments received with respect to the Mortgage Loans being serviced
by such Subservicer. Such Subservicer's collection account will be an
Eligible Account and will satisfy requirements that are substantially
similar to the requirements for the Collection Account set forth in the
Pooling and Servicing Agreement.

INCOME FROM ACCOUNTS

So long as no Event of Default shall have occurred and be
continuing, and consistent with any requirements of the Code, amounts on
deposit in the Certificate Account and the FHA Insurance Premium Account
(each, together with the Collection Account, an "ACCOUNT") shall be
invested by the Trustee, as directed by the Depositor, in one or more
Permitted Instruments (as defined in the Pooling and Servicing Agreement)
bearing interest or sold at a discount. So long as no Event of Default
shall have occurred and be continuing, and consistent with any
requirements of the Code, amounts on deposit in the Collection Account
shall be invested by the Servicer, as directed by the Depositor, in one
or more Permitted Instruments bearing interest or sold at a discount. No
such investment in any Account shall mature later than the business day
immediately preceding the next Distribution Date. All income or other
gain from investments in any Account shall be deposited in such Account
immediately on receipt, unless otherwise specified herein.

AVAILABLE REMITTANCE AMOUNT

Distributions on the Certificates on each Distribution Date will be
made from the Available Remittance Amount. The Servicer shall calculate
the Available Remittance Amount on the fifth business day prior to each
Distribution Date (each such day, a "DETERMINATION DATE"). With respect
to each Distribution Date, the "AVAILABLE REMITTANCE AMOUNT" is the sum
of (i) all amounts received on the Mortgage Loans or required to be paid
by the Servicer, the Transferor or the Depositor (exclusive of amounts
not required to be deposited in the Collection Account and amounts
permitted to be withdrawn by the Servicer from the Collection Account
pursuant to the Pooling and Servicing Agreement) during the related Due
Period (or, in the case of amounts paid by the Transferor in connection
with the purchase or substitution of a Mortgage Loan for defective loan
documentation or a breach of representation or warranty, as of the
related Determination Date) as reduced by any portion thereof that may
not be withdrawn therefrom pursuant to an order of a United States
bankruptcy court of competent jurisdiction imposing a stay pursuant to
Section 362 of the United States Bankruptcy Code, (ii) in the case of a
Distribution Date relating to a Due Period that occurs prior to the end
of the Funding Period, an amount from the Capitalized Interest Account
sufficient to fund any shortfall in the Interest Remittance Amount, (iii)
in the case of the Distribution Date following the Due Period in which
the Funding Period ends, amounts, if any, remaining in the Pre-Funding
Account at the end of the Funding Period (net of reinvestment income
which must be transferred to the Capitalized Interest Account), (iv) with
respect to the final Distribution Date in connection with the purchase of
all the Mortgage Loans and REO Properties by the Servicer, the
Termination Price and (v) any and all income or gain from investments in
the Collection Account.

DISTRIBUTIONS ON THE SENIOR CERTIFICATES

On each Distribution Date, the sum of (i) the Available Remittance
Amount and (ii) any income or gain from investments in the Certificate
Account (such sum, the "AMOUNT AVAILABLE") will be distributed by the
Trustee, along with any Guaranteed Payment deposited in the Certificate
Account by or on behalf of the Certificate Insurer (which payments may
only be used to pay the holders of the Senior Certificates the respective
Interest Remittance Amount, the Interest Carry-Forward Amount, the
Principal Remittance Amount or the Principal Carry-Forward Amount, as
applicable, of such Class of Certificates) sequentially in the following
order of priority to the extent of the Amount Available and any
Guaranteed Payment (with respect to any Senior Certificate only):

(i) first to the FHA Insurance Premium Account, an amount
equal to the aggregate FHA Insurance Premium Deposit Amount;

(ii) then to the Certificate Insurer, an amount equal to the
Certificate Guaranty Insurance Premium;

(iii) then to the Trustee, an amount equal to the Trustee
Fee and then, if applicable, to the Custodian, an amount equal to
the Custodian Fee;

S-35

<PAGE>

(iv) then pro rata to the Class A-1, Class A-2, Class A-3 and
Class A-4 Certificateholders as a distribution of principal, any
amounts deposited into the Certificate Account from the amounts
remaining in the Pre-Funding Account after the Funding Period ends;

(v) then pro rata to the Class A-1, Class A-2, Class A-3 and
Class A-4 Certificateholders (A) the Interest Remittance Amount
applicable to the respective Class A Certificates and (B) the
Interest Carry-Forward Amount, if any, applicable to the respective
Class A Certificates;

(vi) then to the Class A-1 Certificateholders, (A) to be
applied to reduce the Class Principal Balance of the Class A-1
Certificates until such Class Principal Balance is reduced to zero,
an amount equal to the Principal Remittance Amount and (B) the
Principal Carry-Forward Amount, if any, applicable to the Class A-1
Certificates;

(vii) then to the Class A-2 Certificateholders, (A) to be
applied to reduce the Class Principal Balance of the Class A-2
Certificates until such Class Principal Balance is reduced to zero,
an amount equal to that portion of the Principal Remittance Amount,
if any, remaining after any distributions pursuant to clause (vi)
above and (B) the Principal Carry-Forward Amount, if any, applicable
to the Class A-2 Certificates;

(viii) then to the Class A-3 Certificateholders, (A) to be
applied to reduce the Class Principal Balance of the Class A-3
Certificates until such Class Principal Balance is reduced to zero,
an amount equal to that portion of the Principal Remittance Amount,
if any, remaining after any distributions pursuant to clauses (vi)
and (vii) above and (B) the Principal Carry-Forward Amount, if any,
applicable to the Class A-3 Certificates;

(ix) then to the Class A-4 Certificateholders, (A) to be
applied to reduce the Class Principal Balance of the Class A-4
Certificates until such Class Principal Balance is reduced to zero,
an amount equal to that portion of the Principal Remittance Amount,
if any, remaining after any distributions pursuant to clauses (vi),
(vii) and (viii) above and (B) the Principal Carry-Forward Amount,
if any, applicable to the Class A-4 Certificates;

(x) then to the Certificate Insurer, reimbursement for any
Guaranteed Payments in respect of the Class A Certificates not
previously reimbursed (the "CERTIFICATE INSURER REIMBURSEMENT
AMOUNT");

(xi) then to the Class B Certificateholders, (A) the Interest
Remittance Amount applicable to the Class B Certificates and (B) the
Interest Carry-Forward Amount, if any, applicable to the Class B
Certificates;

(xii) then to the Class B Certificateholders, (A) to be
applied to reduce the Class Principal Balance of the Class B
Certificates until such Class Principal Balance is reduced to zero,
an amount equal to that portion of the Principal Remittance Amount,
if any, remaining after any distributions pursuant to clauses (vi),
(vii), (viii), (ix) and (x) above and (B) the Principal Carry-
Forward Amount, if any, applicable to the Class B Certificates;

(xiii) then after making all of the foregoing distributions,
to the extent of any remaining Amount Available, to the Servicer an
amount equal to Servicing Advances previously made by the Servicer
and not previously reimbursed; and

(xiv) then after making all of the foregoing distributions,
(A) to the Class A Certificateholders, as an additional sequential
distribution of principal, the remaining balance, if any, of the
Amount Available after all of the foregoing distributions pursuant
to clauses (i) through (xiii) above (the "EXCESS SPREAD") until the
Class A Overcollateralization Amount equals or exceeds the Required
Class A Overcollateralization Amount (the "CLASS R DISTRIBUTION
TRIGGER"); and, if a Class R Distribution Trigger occurs, then (B)
to the Class B Certificateholders an amount equal to the portion of
the Excess Spread, if any, remaining after any distributions to the
Class A Certificateholders pursuant to the preceding subclause (A),
until the Class B Loss Reimbursement Amount is reduced to zero, and
then (C) to the Class R Certificateholders an amount equal to the
portion of the Excess Spread, if any, remaining after any
distributions to the Class A Certificateholders and Class B
Certificateholders pursuant to the preceding subclauses (A) and (B).

If the Amount Available is insufficient to distribute in full the
amounts described in items (v) through (ix) above to the Holders of the
Senior Certificates, the Trustee shall make a claim under the Guaranty
Policy for the amount of such insufficiency in accordance with the terms
thereof. Guaranteed Payments, if any, for any Senior Certificates under
the Guaranty Policy will be available only for distribution to Holders of
the Senior Certificates, as appropriate, to compensate for any shortfalls
in respect of the Interest Remittance Amounts and the Principal
Remittance Amounts with respect to the Senior Certificates.

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<PAGE>

All distributions made to the Class A-1 Certificateholders, the
Class A-2 Certificateholders, the Class A-3 Certificateholders, the Class
A-4 Certificateholders, the Class B Certificateholders or the holders of
the Class R Certificates as a Class on each Distribution Date will be
made on a pro rata basis among the Certificateholders of the respective
Class of record on the next preceding Record Date based on the Percentage
Interest represented by their respective Certificates, and except as
otherwise provided herein under "Description of Book Entry Procedures,"
shall be made through the book-entry system maintained by DTC.

If, on a particular Distribution Date, the Amount Available applied
in the order described above is not sufficient to make a full
distribution of the Interest Remittance Amount on any Class of Senior
Certificates, interest will be distributed, first to the Senior
Certificates based on the Interest Remittance Amount each such Class
would otherwise have been entitled to receive in the absence of such a
shortfall and second, to the extent of any remaining funds after the
distribution of the Principal Remittance Amount for the Senior
Certificates to the Class B Certificates. Any unpaid Interest Remittance
Amounts will be carried forward as an Interest Carry-Forward Amount for
each such Class and be distributed to holders of each such Class of
Senior Certificates on the next Distribution Date. Such a shortfall
could occur, for example, if losses realized on the Mortgage Loans were
exceptionally high or were concentrated in a particular month. Any
unpaid Interest Remittance Amount will not bear interest. No interest
will accrue on any Interest Carry-Forward Amount outstanding with respect
to any Class of Senior Certificates.

The "INTEREST REMITTANCE AMOUNT" on any Distribution Date and for
each Class of Senior Certificates will be equal to 30 days" interest
(except for the first Distribution Date, two days" interest) at the
applicable Certificate Interest Rate on the Class Principal Balance of
such Class immediately prior to such Distribution Date.

The "PRINCIPAL REMITTANCE AMOUNT" on each Distribution Date will be
equal to the lesser of (A) the Class Principal Balance of the Class A
Certificates and Class B Certificates immediately prior to such
Distribution Date and (B) the sum of (i) each scheduled payment of
principal collected by the Servicer in the related Due Period (excluding
partial payments held in escrow pursuant to FHA Regulations), (ii) all
partial and full principal prepayments received by the Servicer during
such related Due Period, (iii) the principal portion of all Net
Liquidation Proceeds, FHA Insurance Proceeds, Insurance Proceeds and
Released Mortgaged Property Proceeds received during the related Due
Period, (iv) (a) that portion of the purchase price of any repurchased
Mortgage Loan which represents principal and (b) the principal portion of
any Substitution Adjustments required to be deposited in the Collection
Account as of the related Determination Date, (v) upon the reduction of
the Class A Overcollateralization to zero, the principal portion of any
Net Loan Losses (as defined below) in excess of such Class A
Overcollateralization. Notwithstanding clause (v) of the preceding
sentence, if on the final Distribution Date the funds available from any
Excess Spread and any Guaranteed Payment received by the Trustee are not
sufficient to provide for the distribution of the portion of the
Principal Remittance Amount attributable to clause (v) of the preceding
sentence for such Distribution Date and any preceding Distribution Date,
then the holders of the Class A Certificates will not be distributed such
portion of the Principal Remittance Amount, in which event such portion
of the Principal Remittance Amount, including any such portion
represented by a Principal Carry-Forward Amount, will be written-off and
the corresponding Class Principal Balances of all Class A Certificates
will be reduced to zero without the distribution of funds to fully pay
the Class A Certificateholders. If the Class A Overcollateralization is
reduced to zero, then the principal portion of any Net Loan Losses will
be included within the Principal Remittance Amount for the related
Distribution Date. However, no corresponding proceeds of principal from
the Mortgage Loans will be included in the Amount Available to provide
funds for the distribution of the portion of the Principal Remittance
Amount attributable to such Net Loan Losses, and the distribution of this
portion of the Principal Remittance Amount to the Class A
Certificateholders will be dependent upon the receipt of funds from,
first, the Excess Spread, if any, and, second, if such Excess Spread does
not provide sufficient funds, any Guaranteed Payment received by the
Trustee. If sufficient funds for the distribution of this portion of the
Principal Remittance Amount are not provided from the Excess Spread and
the Guaranteed Payment on the applicable Distribution Date, then the
amount of such insufficiency would become a Principal Carry-Forward
Amount, which would ultimately be subject to the write-off on the final
Distribution Date to the extent that sufficient funds are not provided
from the receipt of Excess Spread and Guaranteed Payments on or before
such final Distribution Date.

As set forth above, on each Distribution Date the Principal
Remittance Amount will be distributed to the Class A Certificateholders,
sequentially in order of their respective Class designations until the
Class Principal Balance for each such Class has been reduced to zero; and
thereafter, to the Class B Certificateholders. Accordingly, no payments
of the Principal Remittance Amount will be made on any Class A
Certificate of a particular Class until all Class A Certificates having
an earlier Class designation have been paid in full, and no payments of
the Principal Remittance Amount will be made on any Class B Certificates
until all Class A Certificates have been paid in full.

The "FHA INSURANCE PROCEEDS" on each Distribution Date will be equal
to with respect to any Title I Mortgage Loan the proceeds, if any,
received by the Trustee (or any FHA Claims Administrator) during the
prior Due Period from the FHA pursuant to the FHA Insurance from the
related FHA Claim. The "INSURANCE PROCEEDS" on each Distribution Date
will be equal to with respect to any Mortgage Loan the proceeds paid to
the Trustee or the Servicer by any insurer pursuant to any insurance
policy

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<PAGE>

covering a Mortgage Loan, Mortgaged Property or REO Property or any other
insurance policy that relates to a Mortgage Loan, net of any expenses which
are incurred by the Trustee or the Servicer in connection with the collection
of such proceeds and not otherwise reimbursed to the Trustee or the Servicer,
but excluding any FHA Insurance Proceeds, Guaranty Policy Proceeds and
proceeds of any insurance policy that are to be applied to the restoration or
repair of the Mortgaged Property or released to the borrower in accordance
with customary loan servicing procedures. A "LIQUIDATED MORTGAGE LOAN" is a
defaulted Mortgage Loan as to which the Servicer has determined that all
recoverable liquidation and insurance proceeds have been received, which will
be deemed to occur upon the earlier of: (a) with respect to a Title I
Mortgage Loan, the receipt of FHA Insurance Proceeds after the submission of
an FHA Claim, (b) the liquidation of the related Mortgaged Property acquired
through foreclosure or similar proceedings, (c) the Servicer's determination
in accordance with customary servicing practices that no further amounts are
collectible from the Mortgage Loan and any related security, or (d) any
portion of a scheduled monthly payment of principal and interest is in excess
of 300 days past due. The "NET LIQUIDATION PROCEEDS" on each Distribution
Date will be equal to any cash amounts received from Liquidated Mortgage
Loans, whether through trustee's sale, foreclosure sale, disposition of REO
or otherwise (other than FHA Insurance Proceeds, Insurance Proceeds and
Released Mortgaged Property Proceeds), and any other cash amounts received in
connection with the management of the Mortgaged Properties from defaulted
Mortgage Loans, in each case, net of any reimbursements to the Servicer made
from such amounts for any unreimbursed Servicing Advances made and any other
fees and expenses paid in connection with the foreclosure, conservation and
liquidation of the related Liquidated Mortgage Loan or Mortgaged Properties.
The "RELEASED MORTGAGED PROPERTY PROCEEDS" on each Distribution Date will be
equal to with respect to any Mortgage Loan, the proceeds received by the
Servicer in connection with (i) a taking of an entire Mortgaged Property by
exercise of the power of eminent domain or condemnation or (ii) any release
of part of the Mortgaged Property from the lien of the related Mortgage,
whether by partial condemnation, sale or otherwise, which in either case are
not released to the borrower in accordance with applicable law, customary
mortgage servicing procedures and the Pooling and Servicing Agreement.

The "CLASS PRINCIPAL BALANCE" of any Class of Senior Certificates as
of any date of determination is equal to the Original Class Principal
Balance of such Class reduced by all amounts in respect of principal
previously distributed to the Certificateholders of such Class on all
previous Distribution Dates (other than any amounts that constitute
mortgagor payments that are recovered from such Certificateholders as
voidable preferences by a trustee in bankruptcy) and by all amounts
allocated to such Class on all previous Distribution Dates attributable
to any losses as determined by the Servicer under the Pooling and
Servicing Agreement (See the subheading "Subordination and Allocation of
Losses" below).

The "INTEREST CARRY-FORWARD AMOUNT" is the amount, if any, by which
the interest portion of the Remittance Amount applicable to any Class of
Senior Certificates as of the immediately preceding Distribution Date
exceeded the amount of the actual distribution to the Certificateholders
of such Class in respect of interest made on such immediately preceding
Distribution Date. No interest will accrue on any Interest Carry-Forward
Amount with respect to any Class of Certificates.

The "PRINCIPAL CARRY-FORWARD AMOUNT" is the amount, if any, by which
the principal portion of the Remittance Amount applicable to any Class of
Senior Certificates as of the immediately preceding Distribution Date
exceeded the amount of the actual distribution to the Certificateholders
of such Class in respect of principal. Interest will accrue on the Class
Principal Balance, which includes any Principal Carry-Forward Amount,
with respect to any Class of Certificates.

With respect to each Distribution Date and with respect to each
Class of Senior Certificates, the sum of the Interest Remittance Amount
applicable to such Class, the Principal Remittance Amount, if any,
applicable to such Class, an amount equal to any amount that constitutes
any mortgagor payment that is recovered from the Certificateholders of
such Class during the related Due Period 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, the Interest Carry-Forward Amount applicable to such Class
and the Principal Carry-Forward Amount applicable to such Class
constitutes the "REMITTANCE AMOUNT".

With respect to any Distribution Date, on which a Class R
Distribution Trigger occurs, all or a portion of the Excess Spread, if
any, will be distributed to the Class R Certificateholders. Any amounts
so distributed to the Class R Certificateholders will not be available on
future Distribution Dates for distribution to the Class A
Certificateholders or the Class B Certificateholders.

CLASS A OVERCOLLATERALIZATION

On the Closing Date, the "INITIAL CLASS A OVERCOLLATERALIZATION"
which provides credit enhancement for the Class A Certificates will equal
the excess of the Assumed Pool Principal Balance over the Original Class
Principal Balance of all Classes of Class A Certificates, which excess
will equal the Original Class Principal Balance of the Class B
Certificates of $__________, or approximately ___% or the Assumed Pool
Principal Balance. As of each Determination Date occurring after
termination of the Funding Period, the "CLASS A OVERCOLLATERALIZATION"
will equal the excess of the Pool Principal Balance over the Class
Principal

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<PAGE>

Balance of all Classes of Class A Certificates. A limited acceleration of
the principal amortization of the Class A Certificates relative to the
principal amortization of the Mortgage Loans has been designed to increase
the Class A Overcollateralization by making additional sequential
distributions of prinicpal to the Class A Certificateholders, in the manner
described herein.

Until the Class A Overcollateralization equals or exceeds the
Required Class A Overcollateralization Level, distributions of Excess
Spread, if any, on a Distribution Date that would otherwise be made to
the holders of the Class R Certificates will be made as an additional
distribution of principal to the holders of the Class A Certificates,
sequentially among the Classes of the Class A Certificates in order of
their respective Class designations. The distribution of such Excess
Spread is intended to accelerate the amortization of the Class Principal
Balance of all Classes of Class A Certificates, and thereby increase the
Class A Overcollateralization. If distributions of such Excess Spread
are made to the holders of the Class A Certificates such that the Pool
Principal Balance exceeds the aggregate Class Principal Balance of the
Class A and Class B Certificates then outstanding, then a portion of the
Pool Principal Balance, equal to such excess, will become attributable to
the Class R Certificates. In addition, the relative percentage of the
Class Principal Balance of the Class B Certificates to the Pool Principal
Balance will increase as a result of the principal amortization of the
Class A Certificates prior to the principal amortization of the Class B
Certificates. On any Distribution Date on which a Class R Distribution
Trigger occurs, all or a portion of the Excess Spread may be distributed
to the holders of the Class R Certificates and not to the Class A
Certificates; therefore, ceasing the acceleration of the principal
amortization of the Class A Certificates.

While the distribution of Excess Spread to holders of the Class A
Certificates in the manner specified above has been designed to produce
and maintain a given level of overcollateralization with respect to
Class A Certificates, there can be no assurance that Excess Spread will
be generated in sufficient amounts to ensure that such
overcollateralization level will be achieved or maintained at all times.
Net losses on Liquidated Mortgage Loans will be allocated first to reduce
the principal imputed to the Class R Certificates, if any, and the Class
Principal Balance of the Class B Certificates, thereby reducing the
Class A Overcollateralization. See "Description of the Certificates --
Subordination and Allocation of Losses" and "Risk Factors -- No Assurance
of Adequacy of Credit Enhancement" herein.

As of each Determination Date, the "REQUIRED CLASS A
OVERCOLLATERALIZATION LEVEL" will be the sum of the Required Title I OC
Level and the Required Conventional OC Level, minus the Class Principal
Balance of the Class B Certificates. On the Closing Date, assuming that
the Assumed Pool Principal Balance has the same characteristics as the
Initial Pool Principal Balance, the Required Class A
Overcollateralization Level would be equal to $_____________, which is
______% of the Assumed Pool Principal Balance.

[Prior to the Credit Support Reduction Date, as of a Determination
Date, the "REQUIRED TITLE I OC LEVEL" will be an amount equal to the
greater of (i) the sum of (a) ____% of the sum of the aggregate Cut-Off
Date Principal Balances of the Title I Mortgage Loans and the amount on
deposit in the Pre-Funding Account intended to fund the purchase of
Title I Mortgage Loans, plus (b) ____% of the amount of any shortfall in
the FHA Insurance Amount transferred to the Trustee's FHA Reserve (the
"REQUIRED TITLE I OC FLOOR"), and (ii) the product of (x) the Title I
Credit Support Multiple and (y) ____% of the sum of the aggregate Cut-Off
Date Principal Balances of the Title I Mortgage Loans and the amount on
deposit in the Pre-Funding Account intended to fund the purchase of
Title I Mortgage Loans; PROVIDED, HOWEVER, that on or after the Credit
Support Reduction Date, such amount will be equal to the greater of (i)
the Required Title I OC Floor, and (ii) the product of (x) the Title I
Credit Support Multiple and (y) the lesser of (A) ____% of the sum of the
aggregate Cut-Off Date Principal Balances of the Title I Mortgage Loans
and the amount on deposit in the Pre-Funding Account intended to fund the
purchase of Title I Mortgage Loans or (B) ____% of the sum of the
aggregate Principal Balances of the Title I Mortgage Loans and the amount
on deposit in the Pre-Funding Account intended to fund the purchase of
Title I Mortgage Loans. Prior to the Credit Support Reduction Date, as
of a Determination Date, the "REQUIRED CONVENTIONAL OC LEVEL" will be an
amount equal to the greater of (i) ____% of the sum of the aggregate Cut-
Off Date Principal Balances of the Conventional Mortgage Loans and the
amount on deposit in the Pre-Funding Account intended to fund the
purchase of Conventional Mortgage Loans (the "REQUIRED CONVENTIONAL OC
FLOOR"), and (ii) the product of (x) the Conventional Credit Support
Multiple, and (y) ____% of the sum of the aggregate Cut-Off Date
Principal Balances of the Conventional Mortgage Loans and the amount on
deposit in the Pre-Funding Account intended to fund the purchase of
Conventional Mortgage Loans; PROVIDED, HOWEVER, that on or after the
Credit Support Reduction Date, such amount will be equal to the greater
of (i) the Required Conventional OC Floor, and (ii) the product of (x)
the Conventional Credit Support Multiple and (y) the lesser of (A) ____%
of the sum of the aggregate Cut-Off Date Principal Balances of the
Conventional Mortgage Loans and the amount on deposit in the Pre-Funding
Account intended to fund the purchase of Conventional Mortgage Loans or
(B) 16.0% of the sum of the aggregate Principal Balances of the
Conventional Mortgage Loans and the amount on deposit in the Pre-Funding
Account intended to fund the purchase of Conventional Mortgage Loans.]

[The amount of the "TITLE I CREDIT SUPPORT MULTIPLE" will be
calculated on each Determination Date as follows: (i) if less than
_____% of the Title I Mortgage Loans are more than 30 days delinquent,
and if less than ____% of the Title I Mortgage Loans

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<PAGE>

are more than 60 days delinquent, and if less than ____% of the Title I
Mortgage Loans have become Defaulted Mortgage Loans on an annualized basis,
then such amount will be ____; (ii) if less than ____% of the Title I
Mortgage Loans are more than 30 days delinquent, and if less than ____% of
the Title I Mortgage Loans are more than 60 days delinquent, and if less than
____% of the Title I Mortgage Loans have become Defaulted Mortgage Loans on
an annualized basis, then such amount will be ____; (iii) if less than ____%
of the Title I Mortgage Loans are more than 30 days delinquent, and if less
than _____% of the Title I Mortgage Loans are more than 60 days delinquent,
and if less than ____% of the Title I Mortgage Loans have become Defaulted
Mortgage Loans on an annualized basis, then such amount will be ____; (iv) if
____% or more of the Title I Mortgage Loans are more than 30 days delinquent,
or if ____% or more of the Title I Mortgage Loans are more than 60 days
delinquent, or if ____% or more of the Title I Mortgage Loans have become
Defaulted Mortgage Loans on an annualized basis, then such amount will be
____; or (v) if ____% or more of the Title I Mortgage Loans have become
Defaulted Mortgage Loans on a cumulative basis on or prior to the first
anniversary of the __________________, 199__ Cut-Off Date, or if ____% or
more of the Title I Mortgage Loans have become Defaulted Mortgage Loans on a
cumulative basis on or prior to the second anniversary of the
__________________, 199__ Cut-Off Date, or if ____% or more of the Title I
Mortgage Loans have become Defaulted Mortgage Loans on a cumulative basis
after the second anniversary of the __________________, 199__ Cut-Off Date,
then such amount will be ____; provided that except with respect to the
calculation on a cumulative basis in the preceding clause (v), the preceding
delinquency and default percentages will be calculated as the average of the
ratios for the immediately preceding three months based on the outstanding
aggregate Principal Balances for such Title I Mortgage Loans.]

[The amount of the "CONVENTIONAL CREDIT SUPPORT MULTIPLE" will be
calculated as follows: (i) if less than ____% of the Conventional
Mortgage Loans are more than 30 days delinquent, and if less than ____%
of the Conventional Mortgage Loans are more than 60 days delinquent, and
if less than ____% of the Conventional Mortgage Loans have become
Defaulted Mortgage Loans on an annualized basis, then such amount will be
____; (ii) if less than ____% of the Conventional Mortgage Loans are more
than 30 days delinquent, and if less than ____% of the Conventional
Mortgage Loans are more than 60 days delinquent, and if less than ____%
of the Conventional Mortgage Loans have become Defaulted Mortgage Loans
on an annualized basis, then such amount will be ____; (iii) if less than
____% of the Conventional Mortgage Loans are more than 30 days
delinquent, and if less than ____% of the Conventional Mortgage Loans are
more than 60 days delinquent, and if less than ____% of the Conventional
Mortgage Loans have become Defaulted Mortgage Loans on an annualized
basis, then such amount will be ____; (iv) if ____% or more of the
Conventional Mortgage Loans are more than 30 days delinquent, or if ____%
or more of the Conventional Mortgage Loans are more than 60 days
delinquent, or if ____% or more of the Conventional Mortgage Loans have
become Defaulted Mortgage Loans on an annualized basis, then such amount
will be ____; or (v) if ____% or more of the Conventional Mortgage Loans
have become Defaulted Mortgage Loans on a cumulative basis on or prior to
the first anniversary of the __________________, 199__ Cut-Off Date, or
if ____% or more of the Conventional Mortgage Loans have become Defaulted
Mortgage Loans on a cumulative basis on or prior to the second
anniversary of the __________________, 199__ Cut-Off Date, or if ____% or
more of the Conventional Mortgage Loans have become Defaulted Mortgage
Loans on a cumulative basis after the second anniversary of the
__________________, 199__ Cut-Off Date, then such amount will be ____;
provided that except with respect to the calculation on a cumulative
basis in the preceding clause (v), the preceding delinquency and default
percentages will be calculated as the average of the ratios for the
immediately preceding three months based on the outstanding aggregate
Principal Balances for such Conventional Mortgage Loans.]

For purposes of determining the Required Class A Overcollateralization
Level a "DEFAULTED MORTGAGE LOAN" will be any Mortgage Loan for which any of
the following occurs: (a) with respect to a Title I Mortgage Loan, an FHA
Claim has been submitted; (b) foreclosure proceedings have commenced; (c) any
portion of a scheduled monthly payment of principal and interest is 180 days
past due; or (d) the Servicer has determined in accordance with customary
servicing practices that the Mortgage Loan is uncollectible. The "CREDIT
SUPPORT REDUCTION DATE" will be the later of: (i) the ______________ (_____)
Distribution Date; or (ii) the Distribution Date on which the Pool Principal
Balance is equal to or less than _________________ percent (_____%) of the
aggregate Cut-Off Date Principal Balances of the Mortgage Loans.

While the Required Class A Overcollateralization Level may be
reduced as described above, no distributions of principal will be made to
the holders of the Class B Certificates or the Class R Certificates which
would have the effect of reducing the Class A Overcollateralization.
However, the Class A Overcollateralization will be reduced as a result of
the allocation of Net Loan Losses, first to the principal imputed to the
Class R Certificates and next to the Class Principal Balance of the
Class B Certificates.

SUBORDINATION AND ALLOCATION OF LOSSES

The rights of the holders of the Class B Certificates and Class R
Certificates to receive distributions with respect to the Mortgage Loans
in the Trust Fund will be subordinated, to the extent described herein,
to such rights of the holders of the Class A Certificates. This
subordination is intended to enhance the likelihood of regular receipt by
the holders of the Class A Certificates

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<PAGE>

of the full amount of interest and principal distributions due to such
holders and to afford such holders protection against losses on the Mortgage
Loans. The protection afforded to the holders of the Class A Certificates by
means of the subordination feature will be accomplished by the preferential
right of such Class A Certificateholders, on each Distribution Date, to
receive their interest and principal distributions prior to any interest and
principal distributions being made to the holders of the Class B
Certificates, and, subject to the occurrence of a Class R Distribution
Trigger, prior to any distributions of the Excess Spread on deposit on such
date in the Certificate Account being made to the holders of the Class R
Certificates, and, if necessary, by the right of such holders of the Class A
Certificates to receive their future distributions of interest and principal
from the Certificate Account that otherwise would have been payable to the
holders of the Class B Certificates and the Class R Certificates.

On the Closing Date, the Original Class Principal Balance of the
Class B Certificates in the aggregate will evidence the beneficial
ownership of approximately ____% of the Assumed Pool Principal Balance
and ____% of the Original Class Principal Balance for all Classes of
Class A Certificates. Subject to the occurrence on each Distribution
Date of a Class R Distribution Trigger, and further subject to the right
of the holders of the Class B Certificates to reimbursement for any
unreimbursed Net Loan Losses previously allocated to such Class B
Certificates, the Class R Certificates will evidence the right to
receive, on such Distribution Date, all or a portion of the Excess
Spread.

On each Distribution Date, with respect to the Liquidated Mortgage
Loans occurring during the immediately preceding Due Period, the "NET
LOAN LOSSES" will be equal to the amount (but not less than zero)
determined as of the related Determination Date equal to: (i) the
aggregate uncollected Principal Balances of and accrued and unpaid
interest on such Liquidated Mortgage Loans as of the last day of such Due
Period, with interest computed at the weighted average interest rate for
the Class A Certificates and Class B Certificates plus the aggregate rate
of the Trustee Fees, Custodian Fees, REMIC Administration Fees, the
Servicing Fees and Certificate Insurer Premium, and without application
of any amounts included in clause (ii) below, minus (ii) the aggregate
amount of any recoveries with respect to such Liquidated Mortgage Loans
from whatever source, including any Net Liquidation Proceeds, FHA
Insurance Proceeds, any Insurance Proceeds, any Released Mortgaged
Property Proceeds, any payments from the related borrower and any
payments made to purchase such Liquidated Mortgage Loans pursuant to the
Pooling and Servicing Agreement, less the amount of any expenses incurred
in connection with such recoveries and liquidation.

If on any Distribution Date Net Loan Losses occur, then the
principal portion of the Net Loan Losses attributable to such Liquidated
Mortgage Loans will be allocated as follows: (i) first to reduce the
portion of the Pool Principal Balance attributable to the Class R
Certificates (which is the excess of the Pool Principal Balance over the
aggregate Class Principal Balance of the Class A Certificates and the
Class B Certificates), until such excess has been reduced to zero; and
(ii) second, to reduce the Class Principal Balance of the Class B
Certificates, until such Class Principal Balance has been reduced to
zero; provided that with respect to clause (ii) above, the interest
portion of such Net Loan Losses that corresponds to the principal portion
thereof will be allocated to the Class B Certificates to reduce to zero
the amount of any accrued and unpaid interest on such Class B
Certificates, including any Interest Carry-Forward Amount for such Class
B Certificates. After the reduction of the Class A Overcollateralization
to zero, the principal portion of any Net Loan Losses will not be
allocated to reduce the Class Principal Balance of the Class A
Certificates, but rather the principal portion of any such Net Loan
Losses will be included in the Principal Remittance Amount attributable
to the Class A Certificates. See the definition of "Principal Remittance
Amount" under the subheading "Distributions on the Senior Certificates"
above. Accordingly, if the Net Loan Losses occur after the Class A
Overcollateralization has been reduced to zero, the holders of such Class
A Certificates will be distributed, as appropriate, the full amount of
the interest and principal distributions due such holders to the extent
that sufficient funds are received from the Excess Spread and that
Guaranteed Payments are made under the Guaranty Policy.

The Class A-2 Certificates will not be subordinate to Class A-1
Certificates with respect to the allocation of losses, the Class A-3
Certificates will not be subordinate to the Class A-2 and Class A-1
Certificates with respect to the allocation of losses, and the Class A-4
Certificates will not be subordinate to the Class A-3, Class A-2 and
Class A-1 Certificates with respect to the allocation of losses.
Nevertheless, the Class A-2 Certificates will not be entitled to any
distributions of principal until the Class Principal Balance of the Class
A-1 Certificates has been reduced to zero; the Class A-3 Certificates
will not be entitled to any distributions of principal until the Class
Principal Balances of the Class A-2 and Class A-1 Certificates have been
reduced to zero; and the Class A-4 Certificates will not be entitled to
any distributions of principal until the Class Principal Balances of the
Class A-3, Class A-2 and Class A-1 Certificates have been reduced to
zero.

If Net Loan Losses are allocated to reduce the Class Principal
Balance of the Class B Certificates and the corresponding amount of the
accrued and unpaid interest on such Class B Certificates, then the Class
B Certificateholders may be reimbursed for such allocated Net Loan Losses
to the extent that any Excess Spread would otherwise be distributable
upon a Class R Distribution Trigger (the amount of such allocated Net
Loan Losses less any reimbursement received from Excess Spread, if any,
will equal the "CLASS B LOSS REIMBURSEMENT AMOUNT").

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REPORTS TO CERTIFICATEHOLDERS

On each Distribution Date, the Trustee will be required to forward
to each Certificateholder, the Depositor, the Certificate Insurer, the
Rating Agencies and any FHA Claims Administrator a statement which will
set forth, among other things:

(i) the Available Remittance Amount for such Distribution
Date;

(ii) the Class Principal Balance of each Class of Senior
Certificates and the Pool Principal Balance (including until the
Funding Period ends, the amount remaining in the Pre-Funding Account
and the Capitalized Interest Account as of such Distribution Date)
as of the first day of the related Due Period and after giving
effect to distributions made to the Holders of the Senior
Certificates on such Distribution Date;

(iii) the Class Pool Factor with respect to each Class of
Senior Certificates then outstanding;

(iv) the amount of principal and interest received on the
Mortgage Loans during the related Due Period;

(v) the Principal Remittance Amount, the Interest Remittance
Amount, the Interest Carry-Forward Amount and the Principal Carry-
Forward Amount, if any, with respect to each Class of Senior
Certificates then outstanding;

(vi) whether a Class R Distribution Trigger has occurred on
such Distribution Date, and if so, the amount of any Excess Spread
or any other amount to be distributed to the holders of the Class R
Certificates on such Distribution Date;

(vii) the Servicing Fees, the Trustee Fees, the Custodian
Fees, the Certificate Guaranty Insurance Premium, the REMIC
Administration Fee and the amounts deposited to the FHA Insurance
Premium Deposit Amount;

(viii) the FHA Insurance Amount before and after such
Distribution Date, and the aggregate number of FHA Claims submitted,
the aggregate principal balance of all the Mortgage Loans relating
to FHA Claims finally rejected by the FHA and the amount of FHA
Insurance Proceeds received, in each case during the related Due
Period, and the cumulative amount of FHA Insurance Proceeds
received;

(ix) the Class A Overcollateralization on such Distribution
Date, the Required Class A Overcollateralization Level, as of such
Distribution Date, the Net Loan Losses incurred during the related
Due Period and the cumulative Net Loan Losses as of such
Distribution Date;

(x) the weighted average maturity of the Mortgage Loans and
the weighted average Mortgage Loan Rate of the Mortgage Loans;

(xi) certain performance information, including delinquency and
foreclosure information, as set forth in the Servicer's Monthly
Remittance Report;

(xii) the amount of any Guaranteed Payment included in the
amounts distributed on such Distribution Date, and the amount of any
Certificate Insurer Reimbursement Amount, and any such obligations
remaining unsatisfied after distributions on such Distribution Date;
and

(xiii) the aggregate Principal Balance of the Mortgage Loans
that became Defaulted Mortgage Loans during the related Due Period,
and the cumulative amount thereof from the Closing Date.

ASSIGNMENT OF MORTGAGE LOANS

On the Closing Date, the Transferor will sell, convey, transfer and
assign all of its right, title and interest in and to the Initial
Mortgage Loans to the Depositor, and the Depositor will sell, convey,
transfer and assign the Initial Mortgage Loans to the Trustee. The
Trustee will, concurrently with the sale, conveyance, transfer and
assignment of the Initial Mortgage Loans and the deposit of funds in the
Pre-Funding Account, deliver the Certificates to the Depositor in
exchange for the Initial Mortgage Loans and the Pre-Funding Account
Deposit. Each Initial Mortgage Loan will be identified in a schedule
appearing as an exhibit to the Pooling and Servicing Agreement (the
"MORTGAGE LOAN SCHEDULE").

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Following the Closing Date, the funds in the Pre-Funding Account
will be used to purchase from the Depositor, from time to time prior to
the end of the Funding Period, subject to the availability thereof,
Subsequent Mortgage Loans consisting of closed-end fixed rate, property
improvement and/or home equity loans. In connection with each purchase
of such Subsequent Mortgage Loans, the Trust Fund will be required to pay
to the Depositor from the Pre-Funding Account a cash purchase price of
not more than 100% of the principal balance thereof; the Trust Fund may
pay a cash purchase price of less than 100% for the purpose of increasing
the amounts available for distribution, but in no event less than the
fair market value of such Subsequent Mortgage Loans. In connection with
any purchase of Subsequent Mortgage Loans by the Trust Fund after the
Closing Date, the Transferor will assign to the Depositor all of its
right, title and interest in and to such Subsequent Mortgage Loans and
the Depositor in turn will assign to the Trustee all of its right, title
and interest in and to such Subsequent Mortgage Loans, except that the
Transferor will retain the accrued and unpaid interest on the principal
amount of the Subsequent Mortgage Loans up to the Subsequent Transfer
Date.

In addition, the Depositor will, as to each Mortgage Loan, deliver
to the Trustee or the Custodian the Note endorsed to the order of the
Trustee or the Custodian without recourse, the Mortgage with evidence of
recording indicated thereon (except for any Mortgage not returned from
the public recording office), an assignment of the Mortgage with evidence
of recording thereon (except for any assignment of Mortgage to the
Trustee or the Custodian not returned from the public recording office),
intervening assignments of the Mortgage and assumption and modification
agreements (each, a "TRUSTEE'S MORTGAGE LOAN FILE"). In the event that,
with respect to any Mortgage Loan, the Depositor cannot deliver the
Mortgage or any assignment with evidence of recording thereon
concurrently with the conveyance thereof under the Pooling and Servicing
Agreement because they have not yet been returned by the public recording
office, the Depositor will deliver or cause to be delivered to the
Trustee or the Custodian a certified true photocopy of such Mortgage or
assignment. The Depositor will deliver or cause to be delivered to the
Trustee or the Custodian any such Mortgage or assignment with evidence of
recording indicated thereon upon receipt thereof from the public
recording office. The Trustee agrees, for the benefit of the
Certificateholders, to review (or cause to be reviewed) each Trustee's
Mortgage Loan File within 45 days after the conveyance of the related
Mortgage Loan to the Trust Fund to ascertain that all required documents
have been executed and received.

PRE-FUNDING ACCOUNT; FORWARD PURCHASE COMMITMENT

On the Closing Date, cash in the aggregate amount of approximately
$__________ (the "PRE-FUNDING ACCOUNT DEPOSIT") will be deposited in an
Eligible Account (the "PRE-FUNDING ACCOUNT"), which account will be part
of the Trust Fund and will be maintained as an Eligible Account with the
Trustee, in its corporate trust department for the purchase of Mortgage
Loans. The Pre-Funding Account Deposit will be increased or decreased by
an amount equal to the aggregate of the principal balances of any
mortgage loans removed from or added to, respectively, the Mortgage Loan
Pool prior to the Closing Date, provided that any such increase or
decrease shall not exceed ____% of the Initial Pool Principal Balance.
During the period (the "FUNDING PERIOD") from the Closing Date until the
earlier of (i) the date on which the amount on deposit in the Pre-Funding
Account is reduced below $_________, and (ii)__________________, 199__,
the amount on deposit in the Pre-Funding Account will be reduced by the
amount thereof used to purchase Subsequent Mortgage Loans in accordance
with the applicable provisions of the Pooling and Servicing Agreement;
provided that the Funding Period will be subject to an earlier
termination if insufficient funds are on deposit in the Capitalized
Interest Account on any Determination Date to cover any interest
shortfall for distributions to the Class A Certificates and the Class B
Certificates on the immediately following Distribution Date. Subsequent
Mortgage Loans purchased by and added to the Trust Fund on any Subsequent
Transfer Date must satisfy the criteria set forth in the Pooling and
Servicing Agreement and must be approved by the Certificate Insurer.
Assuming that the aggregate Cut-Off Date Principal Balances of all
Subsequent Mortgage Loans conveyed to the Trust Fund equals the Pre-
Funding Account Deposit, then it is expected that the Assumed Pool
Principal Balance will consist of approximately ____% to ____% Title I
Mortgage Loans, and approximately _____% to _____% Conventional Mortgage
Loans. See "The Mortgage Loan Pool -- Conveyance of Subsequent Mortgage
Loans" herein.

On the Distribution Date following the Due Period in which such
Funding Period ends, the portion of the Pre-Funding Account Deposit that
is remaining at the end of the Funding Period (net of reinvestment income
which is required to be transferred to the Capitalized Interest Account)
will be applied only to reduce the Class Principal Balances of all
Classes of Senior Certificates, on a pro rata basis. Although it is
intended that the principal amount of Subsequent Mortgage Loans sold to
the Trust Fund after the Closing Date will require application of
substantially all of the Pre-Funding Account Deposit, and it is not
currently anticipated that there will be any material amount of principal
distributions from amounts remaining on deposit in the Pre-Funding
Account in reduction of the Class Principal Balances of the Senior
Certificates, no assurance can be given that such a distribution with
respect to the Senior Certificates will not occur on the Distribution
Date following the Due Period in which the Funding Period ends. In any
event, it is unlikely that the Transferor will be able to deliver
Subsequent Mortgage Loans after the Closing Date with aggregate principal
balances that exactly equal the Pre-Funding Account Deposit, and the
portion of the Pre-Funding Account Deposit remaining at the end of the
Funding Period, if any, will be distributed in reduction of the Class
Principal Balance of each Class of the Senior Certificates, on a pro rata
basis among all Classes of Senior Certificates, thereby reducing the
weighted average lives of such

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Certificates. If pro rata principal distributions are made on the
Senior Certificates as a result of funds remaining on deposit in the
Pre-Funding Account after the termination of the Funding Period,
interest will not accrue on such principal distributions during the
20-day period that will elapse between the end of the monthly accrual
period immediately preceding the Distribution Date on which such
principal distributions will be made and such Distribution Date.

Amounts on deposit in the Pre-Funding Account will be invested in
Permitted Investments as defined in the Pooling and Servicing Agreement.
Permitted Investments are required to mature as may be necessary for the
purchase of Subsequent Mortgage Loans on any Subsequent Transfer Date no
later than the Business Day prior to the related Subsequent Transfer
Date, and in any case, no later than the Business Day prior to the
applicable Distribution Date. All interest and any other investment
earnings on amounts on deposit in the Pre-Funding Account will be
transferred to the Capitalized Interest Account.

CAPITALIZED INTEREST ACCOUNT

On the Closing Date, the Depositor will direct that a portion of the
sales proceeds from the Senior Certificates, in an amount not less than
$_________________ (the "CAPITALIZED INTEREST ACCOUNT DEPOSIT"), be
deposited in an Eligible Account maintained by and in the name of the
Trustee (the "CAPITALIZED INTEREST ACCOUNT"). The amount on deposit in
the Capitalized Interest Account will be specifically allocated to cover
shortfalls in interest (the "INTEREST SHORTFALL") on the Class A
Certificates and the Class B Certificates that may arise as a result of
the utilization of the Pre-Funding Account for the purchase by the Trust
Fund of Subsequent Mortgage Loans after the Closing Date and will be so
applied by the Trustee for the distribution of interest to
Certificateholders. The Interest Shortfall with respect to each
Distribution Date shall be calculated as set forth in the Pooling and
Servicing Agreement. The initial deposit in the Capitalized Interest
Account on the Closing Date will be sufficient to cover only
_______________ days of interest, reflecting the Interest Shortfall with
respect to the __________________ Distribution Date and the
__________________ Distribution Date. If the Transferor and Depositor
deliver Subsequent Mortgage Loans on or prior to __________________,
199__, the Trustee may release to the Depositor the portion of the
Capitalized Interest Account Deposit which, based on a recomputation of
the Interest Shortfall, will not be needed on the __________________
Distribution Date. Additionally, on or before __________________, 199__,
the Depositor may deposit into the Capitalized Interest Account the
Interest Shortfall with respect to the __________________ Distribution
Date. The Depositor's failure to make the required Interest Shortfall
deposit on __________________, 199__ with respect to the
__________________ Distribution Date will cause the Funding Period to end
on __________________, 199__. Any amounts remaining in the Capitalized
Interest Account on any Determination Date, that are not required to
cover the anticipated interest shortfall described above, will be
distributed to the Depositor, including any net reinvestment income
thereon.

Amounts on deposit in the Capitalized Interest Account will be
invested in Permitted Investments as defined in the Pooling and Servicing
Agreement. All such Permitted Investments are required to mature no
later than the Business Day prior to the applicable Distribution Date as
specified in the Pooling and Servicing Agreement. All interest and any
other investment earnings on amounts on deposit in the Capitalized
Interest Account will be distributed to the Depositor.

TRUST FUND FEES AND EXPENSES

As compensation for their services pursuant to the Pooling and
Servicing Agreement, the Trustee is entitled to the Trustee Fee, the
Custodian is entitled to the Custodian Fee, and the Servicer is entitled
to the Servicing Fee and additional servicing compensation and
reimbursement as described under the "Servicing" subheading below. As
compensation for issuing the Guaranty Policy, the Certificate Insurer is
entitled to the Certificate Guaranty Insurance Premium.

SERVICING

The Servicer is entitled to a Servicing Fee, payable monthly on each
Distribution Date, equal to ____% per annum on the Pool Principal Balance
(as adjusted for Liquidated Mortgage Loans) as of the first day of the
immediately preceding Due Period divided by 12. The Servicer shall pay
the fees of each Subservicer out of the amounts it receives as the
Servicing Fee. In addition to the Servicing Fee, the Servicer is
entitled to retain additional servicing compensation in the form of
assumption and other administrative fees, release fees, insufficient
funds charges, late payment charges and any other servicing-related fees.

THE TRUSTEE

________________________ , has been named Trustee pursuant to the
Pooling and Servicing Agreement. The Trustee has accepted appointment as
the Certificate Registrar and Paying Agent pursuant to the Pooling and
Servicing Agreement. The address of the Trustee is: ____________________.

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FHA INSURANCE ON THE TITLE I MORTGAGE LOANS

The Depositor and Trustee will contract with the Servicer to serve
as FHA Claims Administrator and as such to handle all aspects of
administering, processing and submitting FHA Claims with respect to the
Title I Mortgage Loans, in the name and on behalf of the Depositor. The
Servicer (acting as FHA Claims Administrator) shall file all claims with
the FHA and monitor the FHA Insurance Amount with respect to the Title I
Mortgage Loans. In the event it is determined that any FHA Claims
Administrator is no longer able to perform its duties hereunder, the
Trustee or its designee shall perform the obligations and duties of the
FHA Claims Administrator until a successor has assumed the FHA Claims
Administrator's responsibilities and obligations under the Pooling and
Servicing Agreement.

In order to accomplish the transfer of the FHA Insurance Amount for
the Title I Mortgage Loans, as soon as practicable after the Closing
Date, the Transferor will prepare and submit a Transfer Report to the FHA
regarding the assignment of the Title I Mortgage Loans to the Depositor
at such time as the Transferor has determined that the FHA has registered
substantially all of the insurance coverage for the Title I Mortgage
Loans within the Transferor's FHA Reserve, including such insurance for
any Title I Mortgage Loans acquired from any other Title I Lenders. On
each Transfer Date, the Depositor shall allocate on its books and records
that portion of the insurance coverage within its FHA Reserve equal to
the FHA Insurance Amount transferred by the FHA with respect to the
related Title I Mortgage Loans as available for FHA Claims relating to
the Title I Mortgage Loans. Also, as soon as practicable after the final
Transfer Date, the Depositor (or the Servicer, as FHA Claims
Administrator) is required to certify to the Rating Agencies, the
Certificate Insurer and the Trustee as to the actual amount of the
initial FHA Insurance Amount. With respect to the transfer of the FHA
Insurance Amount, see "Risk Factors -- No Assurance of Adequacy of Credit
Enhancement" and "The Title I Program -- General" herein.

In no event shall the Depositor (or any FHA Claims Administrator)
submit any FHA Claim if the amount of such FHA Claim would exceed the FHA
Insurance Amount. In addition, the Depositor (or any FHA Claims
Administrator) shall not submit any claim for FHA insurance relating to a
Title I loan not part of the Trust Fund if the effect thereof would be to
reduce the FHA Insurance Amount.

FHA INSURANCE PREMIUM ACCOUNT

An Eligible Account (the "FHA INSURANCE PREMIUM ACCOUNT") will be
established by the Trustee into which an initial deposit of $1,000 (the
"INITIAL FHA INSURANCE PREMIUM ACCOUNT DEPOSIT") will be made on the
Closing Date. On each Distribution Date, to the extent that funds are
available in the Certificate Account (after taking into account any prior
distributions therefrom), the Trustee will deposit an amount (the "FHA
INSURANCE PREMIUM DEPOSIT AMOUNT") equal to one-twelfth of the product of
(A) the applicable Annual FHA Premium Rate, multiplied by (B) the
original principal balance of each outstanding Title I Mortgage Loan.
The "ANNUAL FHA PREMIUM RATE" (i.e., the percentage rate applied on a
non-declining basis to the original principal balance of a Title I
Mortgage Loan to calculate the insurance premium) varies from .50% to
1.00%, depending on the type of loan and the loan term.

The Servicer's Monthly Remittance Report shall indicate the FHA
Premium Amount for each Title I Mortgage Loan outstanding as of the first
day of the immediately preceding Due Period. The FHA Premium Amount for
each Title I Mortgage Loan is an annual premium that ranges from 0.50% to
1.00% of the original principal balance of each such Title I Mortgage
Loan, depending on the type of Mortgage Loan and its term to maturity.
For the Title I Mortgage Loans that are property improvement loans with
maturities in excess of 25 months, which comprise substantially all of
the Title I Mortgage Loans, the annual premium rate is 0.50% of the
original principal balance of each such Mortgage Loan. On or before the
23rd day of each calendar month and in accordance with the FHA
Regulations, the Trustee shall withdraw from the FHA Insurance Premium
Account and pay to the FHA an amount equal to the FHA Premium Amount for
each Title I Mortgage Loan as to which such FHA Premium Amount is payable
to the FHA during such calendar month.

In order to provide for the payment of the FHA Premium Amount on
each Title I Mortgage Loan, the Trustee shall establish and maintain the
FHA Insurance Premium Account which shall be an Eligible Account into
which an initial deposit of $10,000 shall be made and into which shall be
deposited on a monthly basis an amount equal to one twelfth of the
product of the original principal balance of each outstanding Title I
Mortgage Loan multiplied by the appropriate annual premium rate
applicable to each such Mortgage Loan (the "FHA INSURANCE PREMIUM DEPOSIT
AMOUNT"). Amounts may be withdrawn from the FHA Insurance Premium
Account on each Distribution Date to reimburse the Transferor or FHA
Claims Administrator, or any Person acting on either of their behalf, for
any amounts advanced to the FHA by such entity in respect of the FHA
Premium Amount relating to any Title I Mortgage Loan in lieu of
withdrawals from the FHA Insurance Premium Account. In addition, monies
in excess of that required to be

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maintained in the FHA Insurance Premium Account as of the Distribution
Date occurring in November of each year commencing in __________ will be
transferred to the Certificate Account.

TERMINATION

The Servicer may, at its option, terminate the Pooling and Servicing
Agreement on any Distribution Date on which the Class Principal Balance
of the Certificates is less than 10% of the sum of the Initial Pool
Principal Balance and the aggregate Cut-Off Date Principal Balance of all
Subsequent Mortgage Loans conveyed to the Trust Fund. Such termination
shall be effected by the Servicer purchasing from the Trust Fund all of
the Mortgage Loans and REO Properties at the Termination Price. In
connection with any such purchase, the Servicer will pay the outstanding
fees and expenses, if any, of the Trustee, the Certificate Insurer, the
Custodian, and the Servicer.

THE CERTIFICATES; RESTRICTIONS ON TRANSFER

Each Class of the Class A Certificates will be represented by a
global certificate registered in the name of the nominee of The
Depository Trust Company. No person acquiring an interest in the Class A
Certificates will be entitled to receive a definitive certificate
representing such person's interest. SEE "Description of Book Entry
Procedures" herein.

DESCRIPTION OF BOOK ENTRY PROCEDURES

Each of the Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates and the Class A-4 Certificates (collectively, the
"BOOK ENTRY CERTIFICATES") will be represented by a single certificate
registered in the name of the nominee of The Depository Trust Company
("DTC"). DTC will maintain book entry records of ownership, transfers
and pledges by purchasers and other beneficial owners (each a "BENEFICIAL
OWNER") of such Book Entry Certificates only in the names of its
participants and indirect participants (the "DTC PARTICIPANTS"), which
include securities brokers and dealers, banks and trust companies and
clearing corporations and may include certain other organizations. Prior
to Book Entry Termination (as defined below), Beneficial Owners who are
not DTC Participants may transfer and pledge their interests in the Book
Entry Certificates, and exercise any other rights and remedies of
Certificateholders, only through DTC Participants or other entities that
maintain relationships with DTC Participants. The Trustee will have no
responsibility to monitor or restrict the transferability of interests in
the Book Entry Certificates through the facilities of DTC. DTC may
charge its customary fee to DTC Participants in connection with any such
transfers and pledges. In addition, prior to Book Entry Termination,
distributions on the Book Entry Certificates will be made to Beneficial
Owners only through DTC and its DTC Participants. Consequently,
Beneficial Owners may experience some delay in the receipt of their
payments. SEE "Risk Factors -- Book Entry Registration."

Each Class of the Book Entry Certificates will be issued in
certificated, registered form ("DEFINITIVE CERTIFICATES") to Beneficial
Owners or their nominees, and thereupon such Beneficial Owners will
become Certificateholders if, and only if, one of the following events
shall occur (any such event being referred to as "BOOK ENTRY
TERMINATION"): (i) DTC or the Transferor advises the Trustee in writing
that DTC is no longer willing or able properly to discharge its
responsibilities as a clearing corporation with respect to the Book Entry
Certificates and the Transferor and the Trustee are unable to engage a
qualified successor to serve as DTC, or (ii) DTC and DTC Participants, at
the direction of Beneficial Owners representing a majority of the
outstanding principal amount of the Book Entry Certificates, advise the
Trustee in writing that the continuation of a book entry system is no
longer in the best interests of Beneficial Owners. Upon Book Entry
Termination, Beneficial Owners will become registered Certificateholders
and will deal directly with the Trustee with respect to transfers,
notices and payments.

DTC has advised the Transferor and the Trustee that, prior to Book
Entry Termination, DTC will take any action permitted to be taken by a
Certificateholder under the Pooling and Servicing Agreement only at the
direction of one or more DTC Participants to whom the Book Entry
Certificates are credited in an account maintained by DTC. DTC has
advised that it will take such action with respect to any principal
amount of the Book Entry Certificates only at the direction of and on
behalf of DTC Participants with respect to those principal amounts of
such Book Entry Certificates.

Issuance of the Book Entry Certificates in book entry form rather
than as physical certificates may adversely affect the liquidity of such
Certificates in the secondary market and the ability of
Certificateholders to pledge them. In addition, since distributions on
the Book Entry Certificates will be made by the Trustee to DTC and DTC
will credit such distributions to the accounts of its Participants, which
will further credit them to the accounts of indirect participants of the
Book Entry Certificateholders, such Certificateholders may experience
delays in the receipt of such distributions.

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CERTAIN FEDERAL INCOME TAX CONSEQUENCES

An election will be made to treat the assets of the Trust Fund as a
REMIC for federal income tax purposes. The Class A-1 Certificates, Class
A-2 Certificates, Class A-3 Certificates, and Class B Certificates will
be regular interests in the Trust Fund, and the Class R Certificates will
be the residual interest in the Trust Fund.

The Senior Certificates may be treated as having been issued with
original issue discount. As a result, holders of Senior Certificates may
be required to recognize income with respect to the Senior Certificates
somewhat in advance of the receipt of cash attributable to that income.
The prepayment assumption that will be used for purposes of computing
original issue discount for federal income tax purposes is a CPR of
____%. No representation is made that the Mortgage Loans will, in fact,
prepay at this or any other rate.

See "Certain Federal Income Tax Consequences" in the Prospectus.

ERISA CONSIDERATIONS

As described in the Prospectus under "ERISA Considerations," the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
the Code impose certain duties and restrictions on any person which is an
employee benefit plan within the meaning of Section 3(3) of ERISA or Code
Section 4975 or any person utilizing the assets of such employee benefit
plan (an "ERISA Plan") and certain persons who perform services for ERISA
Plans. For example, unless exempted, investment by an ERISA Plan in the
Certificates may constitute a prohibited transaction under ERISA or the
Code. There are certain exemptions issued by the United States
Department of Labor (the "DOL") that may be applicable to an investment
by an ERISA Plan in the Certificates, including Prohibited Transaction
Class Exemption 83-1 ("PTE 83-1"). For a further discussion of PTE 83-1,
including the necessary conditions to its applicability, and other
important factors to be considered by an ERISA Plan contemplating
investing in the Certificates, See "ERISA Considerations" in the
accompanying Prospectus.

On __________________, the DOL issued to the Underwriter an
individual administrative exemption, Prohibited Transaction Exemption
_____________, Fed. Reg. __________ (the "Exemption"), from certain of
the prohibited transaction rules of ERISA with respect to the initial
purchase, the holding, and the subsequent resale by an ERISA Plan of
certificates in pass-through trusts that meet the considerations and
requirements of the Exemption. The Exemption might apply to the
acquisition, holding and resale of the Certificates by an ERISA Plan,
provided that specified conditions are met.

Among the conditions which would have to be satisfied for the
Exemption to apply to the acquisition by an ERISA Plan of the
Certificates, is the condition that the ERISA Plan investing in the
Certificates be an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Securities and Exchange Commission under the
Securities Act of 1933 (the "SECURITIES ACT").

Before purchasing any Certificate, a fiduciary of an ERISA Plan
should make its own determination as to the availability of the exemptive
relief provided in the Exemption or the availability of any other
prohibited transaction exemptions (including PTE 83-1), and whether the
conditions of any such exemption will be applicable to the Certificates.

Any fiduciary of an ERISA Plan considering whether to purchase any
Certificate should not only consider the applicability of exemptive
relief, but should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions
of ERISA and the Code to such investment. See "ERISA Considerations" in
the accompanying Prospectus.

LEGAL INVESTMENT

The Senior Certificates offered hereby will not constitute "mortgage
related securities" under the Secondary Mortgage Market Enhancement Act
of 1984 ("SMMEA") because a substantial number of the Mortgage Loans are
secured by liens on real estate that are not first liens, as required by
SMMEA. Accordingly, many institutions with legal authority to invest in
"mortgage related securities" may not be legally authorized to invest in
the Senior Certificates.

Although the Title I Mortgage Loans underlying the Senior
Certificates are partially insured under the Title I Program by the FHA,
the FHA has not guaranteed payments on the Senior Certificates
themselves. Therefore, the Senior Certificates should not be considered
to be "exempt" securities within the meaning of the Securities Act or the
Securities Exchange Act of 1934.

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There may be restrictions on the ability of certain investors,
including depository institutions, either to purchase the Senior
Certificates or to purchase Senior Certificates representing more than a
specified percentage of the investor's assets. Investors should consult
their own legal advisors in determining whether and to what extent the
Senior Certificates constitute legal investments for such investors.

RATINGS

At their initial issuance the Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates and the Class A-4 Certificates
will be rated "_____" by Standard & Poor's and "_____" by Moody's. A
security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time.

The ratings on mortgage pass-through securities address the
likelihood of the receipt by security holders of all distributions on the
underlying mortgage loans to which they are entitled. Ratings also
address the structural, legal and issuer-related aspects associated with
mortgage pass-through securities, including the nature of the underlying
mortgage loans. In general, the ratings on mortgage pass-through
securities address credit risk and not prepayment risk. Ratings on
mortgage pass-through securities do not represent any assessment of the
likelihood that principal prepayments will be made by borrowers or the
degree to which the rate of such prepayments might differ from that
originally anticipated. As a result, the initial ratings assigned to the
Senior Certificates do not address the possibility that holders of the
Senior Certificates might suffer a lower than anticipated yield in the
event of principal payments on the Senior Certificates resulting from
funds remaining in the Pre-Funding Account at the end of the Funding
Period or rapid prepayments of the Mortgage Loans, or in the event that
the Trust Fund is terminated prior to the Assumed Final Distribution
Dates of each Class of Senior Certificates.

The Depositor has not discussed ratings on the Senior Certificates
with any rating agency other than the Rating Agencies. However, there
can be no assurance as to whether any other rating agency will rate the
Senior Certificates, or, if it does, what rating would be assigned by any
such other rating agency. Any rating on the Senior Certificates by
another rating agency, if assigned at all, may be lower than the ratings
assigned to the Senior Certificates by the Rating Agencies.

A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by
the assigning rating organization. Each security rating should be
evaluated independently of any other security rating. In the event that
the rating initially assigned to any of the Senior Certificates is
subsequently lowered for any reason, no person or entity is obligated to
provide any additional support or credit enhancement with respect to such
Senior Certificates.

LEGAL MATTERS

Certain legal matters will be passed upon for the Transferor by
Andrews & Kurth L.L.P., Dallas, Texas, and for the Underwriter by
_____________________________________. In addition, Andrews & Kurth
L.L.P. will pass on certain other legal matters for the Depositor.
Certain legal matters will be passed upon for the Certificate Insurer by
_______________________________.

UNDERWRITING

_________________________ (the "UNDERWRITER"), has agreed, subject
to the terms and conditions of the Underwriting Agreement, to purchase
from the Company the entire principal amount of the Senior Certificates
offered hereby.

The Company has been advised by the Underwriter that it proposes to
offer the Senior Certificates from time to time in negotiated
transactions or otherwise at varying prices to be determined, in each
case, at the time of sale. The Underwriter may effect such transactions
by selling the Senior Certificates to or through certain dealers and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter and any purchasers of
such Senior Certificates for whom they may act as agent. The Underwriter
and any dealers that participate with the Underwriter in the distribution
of the Senior Certificates may be deemed to be underwriters, and any
amounts or commissions received by them and any profits on the resale of
such Senior Certificates positioned by them may be deemed to be
underwriting discounts or commissions, under the Securities Act.

The Company and the Transferor will indemnify the Underwriter
against certain civil liabilities, including liabilities under the
Securities Act or contribute to payments the Underwriter may be required
to make in respect thereof.

S-48

<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.

<PAGE>

SUBJECT TO COMPLETION; DATED DECEMBER __, 1995
PROSPECTUS
ASSET-BACKED CERTIFICATES
(ISSUABLE IN SERIES)
REMODELERS INVESTMENT CORPORATION
AND CERTAIN TRUSTS, ALL OF THE BENEFICIAL OWNERSHIP INTEREST
IN WHICH IS OWNED BY REMODELERS INVESTMENT CORPORATION

This Prospectus relates to Asset-Backed Certificates (the "CERTIFICATES")
which may be sold from time to time in one or more series (each, a "SERIES")
by Remodelers Investment Corporation (the "DEPOSITOR") on terms determined at
the time of sale and described in this prospectus and the related Prospectus
Supplement (a "PROSPECTUS SUPPLEMENT"). As specified in the related
Prospectus Supplement, the Certificates of each Series will evidence a
beneficial ownership interest in assets deposited into a trust fund (a "TRUST
FUND") by the Depositor as depositor pursuant to a Pooling and Servicing
Agreement, as described herein. The issuer (the "ISSUER") with respect to a
Series of Certificates will be the Trust Fund established in respect of such
Certificates.

The Certificates of each Series will represent a beneficial interest in
certain mortgage related assets (the "MORTGAGE ASSETS") and may also be
secured by, represent a beneficial interest in, or have the benefits of
certain other assets (together with the Mortgage Assets, the "ASSETS") which
may include reinvestment income, reserve funds, cash accounts, insurance
policies, guarantees, letters of credit or other credit enhancement ("CREDIT
ENHANCEMENT") as described in the related Prospectus Supplement. The
Mortgage Assets with respect to a Series of Certificates will consist of one
or more of the following: mortgage-backed certificates, mortgage pass-through
certificates or mortgage participation certificates ("AGENCY SECURITIES")
issued or guaranteed by the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA") or the Federal
Home Loan Mortgage Corporation ("FHLMC"); pools of single family (one- to
four-unit) residential mortgage loans, property improvement and/or home
equity loans, or participation interests therein ("MORTGAGE LOANS"), (iii)
pools of home improvement and/or manufactured housing conditional sales
contracts, installment sales contracts and/or installment loan agreements, or
participation interests therein ("CONTRACTS"), and (v) participation or other
interests in any of the foregoing. To the extent specified in the related
Prospectus Supplement, Mortgage Loans and Contracts may be secured by junior
liens on the related mortgaged properties and may include Title I Mortgage
Loans and Title I Contracts.

Each Series will be issued in one or more Classes, one or more of which
may be Principal Only Certificates, Interest Only Certificates, Compound
Interest Certificates, Variable Interest Rate Certificates, Scheduled
Amortization Certificates, Companion Certificates, Special Allocation
Certificates or any other Class of Certificates, if any, included in such
Series and described in the related Prospectus Supplement. Principal Only
Certificates will not accrue, and will not be entitled to receive, any
interest. Payments or distribution of interest on each Class of Securities
other than Principal Only Certificates and Compound Interest Certificates
will be made on each Distribution Date as specified in the related Prospectus
Supplement. Interest will not be paid or distributed on Compound Interest
Certificates on a current basis until the date or period specified in the
related Prospectus Supplement. Prior to such time, interest on such Class of
Compound Interest Certificates will accrue and the amount of interest so
accrued will be added to the principal thereof

(COVER CONTINUED ON NEXT PAGE)

SEE "RISK FACTORS" BEGINNING ON PAGE __ HEREIN FOR A DESCRIPTION OF
CERTAIN RISKS AND OTHER FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING AN
INVESTMENT IN THE CERTIFICATES.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY

ADEQUACY OF THIS PROSPECTUS OR ANY RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Offers of the Certificates of a Series may be made through one or more
different methods, including offerings through underwriters, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement.

There will have been no public market for any Certificates prior to the
offering thereof. There can be no assurance that a secondary market will
develop for the Certificates of any Series or, if it does develop, that such
market will continue.

Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Certificates unless accompanied by a Prospectus
Supplement.

THE DATE OF THIS PROSPECTUS IS _______________, 199__.

<PAGE>

(COVER CONTINUED FROM PREVIOUS PAGE)

on each Distribution Date. The amount of principal and interest available
and payable on each Series on each Distribution Date will be applied to the
Classes of such Series in the order and as otherwise specified in the related
Prospectus Supplement. Principal payments or distributions on each Class of
a Series will be made on a pro rata, random lot or other selection basis
among Certificates of such Class, as specified in the related Prospectus
Supplement. Certificates of a Series will be subject to redemption or
repurchase only under the circumstances and according to the priorities
described herein and in the related Prospectus Supplement. The Depositor or
its affiliates may retain or hold for sale from time to time all or a portion
of one or more Classes of a Series.

Certificates of a Series will evidence an interest in the related Trust
Fund only. The Certificates will not be insured or guaranteed by GNMA, FNMA,
FHLMC or any governmental entity or, unless otherwise specified in the
related Prospectus Supplement, by any other person. Unless otherwise
specified in the related Prospectus Supplement, the Depositor's only
obligations, if any, with respect to a Series will be to obtain certain
representations and warranties from each Transferor of the related Mortgage
Assets and to assign to the related Trustee the Depositor's rights with
respect thereto, and its obligations pursuant to certain representations and
warranties made by it. Unless otherwise specified in the Prospectus
Supplement relating to a Series, no affiliate of the Depositor will have any
obligations with respect to such Series.

The yield on each Class of a Series will be affected by the rate of
payment of principal and interest (including prepayments) on the related
Mortgage Assets and the timing of receipt of such payments as described
herein and in the related Prospectus Supplement.

If specified in the Prospectus Supplement for a Series, one or more
elections may be made to treat all or specified portions of the related Trust
Fund as a real estate mortgage investment conduit ("REMIC") or to treat the
arrangement by which such Series is issued as a REMIC, for federal income tax
purposes. See Certain Federal Income Tax Consequences .

<PAGE>

PROSPECTUS SUPPLEMENT AND CURRENT REPORT ON FORM 8-K

The Prospectus Supplement and Current Report on Form 8-K relating to a
Series to be offered hereunder will, among other things, set forth all of the
following with respect to such Series:

(i) information as to the Assets, included in the related Trust
Fund, or otherwise available for such Series including
(A) the certain characteristics of the Mortgage Assets
included therein and (B) a description of the Credit
Enhancement, if any, with respect to such Series;

(ii) the aggregate original principal balance of each Class of
such Series entitled to distributions allocable to
principal and, if a fixed rate of interest, the interest
rate for each Class of such Series entitled to
distributions allocable to interest;

(iii) information as to any Class of such Series that has a rate
of interest that is subject to change from time to time and
the basis on which such interest rate will be determined;

(iv) information as to any Class of such Series on which
interest will accrue and be added to the principal or, if
applicable, notional principal balance thereof;

(v) information as to the method used to calculate the amount
of interest to be paid on any Class of such Series entitled
to distributions of interest only;

(vi) information as to the nature and extent of subordination
with respect to any Class of such Series that is
subordinate in right of payment to any other Class of
such Series;

(vii) the Assumed Final Distribution Date of each Class of
Certificates;

(viii) the circumstances, if any, under which the Certificates of
such Series are subject to repurchase;

(ix) the Distribution Dates for each Class of such Certificates;

(x) the method used to calculate the aggregate amounts of
principal and interest available and required to be applied
to the Certificates of such Series on each Distribution
Date, and with respect to a Series consisting of more than
one Class, the basis on which such amounts will be
allocated among the Classes of such Series;

(xi) the identity of the Trustee for such Series;

(xii) whether one or more elections will be made to treat all or
specified portions of the Assets securing such Series
or included in the related Trust Fund as a REMIC and, if
applicable, the designation of the regular interests and
residual interests therein; and

(xiii) information with respect to the plan of distribution of
such Series.

The actual characteristics of the Mortgage Assets relating to a Series
will not deviate in any material respect from the parameters specified in the
related Prospectus Supplement; provided, however, that if the characteristics
described in the initial related Prospectus Supplement materially differ from
the actual characteristics, a supplement to the related Prospectus Supplement
will be distributed.

AVAILABLE INFORMATION

The Depositor is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and in
accordance therewith is required to file reports and other information (the
REPORTS") with the Securities and Exchange Commission (the "COMMISSION").
The Depositor has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), with respect
to the Certificates. This Prospectus, which forms a part of the Registration
Statement, and the Prospectus Supplement relating to each series of
Certificates contain summaries of the material documents referred to herein
and therein, but do not contain all of the information contained in such
Registration Statement pursuant to the rules and

<PAGE>

regulations of the Commission. The Registration Statement can be inspected
and copied at prescribed rates at the public reference facilities maintained
by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., 1st
Floor, Room 1024, Washington, D.C. 20549, and at the following regional
offices of the Commission: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and New York
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048.

The Depositor does not plan to send any financial information to Holders
of Certificates. The Trustee, however, will include with each distribution
on the Certificates of a Series a statement containing certain payment
information with respect to such Certificates.

The Depositor's principal executive offices are located at 16901 Dallas
Parkway, Suite 200, Dallas, Texas 75248. Its telephone number is
(214) 380-5995.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

All documents filed by the Depositor pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Certificates shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in another subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Depositor will provide without charge to each person to whom a copy
of this Prospectus has been delivered, upon the request of such person, a
copy of any or all of the documents referred to above which have been or may
be incorporated in this Prospectus by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
into any such document). Requests for such copies should be directed to
Christopher J. Gramlich, Vice President, Remodelers Investment Corporation,
16901 Dallas Parkway, Suite 200, Dallas, Texas 75248, (214) 380-5995.

<PAGE>

TABLE OF CONTENTS

PAGE

PROSPECTUS SUPPLEMENT AND CURRENT REPORT ON FORM 8-K . . . . . . . . . . .3

AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .3

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . .4

TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

SUMMARY OF PROSPECTUS. . . . . . . . . . . . . . . . . . . . . . . . . . .8

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Risks Associated with Mortgage Assets . . . . . . . . . . . . . . . 18
Security Interests and Other Aspects of the Contracts . . . . . . . 20
Limited Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . 20
Limited Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Limitations, Reduction and Substitution of Credit Enhancement . . . 21
Original Issue Discount; Residual Certificates. . . . . . . . . . . 22
Book Entry Registration . . . . . . . . . . . . . . . . . . . . . . 22
Nature of Direct or Indirect Backing for Certificates . . . . . . . 23
Certain Matters Relating to Insolvency. . . . . . . . . . . . . . . 23
Remedies Following Default. . . . . . . . . . . . . . . . . . . . . 23
Deposits, Substitutions and Withdrawals of Assets . . . . . . . . . 23
Other Legal Considerations. . . . . . . . . . . . . . . . . . . . . 23

DESCRIPTION OF THE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
The Certificates - General. . . . . . . . . . . . . . . . . . . . . 25
Form of Certificates; Transfer and Exchange . . . . . . . . . . . . 25
REMIC Election. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Classes of Certificates . . . . . . . . . . . . . . . . . . . . . . 26
Distributions of Principal and Interest . . . . . . . . . . . . . . 27
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Distributions of Interest . . . . . . . . . . . . . . . . . . . . . 28
Distributions of Principal. . . . . . . . . . . . . . . . . . . . . 28
Unscheduled Distributions . . . . . . . . . . . . . . . . . . . . . 29
Termination or Repurchase of the Certificates . . . . . . . . . . . 29
Book Entry Registration . . . . . . . . . . . . . . . . . . . . . . 30
Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . 30

ASSETS SECURING OR UNDERLYING THE CERTIFICATES . . . . . . . . . . . . . 30
Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Agency Securities . . . . . . . . . . . . . . . . . . . . . . . . . 32
Government National Mortgage Association (GNMA) . . . . . . . . . . 32
Federal National Mortgage Association (FNMA). . . . . . . . . . . . 34
Federal Home Loan Mortgage Corporation (FHLMC). . . . . . . . . . . 35
Stripped Agency Securities. . . . . . . . . . . . . . . . . . . . . 36
Other Agency Securities . . . . . . . . . . . . . . . . . . . . . . 37
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Deposit, Substitution and Withdrawal of Assets. . . . . . . . . . . 38

<PAGE>

TABLE OF CONTENTS
(continued)

PAGE

CREDIT ENHANCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Overcollateralization . . . . . . . . . . . . . . . . . . . . . . . 39
Cross-Support . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Certificate Insurance . . . . . . . . . . . . . . . . . . . . . . . 39
Pool Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Special Hazard Insurance. . . . . . . . . . . . . . . . . . . . . . 40
Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Other Insurance, Guarantees and Similar Instruments or Agreements . 40

SERVICING OF THE MORTGAGE LOANS AND CONTRACTS. . . . . . . . . . . . . . 41
Enforcement of Due-on-Sale Clauses. . . . . . . . . . . . . . . . . 41
Waivers and Deferments of Certain Payments. . . . . . . . . . . . . 42
Subservicers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Removal and Resignation of Servicer . . . . . . . . . . . . . . . . 42
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Servicing Procedures. . . . . . . . . . . . . . . . . . . . . . . . 43
Administration and Servicing Compensation and Payment of Expenses . 44

THE POOLING AND SERVICING AGREEMENT. . . . . . . . . . . . . . . . . . . 44
Assignment of Mortgage Assets . . . . . . . . . . . . . . . . . . . 44
Assignment of Mortgage Loans. . . . . . . . . . . . . . . . . . . . 44
Assignment of Contracts . . . . . . . . . . . . . . . . . . . . . . 45
Assignment of Agency Securities . . . . . . . . . . . . . . . . . . 46
Repurchase or Substitution of Mortgage Loans and Contracts. . . . . 46
Evidence as to Compliance . . . . . . . . . . . . . . . . . . . . . 46
List of Certificateholders. . . . . . . . . . . . . . . . . . . . . 47
Administration of the Certificate Account . . . . . . . . . . . . . 47
Reports to Holders of Certificates. . . . . . . . . . . . . . . . . 48
Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 48
Rights Upon Event of Default. . . . . . . . . . . . . . . . . . . . 49
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

THE DEPOSITOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

CERTAIN LEGAL ASPECTS OF THE MORTGAGE ASSETS . . . . . . . . . . . . . . 51
General Legal Considerations. . . . . . . . . . . . . . . . . . . . 51
Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Cooperative Loans . . . . . . . . . . . . . . . . . . . . . . . . . 52
Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Truth in Lending Act. . . . . . . . . . . . . . . . . . . . . . . . 59
Applicability of Usury Laws . . . . . . . . . . . . . . . . . . . . 60
Soldiers' and Sailors' Civil Relief Act . . . . . . . . . . . . . 60
The Title I Program . . . . . . . . . . . . . . . . . . . . . . . . 60

<PAGE>

TABLE OF CONTENTS
(continued)

PAGE

LEGAL INVESTMENT MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 68

ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 68

CERTAIN FEDERAL INCOME TAX CONSEQUENCES. . . . . . . . . . . . . . . . . 69
Federal Income Tax Consequences for REMIC Certificates. . . . . . . 70
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Status of REMIC Certificates . . . . . . . . . . . . . . . . . 70
Qualification as a REMIC . . . . . . . . . . . . . . . . . . . 71
Taxation of Regular Certificates . . . . . . . . . . . . . . . 71
Taxation of Residual Certificates. . . . . . . . . . . . . . . 78
Limitations on Deduction of Certain Expenses . . . . . . . . . 85
Taxation of Certain Foreign Investors. . . . . . . . . . . . . 86
Backup Withholding . . . . . . . . . . . . . . . . . . . . . . 87
Reporting Requirements . . . . . . . . . . . . . . . . . . . . 87
Federal Income Tax Consequences for Certificates as to
Which No REMIC Election Is Made. . . . . . . . . . . . . . . . 87
Standard Certificates. . . . . . . . . . . . . . . . . . . . . 87
Stripped Certificates. . . . . . . . . . . . . . . . . . . . . 90
Reporting Requirements and Backup Withholding. . . . . . . . . 93
Taxation of Certain Foreign Investors. . . . . . . . . . . . . 93

STATE TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . 93

PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 93

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

FINANCIAL INFORMATION AND ADDITIONAL INFORMATION . . . . . . . . . . . . 94

<PAGE>

SUMMARY OF PROSPECTUS

The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
Prospectus Supplement with respect to the Series offered thereby and to the
related Pooling and Servicing Agreement. Unless otherwise specified,
initially capitalized terms used and not defined in this Summary of
Prospectus have the meanings given to them in this Prospectus and in the
related Prospectus Supplement. See "Index of Principal Terms" herein.

Securities Offered . . . . Certificates issuable in Series. Certificates
of a Series will be issued pursuant to a pooling
and servicing agreement (each, a "POOLING AND
SERVICING AGREEMENT") between the Depositor, as
depositor, the Servicer, any Administrators, the
Master Servicer, if any, and the Trustee for such
Series and will evidence beneficial interests
in the assets included in a trust fund (the
"TRUST FUND") and assigned to the Trustee for
the applicable Series. With respect to each
Series, a bank, trust company or other
fiduciary acting as a trustee and named in the
Prospectus Supplement (the "TRUSTEE" with respect
to such Series) will enter into the related
Pooling and Servicing Agreement. Holders of
Certificates are referred to herein as "HOLDERS" or
"CERTIFICATEHOLDERS."

The Certificates of any Series may be issued in
one or more classes (each a "CLASS"), as
specified in the related Prospectus Supplement.
One or more Classes of Certificates of each
Series

(i) may be entitled to receive distributions
allocable only to principal ("PRINCIPAL ONLY
CERTIFICATES"), only to interest ("INTEREST ONLY
CERTIFICATES") or to any combination thereof;

(ii) may be entitled to receive distributions
only of prepayments of principal throughout the
lives of the Certificates of such Series or
during specified periods;

(iii) may be subordinated in the right to
receive distributions of scheduled payments of
principal, prepayments of principal, interest or
any combination thereof to one or more other
Classes of such Series throughout the lives of
the Certificates of such Series or during
specified periods;

(iv) may be entitled to receive such
distributions only after the occurrence of events
specified in the Prospectus Supplement;

(v) may be entitled to receive distributions in
accordance with a schedule or formula or on the
basis of collections from designated portions of
the Assets securing such Series or in the
related Trust Fund;

(vi) may be entitled to receive interest at a
rate that is subject to change from time to time
("VARIABLE INTEREST RATE CERTIFICATES") or at a
fixed rate;

(vii) may accrue interest, with such accrued
interest added to the principal amount of the
Certificates of such Class and no payments being
made thereon until such time as is specified in
the related Prospectus Supplement ("COMPOUND
INTEREST CERTIFICATES").

The timing and amounts of such distributions may
vary among Classes, over time, or otherwise as
specified in the related Prospectus Supplement.

<PAGE>

The Depositor or its affiliates may retain or
hold for sale from time to time all or a portion
of one or more Classes of a Series.

The Certificates of each Class of a Series will
be issued either in fully registered form or in
book entry form in the authorized denominations
specified in the Prospectus Supplement. The
Certificates will not be guaranteed or insured by
GNMA, FNMA, FHLMC, any governmental entity or,
unless otherwise specified in the related
Prospectus Supplement, by any other person and,
except as otherwise specified in the related
Prospectus Supplement, the Mortgage Assets (other
than Agency Securities) relating to a Series
will not be guaranteed or insured by any
governmental agency or instrumentality or any
other insurer.

The Depositor. . . . . . . Remodelers Investment Corporation (the "DEPOSITOR")
is a Nevada corporation incorporated on
___________________. The Depositor's principal
executive offices are located at 16901 Dallas
Parkway, Suite 200, Dallas, Texas 75248; telephone
number (214) 380-5995. See "The Depositor."

Issuer . . . . . . . . . . The Issuer with respect to a Series of Certificates
will be the Trust Fund established by the Depositor
pursuant to the related Pooling and Servicing
Agreement.

Unless otherwise specified in a related
Prospectus Supplement each Series of
Certificates will be entitled to distributions
only from the Assets included in the related
Trust Fund and any other assets pledged or
otherwise available for the benefit of Holders
of such Series as specified in the related
Prospectus Supplement.

The Servicer . . . . . . . With respect to a Series of Certificates for
which the related Trust Fund includes
Mortgage Loans or Contracts, the entity or
entities named as the Servicer in the related
Prospectus Supplement (the "SERVICER"), will act
as servicer with respect to such Mortgage Loans
or Contracts. The Servicer may be an affiliate of
the Depositor. With respect to a Series of
Certificates for which the Trust Fund does not
include Mortgage Loans or Contracts, there will
be no Servicer unless otherwise specified in the
related Prospectus Supplement.

The Administrator. . . . . With respect to a Series of Certificates, the entity
or entities named as Administrator, if any, in the
related Prospectus Supplement (the "ADMINISTRATOR"),
will act as administrator with respect to one or
more aspects related to any Mortgage Loans or
Contracts included in the related Trust Fund (e.g.
REMIC Administrator, FHA Claims Administrator, etc.).
The Administrator may be an affiliate of the
Depositor.

The Master Servicer .. . . With respect to a Series of Certificates for which
the related Trust Fund includes Mortgage Loans or
Contracts, the entity or entities, if any, named as
the master servicer in the related Prospectus
Supplement (the "MASTER SERVICER"), will act as
master servicer with respect to such Mortgage
Loans or Contracts. The Master Servicer may be
an affiliate of the Depositor. With respect to a
Series of Certificates for which the Trust Fund
does not include Mortgage Loans or Contracts,
there will be no Master Servicer unless
otherwise specified in the related Prospectus
Supplement.

<PAGE>

Distributions of Interest .Each Class of a Series (other than a Class of
Principal Only Certificates) will accrue
interest at the rate set forth in (or, in the
case of Variable Interest Certificates, as
determined as provided in) the related Prospectus
Supplement (the "CERTIFICATE INTEREST RATE"). One
or more Classes of a Series may be entitled to
receive distributions of interest only to the
extent of amounts available to make such
distributions. Interest on each Class will accrue
during the respective periods and be paid or
distributed on the respective dates specified in
the related Prospectus Supplement (each such
period a "DUE PERIOD" and each such date a
"DISTRIBUTION DATE"). Interest on all
Certificates that bear or receive interest, other
than Compound Interest Certificates, will be
distributed on the Distribution Dates specified
in the related Prospectus Supplement. However,
failure to distribute interest on a current
basis may not necessarily be an Event of Default
with respect to a particular Series or Class of
Certificates. Interest on any Class of Compound
Interest Certificates will not be paid or
distributed currently, but will accrue and the
amount of the interest so accrued will be added
to the principal thereof on each Distribution
Date until such time as is specified in the
related Prospectus Supplement. Principal Only
Certificates will not accrue, and will not be
entitled to receive, any interest. Upon maturity
or earlier termination of the Certificates of
any Class or earlier termination of the Trust
Fund for any Series, interest will be paid to the
date specified in the related Prospectus
Supplement.

Each payment of interest on each Class of
Certificates (or addition to principal of a
Class of Compound Interest Certificates) on a
Distribution Date will include all interest
accrued during the related Due Period. If the Due
Period for a Series ends on a date other than a
Distribution Date for such Series, the yield
realized by the Holders of such Certificates may
be lower than the yield that would result if the
Due Period ended on such Distribution Date.
Additionally, if so specified in the related
Prospectus Supplement, interest accrued for a Due
Period for one or more Classes may be calculated
on the assumption that principal distributions
(and additions to principal of the
Certificates), and allocations of losses on the
Mortgage Assets (if so specified in the related
Prospectus Supplement), are made on the first day
of the preceding Due Period and not on the
Distribution Date for such preceding Due Period
when actually made or added. Such method would
produce a lower effective yield than if interest
were calculated on the basis of the actual
principal amount outstanding.

With respect to each Class of Variable Interest
Rate Certificates of a Series, the related
Prospectus Supplement will set forth: (i) the
initial Certificate Interest Rate, (or the
manner of determining the initial Certificate
Interest Rate); (ii) the formula, index or other
method by which the Certificate Interest Rate
will be determined from time to time; (iii) the
periodic intervals at which such determination
will be made; (iv) the interest rate cap (the
"MAXIMUM VARIABLE INTEREST RATE") if any, and the
interest rate floor (the "MINIMUM VARIABLE
INTEREST RATE"), if any, on the Certificate
Interest Rate for such Variable Interest Rate
Certificates; and (v) any other terms relevant
to such Class of Certificates. See "Description of
the Certificates -- Distributions of Principal
and Interest -- Distributions of Interest."

Distributions of Principal Principal distributions on the Certificates of a
Series will be made from amounts available
therefor on each Distribution Date in an
aggregate amount determined as set forth in the
related Prospectus Supplement

<PAGE>

and will be allocated among the respective Classes
of a Series of Certificates at the times, in the
manner and in the priority set forth in the
related Prospectus Supplement.

Except with respect to Compound Interest
Certificates and Interest Only
Certificates, unless specified otherwise in the
related Prospectus Supplement, on each
Distribution Date principal distributions will be
made on the Certificates of a Series in an
aggregate amount determined in the related
Prospectus Supplement. If a Series has a Class
of Compound Interest Certificates, additional
principal distributions on the Certificates of
such Series will be made on each Distribution
Date in an amount equal to the interest accrued,
but not then payable or distributable, on such
Class of Compound Interest Certificates for the
related Due Period. See "Description of the
Certificates -- Distributions of Principal and
Interest -- Distributions of Principal."

Unscheduled Distributions. If specified in the related Prospectus Supplement,
the Certificates of a Series will be subject to
receipt of distributions before the next
scheduled Distribution Date as described under
"Description of Certificates -- Distributions of
Principal and Interest -- Unscheduled
Distributions."

Allocation of Losses . . . If so specified in the related Prospectus
Supplement, on any Distribution Date on which
the principal balance of the Mortgage Assets
relating to a Series is reduced due to losses on
such Mortgage Assets, (i) the amount of such
losses will be allocated first, to reduce the
aggregate outstanding principal balance of the
Subordinate Certificates of such Series or other
subordination or reserves, if any, and,
thereafter, to reduce the aggregate outstanding
principal balance of the remaining Certificates
of such Series in the priority and manner
specified in such Prospectus Supplement until
the aggregate outstanding principal balance of
each Class of such Certificates so specified has
been reduced to zero or paid in full, thus
reducing the amount of principal distributable
on each such Class of Certificates or (ii) such
losses may be allocated in any other manner set
forth in the related Prospectus Supplement.
Unless otherwise specified in the related
Prospectus Supplement, such reductions of
principal of a Class or Classes of Certificates
will be allocated to the Holders of the
Certificates of such Class or Classes pro rata in
the proportion which the outstanding principal
of each Certificate of such Class or Classes
bears to the aggregate outstanding principal
balance of all Certificates of such Class. See
"Description of the Certificates -- Distributions
of Principal and Interest -- Distributions of
Principal."

Assumed
Final Distribution Date. . The "ASSUMED FINAL DISTRIBUTION DATE" for each Class
of Certificates of a Series will be the date
specified in the related Prospectus Supplement
after which no Certificates of such Class will
remain outstanding, as determined on the basis of
the assumptions set forth in the related
Prospectus Supplement. The Assumed Final
Distribution Date of a Class of Certificates may
equal the maturity date of the Mortgage Asset in
the related Trust Fund which has the latest
stated maturity or will be determined as
described herein and in the related Prospectus
Supplement.

The actual maturity date of the Certificates of a
Series will depend primarily upon the rate and
timing of principal and interest payments

<PAGE>

(including the level of prepayments) with
respect to the Mortgage Assets (including the
Underlying Mortgage Loans if such Mortgage
Assets consist of Agency Securities) securing or
underlying such Series of Certificates. The
actual maturity of any Certificates is likely to
occur earlier and may occur substantially earlier
than the Assumed Final Distribution Date of the
Certificates as a result of the application of
prepayments and the allocation of other
distributions to the reduction of the principal
balances of the Certificates. The rate and
timing of principal and interest payments
including prepayments on the Mortgage Assets
securing or underlying a Series will depend on a
variety of factors, including certain
characteristics of such Mortgage Loans and the
prevailing level of interest rates from time to
time, as well as on a variety of economic,
demographic, tax, legal, social and other
factors. No assurance can be given as to the
actual rate and timing of principal and interest
payments including the level of prepayments
experienced with respect to a Series. See "Risk
Factors."

Termination or Repurchase with
Respect to Certificates. . To the extent provided in the related Prospectus
Supplement, the Certificates of any Class of a
Series may be (i) repurchased at the request of
holders of such Certificates; (ii) repurchased
at the option of the Depositor, the Servicer or
another party specified in the related
Prospectus Supplement; or (iii) subject to
special repurchase under certain circumstances.
In addition, if so specified in the Prospectus
Supplement for a Series of Certificates, the
Depositor, the Servicer or another party
specified in the related Prospectus Supplement
may, at its option, cause an early termination of
the Trust Fund for such Series by repurchasing
all of the Mortgage Assets from such Trust Fund,
under the circumstances specified in such
Prospectus Supplement. The circumstances and
terms under which the Certificates of a Series
may be repurchased and the circumstances and
terms under which the related Trust Fund may be
terminated will be described in the related
Prospectus Supplement.

Assets Securing or Under-
lying the Certificates. . .Each Series of Certificates will represent
beneficial ownership interests in a Trust Fund.
The Mortgage Assets included in the Trust Fund
with respect to a Series of Certificates will
include Mortgage Assets consisting of one or more
of the following, as specified in the related
Prospectus Supplement:

(i) mortgage-backed certificates, mortgage
pass-through certificates or mortgage
participation certificates, including residual
interests ("AGENCY SECURITIES") issued or
guaranteed by the Government National Mortgage
Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") or the Federal
Home Loan Mortgage Corporation ("FHLMC");

(ii) a pool (a "MORTGAGE POOL") of single family
(one- to four-unit) residential mortgage loans,
property improvement and/or home equity loans, or
participation interests therein ("Mortgage LOANS");

(iii) a pool (a "CONTRACT POOL") of home
improvement and/or manufactured housing
conditional sales contracts, installment sales
contracts and/or installment loan agreements, or
participation interests therein ("CONTRACTS");
and

<PAGE>

(iv) participation or other interests in any of
the foregoing.

A Trust Fund may also include, or the related
Certificates may also have the benefits of,
certain other assets, including but not limited
to: reinvestment income, reserve funds, cash
accounts, insurance policies, guarantees, letters
of credit or other credit enhancement as
described in the related Prospectus Supplement
(together with the Mortgage Assets, the "Assets"),
intended to decrease the likelihood that
Holders of Certificates will experience delays
in distributions of scheduled distributions on,
or losses in respect of, the assets included in
such Trust Fund. The Certificates of any Series
will be entitled to payment only from the Assets
included in the related Trust Fund and any other
Assets pledged or otherwise available for the
benefit of the holders of such Certificates as
specified in the related Prospectus Supplement.

A. Agency Securities . . Agency Securities will consist of:

(i) fully modified pass-through mortgage-backed
certificates guaranteed as to timely payment of
principal and interest by GNMA ("GNMA
CERTIFICATES"),

(ii) guaranteed mortgage pass-through
certificates issued and guaranteed as to timely
payment of principal and interest by FNMA ("FNMA
CERTIFICATES"),

(iii) mortgage participation certificates issued
and guaranteed as to timely payment of interest
and, unless otherwise specified in the related
Prospectus Supplement, ultimate payment of
principal by FHLMC ("FHLMC CERTIFICATES"),

(iv) stripped mortgage-backed securities
representing an undivided interest in all or a
part of either the principal distributions (but
not the interest distributions) or the interest
distributions (but not the principal
distributions) or in some specified portion of
the principal and interest distributions (but not
all of such distributions) on certain GNMA, FNMA
or FHLMC Certificates and, unless otherwise
specified in the Prospectus Supplement,
guaranteed to the same extent as the underlying
securities,

(v) other types of mortgage-backed certificates,
mortgage pass-through certificates or mortgage
participation certificates issued or guaranteed
by GNMA, FNMA or FHLMC, such as FNMA Guaranteed
REMIC Pass- Through Certificates and FHLMC
Multiclass Mortgage Participation Certificates,
and including residual interest securities, as
described in the related Prospectus Supplement;
or

(vi) a combination of such Agency Securities.

All GNMA Certificates will be backed by the full
faith and credit of the United States. No FHLMC
or FNMA Certificates will be backed, directly or
indirectly, by the full faith and credit of the
United States.

The Prospectus Supplement for a Series will
describe any Agency Securities to be included in
the related Trust Fund. See "Assets Securing or
Underlying the Certificates -- Agency
Securities."

<PAGE>

B. Mortgage Loans. . . . Unless otherwise specified in the related Prospectus
Supplement, the Mortgage Loans will be fixed
rate, fully-amortizing single family residential
mortgage loans, property improvement and/or home
equity loans, that will be evidenced by
promissory notes, retail installment sales
contracts, or other evidences of indebtedness
(the "NOTES") and will be secured by mortgages,
deeds of trust or other similar security
instruments (the "MORTGAGES") creating a lien or
security interest on single family (one-to-four
unit) residences, units in planned unit
developments, units in condominium developments
and town homes (the "MORTGAGED PROPERTIES").
Unless otherwise specified in the related
Prospectus Supplement, substantially all of the
Mortgages will be junior (i.e., second, third,
etc.) liens on the related Mortgaged Properties,
which consist of owner occupied single family
residences, and the Mortgage Loans will have
scheduled monthly payment dates throughout a
month. Certain of the Mortgage Loans will be
partially insured, to the extent described in the
related Prospectus Supplement, by the Federal
Housing Administration (the "FHA") under the
Title I Program (the "TITLE I MORTGAGE LOANS");
while other Mortgage Loans will not be insured
by the FHA (the "CONVENTIONAL MORTGAGE LOANS").
Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans will
be originated or acquired by the Depositor,
either directly or through an affiliate. The
residential properties securing the Mortgage
Loans will be located in the United States. If
so specified in the related Prospectus
Supplement, the Mortgage Loans relating to a
Series may include cooperative apartment or
manufactured housing loans with respect to
individual units in cooperative apartment or
manufactured housing complexes, respectively,
which loans are secured by security interests in
shares issued by the related private, non-profit,
cooperative housing corporations
("COOPERATIVES") and in the related proprietary
leases or occupancy agreements granting
exclusive rights to occupy specific dwelling
units in such Cooperatives buildings or
complexes.

The related Prospectus Supplement for a Series
will describe any Mortgage Loans included in the
Trust Fund and will specify certain information
regarding the payment terms of such Mortgage
Loans. See "Assets Securing or Underlying the
Certificates -- Mortgage Loans."

C. Contracts. . . . . . The Contracts included in the Trust Fund for a
Series of Certificates will consist of property
improvement and/or manufactured housing
conditional sales contracts, installment sales
contracts and/or installment loan agreements, or
participation interests therein secured by new
or used Manufactured Homes (as defined herein).
As specified in the related Prospectus
Supplement, Contracts may either be secured by a
Manufactured Home (a "SECURED CONTRACT") or be
unsecured (a "UNSECURED CONTRACT"), and in either
case Contracts may not be insured or guaranteed
by any government agency ("CONVENTIONAL
CONTRACTS") or may be partially insured by the
FHA pursuant to the Title I Program ("TITLE I
CONTRACTS"). Unless otherwise specified in the
related Prospectus Supplement, each Contract will
be fully amortizing and will bear interest at a
fixed annual percentage rate ("APR"). The
related Prospectus Supplement for a Series will
describe any Contracts included in the Trust
Fund. See "Assets Securing or Underlying the
Certificates -- Contracts."

Credit Enhancement. . . . .If specified in the related Prospectus Supplement,
a Series, or certain Classes within such Series,
may have the benefit of one or more types of
credit enhancement ("CREDIT ENHANCEMENT")
including but not

<PAGE>

limited to overcollateralization, subordination,
cross support, mortgage pool insurance, certificate
insurance, special hazard insurance, a
bankruptcy bond, reserve funds, cash accounts,
other insurance, guarantees, letters of credit
and similar instruments and arrangements. The
protection against losses afforded by any such
Credit Enhancement will be limited. See "Credit
Enhancement."

Book Entry Registration . .If the Prospectus Supplement for a Series so
provides, Certificates of one or more Classes of
such Series may be issued in book entry form
("BOOK ENTRY CERTIFICATES") in which case a
single Certificate will be issued in the name of
a clearing agency (a "CLEARING AGENCY")
registered with the Securities and Exchange
Commission, or its nominee. Transfers and
pledges of Book Entry Certificates may be made
only through entries on the books of the
Clearing Agency in the name of brokers, dealers,
banks and other organizations eligible to
maintain accounts with the Clearing Agency
("CLEARING AGENCY PARTICIPANTS") or their
nominees. Transfers and pledges by purchasers
and other beneficial owners of Book Entry
Certificates ("BENEFICIAL OWNERS") other than
Clearing Agency Participants may be effected only
through Clearing Agency Participants. Beneficial
Owners will receive distributions of principal
and interest, and, if applicable, may tender
Certificates for repurchase to the related
Trustee, only through the Clearing Agency and
Clearing Agency Participants. Except as
otherwise specified in this Prospectus or a
related Prospectus Supplement, the terms
"CERTIFICATEHOLDERS" and "HOLDERS" shall be deemed
to include Beneficial Owners. See "Risk Factors --
Book Entry Registration and Description of the
Certificates -- Book Entry Registration."

Certain Federal Income Tax
Consequences. . . . . . . . The federal income tax consequences to Holders of a
Series will depend on, among other factors,
whether one or more elections are made to treat
the related Trust Fund or specified portions
thereof as a real estate mortgage investment
conduit ("REMIC") under the provisions of the
Internal Revenue Code of 1986, as amended (the
"CODE"). The Prospectus Supplement for each Series
will specify whether such an election will be
made.

If the applicable Prospectus Supplement so
specifies with respect to a Series of
Certificates, one or more REMIC elections will be
made with respect to such Series of
Certificates. Certificates of such Series will be
designated as regular interests in a REMIC
("REGULAR CERTIFICATES") or as residual interests
in a REMIC ("RESIDUAL CERTIFICATES").

If the applicable Prospectus Supplement so
specifies with respect to a Series of
Certificates, the Certificates of such Series
will not be treated as regular or residual
interests in a REMIC for federal income tax
purposes but instead will be treated as (i)
indebtedness of the Issuer, (ii) an undivided
beneficial ownership interest in the Mortgage
Assets (and the arrangement pursuant to which the
Mortgage Assets will be held and the
Certificates will be issued will be treated as a
grantor trust under Subpart E, part I of
subchapter J of Chapter 1 of Subtitle A of the
Code and not as an association taxable as a
corporation for federal income tax purposes);
(iii) equity interests in an association that
will satisfy the requirements for qualification
as a real estate investment trust; or (iv)
interests in an entity that will satisfy the
requirements for qualification as a partnership
for federal income tax purposes. The

<PAGE>

federal income tax consequences to Holders of any
such Series will be described in the related
Prospectus Supplement to the extent not described
herein.

Compound Interest Certificates and Principal
Only Certificates will, and certain other
Classes of Certificates may, be issued with
original issue discount that is not de minimis.
In such cases, the Holder will be required to
include the original issue discount in gross
income as it accrues, which may be prior to the
receipt of cash, or a portion of the cash,
attributable to such income. If a Certificate is
issued at a premium, the Holder will be entitled
to make an election to amortize such premium on
a constant yield method. Certificates
constituting regular or residual interests in a
REMIC will generally represent "qualifying real
property loans" for mutual savings banks and
domestic building and loan associations, "loans
secured by an interest in real property" for
domestic building and loan associations and "real
estate assets" for real estate investment trusts
to the extent that the underlying mortgage loans
and interest thereon qualify for such treatment.
Non-REMIC Certificates will not qualify for such
treatment.

A Holder of a Residual Certificate will be
required to include in its income its pro rata
share of the taxable income of the REMIC. In
certain circumstances, the Holder of a Residual
Certificate may have REMIC taxable income or tax
liability attributable to REMIC taxable income
for a particular period in excess of cash
distributions for such period or have an
after-tax return that is less than the after-tax
return on comparable debt instruments. In
addition, a portion (or, in some cases, all) of
the income from a Residual Certificate (i)
except in certain circumstances with respect to
a Holder classified as a thrift institution under
the Code, may not be subject to offset by losses
from other activities, (ii) for a Holder that is
subject to tax under the Code on unrelated
business taxable income, may be treated as
unrelated business taxable income and (iii) for
a foreign Holder, may not qualify for exemption
from or reduction of withholding. Further,
individual Holders are subject to limitations on
the deductibility of expenses of the REMIC. See
"Certain Federal Income Tax Consequences."

ERISA Considerations. . . .A fiduciary of any employee benefit plan subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the Code should
carefully review with its own legal advisors
whether the purchase or holding of Certificates
could give rise to a transaction prohibited or
otherwise impermissible under ERISA or the Code.
See "ERISA Considerations." To the extent described
in the Prospectus Supplement for a Series,
certain Classes of Certificates of such Series
may not be transferred unless the Trustee and
the Depositor are furnished with a letter of
representation or an opinion of counsel to the
effect that such transfer will not result in a
violation of the prohibited transaction
provisions of ERISA and the Code and will not
subject the Trustee, the Depositor or the
Servicer, the Master Servicer, if any, or the
Administrator, if any, to additional obligations.
If specified in the related Prospectus
Supplement, the United States Department of Labor
may have issued to the Underwriter an
administrative exemption for certain classes of
securities. See "Description of the Certificates
-- General" and "ERISA Considerations."

Legal Investment Matters. .Unless otherwise specified in the related
Prospectus Supplement, Certificates of each
Series will not constitute "mortgage related

<PAGE>

securities" under the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA") because, unless
otherwise specified in the related Prospectus
Supplement, a substantial number of the Mortgage
Loans will be secured by liens on real estate
that are not first liens, as required by SMMEA.
Accordingly, many institutions with legal
authority to invest in "mortgage related
securities" may not be legally authorized to
invest in the Certificates of any Series.
Investors should consult their own legal advisors
in determining whether and to what extent the
Certificates of any particular Series constitute
legal investments for such investors.

Use of Proceeds . . . . . .Substantially all of the net proceeds from the sale
of a Series will be applied to the simultaneous
purchase of the Mortgage Assets included in the
related Trust Fund or to reimburse the amounts
previously used to effect such purchase, the
costs of carrying the Mortgage Assets until sale
of such Series and to pay other expenses
connected with pooling the Mortgage Assets and
issuing such Series. See "Use of Proceeds."

Rating. . . . . . . . . . .It is a condition to the issuance of each Class of
a Series specified as being offered by the
related Prospectus Supplement that the
Certificates of such Class be rated in one of
the four highest rating categories established
for such Certificates by a nationally recognized
statistical rating agency.

<PAGE>

RISK FACTORS

Prospective investors in the Certificates should consider, among other
things, the following factors in connection with the purchase of the
Certificates:

GENERAL

The Certificates will not represent an interest in or obligation of the
Depositor, the Trustee, the Servicer, the Master Servicer, if any, the
Administrator, if any, any Subservicer or any of their respective affiliates.
UNLESS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, PROCEEDS OF
THE ASSETS INCLUDED IN THE TRUST FUND WILL BE THE SOLE SOURCE OF PAYMENTS ON
THE OFFERED CERTIFICATES.

RISKS ASSOCIATED WITH MORTGAGE ASSETS

GEOGRAPHIC CONCENTRATION. Certain geographic regions of the United
States from time to time will experience weaker regional economic conditions
and housing markets, and, consequently, will experience higher rates of loss
and delinquency on mortgage loans generally. Any concentration of the
Mortgage Assets in such a region may present risk considerations in addition
to those generally present for similar mortgage-backed securities without
such concentration.

DECLINE IN VALUE OF THE UNDERLYING ASSET. An investment in Certificates
secured by or evidencing an interest in a Mortgage Pool may be affected by,
among other things, a decline in one-to-four family residential property
values. No assurance can be given that values of the Mortgaged Properties
have remained or will remain at the levels existing on the dates of
origination of the related Mortgage Loans. If the residential real estate
market should experience an overall decline in property values such that the
outstanding balances of the Mortgage Loans in a particular Mortgage Pool, and
any other financing on the Mortgaged Properties, become equal to or greater
than the value of the Mortgaged Properties, the actual rates of
delinquencies, foreclosures and losses could be higher than those now
generally experienced in the mortgage lending industry. To the extent that
such losses are not covered by applicable insurance policies, if any, or by
any Credit Enhancement as described in the related Prospectus Supplement,
Holders of Certificates secured by or evidencing interests in such Mortgage
Pool will bear all risk of loss resulting from defaults by Mortgagors and
will have to look primarily to the value of the related Mortgaged Properties
for recovery of the outstanding principal and unpaid interest of the
defaulted Mortgage Loans. See "Assets Securing or Underlying the
Certificates -- Mortgage Loans."

An investment in Certificates secured by or evidencing interests in
Contracts may be affected by, among other things, a downturn in regional or
local economic conditions. These regional or local economic conditions are
often volatile, and historically have affected the delinquency, loan loss and
repossession experience of Contracts. To the extent that losses on Contracts
are not covered by applicable insurance policies, if any, or by any Credit
Enhancement, Holders of the Certificates secured by or evidencing interests
in such Contracts will bear all risk of loss resulting from default by
obligors and will have to look primarily to the value of the underlying asset
for recovery of the outstanding principal and unpaid interest of the
defaulted Contracts. See "Assets Securing or Underlying the Certificates --
Contracts."

JUNIOR LIENS. Unless otherwise specified in the related Prospectus
Supplement, substantially all of the Mortgage Loans will be secured by junior
liens, and the related senior liens will not be included in the Mortgage
Pool. The primary risk to holders of Mortgage Loans secured by junior liens
is the possibility that adequate funds will not be received in connection
with a foreclosure of the related Mortgaged Property to satisfy fully both
the senior lien(s) and the Mortgage Loan. (Provided the Trustee or the
Administrator, if any, can file a valid FHA Claim and receive FHA Insurance
proceeds with respect to a defaulted Title I Mortgage Loan, the following
discussion concerning junior liens generally will not be applicable to the
Title I Mortgage Loans.) The claims of the holder(s) of the senior lien(s)
will be satisfied in full out of proceeds of the liquidation of the Mortgaged
Property, if such proceeds are sufficient, before the Trust Fund as holder of
the junior lien receives any payments in respect of the Mortgage Loan. If
the Servicer or a Subservicer, if any, were to foreclose on any Mortgage
Loan, it would do so subject to any related senior lien(s). In order for the
debt related to the Mortgage Loan to be paid in full at such sale, a bidder
at the foreclosure sale of such Mortgage Loan would have to both bid an
amount sufficient to pay off all sums due under the Mortgage Loan and the
senior lien(s) or purchase the Mortgaged Property subject to the senior
lien(s). If proceeds from a foreclosure and liquidation of the related
Mortgaged Property are insufficient to satisfy the costs of foreclosure and
liquidation and the amounts owed under the loans secured by the senior
lien(s) and the Mortgage Loan in the aggregate, the Trust Fund, as the holder
of the junior lien, will bear (i) the risk of delay in distributions while a
deficiency judgment (which may not be available in certain jurisdictions)
against the borrower is obtained and realized and (ii) the risk of loss if
the deficiency judgment is not obtained or realized. Any such delays or
losses will be borne by the

<PAGE>

Certificates of a Series to the extent that such delays or losses are not
otherwise covered by amounts available from any Credit Enhancement provided
for such Certificates, as specified in the related Prospectus Supplement. In
servicing loans secured by junior liens in their portfolios and as a result
of the foregoing factors and costs involved, it will not be the Servicer's or
any Subservicer's practice to pursue the foreclosure of a defaulted Mortgage
Loan, to satisfy the senior mortgage(s) at or prior to the foreclosure sale
of the Mortgaged Property, or to advance funds to keep the senior mortgage(s)
current. The Trust Fund will have no source of funds (and may not be
permitted under the REMIC provisions of the Code if such Trust Fund is a
REMIC) to satisfy the senior mortgage(s) or make payments due to the senior
mortgagee(s), and, therefore, Certificateholders should not expect that any
senior mortgage(s) will be kept current by the Trust Fund for the purpose of
protecting the Trust Fund's junior lien. SEE "Certain Legal Aspects of the
Mortgage Loans -- Junior Liens" herein.

NO HAZARD INSURANCE FOR MORTGAGE LOANS. With respect to any Title I
Mortgage Loans, neither the underwriting standards of the Transferor nor the
FHA Regulations require that a borrower obtain title or fire and casualty
insurance as a condition to obtaining a property improvement and/or home
equity loan. With respect to both manufactured home contracts that are Title
I Contracts and property improvement loans that are Title I Mortgage Loans,
if the related Mortgage Property is located in a flood hazard area, however,
flood insurance in an amount at least equal to the loan amount is required.
In addition, the FHA Regulations do not require that the borrower obtain
insurance against physical damage arising from earth movement (including
earthquakes, landslides and mudflows) as a condition to obtaining a property
improvement loan insured under the Title I Program. Accordingly, if a
Mortgaged Property that secures a Title I Mortgage Loan suffers any uninsured
hazard or casualty losses, holders of any Senior Certificates secured in
whole or in part by Title I Mortgage Loans may bear the risk of loss
resulting from a default by the borrower to the extent such losses are not
recovered by foreclosure on the defaulted loans. Such loss may be otherwise
covered by amounts available from the credit enhancement provided for the
Senior Certificates, as specified in the related Prospectus Supplement.

PREPAYMENT AND YIELD CONSIDERATIONS

The prepayment experience on (i) the Mortgage Loans and the Contracts
included in a Trust Fund and (ii) the mortgage loans underlying the Agency
Securities (the "UNDERLYING MORTGAGE LOANS") will affect the average life of
each Class of Certificates relating to a Trust Fund including such Mortgage
Assets. Prepayments on the Mortgage Loans, the Contracts and the Underlying
Mortgage Loans may be influenced by a variety of economic, geographic, social
and other factors, including the difference between the interest rates on the
Mortgage Loans, the Contracts or the Underlying Mortgage Loans (giving
consideration to the cost of refinancing) and prevailing mortgage rates. In
general, if mortgage interest rates fall below the interest rates on the
Mortgage Loans, the Contracts or the Underlying Mortgage Loans relating to a
Series, the rate of prepayment would be expected to increase and
Certificateholders of such Series may be unable to reinvest such payments in
securities of comparable quality having interest rates similar to those borne
by the Certificates of such Series. Conversely, if mortgage interest rates
rise above the interest rates on the Mortgage Loans, the Contracts or the
Underlying Mortgage Loans, the rate of prepayment would be expected to
decrease. Prepayments may be influenced by a variety of economic,
geographic, social and other factors, including aging, seasonality and
interest rate fluctuations. Other factors affecting prepayment of mortgage
loans include changes in housing needs, job transfers, unemployment and
servicing decisions.

With respect to the Contracts and junior lien Mortgage Loans, there are
no reliable statistics available regarding the rates of prepayment of the
Contracts and junior lien Mortgage Loans. Therefore, no assurance can be
given as to the level of prepayments that the Contracts and junior lien
Mortgage Loans will experience. A number of factors suggest that the
prepayment experience of the Contracts and junior lien Mortgage Loans may be
significantly different from that of any first lien Mortgage Loans with
equivalent interest rates and maturities.

Additional prepayment, yield and weighted average life considerations
with respect to a Series of Certificates will be set forth in the related
Prospectus Supplement.

SECURITY INTERESTS AND OTHER ASPECTS OF THE CONTRACTS

CONTRACTS SECURED BY MANUFACTURED HOMES. Contracts may be secured by a
security interest in a Manufactured Home. Perfection of security interests
in the Manufactured Homes and enforcement of rights to realize upon the value
of the Manufactured Homes as collateral for the Contracts are subject to a
number of Federal and state laws, including the Uniform Commercial Code as
adopted in each state and each state's certificate of title statutes. The
steps necessary to perfect the security interest in a Manufactured Home will
vary from state to state. Because of the expense and administrative
inconvenience involved, the Servicer of a Contract will not amend any
certificate of title to change the lienholder specified therein from such
Servicer to the Trustee and will not deliver any certificate of title to such
trustee or note thereon the

<PAGE>

trustee's interest. Consequently, in some states, in the absence of such an
amendment, the assignment to such trustee of the security interest in the
Manufactured Home may not be effective or such security interest may not be
perfected and, in the absence of such notation or delivery to such trustee,
the assignment of the security interest in the Manufactured Home may not be
effective against creditors of the Servicer or a trustee in bankruptcy of
such servicer. In addition, numerous Federal and state consumer protection
laws impose requirements on lending under conditional sales contracts,
installment sales contracts and installment loan agreements such as the
Contracts, and the failure by the lender or seller of goods to comply with
such requirements could give rise to liabilities of assignees for amounts due
under such agreements and claims by such assignees may be subject to set-off
as a result of such lender's or seller's noncompliance. These laws would
apply to a Trustee as an assignee of Contracts. Each Transferor of Contracts
will warrant that each Contract complies with all requirements of law and
will make certain warranties relating to the validity, subsistence,
perfection and priority of the security interest in each Manufactured Home
securing a Contract. A breach of any such warranty that materially adversely
affects any Contract would create an obligation of the Transferor to
repurchase such Contract unless such breach is cured. If any related Credit
Enhancement is exhausted and recovery of amounts due on the Contracts is
dependent on repossession and resale of Manufactured Homes securing Contracts
that are in default, certain other factors may limit the ability of the
Holders to realize upon the Manufactured Homes or may limit the amount
realized to less than the amount due.

UNSECURED CONTRACTS. The obligations of the obligor under any Unsecured
Contract included in the related Trust Fund will not be secured by an
interest in the related real estate or otherwise, and the Trust Fund, as the
owner of such Contract, will be a general unsecured creditor as to such
obligations. As a consequence, in the event of a default under an Unsecured
Contract, the related Trust Fund will have recourse only against the
obligor's assets generally, along with all other general unsecured creditors
of the obligor. In a bankruptcy or insolvency proceeding relating to an
obligor on an Unsecured Contract, the obligations of the obligor under such
Unsecured Contract may be discharged in their entirety, notwithstanding the
fact that the portion of such obligor's assets made available to the related
Trust Fund as a general unsecured creditor to pay amounts due and owing
thereunder are insufficient to pay all such amounts. An obligor on an
Unsecured Contract may not demonstrate the same degree of concern over
performance of the obligor's obligations under such Unsecured Contract as if
such obligations were secured by the real estate owned by such Obligor.

LIMITED LIQUIDITY

There will be no market for the Certificates of any Series prior to the
issuance thereof, and there can be no assurance that a secondary market will
develop or, if it does develop, that it will provide the related Holders with
liquidity of investment or will continue for the life of such Series. The
market value of the Certificates will fluctuate with changes in prevailing
rates of interest. Consequently, the sale of Certificates by a Holder in any
market that may develop may be at a discount from par value or their purchase
price. Unless otherwise specified in the Prospectus Supplement for a Series,
Holders of the Certificates of such Series will have no right to request
repurchase of such Certificates, and such Certificates will be subject to
repurchase only under the limited circumstances described in such Prospectus
Supplement.

LIMITED ASSETS

Holders of Certificates of any Series must rely solely upon funds
collected from the related Mortgage Assets, together with the other specified
Assets in the related Trust Fund (which Assets may be subject to release from
such Trust Fund prior to payment in full of the Certificates), for the
distribution of principal of, and interest on, such Series of Certificates.
If the Mortgage Assets and other specified Assets comprising the related
Trust Fund are insufficient to make distributions on such Certificates, no
other assets of the Depositor will be available for payment of the
deficiency. Unless otherwise set forth in the Prospectus Supplement for a
Series of Certificates, the Trust Fund for such Series will be the only
available source of funds to make distributions on the Certificates of such
Series.

The only obligations, if any, of the Depositor with respect to a Series
will be to obtain certain representations and warranties from each Transferor
of the related Mortgage Assets and to assign to the related Trustee the
Depositor's rights with respect thereto, and its obligations pursuant to
certain representations and warranties made by it. The Depositor does not
have, and is not expected in the future to have, any significant assets. If
the Depositor were required to repurchase a Mortgage Asset included in the
Trust Fund for a Series, its only sources of funds to make such repurchase
would be funds obtained from the enforcement of a corresponding obligation,
if any, on the part of the Transferor of such Mortgage Asset or the related
Servicer, as the case may be, or from a Reserve Fund, if any, established to
provide funds for such repurchases. Further, there is no assurance that the
Transferor or the Servicer will have sufficient assets to satisfy their
respective corresponding obligations.

<PAGE>

Immediately after each required distribution of principal of, and
interest on, a Series has been paid in full, funds held in one or more
accounts maintained pursuant to the related Pooling and Servicing Agreement,
if not required to be deposited in any related Reserve Fund or otherwise
applied pursuant to the related Pooling and Servicing Agreement, may be
withdrawn under certain circumstances and conditions described in the related
Prospectus Supplement, or may be distributed to a party specified in such
Pooling and Servicing Agreement. In addition, certain amounts remaining in
related Reserve Funds with respect to a Series may likewise be withdrawn or
distributable to a party specified in the related Pooling and Servicing
Agreement after such Reserve Funds reach certain prescribed balances, or
after the principal balances of the Certificates of such Series have been
reduced to a prescribed level, in which cases such amounts would no longer be
available to make distributions on such Certificates.

Because distributions of principal on the Certificates of a Series may,
if so provided in the related Prospectus Supplement, be applied to
outstanding Classes of such Series in the priority specified in the related
Prospectus Supplement, a deficiency that arises after Certificates of a Class
of any such Series having higher priority in payment have been fully or
partially repaid will have a disproportionately greater effect on the
Certificates of Classes of such Series having lower priority in payment. The
disproportionate effect of any such deficiency is further increased in the
case of Classes of Compound Interest Certificates of any Series because,
prior to the retirement of all Classes of such Series having higher priority
in payment than such Compound Interest Certificates, interest is not payable,
unless otherwise provided in the related Prospectus Supplement, but is
accrued and added to the principal of such Compound Interest Certificates.

In addition, due to the priority of distributions and the allocation of
losses, defaults experienced on the Mortgage Assets included in the Trust
Fund for a Series of Special Allocation Certificates may have a
disproportionate effect on a specified Class or Classes within such Series.
If so specified in the Prospectus Supplement for a Series of Special
Allocation Certificates, on any Distribution Date for such Series on which
the principal balance of the related Mortgage Assets is reduced due to losses
on such Mortgage Assets (i) the amount of such losses shall be allocated
first to reduce the aggregate outstanding principal balance of the
Subordinate Certificates and thereafter to reduce the aggregate outstanding
principal balance of the remaining Certificates in the priority and manner
specified in such Prospectus Supplement until the aggregate outstanding
principal balance of each Class of Certificates so specified has been reduced
to zero or paid in full, thereby reducing the amount of principal payable on
each such Class of Certificates or (ii) such losses may be allocated in any
other manner set forth in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, such reductions of
principal of a Class of a Series will be allocated to the Holders of the
Certificates of such Class pro rata in their proportion which the outstanding
principal balance of each Certificate of such Class bears to the aggregate
outstanding principal balance of all Certificates of such Class.

LIMITATIONS, REDUCTION AND SUBSTITUTION OF CREDIT ENHANCEMENT

As specified in the related Prospectus Supplement with respect to each
Series, Credit Enhancement will be provided to the extent required by the
rating agencies requested to rate any Certificates or such Series of
Certificates. Credit Enhancement with respect to a Series will be provided
in one or more of the forms described in the related Prospectus Supplement,
including, but not limited to, prioritization as to distributions to one or
more Classes of such Series, overcollateralization of such Series, a Mortgage
Pool Insurance Policy, a Certificate Insurance Policy, a Special Hazard
Insurance Policy, FHA Insurance (with respect to Title I Mortgage Loans and
Title I Contracts, if any), a bankruptcy bond, one or more Reserve Funds,
other insurance, guarantees and similar instruments and agreements, or any
combination thereof. Regardless of the form of Credit Enhancement provided
with respect to a Series, the amount of coverage will be limited in amount
and in most cases will be subject to periodic reduction in accordance with a
schedule or formula. Furthermore, such Credit Enhancement may provide only
very limited coverage as to certain types of losses, and may provide no
coverage as to certain other types of losses. The related Trustee will
generally be permitted to reduce, terminate or substitute all or a portion of
the Credit Enhancement for a Series, if the applicable rating agencies
indicate that the then-current rating of the Certificates of such Series will
either not be adversely affected or be affirmed.

LIMITATIONS ON FHA INSURANCE. The related Prospectus Supplement will
specify the number and percentage of the Mortgage Loans and/or Contracts, if
any, included in the related Trust Fund that are partially insured by the FHA
pursuant to Title I of the National Housing Act (respectively, "TITLE I
MORTGAGE LOANS" and "TITLE I CONTRACTS"). Since the FHA Insurance Amount for
the Title I Mortgage Loans and Title I Contracts is limited as described
herein and in the related Prospectus Supplement, and since the adequacy of
such FHA Insurance Amount is dependent upon future events, including
reductions for the payment of FHA claims, no assurance can be given that the
FHA Insurance Amount is or will be adequate to cover 90% of all potential
losses on the Title I Mortgage Loans and Title I Contracts included in the
related Trust Fund. If the FHA Insurance Amount for the Title I Mortgage
Loans and Title I Contracts is reduced to zero, such loans and contracts

<PAGE>

will be effectively uninsured from and after the date of such reduction.
Under the Title I Program, until a claim for insurance reimbursement is
submitted to the FHA, the FHA does NOT review or approve for qualification
for insurance the individual Title I Mortgage Loan or Title I Contract
insured thereunder (as is typically the case with other federal loan
insurance programs). Consequently, the FHA has not acknowledged that any of
the Title I Mortgage Loans and Title I Contracts are eligible for FHA
insurance, nor has the FHA reviewed or approved the underwriting and
qualification by the originating lenders of any individual Title I Mortgage
Loans and Title I Contracts. SEE "Certain Legal Aspects of the Mortgage
Assets -- The Title I Program" herein.

ORIGINAL ISSUE DISCOUNT; RESIDUAL CERTIFICATES

All of the Compound Interest Certificates and Principal Only
Certificates will be, and certain of the other Certificates may be, issued
with original issue discount for federal income tax purposes. A Holder of a
Certificate issued with original issue discount will be required to include
original issue discount in ordinary gross income for federal income tax
purposes as it accrues, in advance of receipt of the cash, or a portion of
the cash, attributable to such income. Accrued but unpaid interest on the
Compound Interest Certificates generally will be treated as original issue
discount for this purpose. At certain rapid Mortgage Asset prepayment rates,
original issue discount may accrue on certain Classes of Certificates,
including certain variable rate Regular Certificates, that may never be
received as cash, resulting in a subsequent loss on such Certificates. See
"Certain Federal Income Tax Consequences -- Federal Income Tax Consequences
for REMIC Certificates -- Taxation of Regular Certificates -- Original Issue
Discount" and "Certain Federal Income Tax Consequences -- Federal Income Tax
Consequences for Certificates as to Which No REMIC Election Is Made --
Standard Certificates -- Premium and Discount -- Original Issue Discount" and
"-- Stripped Certificates -- Taxation of Stripped Certificates -- Original
Issue Discount."

An election may be made to treat all or any portion of any Trust Fund as
a REMIC for federal income tax purposes. Holders ("RESIDUAL HOLDERS") of
Certificates representing the residual interests in the related REMIC
("RESIDUAL CERTIFICATES") must report on their federal income tax returns
their pro rata share of REMIC taxable income or loss. All or a portion of
the REMIC taxable income reportable by Residual Holders may be treated as
such holders "excess inclusion" subject to special rules for federal income
tax purposes. The REMIC taxable income, and possibly the tax liabilities of
the Residual Holders, may exceed the cash distributions on the Residual
Certificates during certain periods. Residual Holders who are individuals
may be subject to limitations on the deductibility of servicing fees on the
related Mortgage Assets and other REMIC administrative expenses. Hence,
Residual Holders may experience an after-tax return that is significantly
lower than would be anticipated based upon the stated interest rate, if any,
of their Residual Certificates. See "Certain Federal Income Tax Consequences
- -- Federal Income Tax Consequences for REMIC Certificates -- Taxation of
Residual Certificates."

BOOK ENTRY REGISTRATION

Because transfers and pledges of Book Entry Certificates can be effected
only through book entries at a Clearing Agency through Clearing Agency
Participants, the liquidity of the secondary market for Book Entry
Certificates may be reduced to the extent that some investors are unwilling
to hold Certificates in book entry form in the name of Clearing Agency
Participants, and the ability to pledge Book Entry Certificates may be
limited due to lack of a physical certificate. Beneficial Owners of Book
Entry Certificates may, in certain cases, experience delay in the receipt of
distributions of principal and interest since such distributions will be
forwarded by the related Trustee to the Clearing Agency who will then forward
payment to the Clearing Agency Participants who will thereafter forward
payment to Beneficial Owners. In the event of the insolvency of the Clearing
Agency or of a Clearing Agency Participant in whose name Certificates are
recorded, the ability of Beneficial Owners to obtain timely payment and (if
the limits of applicable insurance coverage by the Securities Investor
Protection Corporation are exceeded, or if such coverage is otherwise
unavailable) ultimate payment of principal and interest on Book Entry
Certificates may be impaired.

NATURE OF DIRECT OR INDIRECT BACKING FOR CERTIFICATES

Only Agency Securities are guaranteed by an agency or instrumentality of
the United States and only the guarantee by GNMA of GNMA Certificates is
entitled to the full faith and credit of the United States. The guarantees
by FNMA and FHLMC of FNMA Certificates and FHLMC Certificates, respectively,
are backed only by the credit of FNMA, a federally chartered privately owned
corporation, or by the credit of FHLMC, a federally chartered corporation
controlled by the Federal Home Loan Banks. See "Assets Securing or
Underlying the Certificates - Agency Securities." Although payment of
principal of, and interest on, any Agency Security securing or underlying a
Series will be guaranteed by either GNMA, FNMA or FHLMC, such guarantee will
run only to such Agency Security and will not guarantee the payment of
principal or interest on the Certificates of such Series.

<PAGE>

CERTAIN MATTERS RELATING TO INSOLVENCY

The Transferors of the Mortgage Assets to the Depositor and the
Depositor will intend that the transfers of such Mortgage Assets to the
Depositor and, in turn to the applicable Trust Funds, constitute sales rather
than pledges to secure indebtedness of the Transferor. However, if a
Transferor of Mortgage Assets were to become a debtor under the federal
bankruptcy code, it is possible that a creditor or trustee-in-bankruptcy of
such Transferor may argue that the sale thereof by such Transferor is a
pledge rather than a sale. This position, if argued or accepted by a court,
could result in a delay in or reduction of distributions to the related
Holders.

REMEDIES FOLLOWING DEFAULT

The market value of the Mortgage Assets securing or underlying a Series
will fluctuate as general interest rates fluctuate. In the event the
principal of the Certificates of a Series is declared due and payable, the
Holders of any such Certificates issued at a discount from par ("ORIGINAL
ISSUE DISCOUNT") may be entitled, under applicable provisions of the federal
Bankruptcy Code, to receive no more than an amount equal to the unpaid
principal amount thereof less unamortized original issue discount ("ACCRUED
VALUE"). There is no assurance as to how such accrued value would be
determined if such event occurred.

DEPOSITS, SUBSTITUTIONS AND WITHDRAWALS OF ASSETS

To the extent provided in the related Prospectus Supplement for a
Series, the Depositor may, subsequent to the issuance of such a Series,
deposit additional Assets or withdraw Assets previously included in the Trust
Fund for such Series, substituting assets therefore or deposit additional
Assets or withdraw Assets previously deposited in a Reserve Fund for such
Series. The effect of deposit or substitution of other Assets may be to
alter the characteristics and composition of the Assets underlying such
Series, either of which may alter the timing and amount of distributions or
the date of the final distribution on the Certificates of such Series. See
"Assets Securing or Underlying the Certificates -- Deposit, Substitution and
Withdrawal of Assets."

OTHER LEGAL CONSIDERATIONS

Applicable state laws generally regulate interest rates and other
charges that may be assessed on borrowers, require certain disclosures to
borrowers, and may require licensing of the Depositor, the Trustee, the
Servicer, the Administrator, if any, the Master Servicer, if any, and any
Subservicer. In addition, most states have other laws, public policies and
general principles of equity relating to the protection of consumers and the
prevention of unfair and deceptive practices which may apply to the
origination, servicing and collection of the Mortgage Loans and Contracts.
The Mortgage Loans and Contracts also may be subject to federal laws,
including, if applicable, the following: (i) the federal Truth-in-Lending
Act and Regulation Z promulgated thereunder, which require certain
disclosures to the borrowers regarding the terms of the Mortgage Loans; (ii)
the Real Estate Settlement Procedures Act and Regulation X promulgated
thereunder, which require certain disclosures to the borrowers regarding the
settlement and servicing of the Mortgage Loans; (iii) the Equal Credit
Opportunity Act and Regulation B promulgated thereunder, which prohibit
discrimination on the basis of age, race, color, sex, religion, marital
status, national origin, receipt of public assistance or the exercise of any
right under the Consumer Credit Protection Act; (iv) the Fair Credit
Reporting Act, which regulates the use and reporting of information related
to the borrower's credit experience; (v) the Federal Trade Commission
Preservation of Consumers' Claims and Defenses Rule, 16 C.F.R. Part 433,
regarding the preservation of a consumer's rights; (vi) the Fair Housing Act,
42 U.S.C. 3601 ET SEQ., relating to the creation and governance of the Title
I Program; (vii) the Home Ownership and Equity Protection Act; and (viii) the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "RELIEF
ACT"). SEE "Certain Legal Aspects of the Mortgage Assets" herein. Federal
and state environmental laws and regulations may also impact the Servicer's
or any Subservicer's ability to realize value with respect to the Mortgaged
Properties. See "Certain Legal Aspects of the Mortgage Assets" herein.

Depending on the provisions of applicable law and the specific facts and
circumstances involved, violations of these laws, policies and principles may
limit the ability of the Servicer or any Subservicer to collect all or part
of the principal of or interest on the Mortgage Loans and Contracts, may
entitle the borrower to a refund of amounts previously paid, and, in
addition, could subject the Servicer or any Subservicer to damages and
administrative sanctions. Further, violations of state law can affect the
insurability of the Title I Mortgage Loans and Title I Contracts under FHA
Regulations. SEE "Certain Legal Aspects of the Mortgage Assets -- The Title
I Program." If the Servicer or any Subservicer is unable to collect all or
part of the principal or interest on any Mortgage Loan or Contract because of
a violation of the aforementioned laws, public policies or general principles
of equity, distributions from the Trust Fund may be delayed or the Trust Fund
may be unable

<PAGE>

to make all distributions owed to the Certificateholders to the extent any
related losses are not otherwise covered by amounts available from any Credit
Enhancement provided for the Series of Certificates. Furthermore, depending
upon whether damages and sanctions are assessed against the Servicer, the
Master Servicer, if any, or any Subservicer, such violations may materially
impact the financial ability of the Master Servicer, if any, the Servicer or
Subservicer to continue to act in such capacity.

Unless otherwise specified in the related Prospectus Supplement, the
related Transferor or the Depositor will be required to repurchase any
Mortgage Loan or Contract which, at the time of origination, did not comply
with applicable federal and state laws or regulations.

DESCRIPTION OF THE CERTIFICATES

GENERAL

The following summaries describe certain features common to each Series.
Such summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Pooling and Servicing Agreement and the Prospectus Supplement relating to
each Series. When particular provisions or terms used or referred to in a
Pooling and Servicing Agreement are referred to herein, such provisions or
terms shall be as used or referred to in such Pooling and Servicing Agreement.

The Certificates will not be insured or guaranteed by GNMA, FNMA, FHLMC,
any governmental entity or, unless otherwise specified in the related
Prospectus Supplement, any other person. Unless otherwise specified in the
related Prospectus Supplement, the Depositor's only obligations with respect
to a Series will be to obtain certain representations and warranties from
each Transferor and to assign to the related Trustee the Depositor's rights
with respect thereto, and its obligations pursuant to certain representations
and warranties made by it. Unless otherwise specified in the Prospectus
Supplement relating to a Series, no affiliate of the Depositor will have any
obligations with respect to such Series.

Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Assets relating to a Series, other than the Agency Securities and
the Title I Mortgage Loans and Title I Contracts, will not be insured or
guaranteed by any governmental entity or, any other person. With respect to a
Series for which the related Trust Fund includes Mortgage Loans or Contracts,
to the extent that delinquent payments on or losses in respect of defaulted
Mortgage Loans or Contracts, are not paid from any applicable Credit
Enhancement, such delinquencies may result in delays in distributions to the
Holders of one or more Classes of such Series, and such losses will be borne
by the Holders of one or more Classes of such Series. Unless otherwise
specified in the related Prospectus Supplement, the Servicer will have no
obligation to advance such delinquencies.

In addition, with respect to a Series for which the related Trust Fund
includes Mortgage Assets, late payments on such Mortgage Assets may result in
delays in distributions to the Holders of one or more Classes of such Series,
and losses on such Mortgage Assets will be borne by the Holders of one or
more Classes of such Series, to the extent such late payments and losses are
not advanced or paid from any applicable Credit Enhancement.

THE CERTIFICATES - GENERAL

The Certificates will be issued in Series pursuant to separate Pooling
and Servicing Agreements between the Depositor, the Servicer, the
Administrator, if any, the Master Servicer, if any, and the related Trustee
named in the Prospectus Supplement. A form of Pooling and Servicing
Agreement has been filed as an Exhibit to the Registration Statement of which
this Prospectus forms a part. The Pooling and Servicing Agreement relating
to a Series of Certificates will be filed as an Exhibit to a Report on Form
8-K to be filed with the Commission within 15 days following the issuance of
such Series of Certificates.

The "Issuer" with respect to a Series of Certificates will be the
related Trust Fund established by the Depositor pursuant to the related
Pooling and Servicing Agreement. Each Series of Certificates will be
entitled to distributions only from the Assets included in the related Trust
Fund and any other assets pledged or otherwise available for the benefit of
the Holders of such Series as specified in the related Prospectus Supplement.
Accordingly, the investment characteristics of a Series of Certificates will
be determined by the Assets included in the related Trust Fund. The
Certificates of a Series will not represent obligations of the Depositor, the
Servicer, any Administrator, any Master Servicer or any affiliate thereof.

<PAGE>

FORM OF CERTIFICATES; TRANSFER AND EXCHANGE

As specified in the related Prospectus Supplement, the Certificates of
each Series will be issued either in book entry form or fully registered
certificated form in the minimum denominations for each Class specified in
the related Prospectus Supplement. Unless otherwise specified in the
Prospectus Supplement, the original Principal Balance of each Certificate
will equal the aggregate distributions allocable to principal to which such
Certificate is entitled. Unless otherwise specified in the related Prospectus
Supplement, distributions allocable to interest on each Certificate of a
Series that is not entitled to distributions allocable to principal will be
calculated based on the Notional Principal Balance of such Certificate. The
"NOTIONAL PRINCIPAL BALANCE" of a Certificate will be a notional amount
assigned to such certificate and will not evidence an interest in or
entitlement to distributions allocable to principal, but will be used solely
for convenience in expressing the calculation of interest and for certain
other purposes.

Except as described below under "Book Entry Registration" with respect
to Book Entry Certificates, the Certificates of each Series will be
transferable and exchangeable on a register to be maintained at the corporate
trust office of the related Trustee or such other office or agency maintained
for such purposes by the Trustee. Unless otherwise specified in the
Prospectus Supplement with respect to a Series, under the related Pooling and
Servicing Agreement, the Trustee will be appointed initially as the
"REGISTRAR" for such Series for purposes of maintaining books and records of
the ownership and transfer of the Certificates of such Series. Unless
otherwise specified in the Prospectus Supplement with respect to a Series, no
service change will be made for any registration of transfer or exchange of
Certificates of such Series, but payment of a sum sufficient to cover any tax
or other governmental charge may be required.

Under current law the purchase and holding of a Class of Certificates
entitled only to a specified percentage of distributions of either interest
or principal or a notional amount of either interest or principal on the
related Mortgage Assets or a Class of Certificates entitled to receive
distributions of interest and principal on the Mortgage Assets only after
distributions to other Classes or after the occurrence of certain specified
events by or on behalf of any employee benefit plan or other retirement
arrangement (including individual retirement accounts and annuities, Keogh
plans and collective investment funds in which such plans, accounts or
arrangements are invested) subject to provisions of ERISA or the Code, may
result in "PROHIBITED TRANSACTIONS" within the meaning of ERISA and the Code.
See "ERISA Considerations." Unless otherwise specified in the related
Prospectus Supplement, transfer of Certificates of such a Class will not be
registered unless the transferee (i) executes a representation letter stating
that it is not, and is not purchasing on behalf of, any such plan, account or
arrangement or (ii) provides an opinion of counsel satisfactory to the
related Trustee and the Depositor that the purchase of Certificates of such a
Class by or on behalf of such plan, account or arrangement is permissible
under applicable law and will not subject the related Trustee, the Servicer,
the Administrator, if any, the Master Servicer, if any, or the Depositor to
any obligation or liability in addition to those undertaken in the Pooling
and Servicing Agreement.

REMIC ELECTION

As to each Series, one or more elections may be made to treat all or
specified portions of the related Trust Fund as a REMIC for federal income
tax purposes. The related Prospectus Supplement will specify whether a REMIC
election is to be made. Alternatively, the Pooling and Servicing Agreement
for a Series may provide that a REMIC election may be made at the discretion
of the Depositor, the Servicer, the Administrator, if any, the Master
Servicer, if any, or another entity and may only be made if certain
conditions are satisfied. As to any such Series, the terms and provisions
applicable to the making of a REMIC election, as well as any material federal
income tax consequences to Holders of such Series not otherwise described
herein, will be set forth in the related Prospectus Supplement. If such an
election is made with respect to a Series, one or more of the Classes of such
Series will be designated as evidencing the "residual interests" in the
related REMIC or REMICs, as defined in the Code. All other Classes of such
Series will constitute "regular interests" in the related REMIC or REMICs, as
defined in the Code. As to each Series with respect to which a REMIC
election is to be made, the Servicer, the Administrator, if any, the related
Trustee, a Residual Holder or another person as specified in the related
Prospectus Supplement will be obligated to take all actions required in order
to comply with applicable laws and regulations and will be obligated to pay
any prohibited transaction taxes. The person so specified, unless otherwise
provided in the related Prospectus Supplement, will be entitled to
reimbursement for any such payment from the assets of the related Trust Fund
or, if applicable, from any Residual Holder.

CLASSES OF CERTIFICATES

Each Series will be issued in one or more Classes. If specified in the
Prospectus Supplement, one or more Classes of a Series may evidence
beneficial ownership interests in separate groups of Assets included in the
related Trust Fund or

<PAGE>

otherwise available for the benefit of such Series. The Certificates of a
Series will have an aggregate original principal balance as specified in the
related Prospectus Supplement. The original principal balance of the
Certificates of a Series and the Certificate Interest Rate on the Classes of
such Certificates will be determined in the manner specified in the
Prospectus Supplement.

Each Class of Certificates that is entitled to distributions allocable
to interest will bear interest at the applicable Certificate Interest Rate,
which may be a fixed rate (which may be zero) or, in the case of Variable
Interest Certificates, may be a rate that is subject to change from time to
time (a) in accordance with a schedule, (b) in reference to an index, or (c)
otherwise in each case as specified in the related Prospectus Supplement.
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, one or more Classes of a Series may be entitled to receive
distributions of interest only to the extent of amounts available to make
such distributions. One or more Classes of Certificates may provide for
interest that accrues, but is not currently payable ("COMPOUND INTEREST
CERTIFICATES"). With respect to any Class of Compound Interest Certificates,
if specified in the related Prospectus Supplement, any interest that has
accrued but is not paid on a given Distribution Date will be added to the
aggregate principal balance of such Class on that Distribution Date.

A Series may include one or more Classes entitled only to distributions
(i) allocable to interest ("INTEREST ONLY CERTIFICATES"), (ii) allocable to
principal ("PRINCIPAL ONLY CERTIFICATES"), and allocable as between scheduled
payments of principal and Principal Prepayments, as defined below under
"Distributions of Principal and Interest" or (iii) allocable to both
principal (and allocable as between scheduled payments of principal and
Principal Prepayments) and interest. A Series may include one or more
classes as to which distributions will be allocated (i) on the basis of
collections from designated portions of the Assets included in the related
Trust Fund, (ii) in accordance with a schedule or formula, (iii) in relation
to the occurrence of events, or (iv) otherwise, in each case as specified in
the related Prospectus Supplement. The timing and amounts of such
distributions may vary among Classes, over time or otherwise, in each case as
specified in the related Prospectus Supplement.

A Series of Certificates may include one or more Classes of Scheduled
Amortization Certificates and Companion Certificates. "SCHEDULED AMORTIZATION
CERTIFICATES" are Certificates with respect to which distributions of
principal are to be made in specified amounts on specified Distribution
Dates, to the extent of funds available on such Distribution Date. "COMPANION
CERTIFICATES" are Certificates which receive distributions of all or a
portion of any funds available on a given Distribution Date which are in
excess of amounts required to be applied to distributions on Scheduled
Amortization Certificates on such Distribution Date. Because of the manner
of application of distributions of principal to Companion Certificates, the
weighted average lives of Companion Certificates of a Series may be expected
to be more sensitive to the actual rate of prepayments on the Mortgage Assets
in the related Trust Fund than will the Scheduled Amortization Certificates
of such Series.

One or more Series of Certificates may constitute a Series of "SPECIAL
ALLOCATION CERTIFICATES" which may include Senior Certificates, Subordinated
Certificates, Priority Certificates and Non-Priority Certificates. As more
fully described in the related Prospectus Supplement for a Series of Special
Allocation Certificates, Special Allocation Certificates are Certificates for
which the timing and/or priority of distributions of principal and/or
interest may favor one or more Classes of such Certificates over one or more
other Classes of such Certificates. Such timing and/or priority may be
modified or reordered upon the occurrence of one or more specified events.
Unless otherwise specified in the related Prospectus Supplement for a Series
of Special Allocation Certificates, losses on the Assets included in the
related Trust Fund may be disproportionately borne by one or more Classes of
such Series, and the proceeds and distributions from such Assets may be
applied to the payment in full of one or more Classes of such Series before
the balance, if any, of such proceeds are applied to one or more other
Classes within such Series. For example, Special Allocation Certificates in
a Series may be comprised of one or more Classes of Senior Certificates
having a priority in right to distributions of principal and interest over
one or more Classes of Subordinated Certificates, to the extent described in
the related Prospectus Supplement, as a form of Credit Enhancement. See
"Credit Enhancement -- Subordination". Typically, Subordinated Certificates of
a Series will carry a rating by the rating agencies rating the Certificates
of such Series lower than that of the Senior Certificates of such Series. In
addition, one or more Classes of Certificates of a Series ("PRIORITY
CERTIFICATES") may be entitled to a priority of distributions of principal or
interest from Assets included in the related Trust Fund over another Class of
Certificates of such Series ("NON-PRIORITY CERTIFICATES"), but only after the
exhaustion of other Credit Enhancement applicable to such Series. Priority
Certificates and Non-Priority Certificates nonetheless may be within the same
rating category.

<PAGE>

DISTRIBUTIONS OF PRINCIPAL AND INTEREST

GENERAL

Distributions of principal and interest on the Certificates of a Series
will be made by the related Trustee, to the extent of funds available
therefor, on the related Distribution Date. Distributions will be made to
the persons in whose names the Certificates of such Series are registered at
the close of business on the dates specified in the related Prospectus
Supplement (each, a "RECORD DATE"). With respect to Certificates other than
Book Entry Certificates, distributions will be made by check or money order
mailed to Certificateholders of such Series at their addresses appearing in
the books and records maintained by or on behalf of the Issuer of such Series
or, if specified in the related Prospectus Supplement, in the case of
Certificates that are of a certain minimum denomination as specified in the
related Prospectus Supplement, upon written request by a Holder of such
Series, by wire transfer or by such other means as are agreed upon with such
Certificateholder; provided, however, that the final distribution in
retirement of a Series (other than Book Entry Certificates) will be made only
upon presentation and surrender of such Certificates at the office or agency
of the related Trustee specified in the notice to Certificateholders of such
final distribution. With respect to Book Entry Certificates, such
distributions will be made as described below under "Book Entry Registration"
and in the related Prospectus Supplement.

Unless otherwise specified in the related Prospectus Supplement,
distributions allocable to principal and interest on the Certificates of a
Series will be made by the related Trustee out of, and only to the extent of,
funds in a separate account established and maintained under the related
Pooling and Servicing Agreement for the benefit of Certificateholders of such
Series (the "CERTIFICATE ACCOUNT"), including any funds transferred from any
related Reserve Fund or otherwise applicable accounts maintained by the
Trustee. As between Certificates of different Classes of a Series and as
between distributions of principal (and, if applicable, between distributions
of Principal Prepayments) and interest, distributions made on any
Distribution Date will be applied as specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
distributions to any Class of Certificates will be made pro rata to all
Certificateholders of that Class. If so specified in the related Prospectus
Supplement, the amounts received by the Trustee as described below under
"Assets Securing or Underlying the Certificates" will be invested in the
Permitted Instruments specified herein and in the related Prospectus
Supplement, and all income or other gain from such investments will be
deposited in the related Certificate Account and will be available to make
distributions on the Certificates of the applicable Series on the next
succeeding Distribution Date in the manner specified in the related
Prospectus Supplement.

DISTRIBUTIONS OF INTEREST

Each Class of a Series (other than a Class of Principal Only
Certificates) will accrue interest at the applicable Certificate Interest
Rate. One or more Classes may be entitled to receive distributions of
interest only to the extent of amounts available to make such distributions.
Interest on each Class will accrue during the related Due Period and will be
distributed on the related Distribution Date. Interest on all Certificates
which bear or receive interest, other than Compound Interest Certificates,
will be distributed on the Distribution Dates specified in the related
Prospectus Supplement. However, failure to distribute interest on a current
basis may not necessarily be an Event of Default with respect to a particular
Series or Class of Certificates. Interest on any Class of Compound Interest
Certificates or similar securities will not be distributed currently, but
will accrue and the amount of the interest so accrued will be added to the
principal thereof on each Distribution Date until the date specified in the
related Prospectus Supplement. Principal Only Certificates will not accrue,
and will not be entitled to receive, any interest. Upon maturity or earlier
repurchase of the Certificates of any Class, interest will be paid to the
date specified in the related Prospectus Supplement.

Each payment of interest on each Class of Certificates (or addition to
principal of a Class of Compound Interest Certificates) on a Distribution
Date will include all interest accrued during the related Due Period. If the
Due Period for a Series ends on a date other than a Distribution Date for
such Series, the yield realized by the Holders of such Certificates may be
lower than the yield that would result if the Due Period ended on such
Distribution Date. Additionally, if so specified in the related Prospectus
Supplement, interest accrued for a Due Period for one or more Classes may be
calculated on the assumption that principal distributions (and additions to
principal of the Certificates), and allocations of losses on the Mortgage
Assets (if so specified in the related Prospectus Supplement), are made on
the first day of the preceding Due Period and not on the Distribution Date
for such preceding Due Period when actually made or added. Such method would
produce a lower effective yield than if interest were calculated on the basis
of the actual principal amount outstanding.

A Series may include one or more Classes of Variable Interest Rate
Certificates. With respect to each Class of Variable Interest Certificates
of a Series, the related Prospectus Supplement will set forth: (i) the
initial Certificate Interest

<PAGE>

Rate (or the manner of determining the initial Certificate Interest Rate);
(ii) the formula, index or other method by which the Certificate Interest
Rate will be determined from time to time; (iii) the periodic intervals at
which such determination will be made; (iv) the Maximum Variable Interest
Rate, if any, and the Minimum Variable Interest Rate; and (v) any other terms
relevant to such Class of Certificates.

DISTRIBUTIONS OF PRINCIPAL

Principal distributions on the Certificates of a Series will be made
from amounts available therefor on each Distribution Date in an aggregate
amount determined as set forth in the related Prospectus Supplement and will
be allocated among the respective Classes of a Series of Certificates at the
times, in the manner and in the priority set forth in the related Prospectus
Supplement.

Except with respect to Compound Interest Certificates and Interest Only
Certificates or similar securities, unless specified otherwise in the related
Prospectus Supplement, on each Distribution Date principal distributions will
be made on the Certificates of a Series in an aggregate amount determined in
the related Prospectus Supplement. If a Series of Certificates has a Class
of Compound Interest Certificates, additional principal payments on the
Certificates of such Series will be made on each Distribution Date in an
amount equal to the interest accrued, but not then distributable, on such
Class of Compound Interest Certificates for the related Due Period.

If so specified in the related Prospectus Supplement, on any
Distribution Date on which the principal balance of the Mortgage Assets
relating to a Series is reduced due to losses on such Mortgage Assets, (i)
the amount of such losses will be allocated first, to reduce the aggregate
outstanding principal balance of the Subordinate Certificates of such Series
(or other subordination, if any,) and, thereafter, to reduce the aggregate
outstanding principal balance of the remaining Certificates of such Series in
the priority and manner specified in such Prospectus Supplement until the
aggregate outstanding principal balance of each Class of such Certificates of
such Series so specified has been reduced to zero or paid in full, thus
reducing the amount of principal distributable on each such Class of
Certificates or (ii) such losses may be allocated in any other manner set
forth in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, such reductions of principal of a Class or
Classes of Certificates will be allocated to the Holders of the Certificates
of such Class or Classes pro rata in the proportion which the outstanding
principal of each Certificate of such Class or Classes bears to the aggregate
outstanding principal balance of all Certificates of such Class.

If so provided in the related Prospectus Supplement, one or more Classes
of Senior Certificates of a Series will be entitled to receive all or a
disproportionate percentage of the payments of principal which are received
on the related Mortgage Assets in advance of their scheduled due dates and
are not accompanied by amounts representing scheduled interest due after the
month of such payments ("PRINCIPAL PREPAYMENTS") in the percentages and under
the circumstances or for the periods specified in the Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, any such
allocation of principal prepayments to such Class or Classes will have the
effect of accelerating the amortization of such Senior Certificates while
increasing the interests evidenced by the Subordinated Certificates in rights
to the benefit of the Assets in the related Trust Fund. Increasing the
interests of the Subordinated Certificates relative to that of the Senior
Certificates is intended to preserve the availability of the subordination
credit enhancement provided to the Priority Certificates by the Subordinated
Certificates. See "Credit Enhancement -- Subordination."

UNSCHEDULED DISTRIBUTIONS

If specified in the related Prospectus Supplement, the Certificates of a
Series will be subject to receipt of distributions before the next scheduled
Distribution Date under the circumstances and in the manner described below
and in the related Prospectus Supplement. If applicable, the related Trustee
will be required to make such unscheduled distributions on the Certificates
of a Series on the date and in the amount specified in the related Prospectus
Supplement if, due to substantial payments of principal (including Principal
Prepayments) on the related Mortgage Assets, low rates then available for
reinvestment of such payments or both, the Trustee determines, based on the
assumptions specified in the related Pooling and Servicing Agreement, that
the amount anticipated to be on deposit in the Certificate Account for such
Series on the next related Distribution Date, together with, if applicable,
any amounts available to be withdrawn from any related Reserve Fund or from
any other Credit Enhancement provided for such Series, may be insufficient to
make required distributions on the Certificates of such Series on such
Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, the amount of any such unscheduled distribution that is allocable
to principal will not exceed the amount that would otherwise have been
required to be distributed as principal on the Certificates of such Series on
the next Distribution Date. Unless otherwise specified in the related
Prospectus Supplement, all unscheduled distributions will include interest at
the applicable

<PAGE>

Certificate Interest Rate (if any) on the amount of the unscheduled
distribution allocable to principal for the period and to the date specified
in such Prospectus Supplement.

Unless otherwise specified in the related Prospectus Supplement, all
distributions allocable to principal in any unscheduled distribution made on
the Certificates of a Series will be made in the same priority and manner as
distributions of principal on such Certificates would have been made on the
next Distribution Date, and with respect to Certificates of the same Class,
unscheduled distributions of principal will be made on a pro rata basis.
Notice of any unscheduled distribution will be given by the Trustee prior to
the date of such distribution.

TERMINATION OR REPURCHASE OF THE CERTIFICATES

To the extent provided in the related Prospectus Supplement, the
Certificates of any Class of a Series may be (i) repurchased at the request
of holders of such Certificates; (ii) repurchased at the option of the
Depositor, the Servicer, or another party specified in the related Prospectus
Supplement; or (iii) subject to special repurchase under certain
circumstances. In addition, if so specified in the Prospectus Supplement for
a Series of Certificates, the Depositor, the Servicer, or another party
specified in the related Prospectus Supplement may, at its option, cause an
early termination of the Trust Fund for such Series by repurchasing all of
the Mortgage Assets from such Trust Fund, under the circumstances specified
in such Prospectus Supplement. The circumstances and terms under which the
Certificates of a Series may be repurchased and the circumstances and terms
under which the related Trust Fund may be terminated will be described in the
related Prospectus Supplement.

BOOK ENTRY REGISTRATION

If the Prospectus Supplement for a Series so provides, Certificates of
any Class of such Series may be issued in book entry form ("BOOK ENTRY
CERTIFICATES") and held in the form of a single certificate issued in the
name of a Clearing Agency ("CLEARING AGENCY") registered with the Securities
and Exchange Commission or its nominee. Transfers and pledges of Book Entry
Certificates may be made only through entries on the books of the Clearing
Agency in the name of brokers, dealers, banks and other organizations
eligible to maintain accounts with the Clearing Agency ("CLEARING AGENCY
PARTICIPANTS") or their nominees. Clearing Agency Participants may also be
Beneficial Owners (as defined below) of Book Entry Certificates.

Purchasers and other Beneficial Owners of Book Entry Certificates
("BENEFICIAL OWNERS") may not hold Book Entry Certificates directly, but may
hold, transfer or pledge their ownership interest in the Book Entry
Certificates only through Clearing Agency Participants. Additionally,
Beneficial Owners will receive all distributions of principal and interest
with respect to Book Entry Certificates, and, if applicable, may request
repurchase of Book Entry Certificates only through the Clearing Agency and
the Clearing Agency Participants. Beneficial Owners will not be registered
holders of Certificates or be entitled to receive definitive certificates
representing their ownership interest in the Certificates except under the
limited circumstances, if any, described in the related Prospectus
Supplement. See "Risk Factors --Book Entry Registration."

If Certificates of a Series are issued as Book Entry Certificates, the
Clearing Agency will be required to make book entry transfers among Clearing
Agency Participants, to receive and transmit distributions of principal and
interest with respect to the Certificates of such Series, and to receive and
transmit requests for repurchase with respect to such Certificates. Clearing
Agency Participants with whom Beneficial Owners have accounts with respect to
such Book Entry Certificates will be similarly required to make book entry
transfers and receive and transmit distributions and repurchase requests on
behalf of their respective Beneficial Owners. Accordingly, although
Beneficial Owners will not be registered holders of Certificates and will not
possess physical certificates, a method will be provided whereby Beneficial
Owners may receive distributions, transfer their interests, and submit
repurchase requests.

MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES

Unless otherwise specified in the related Prospectus Supplement, (i) any
mutilated Certificate is surrendered to the Certificate Registrar, or the
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (ii) there is delivered to the Depositor, the
Trustee and the Certificate Registrar such security or indemnity as may be
required by each of them to hold each of them harmless, then, in the absence
of notice to the Depositor, the Trustee and the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, the Trustee
shall execute, deliver and authenticate, 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 such new
Certificate, the Depositor and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses connected therewith. Any such
duplicate Certificate

<PAGE>

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.

ASSETS SECURING OR UNDERLYING THE CERTIFICATES

Each Series of Certificates will represent a beneficial interest in the
Assets included in the related Trust Fund and transferred to the related
Trustee by the Depositor. Such Assets may include (i) Mortgage Assets and
payments or distributions thereon (subject, if specified in the Prospectus
Supplement, to certain exclusions); (ii) if specified in the Prospectus
Supplement, reinvestment income on such payments or distributions; (iii) with
respect to a Trust Fund that includes Mortgage Loans or Contracts, all
property acquired by foreclosure or deed in lieu of foreclosure with respect
to any such Mortgage Loan or Contract and certain rights of the
Administrator, if any, and the Servicer under any policies required to be
maintained in respect of the related Mortgage Assets; and (iv) if so
specified in the Prospectus Supplement, one or more forms of Credit
Enhancement. The primary Assets of any Trust Fund will consist of Mortgage
Assets. The Depositor expects to acquire Mortgage Assets from various
Transferors (each, a "TRANSFEROR"), which may be affiliates of the Depositor,
in open market or privately negotiated transactions. Such acquisitions may
be made through an affiliate of the Depositor.

Mortgage Assets may be acquired by the Depositor from affiliates of the
Depositor. The following is a brief description of the Mortgage Assets
expected to be included in the Trust Funds. If specific information
respecting the Mortgage Assets is not known at the time a Series is initially
offered, more general information of the nature described below will be
provided in the related Prospectus Supplement, and specific information will
be set forth in a report on Form 8-K to be filed with the Securities and
Exchange Commission within fifteen days after the initial issuance of such
Series. A copy of the related Pooling and Servicing Agreement with respect
to each Series will be attached to the Form 8-K and will be available for
inspection at the corporate trust office of the related Trustee specified in
the related Prospectus Supplement. A schedule of the Mortgage Assets
relating to each Series, will be attached to the related Pooling and
Servicing Agreement delivered to the Trustee upon delivery of such Series.

MORTGAGE LOANS

The Mortgage Loans will be evidenced by promissory notes, retail
installment sales contracts or other evidences of indebtedness (the "MORTGAGE
NOTES") and will be secured by mortgages, deeds of trust or other similar
security instruments (the "MORTGAGES") creating a lien or security interest,
each of which is typically junior in priority to one or more senior liens, on
single family (one-to-four unit) residences, units in planned unit
developments, units in condominium developments and town homes (the
"MORTGAGED PROPERTIES") located in various states. If so specified in the
Prospectus Supplement, the Mortgage Loans may include cooperative apartment
or manufactured housing loans ("COOPERATIVE LOANS") secured by security
interests in shares issued by private, non-profit, cooperative housing
corporations ("COOPERATIVES") and in the related proprietary leases or
occupancy agreements granting exclusive rights to occupy specific units in
such Cooperatives. If so specified in the related Prospectus Supplement, all
or a portion of the Mortgages will be junior liens on the related Mortgaged
Properties which consist primarily of owner-occupied single family
residences. To the extent the Mortgage Loans are junior liens, the related
superior liens will not be included in the Mortgage Loan Pool unless
otherwise specified in the related Prospectus Supplement. Certain of the
Mortgage Loans may be partially insured to the extent described in the
related Prospectus Supplement (and subject to the conditions described herein
and in the related Prospectus Supplement) by the FHA under the Title I
Program (the "TITLE I MORTGAGE LOANS"). Unless otherwise specified in the
related Prospectus Supplement, the Mortgage Loans will have scheduled monthly
payment dates throughout a month, and no Mortgage Loan will provide for
deferred interest or negative amortization. Unless otherwise specified in
the related Prospectus Supplement, there will not be any commercial or
multifamily loans included in any Mortgage Loan Pool. Each Mortgage Loan
will be selected by the Depositor for inclusion in a Trust Fund from among
those acquired by the Depositor or originated or acquired by one or more
affiliates of the Depositor, including newly originated loans.

The payment terms of the Mortgage Loans to be included in a Trust Fund
for a Series or will be described in the related Prospectus Supplement and
may include any of the following features or combinations thereof or other
features described in the related Prospectus Supplement:

(a) Interest may be payable at a fixed rate, a rate adjustable from
time to time in relation to an index, a rate that is fixed for a period of
time or under certain circumstances and is followed by an adjustable rate, a
rate that otherwise varies from time to time, or a rate that is convertible
from an adjustable rate to a fixed rate. Changes to an adjustable rate may
be subject to periodic limitations, maximum rates, minimum rates or a
combination of such limitations. Accrued interest may be deferred and added
to the principal of a loan for such periods and under such circumstances as
may be specified in

<PAGE>

the related Prospectus Supplement. Mortgage Loans may provide for the
payment of interest at a rate lower than the specified mortgage rate for a
period of time or for the life of the Mortgage Loan with the amount of any
difference contributed from funds supplied by the seller of the Mortgaged
Property or another source.

(b) Principal may be payable on a level debt service basis to fully
amortize the loan over its term, may be calculated on the basis of an
amortization schedule that is significantly longer than the original term to
maturity or on an interest rate that is different from the interest rate on
the Mortgage Loan or may not be amortized during all or a portion of the
original term. Payment of all or a substantial portion of the principal may
be due on maturity. Principal may include interest that has been deferred
and added to the principal balance of the Mortgage Loan.

(c) Monthly payments of principal and interest may be fixed for the
life of the loan, may increase over a specified period of time or may change
from period to period. Mortgage Loans may include limits on periodic
increases or decreases in the amount of monthly payments and may include
maximum or minimum amounts of monthly payments.

(d) Prepayments of principal may be subject to a prepayment fee, which
may be fixed for the life of the loan or may decline over time, and may be
prohibited for the life of the loan or for certain periods ("lockout
periods"). Certain loans may permit prepayments after expiration of the
applicable lockout period and may require the payment of a prepayment fee in
connection with any such subsequent prepayment. Other loans may permit
prepayments without payment of a fee unless the prepayment occurs during
specified time periods. The loans may include "due-on-sale" clauses which
permit the mortgagee to demand payment of the entire mortgage loan in
connection with the sale or certain transfers of the related mortgaged
property. Other Mortgage Loans may be assumable by persons meeting the then
applicable underwriting standards of the Depositor.

With respect to a Series for which the related Trust Fund includes
Mortgage Loans the related Prospectus Supplement may specify, among other
things, information regarding the interest rates (the "MORTGAGE RATES"), the
average principal balance and the aggregate principal balance of such
Mortgage Loans, the years of origination, geographic dispersion and original
principal balances and the loan-to-value ratios of such Mortgage Loans.

AGENCY SECURITIES

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)

GNMA is a wholly-owned corporate instrumentality of the United States
within the United States Department of Housing and Urban Development.
Section 306(g) of Title III of the National Housing Act of 1934, as amended
(the "HOUSING ACT"), authorizes GNMA to guarantee the timely payment of the
principal of and interest on certificates which represent an interest in a
pool of mortgage loans insured by the Federal Housing Administration ("FHA
LOANS"), or guaranteed by the Farmers Home Administration ("FMHA LOANS") or
partially guaranteed by the Veterans' Administration ("VA LOANS").

Section 306(g) of the Housing Act provides that "the full faith and
credit of the United States is pledged to the payment of all amounts which
may be required to be paid under any guarantee under this subsection." In
order to meet its obligations under any such guarantee, GNMA may, under
Section 306(d) of the Housing Act, borrow from the United States Treasury in
an amount which is at any time sufficient to enable GNMA, with no limitations
as to amount, to perform its obligations under its guarantee.

GNMA CERTIFICATES. Each GNMA Certificate relating to a series (which
may be issued under either the GNMA I program or the GNMA II program, as
referred to by GNMA) will be a "fully modified pass-through" mortgage-backed
certificate issued and serviced by a mortgage banking company or other
financial concern ("GNMA ISSUER") approved by GNMA or approved by FNMA as a
seller-servicer of FHA Loans, FmHA Loans and/or VA Loans. Each GNMA
Certificate will represent a fractional undivided interest in a pool of
mortgage loans which may include FHA Loans, FmHA Loans and/or VA Loans. Each
such mortgage loan is secured by a one- to four-family residential property.
Each such GNMA Certificate will provide for the payment by or on behalf of
the GNMA Issuer to the registered holder of such GNMA Certificate of
scheduled monthly payments of principal and interest equal to the registered
holder's proportionate interest in the aggregate amount of the monthly
principal and interest payment on each FHA Loan, FmHA Loan or VA Loan
underlying such GNMA Certificate, less the applicable servicing and guarantee
fee which together equal the difference between the interest on the FHA Loan,
FmHA Loan or VA Loan and the pass-through rate on the GNMA Certificate. In
addition, each payment will include proportionate pass-through payments of
any prepayments of principal on the FHA Loans, FmHA Loans or VA Loans

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underlying such GNMA Certificate and liquidation proceeds in the event of a
foreclosure or other disposition of any such FHA Loans, FmHA Loans or VA
Loans.

The full and timely payment of principal of and interest on each GNMA
Certificate will be guaranteed by GNMA, which obligation is backed by the
full faith and credit of the United States.

Each such GNMA Certificate will have an original maturity of not more
than 30 years (but may have an original maturity of substantially less than
30 years). GNMA will approve the issuance of each such GNMA Certificate in
accordance with a guarantee agreement (a "GUARANTY AGREEMENT") between GNMA
and the GNMA Issuer. Pursuant to its Guaranty Agreement, a GNMA Issuer will
be required to advance its own funds in order to make timely payments of all
amounts due on the GNMA Certificate, even if the payments received by the
GNMA Issuer on the mortgage loans underlying each such GNMA Certificate are
less than the amounts due on such GNMA Certificate.

If a GNMA Issuer is unable to make payments on a GNMA Certificate as
such payments become due, it is required promptly to notify GNMA and request
GNMA to make such payments. Upon such notification and request, GNMA will
make such payments directly to the registered holder of the GNMA Certificate.
In the event no payment is made by a GNMA Issuer and the GNMA Issuer fails
to notify and request GNMA to make such payment, the holder of the GNMA
Certificate will have recourse only against GNMA to obtain such payment. In
the case of GNMA Certificates issued in definitive form, the Trustee, as
registered holder of the GNMA Certificates, will have the right to proceed
directly against GNMA under the terms of the Guaranty Agreements relating to
such GNMA Certificates for any amounts that are not paid when due. In the
case of GNMA Certificates issued in book-entry form, The Participants Trust
Corporation ("PTC"), or its nominee, will have the right to proceed against
GNMA in such event.

All mortgage loans underlying a particular GNMA I Certificate must have
the same interest rate (except for pools of mortgage loans secured by
manufactured homes) over the term of the loan. The interest rate on each
GNMA I Certificate will equal the interest rate on the mortgage loans
included in the pool of mortgage loans underlying such GNMA I Certificate,
less one-half percentage point per annum of the unpaid principal balance of
the mortgage loans.

Mortgage loans underlying a particular GNMA II Certificate may have per
annum interest rates that vary from each other by up to one percentage point.
The interest rate on each GNMA II Certificate will be between one-half
percentage point and one and one-half percentage points lower than the
highest interest rate on the mortgage loans included in the pool of mortgage
loans underlying such GNMA II Certificate (except for pools of mortgage loans
secured by manufactured homes).

Regular monthly installment payments on each GNMA Certificate relating
to a series will be comprised of interest due as specified on such GNMA
Certificate plus the scheduled principal payments on the FHA Loans of VA
Loans underlying such GNMA Certificate due on the first day of the month in
which the scheduled monthly installment on such GNMA Certificate is due.
Such regular monthly installments on each such GNMA Certificate are required
to be paid to the Trustee as registered holder by the 15th day of each month
in the case of a GNMA I Certificate and are required to be mailed to the
Trustee by the 20th day of each month in the case of a GNMA II Certificate.
Any principal prepayments on any FHA Loans, FmHA Loans or VA Loans underlying
a GNMA Certificate relating to a series or any other early recovery of
principal on such loan will be passed through to the Trustee as the
registered holder of such GNMA Certificate.

GNMA Certificates may be backed by graduated payment mortgage loans or
by "buydown" mortgage loans for which funds will have been provided (and
deposited into escrow accounts) for application to the payment of a portion
of the borrowers' monthly payments during the early years of such mortgage
loan. Payments due the registered holders of GNMA Certificates backed by
pools containing "buydown" mortgage loans will be computed in the same manner
as payments derived from non-"buydown" GNMA Certificates and will include
amounts to be collected from both the borrower and the related escrow
account. The graduated payment mortgage loans will provide for graduated
interest payments that, during the early years of such mortgage loans, will
be less than the amount of stated interest on such mortgage loans. The
interest not so paid will be added to the principal of such graduated payment
mortgage loans and, together with interest thereon, will be paid in
subsequent years. The obligations of GNMA and of a GNMA Issuer will be the
same irrespective of whether the GNMA Certificates relating to a series of
Certificates are backed by graduated payment mortgage loans or "buydown"
mortgage loans. No statistics comparable to the FHA's prepayment experience
on level payment, non-"buydown" mortgage loans are available in respect of
graduated payment or "buydown" mortgages. GNMA Certificates included in the
Trust Fund for a Series may be held in book-entry form.

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If specified in the related Prospectus Supplement, GNMA Certificates
included in the Trust Fund for a Series may be held on deposit at PTC, a
limited purpose trust company organized under the banking law of the State of
New York. PTC operates a private sector, industry-owned depository and
settlement facility for the book-entry transfer of interests in GNMA
Certificates. Distributions of principal of and interest on each GNMA
Certificate held through PTC will be credited by PTC to the PTC participant
on whose account the GNMA Certificate is credited.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)

FNMA is a federally chartered and privately owned corporation organized
and existing under the Federal National Mortgage Association Charter Act (the
"CHARTER ACT"). FNMA was originally established in 1938 as a United States
government agency to provide supplemental liquidity to the mortgage market
and was transformed into a stockholder-owned and privately-managed
corporation by legislation enacted in 1968.

FNMA provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, thereby replenishing their funds for additional
lending. FNMA acquires funds to purchase mortgage loans from many capital
market investors that may not ordinarily invest in mortgages, thereby
expanding the total amount of funds available for housing. Operating
nationwide, FNMA helps to redistribute mortgage funds from capital surplus to
capital-short areas.

FNMA CERTIFICATES. FNMA Certificates are Guaranteed Mortgage
Pass-Through Certificates representing fractional undivided interests in a
pool of mortgage loans formed by FNMA. Each mortgage loan must meet the
applicable standards of the FNMA purchase program. Mortgage loans comprising
a pool are either provided by FNMA from its own portfolio or purchased
pursuant to the criteria of the FNMA purchase program.

Mortgage loans underlying FNMA Certificates relating to a series will
consist of conventional mortgage loans, FHA Loans or VA Loans. Original
maturities of substantially all of the conventional, level payment mortgage
loans underlying a FNMA Certificate are expected to be between either 8 to 15
years or 20 to 30 years. The original maturities of substantially all of the
fixed rate level payment FHA Loans or VA Loans are expected to be 30 years.

Mortgage loans underlying a FNMA Certificate may have annual interest
rates that vary by as much as two percentage points from each other. The
rate of interest payable on a FNMA Certificate is equal to the lowest
interest rate of any mortgage loan in the related pool, less a specified
minimum annual percentage representing servicing compensation and FNMA's
guaranty fee. Thus, the annual interest rates on the mortgage loans
underlying a FNMA Certificate will generally be between 50 basis points and
250 points greater than the annual FNMA Certificate pass-through rate. If
specified in the related Prospectus Supplement, FNMA Certificates included in
the Trust Fund with respect to a Series may be backed by adjustable rate
mortgages.

Regular monthly installment payments on each FNMA Certificate will be
comprised of interest due as specified by such FNMA Certificate plus the
scheduled principal payments on the Mortgage Loans underlying such FNMA
Certificate due during the period beginning on the second day of the month
prior to the month in which the scheduled monthly installment on such FNMA
Certificate is due and ending on the first day of such month in which the
scheduled monthly installment on such FNMA Certificate is due. Such regular
monthly installments on each such FNMA Certificate will be distributed to the
holder of record on the 25th day of each month. Any principal prepayments on
the mortgage loans underlying any FNMA Certificate included in the Trust Fund
with respect to a Series or any other early recovery of principal on such
mortgage loans will be passed through to the holder of record of such FNMA
Certificate on the 25th day of the month next following such prepayment or
recovery and, in turn, a portion of such amounts will be paid or distributed
to Holders of such Series, secured thereby, as additional principal payments.

FNMA guarantees to each registered holder of a FNMA Certificate that it
will distribute amounts representing such holder s proportionate share of
scheduled principal and interest payments at the applicable pass-through rate
provided for by such FNMA Certificate on the underlying mortgage loans,
whether or not received, and such holder's proportionate share of the full
principal amount of any foreclosed or other finally liquidated mortgage loan,
whether or not such principal amount is actually recovered. The obligations
of FNMA under its guarantees are obligations solely of FNMA and are not
backed by, nor entitled to, the full faith and credit of the United States.
Although the Secretary of the Treasury of the United States has discretionary
authority to lend FNMA up to $2.25 billion outstanding at any time, neither
the United States nor any agency thereof is obligated to finance FNMA's
operations or to assist FNMA in any other manner. If FNMA were unable to
satisfy its obligations, distributions to holders of FNMA Certificates would
consist solely of payments and other recoveries on the

<PAGE>

underlying mortgage loans and, accordingly, monthly distributions to holders
of FNMA Certificates would be affected by delinquent payments and defaults on
such mortgage loans.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)

FHLMC is a corporate instrumentality of the United States created
pursuant to Title III of the Emergency Home Finance Act of 1970, as amended
(the "FHLMC ACT"). The common stock of FHLMC is owned by the Federal Home
Loan Banks. FHLMC was established primarily for the purpose of increasing
the availability of mortgage credit for the financing of urgently needed
housing. It seeks to provide an enhanced degree of liquidity for residential
mortgage investments primarily by assisting in the development of secondary
markets for conventional mortgages. The principal activity of FHLMC
currently consists of the purchase of first lien conventional mortgage loans
or participation interests in such mortgage loans and the sale of the
mortgage loans or participations so purchased in the form of mortgage
securities, primarily FHLMC Certificates. FHLMC is confined to purchasing,
so far as practicable, mortgage loans that it deems to be of such quality,
type and class as to meet generally the purchase standards imposed by private
institutional mortgage investors.

FHLMC CERTIFICATES. Each FHLMC Certificate represents an undivided
interest in a pool of mortgage loans that may consist of first lien
conventional loans, FHA Loans or VA Loans (a "FHLMC CERTIFICATE GROUP").
FHLMC Certificates are sold under the terms of a Mortgage Participation
Certificate Agreement. A FHLMC Certificate may be issued under either
FHLMC's Cash Program or Guarantor Program.

Unless otherwise described in the related Prospectus Supplement,
mortgage loans underlying the FHLMC Certificates relating to a series will
consist of mortgage loans with original terms to maturity of between 10 and
30 years. Each such mortgage loan must meet the applicable standards set
forth in FHLMC Act. A FHLMC Certificate group may include whole loans,
participation interests in whole loans and undivided interests in whole loans
and/or participations comprising another FHLMC Certificate group. Under the
Guarantor Program any such FHLMC Certificate group may include only whole
loans or participation interests in whole loans.

FHLMC guarantees to each registered holder of a FHLMC Certificate the
timely payment of interest on the underlying mortgage loans to the extent of
the applicable Certificate rate on the registered holder's pro rata share of
the unpaid principal balance outstanding on the underlying mortgage loans in
the FHLMC Certificate group represented by such FHLMC Certificate, whether or
not received. FHLMC also guarantees to each registered holder of a FHLMC
Certificate collection by such holder of all principal on the underlying
mortgage loans, without any offset or deduction, to the extent of such
holder's pro rata share thereof, but does not, except if and to the extent
specified in the Prospectus Supplement for a Series, guarantee the timely
payment of scheduled principal. Under FHLMC's Gold PC Program, FHLMC
guarantees the timely payment of principal based on the difference between
the pool factor published in the month preceding the month of distribution
and the pool factor published in such month of distribution. Pursuant to its
guarantees, FHLMC indemnifies holders of FHLMC Certificates against any
diminution in principal by reason of charges for property repairs,
maintenance and foreclosure. FHLMC may remit the amount due on account of
its guarantee of collection of principal at any time after default on an
underlying mortgage loan, but not later than (i) 30 days following
foreclosure sale, (ii) 30 days following payment of the claim by any mortgage
insurer, or (iii) 30 days following the expiration of any right of
redemption, whichever occurs later, but in any event no later than one year
after demand has been made upon the mortgagor for accelerated payment of
principal. In taking actions regarding the collection of principal after
default on the mortgage loans underlying FHLMC Certificates, including the
timing of demand for acceleration, FHLMC reserves the right to exercise its
judgment with respect to the mortgage loans in the same manner as for
mortgage loans which it has purchased but not sold. The length of time
necessary for FHLMC to determine that a mortgage loan should be accelerated
varies with the particular circumstances of each mortgagor, and FHLMC has not
adopted standards which require that the demand be made within any specified
period.

FHLMC Certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the
United States or any Federal Home Loan Bank. The obligations of FHLMC under
its guarantee are obligations solely of FHLMC and are not backed by, nor
entitled to, the full faith and credit of the United States. If FHLMC were
unable to satisfy such obligations, distributions to holders of FHLMC
Certificates would consist solely of payments and other recoveries on the
underlying mortgage loans and, accordingly, monthly distributions to holders
of FHLMC Certificates would be affected by delinquent payments and defaults
on such mortgage loans.

In addition to FHLMC's guarantees of timely payment of interest and
ultimate collection of principal, FHLMC guarantees with respect to FHLMC
Certificates representing certain qualifying mortgage loans the timely
payment by each mortgagor of the monthly principal scheduled to be paid under
the amortization schedule applicable to each such mortgage

<PAGE>

loan ("SCHEDULED PRINCIPAL"). Servicers of the mortgage loans comprising
these FHLMC Certificates are required to pay Scheduled Principal to FHLMC
whether or not received from the mortgagors. FHLMC, in turn, guarantees to
pay Scheduled Principal to each registered holder of such FHLMC Certificates
whether or not received from the servicers. FHLMC monthly payments of
Scheduled Principal are computed based upon the servicer's monthly report to
FHLMC of the amount of Scheduled Principal due to be paid on the related
mortgage loans. The Prospectus Supplement for each Series for which the
related Trust Fund includes FHLMC Certificates will set forth the nature of
FHLMC's guarantee with respect to scheduled principal payments on the
mortgage loans in the pools represented by such FHLMC Certificates.

Requests for registration of ownership of FHLMC Certificates made on or
before the last business day of a month are made effective as of the first
day of that month. With respect to FHLMC Certificates sold by FHLMC on or
after January 2, 1985, a Federal Reserve Bank which maintains book-entry
accounts with respect thereto will make payments of interest and principal
each month to holders in accordance with the holders instructions. The
first payment to a holder of a FHLMC Certificate will normally be received by
the 15th day of the second month following the month in which the purchaser
became recognized as the holder of such FHLMC Certificate. Thereafter,
payments will normally be received by the 15th day of each month.

A FHLMC Certificate may be issued under programs created by FHLMC,
including its Cash Program or Guarantor Program. Under FHLMC's Cash Program,
the pooled mortgage loans underlying a FHLMC Certificate are purchased for
cash from a number of sellers. With respect to FHLMC Certificate Pools
formed prior to June 1, 1987, under the Cash Program, there is no limitation
on the amount by which interest rates on the mortgage loans underlying a
FHLMC Certificate may exceed the interest rate on the FHLMC Certificate.
Under such program, FHLMC purchases groups of whole mortgage loans at
specified percentages of their unpaid principal balances, adjusted for
accrued or prepaid interest, which, when applied to the interest rate of the
mortgage loans purchased, results in the yield (expressed as a percentage)
required by FHLMC. The required yield, which includes a minimum servicing
fee retained by the servicer, is calculated using the outstanding principal
balance of the mortgage loans, an assumed term and a prepayment period as
determined by FHLMC. No mortgage loan is purchased by FHLMC at greater than
100% of its outstanding principal balance. Thus, the range of interest rates
on the mortgage loans in a FHLMC Certificate Pool formed prior to June 1987
under the Cash Program will vary since mortgage loans are purchased and
identified to a FHLMC Certificate Pool based upon their yield to FHLMC rather
than on the interest rates on the mortgage loans. With respect to FHLMC
Certificate Pools formed on or after June 1, 1987, the range of interest
rates on the mortgage loans and participations in a FHLMC Certificate Pool
which is comprised of 15- or 30-year fixed-rate single family mortgage loans
bought by FHLMC under the Cash Program will be restricted to one percentage
point. In addition, the minimum interest rate on any mortgage loan in a
FHLMC Certificate Pool will be greater than or equal to the annual
pass-through rate on the related FHLMC Certificate, and the maximum interest
rate will not be more than two percentage points above such pass-through rate.

Under FHLMC's Guarantor Program, the mortgage loans underlying a FHLMC
Certificate are purchased from a single seller in exchange for such FHLMC
Certificate. The interest rate on a FHLMC Certificate under such program is
established based upon the lowest interest rate on the underlying mortgage
loans, minus a minimum servicing fee and the amount of FHLMC's management and
guaranty income as agreed upon between the seller and FHLMC. Under the
Guarantor Program, the range between the lowest and highest annual interest
rates on the mortgage loans in a FHLMC Certificate Pool may not exceed two
percentage points. For some FHLMC Certificates issued pursuant to purchase
contracts under the Guarantor Program on or after September 1, 1987, the
range of the interest rates on the mortgage loans in a FHLMC Certificate Pool
will not exceed one percentage point.

STRIPPED AGENCY SECURITIES

Agency Securities may consist of one or more stripped mortgage-backed
securities, each as described herein and in the related Prospectus
Supplement. Each such Agency Security will represent an undivided interest
in all or part of either the principal distributions (but not the interest
distributions) or the interest distributions (but not the principal
distributions), or in some specified portion of the principal and interest
distributions (but not all of such distributions) on certain GNMA
Certificates, FNMA Certificates, FHLMC Certificates, or other Agency
Securities. The underlying securities will be held under a trust agreement
by GNMA, FNMA or FHLMC each as trustee, or by another trustee named in the
related Prospectus Supplement. FHLMC, FNMA or GNMA will guarantee each
stripped Agency Security to the same extent as such entity guarantees the
underlying securities backing such stripped Agency Security, unless otherwise
specified in the related Prospectus Supplement.

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OTHER AGENCY SECURITIES

If specified in the related Prospectus Supplement, a Trust Fund may
include other mortgage pass-through or participation certificates issued or
guaranteed by GNMA, FNMA or FHLMC, including but not limited to FNMA
Guaranteed REMIC Pass-Through Certificates and FHLMC Multiclass Mortgage
Participation Certificates. The characteristics of any such mortgage
pass-through or participation certificates will be described in such
Prospectus Supplement. If so specified, a combination of different types of
Agency Securities may be included in a Trust Fund.

CONTRACTS

Each pool of Contracts included in the Trust Fund with respect to a
Series (the "CONTRACT POOL") will consist of property improvement and/or
manufactured housing conditional sales contracts, installment sales contracts
and/or installment loan agreements, or participation interests therein
(collectively, "CONTRACTS"). As specified in the related Prospectus
Supplement, Contracts may either be secured by a Manufactured Home (a
"SECURED CONTRACT") or be unsecured (a "UNSECURED CONTRACT"), and in either
case Contracts may not be insured or guaranteed by any government agency
("CONVENTIONAL CONTRACTS") or may be partially insured by the FHA pursuant to
the Title I Program ("TITLE I CONTRACTS"). Unless otherwise specified in the
related Prospectus Supplement, the Contracts included in the Trust Fund with
respect to a Series will be fully amortizing and will bear interest at a
fixed annual percentage rate ("APR").

The Manufactured Homes securing the Secured Contracts consist of
manufactured homes within the meaning of 42 United States Code, Section
5402(6), which defines a "MANUFACTURED HOME" as "a structure, transportable
in one or more sections, which in the traveling mode, is eight body feet or
more in width or forty body feet or more in length, or, when erected on site,
is three hundred twenty or more square feet, and which is built on a
permanent chassis and designed to be used as a dwelling with or without
permanent foundation when connected to the required utilities, and includes
the plumbing, heating, air-conditioning, and electrical systems contained
therein; except that such term shall include any structure which meets all
the requires of [this] paragraph except the size requirements and with
respect to which the manufacturer voluntarily files a certification required
by the Secretary of Housing and Urban Development and complies with the
standards established under [this] chapter." Moreover, if an election is made
to treat a Trust Fund including Secured Contracts as a REMIC as described in
"Certain Federal Income Tax Consequences -- Certain Income Tax Consequences
for REMIC Certificates," the related Manufactured Homes will have a minimum
of 400 square feet of living space and a minimum width in excess of 102
inches.

Unless otherwise specified in the Prospectus Supplement with respect to
a Series for which the related Trust Fund includes Secured Contracts, for
purposes of calculating the loan-to-value ratio of a Secured Contract
relating to a new Manufactured Home, the "COLLATERAL VALUE" is no greater
than the sum of a fixed percentage of the list price of the unit actually
billed by the manufacturer to the dealer (exclusive of freight to the dealer
site) including accessories identified in the invoice (the "MANUFACTURER'S
INVOICE PRICE"), plus the actual cost of any accessories purchased from the
dealer, a delivery and set-up allowance, depending on the size of the unit
and the cost of state and local taxes, filing fees and up to three years
prepaid hazard insurance premiums. Unless otherwise specified in the related
Prospectus Supplement, the Collateral Value of a used Manufactured Home is
the least of the sales price, the appraised value, and the National
Automobile Dealer s Association book value plus prepaid taxes and hazard
insurance premiums. The appraised value of a Manufactured Home is based upon
the age and condition of the manufactured housing unit and the quality and
condition of the mobile home park in which it is situated, if applicable.

The related Prospectus Supplement may specify for the Contracts
contained in the related Contract Pool, among other things, the date of
origination of the Contracts; the APRs on the Contracts; the Contract
Loan-to-Value Ratios; the minimum and maximum outstanding principal balance
as of the Cut-off Date and the average outstanding principal balance; the
outstanding principal balances of the Contracts included in the Contract
Pool; and the original maturities of the Contracts and the last maturity date
of any Contract.

DEPOSIT, SUBSTITUTION AND WITHDRAWAL OF ASSETS

With respect to a Series, to the extent provided in the Pooling and
Servicing Agreement and the related Prospectus Supplement, the related
Transferor or the Depositor may, subsequent to the issuance of a Series,
deposit additional Assets or withdraw Assets previously included in the
related Trust Fund for such Series, substituting comparable assets therefor
or withdraw assets previously included in a Reserve Fund for such Series.

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CREDIT ENHANCEMENT

GENERAL

Various forms of credit enhancement ("CREDIT ENHANCEMENT") may be
provided with respect to one or more Classes of a Series or with respect to
the Assets in the related Trust Fund. Credit Enhancement may be in the form
of the subordination of one or more Classes of such Series, the
overcollateralization of the Trust Fund with respect to a Series, the
establishment of one or more Reserve Funds, the use of a cross-support
feature, the use of a Mortgage Pool Insurance Policy, Certificate Insurance
Policy, Special Hazard Insurance Policy, bankruptcy bond, or another form of
Credit Enhancement described in the related Prospectus Supplement, or any
combination of the foregoing. Unless otherwise specified in the related
Prospectus Supplement, any Credit Enhancement with respect to a Series will
not provide protection against all risks of loss and will not guarantee
repayment of the entire principal balance of the Certificates of such Series
and interest thereon. If losses occur which exceed the amount covered by such
Credit Enhancement or which are not covered by the Credit Enhancement,
Holders will bear their allocable share of deficiencies.

SUBORDINATION

If so specified in the related Prospectus Supplement, distributions in
respect of scheduled principal, interest or any combination thereof that
otherwise would have been payable or distributable to one or more Classes of
a Series (the "SUBORDINATED CERTIFICATES") will instead be payable to one or
more other Classes of such Series (the "SENIOR CERTIFICATES") under the
circumstances and to the extent provided in such Prospectus Supplement. If
specified in the Prospectus Supplement, delays in receipt of scheduled
payments on the Mortgage Assets and losses on defaulted Mortgage Assets will
be borne first by the various Classes of Subordinated Certificates and
thereafter by the various Classes of Senior Certificates, in each case under
the circumstances and subject to the limitations specified in the Prospectus
Supplement. The aggregate distributions in respect of delinquent payments or
distributions on the Mortgage Assets over the lives of the Certificates of a
Series or at any time, the aggregate losses in respect of defaulted Mortgage
Assets which must be borne by the Subordinated Certificates by virtue of
subordination and the amount of the distributions otherwise distributable to
the Subordinated Certificates that will be distributable to Holders of Senior
Certificates on any Distribution Date may be limited as specified in the
related Prospectus Supplement. If aggregate distributions in respect of
delinquent payments or distributions on the Mortgage Assets or aggregate
losses in respect of such Mortgage Assets were to exceed the total amounts
distributable and available for distribution to Holders of Subordinated
Certificates were to exceed the specified maximum amount, Holders of Senior
Certificates could experience losses on their Certificates.

In addition to or in lieu of the foregoing, if so specified in the
related Prospectus Supplement, all or any portion of distributions otherwise
distributable to Holders of Subordinated Certificates on any Distribution
Date may instead be deposited into one or more Reserve Fund (as defined
below) established by the related Trustee. If so specified in the related
Prospectus Supplement, such deposits may be made (i) on each Distribution
Date, (ii) on each Distribution Date for specified periods, or (iii) on each
Distribution Date until the balance in the Reserve Fund has reached a
specified amount and, following payments from the Reserve Fund to Holders of
Senior Certificates or otherwise, thereafter to the extent necessary to
restore the balance in the Reserve Fund to required levels, in each case as
specified in such Prospectus Supplement. If so specified in the related
Prospectus Supplement, amounts on deposit in the Reserve Fund may be released
to the Depositor or the Holders of any Class of Certificates at the times and
under the circumstances specified in such Prospectus Supplement.

If specified in the related Prospectus Supplement, various Classes of
Senior Certificates and Subordinated Certificates may themselves be
subordinate in their right to receive certain distributions to other Classes
of Senior and Subordinated Certificates, respectively, through a
cross-support mechanism or otherwise.

As between Classes of Senior Certificates and as between Classes of
Subordinated Certificates, distributions may be allocated among such Classes
(i) in the order of their Assumed Final Distribution Dates, (ii) in
accordance with a schedule or formula, (iii) in relation to the occurrence of
events, or (iv) otherwise, in each case as specified in the related
Prospectus Supplement. As between Classes of Subordinated Certificates,
distributions to Holders of Senior Certificates on account of delinquencies
or losses and payments to any Reserve Fund will be allocated as specified in
the related Prospectus Supplement.

OVERCOLLATERALIZATION

If so provided in the related Prospectus Supplement, the aggregate
principal balance of the Mortgage Assets included in the Trust Fund may
exceed the aggregate original principal balance of the Certificates in a
Series thereby creating an

37
<PAGE>

"EXCESS SPREAD" on each Distribution Date. If so provided in the related
Prospectus Supplement, such Excess Spread may be distributed to holders of
Senior Certificates to produce and maintain a specified level of
overcollateralization. With respect to a Series of Certificates, the
overcollateralization level may be fixed or may increase or decrease over
time, subject to certain floors, caps and triggers, all as set forth in the
related Prospectus Supplement.

CROSS-SUPPORT

If specified in the related Prospectus Supplement, separate Classes of
related Series of Certificates may represent the beneficial ownership of or
be separately secured by, separate groups of Assets included in the Trust
Fund for a Series or otherwise available for the benefit of such
Certificates. In such case, Credit Enhancement may be provided by a
cross-support feature which may require that distributions be made with
respect to Certificates evidencing beneficial ownership of or secured by one
or more asset groups prior to distributions to Subordinated Certificates
evidencing a beneficial ownership interest in or secured by other asset
groups within the same Trust Fund. The Prospectus Supplement for a Series
which includes a cross-support feature will describe the manner and
conditions for applying such cross-support feature.

If specified in the Prospectus Supplement, the coverage provided by one
or more forms of Credit Enhancement may apply concurrently to two or more
separate Trust Funds for a separate Series of Certificates. If applicable,
the Prospectus Supplement will identify the Trust Funds to which such credit
support relates and the manner of determining the amount of the coverage
provided thereby and of the application of such coverage to the identified
Trust Funds.

CERTIFICATE INSURANCE

If specified in the Prospectus Supplement, one or more Certificate
Guaranty Insurance Policies (each, a "CERTIFICATE GUARANTY POLICY" ) will be
obtained. Such Certificate Guaranty Policy with respect to a Series will,
subject to limitations described in the related Prospectus Supplement,
provide to the Holders of the insured Certificates of such Series a guarantee
of payment of any interest and/or principal payments due to such Holders on
each Distribution Date. The related Prospectus Supplement will describe the
terms of any Certificate Guaranty Policy and will set forth certain
information with respect to the Certificate Insurer.

POOL INSURANCE

With respect to a Series for which the related Trust Fund includes
Mortgage Loans (and, if specified in the related Prospectus Supplement, a
Series for which the related Trust Fund includes Contracts), in order to
decrease the likelihood that Holders of the Certificates of such Series will
experience losses in respect of such Mortgage Loans, if specified in the
related Prospectus Supplement, one or more mortgage pool insurance policies
(each, a "MORTGAGE POOL INSURANCE POLICY") will be obtained. Such Mortgage
Pool Insurance Policy will, subject to the limitations described below and in
the Prospectus Supplement, cover loss by reason of default in payments on
such Mortgage Loans up to the amounts specified in the Prospectus Supplement
or reported on Form 8-K and for the periods specified in the Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
the Servicer under the related Pooling and Servicing Agreement will agree to
use its best reasonable efforts to cause to be maintained in effect any such
Mortgage Pool Insurance Policy and to file claims thereunder to the issuer of
such Mortgage Pool Insurance Policy (the "POOL INSURER" ). A Mortgage Pool
Insurance Policy, however, is not a blanket policy against loss, since claims
thereunder may only be made respecting particular defaulted Mortgage Loans
and only upon satisfaction of certain conditions precedent set forth in such
policy as described in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, the Mortgage Pool Insurance
Policies, if any, will not cover losses due to a failure to pay or denial of
a claim under a primary mortgage insurance policy, irrespective of the reason
therefor. The related Prospectus Supplement will describe the terms of any
applicable Mortgage Pool Insurance Policy and will set forth certain
information with respect to the related Pool Insurer.

SPECIAL HAZARD INSURANCE

With respect to a Series for which the related Trust Fund includes
Mortgage Loans (and, if specified in the related Prospectus Supplement, each
Series for which the related Trust Fund includes Contracts), in order to
decrease the likelihood that Holders of the Certificates of such Series will
experience losses in respect of such Mortgage Loans, if specified in the
related Prospectus Supplement, one or more Special Hazard Insurance Policies
(each, a "SPECIAL HAZARD INSURANCE POLICY") will be obtained. Such Special
Hazard Insurance Policy with respect to a Series will, subject to limitations
described below and in the related Prospectus Supplement, protect Holders of
the Certificates of such Series from (i) loss by reason of damage to
Mortgaged Properties caused by certain hazards (including earthquakes and, to
a limited extent, tidal waves and related

<PAGE>

water damage) not covered by the standard form of hazard insurance policy for
the respective states in which the Mortgaged Properties are located or under
flood insurance policies, if any, covering the Mortgaged Properties, and (ii)
loss caused by reason of the application of the coinsurance clause contained
in hazard insurance policies. See "Servicing of the Mortgage Loans and
Contracts -- Standard Hazard Insurance". Any Special Hazard Insurance Policy
may not cover losses occasioned by war, civil insurrection, certain
governmental actions, errors in design, faulty workmanship or materials
(except under certain circumstances), nuclear reaction, flood (if the
Mortgaged Property is located in a federally designated flood area), chemical
contamination and certain other risks. Aggregate claims under each Special
Hazard Insurance Policy will be limited as described in the related
Prospectus Supplement. Any Special Hazard Insurance Policy may also provide
that no claim may be paid unless hazard and if applicable, flood insurance on
the Mortgaged Property has been kept in force and other protection and
preservation expenses have been paid.

The related Prospectus Supplement will describe the terms of any
applicable Special Hazard Insurance Policy and will set forth certain
information with respect to the related Special Hazard Insurer.

RESERVE FUNDS

If specified in the Prospectus Supplement with respect to a Series,
assets such as cash, U.S. Treasury securities, instruments evidencing
ownership of principal or interest payments thereon, letters of credit,
demand notes, certificates of deposit or a combination thereof in the
aggregate amount specified in such Prospectus Supplement will be deposited by
the related Transferor or the Depositor in one or more accounts (each, a
"RESERVE FUND") established and maintained with the related Trustee. Such
cash and the payments on such other assets will be used to enhance the
likelihood of timely distribution of principal of, and interest on, or, if so
specified in the related Prospectus Supplement, to provide additional
protection against losses in respect of, the Assets in the related Trust
Fund, to pay the expenses of the related Trust Fund or for such other
purposes specified in such Prospectus Supplement. Whether or not the related
Transferor or the Depositor has any obligation to make such a deposit,
certain amounts to which the Holders of the Subordinated Certificates of such
Series, if any, the related Transferor or the Depositor would otherwise be
entitled may instead be deposited into the Reserve Fund from time to time and
in the amounts as specified in the related Prospectus Supplement. Any cash in
any Reserve Fund and the proceeds of any other instrument upon maturity will
be invested in Permitted Instruments. If a letter of credit is deposited with
the Trustee, such letter of credit will be irrevocable. Unless otherwise
specified in the Prospectus Supplement with respect to a Series, any
instrument deposited therein will name the related Trustee, in its capacity
as trustee for the Holders of the Certificates of such Series, as beneficiary
and will be issued by an entity acceptable to each rating agency that rates
such Certificates. Additional information with respect to such instruments
deposited in the Reserve Funds may be set forth in the Prospectus Supplement.

OTHER INSURANCE, GUARANTEES AND SIMILAR INSTRUMENTS OR AGREEMENTS

If specified in the Prospectus Supplement with respect to a Series, the
related Trust Fund may also include, or the Certificates of such Series may
also have the benefits of, assets such as insurance, guarantees, surety
bonds, letters of credit, guaranteed investment contracts, swap agreements,
option agreements or similar arrangements for the purpose of (i) maintaining
timely payments or providing additional protection against losses on the
Assets included in such Trust Fund, (ii) paying administrative expenses,
(iii) establishing a minimum reinvestment rate on the distributions made in
respect of such Assets, (iv) guaranteeing timely distribution of principal
and interest on the Certificates of such Series, or (v) for such other
purpose as is specified in such Prospectus Supplement. Such arrangements may
include agreements under which Holders of the Certificates of a Series are
entitled to receive amounts deposited in various accounts held by the related
Trustee upon the terms specified in the related Prospectus Supplement. Such
arrangements may be in lieu of any obligation of the Servicers or the
Administrator, if any, to advance delinquent installments in respect of the
Mortgage Loans. See "Servicing of Mortgage Loans and Contracts -- Advances".

SERVICING OF THE MORTGAGE LOANS AND CONTRACTS

Except as otherwise noted, the description set forth below of the
servicing of Mortgage Loans is applicable to Mortgage Loans included in the
Trust Fund with respect to a Series of Certificates.

Unless otherwise provided in the related Prospectus Supplement, with
respect to a Series of Certificates for which the related Trust Fund includes
Mortgage Loans, Contracts included in the Trust Fund for a Series of
Certificates will be serviced either (i) by the related Servicer as sole
servicer, (ii) by the related Master Servicer as administrator or master
servicer, (iii) by one or more loan servicing institutions as servicers or
(iv) by another institution as master servicer. If an

<PAGE>

institution other than the Servicer acts as the sole servicer or as the
master servicer for a Series, the Servicer may have no servicing obligations
with respect to such Series. Generally, the discussion in this section of the
Prospectus is applicable under circumstances when the Servicer is an
affiliate of the Depositor. If the Servicer is not an affiliate of the
Depositor, the discussion relating to the servicing of the Mortgage Loans and
Contracts as set forth below may be modified or superseded by any discussion
relating to the servicing of the Mortgage Loans and Contracts set forth in
the Prospectus Supplement.

Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans and Contracts will be serviced by one or more loan servicing
institutions, which may include the Servicer or a Subservicer, pursuant to a
subservicing agreement between each Subservicer and the Servicer (each, a
"SUBSERVICING AGREEMENT"), which may be entered into only with the prior
written consent of the Trustee and the Administrator, if any.

ENFORCEMENT OF DUE-ON-SALE CLAUSES

When a Mortgaged Property has been or is about to be conveyed by the
borrower, the Servicer, on behalf of the Trustee, shall, to the extent it has
knowledge of such conveyance or prospective conveyance, enforce the rights of
the Trustee as the mortgagee of record to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, however, that the Servicer shall not exercise any
such right if the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law. In such event or in the
event the related Mortgage and Note do not contain a due-on-sale clause,
the Servicer shall enter into an assumption and modification Agreement with
the person to whom such property has been or is about to be conveyed,
pursuant to which such person becomes liable under the Note and, unless
prohibited by applicable law or the mortgage documents, the borrower remains
liable thereon. The Servicer is also authorized to enter into a substitution
of liability agreement with such person, pursuant to which the original
borrower is released from liability and such person is substituted as
borrower and becomes liable under the Note.

REALIZATION UPON DEFAULTED MORTGAGE LOANS

With respect to any defaulted Mortgage Loan as to which no satisfactory
arrangements can be made for collection of delinquent payments or the cure of
any other event of default, the Servicer will take such action as it shall
deem to be in the best interest of the Certificateholders. Without limiting
the generality of the preceding sentence, the Servicer will, in accordance
with the servicing standard described above, (i) in the case of Title I
Mortgage Loans and Title I Contracts only, direct the Trustee (or any
Administrator) to submit an FHA Claim to the FHA, in accordance with FHA
Regulations, or (ii) in the case of Mortgage Loans and Contracts, take such
other action as the Servicer deems to be in the best interests of the
Certificateholders, which if no superior lien exists on the related Mortgaged
Property, could include a foreclosure upon such Mortgaged Property in the
name of the Trustee for the benefit of the Certificateholders, provided such
action was economically justified and would not affect the status of the
REMIC or cause a tax to be imposed upon the REMIC for federal income tax
purposes. Typically, however, the Servicer has chosen not to pursue
foreclosures of defaulted loans comparable to the Mortgage Loans and
Contracts due to the costs involved. In servicing mortgage loans and
contracts secured by junior liens in their portfolios, it will not be the
Servicer's or any Subservicer's practice to satisfy the senior mortgage(s) at
or prior to the foreclosure sale of the Mortgaged Property, or to advance
funds to keep the senior mortgage(s) current. In addition, if a defaulted
mortgage loan or contract (together with any senior lien indebtedness) has a
high loan-to-value ratio, then the Servicer will be less likely to foreclose
on the related mortgaged property, even if the Servicer has a first-lien
position for such mortgage loan or contract. In the event an FHA Claim is
rejected by the FHA due to circumstances that constitute a breach of the
Transferor's representations and warranties in the Pooling and Servicing
Agreement, the Transferor will be required to repurchase the related Title I
Mortgage Loan or Title I Contract at the purchase price and in the manner set
forth in the Pooling and Servicing Agreement.

In connection with any collection activities or foreclosure, the
Servicer is required to exercise collection and foreclosure procedures with
the same degree of care and skill in its exercise or use, as it would
exercise or use under the circumstances in the conduct of its own affairs.

WAIVERS AND DEFERMENTS OF CERTAIN PAYMENTS

The Pooling and Servicing Agreement requires the Servicer to make
reasonable efforts to collect all payments called for under the terms and
provisions of the Mortgage Loans and the Contracts. Consistent with the
foregoing, the Servicer may at its own discretion waive any late payment
charge, assumption fee or any penalty interest in connection with the payment
of a Mortgage Loan or a Contract or any other fee or charge which the
Servicer would be entitled to retain as servicing

<PAGE>

compensation and may waive, vary or modify any term of any Mortgage Loan or
Contract or consent to the postponement of strict compliance with any such
term or in any matter grant indulgence to any borrower, subject to the
limitations set forth in the Pooling and Servicing Agreement and the FHA
Regulations, if applicable.

SUBSERVICERS

The Servicer is permitted under the Pooling and Servicing Agreement to
enter into servicing arrangements with subservicers meeting the requirements
of the Pooling and Servicing Agreement, provided that the Trustee gives
written consent thereto. Notwithstanding any subservicing arrangements, the
Servicer shall not be relieved of its obligations under the Pooling and
Servicing Agreement to the Trustee and the Certificateholders, and the
Servicer shall be obligated to the same extent and under the same terms and
conditions as if it alone were servicing and administering the Mortgage Loans
and the Contracts.

REMOVAL AND RESIGNATION OF SERVICER

Unless otherwise specified in the Prospectus Supplement, the Trustee may
remove the Servicer upon the occurrence and continuation beyond the
applicable cure period of certain events described in the related Pooling and
Servicing Agreement. Unless otherwise specified in the Prospectus
Supplement, the Servicer will not be permitted to resign from its obligations
and duties except by mutual consent of the Servicer, the Depositor, the
Trustee and any other persons so specified in the related Pooling and
Servicing Agreement, or upon the determination that the Servicer's duties are
no longer permissible under applicable law and such incapacity cannot be
cured by the Servicer. No such resignation shall become effective until a
qualified successor has assumed the Servicer's responsibilities and
obligations. Upon removal or resignation of the Servicer, a successor
servicer will be appointed pursuant to the terms and conditions set forth in
the applicable Pooling and Servicing Agreement.

ADVANCES

Unless otherwise specified in the Prospectus Supplement, neither the
Servicer, nor any Subservicer on behalf of the Servicer, shall have any
obligation to advance its own funds for any delinquent scheduled payments of
principal and interest on any Mortgage Asset or to satisfy or keep current
the indebtedness secured by any Superior Liens on the related Mortgaged
Property. Unless otherwise specified in the Prospectus Supplement, no costs
incurred by the Servicer or any Subservicer in respect of servicing advances
shall, for the purposes of distributions to Certificateholders, be added to
the amount owing under the related Mortgage Asset.

SERVICING PROCEDURES

Unless otherwise specified in the related Prospectus Supplement, the
Servicer and each Subservicer will service the Mortgage Loans and Contracts
pursuant to written guidelines promulgated by the Depositor or the Servicer.
The Servicer will exercise its best reasonable efforts to insure that the
Subservicers service the Mortgage Loans and Contracts in compliance with such
guidelines and in a manner consistent with industry standards.

MORTGAGE LOANS. Unless otherwise specified in the related Prospectus
Supplement, the Servicer and each Subservicer will be required to service and
administer the Mortgage Loans and will have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and
consistent with the terms of the Pooling and Servicing Agreement. The
Servicer, in servicing and administering the Mortgage Loans, will be required
to employ or cause to be employed procedures (including collection,
foreclosure, liquidation and REO Property management and liquidation
procedures) and exercise the same care that it customarily employs and
exercises in servicing and administering loans of the same type as the
Mortgage Loans for its own account, all in accordance with accepted servicing
practices of prudent lending institutions and servicers of loans of the same
type as the Mortgage Loans and giving due consideration to the
Certificateholders reliance on the Servicer. With respect to any Title I
Mortgage Loan, the foregoing servicing standard also shall include the
requirement that the Servicer will and will cause any Subservicer to, comply
with FHA Regulations in servicing the Title I Mortgage Loans so that the FHA
Insurance remains in full force and effect with respect to the Title I
Mortgage Loans, except for good faith disputes relating to FHA Regulations or
such FHA Insurance, unless such disputes would result in the termination or
suspension of such FHA Insurance. The Servicer will be required to maintain
the facilities, procedures and experienced personnel necessary to comply with
such servicing standard and the duties of the Servicer set forth in the
Pooling and Servicing Agreement relating to the servicing of the Mortgage
Loans.

<PAGE>

The Servicer will expend its own funds to restore property securing a
Mortgage Loan which has sustained uninsured damage only if it determines that
such restoration will increase the proceeds of liquidation of the Mortgage
Loan after the reimbursement to the Servicer of its expenses and after the
satisfaction of any Senior liens.

With respect to Cooperative Loans, any prospective purchaser will
generally have to obtain the approval of the board of directors of the
relevant Cooperative before purchasing the shares and acquiring rights under
the related proprietary lease or occupancy agreement. See "Certain Legal
Aspects of the Mortgage Assets" herein. This approval is usually based on the
purchaser's income and net worth and numerous other factors. Although the
Cooperative's approval is unlikely to be unreasonably withheld or delayed,
the necessity of acquiring such approval could limit the number of potential
purchasers for those shares and otherwise limit the ability to sell and
realize the value of those shares.

In general, a "tenant-stockholder" (as defined in Code Section
216(b)(2)) of a corporation that qualifies as a cooperative housing
corporation within the meaning of Code Section 216(b)(1) is allowed a
deduction for amounts paid or accrued within his taxable year to the
corporation representing his proportionate share of certain interest expenses
and certain real estate taxes allowable as a deduction under Code Section
216(a) to the corporation under Code Sections 163 and 164. In order for a
corporation to qualify under Code Section 216(b)(1) for its taxable year in
which such items are allowable as a deduction to the corporation, such Code
Section requires, among other things, that at least 80% of the gross income
of the corporation be derived from its tenant-stockholders (as defined in
Code Section 216(b)(2). By virtue of this requirement, the status of a
corporation for purposes of Code Section 216(b)(1) must be determined on a
year-to-year basis. Consequently, there can be no assurance that Cooperatives
relating to the Cooperative Loans will qualify under such Code Section for
any particular year. In the event that such a Cooperative fails to qualify
for one or more years, the value of the collateral securing any related
Cooperative Loans could be significantly impaired because no deduction would
be allowable to tenant-stockholders under Code Section 216(a) with respect to
those years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under Code Section
216(b)(1), the likelihood that such a failure would be permitted to continue
over a period of years appears remote.

So long as it acts as servicer of the Mortgage Loans, the Servicer will
be required to maintain certain insurance covering errors and omissions in
the performance of its obligations as servicer and certain fidelity bond
coverage ensuring against losses through wrongdoing of its officers,
employees and agents.

CONTRACTS. With respect to a Trust Fund that includes Contracts,
pursuant to the related Pooling and Servicing Agreement, the Servicer will
service and administer the Contracts assigned to the Trustee as more fully
set forth below. The Servicer, either directly or through Subservicers
subject to general supervision by the Servicer, will perform diligently all
services and duties specified in each Pooling and Servicing Agreement, in the
same manner as prudent lending institutions of property improvement and/or
manufactured housing installment sales contracts of the same type as the
Contracts in those jurisdictions where the related obligors are located. The
Servicer will monitor the performance of each Subservicer, if any, and,
unless the related Prospectus Supplement states otherwise, will remain liable
for the servicing of the Contracts in accordance with the terms of the
Pooling and Servicing Agreement. The duties to be performed by the Servicer
or the Subservicer, if any, will include collection and remittance of
principal and interest payments, collection of insurance claims and, if
necessary, repossession.

ADMINISTRATION AND SERVICING COMPENSATION AND PAYMENT OF EXPENSES

With respect to each Mortgage Loan and Contract, the Servicer may
receive compensation with respect to each interest payment thereon in an
amount specified in the related Prospectus Supplement. As compensation for
its servicing duties, each Subservicer, if any, will be entitled to a monthly
servicing fee in the amount specified in the related Prospectus Supplement.
In addition to the primary compensation, each Servicer or Subservicer, if
any, will retain all assumption underwriting fees and late payment charges,
to the extent collected from Mortgagors if so provided in the related
Prospectus Supplement.

The Servicer and any Subservicer will be entitled to reimbursement for
certain expenses incurred by it in connection with the liquidation of
defaulted Mortgage Loans and Contracts. No loss will be suffered on the
Certificates by reason of such expenses to the extent claims for such
expenses are paid directly under any applicable Mortgage Pool Insurance
Policy, a primary mortgage insurance policy, or from other forms of Credit
Enhancement. In the event, however, that the defaulted Mortgage Loans are
not covered by a Mortgage Pool Insurance Policy, Primary Mortgage Insurance
Policies, or another form of Credit Enhancement, or claims are either not
made or not paid under such policies or Credit Enhancement, or if coverage
thereunder has ceased, a loss will occur on the Certificates of the affected
Series to the extent that the proceeds from the

<PAGE>

liquidation of a defaulted Mortgage Loan or Contract, after reimbursement of
the Servicer's and the Subservicer's expenses, are less than the principal
balance of such defaulted Mortgage Loan or Contract.

THE POOLING AND SERVICING AGREEMENT

The following summaries describe certain provisions of the Pooling and
Servicing Agreement not described elsewhere in this Prospectus. Where
particular provisions or terms used in the Pooling and Servicing Agreements
are referred to, the actual provisions (including definitions of terms) are
incorporated by reference as a part of such summaries. The description set
forth below is subject to modification in the Prospectus Supplement for a
Series of Certificates to describe the terms and provisions of the particular
Pooling and Servicing Agreement relating to such Series of Certificates.

Generally, the discussion in this section of the Prospectus is
applicable under circumstances when the Servicer is an affiliate of the
Depositor. If the Servicer is not an affiliate of the Depositor, the
discussion relating to pooling and administration (or master servicing) as
set forth below may be modified or superseded by any discussion relating to
the pooling and administration (or master servicing) set forth in the
Prospectus Supplement. In addition, certain of the following summaries only
apply to a Pooling and Servicing Agreement relating to series of Certificates
for which the related Trust Fund includes Mortgage Loans or Contracts.
Provisions of Pooling and Servicing Agreements relating to series of
Certificates for which the related Trust Fund includes other types of
Mortgage Assets will be summarized and described in the related Prospectus
Supplement.

ASSIGNMENT OF MORTGAGE ASSETS

ASSIGNMENT OF MORTGAGE LOANS

At the time of issuance of the Certificates of a Series, the Depositor
will assign the Mortgage Loans to the related Trustee, together with all
principal and interest (subject to exclusions or adjustments specified in the
related Prospectus Supplement received by the Depositor on or with respect to
such Mortgage Loans on or after the Cut-off Date) other than principal and
interest due and payable on or before the date specified in the related
Prospectus Supplement. The Trustee will, concurrently with such assignment,
execute, countersign and deliver the Certificates to the Depositor in
exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a
schedule appearing as an exhibit to the Pooling and Servicing Agreement.

In addition, as to each Mortgage Loan, the Depositor will deliver to the
Trustee or its custodian, as specified in the related Prospectus Supplement,
the Mortgage Note and Mortgage, any assumption and modification agreement, an
assignment of the Mortgage in recordable form, evidence of title insurance
and, if applicable, the certificate of private mortgage insurance. In
instances where recorded documents cannot be delivered due to delays in
connection with recording, the Depositor may deliver copies thereof and
deliver the original recorded documents promptly upon receipt.

With respect to any Mortgage Loans which are Cooperative Loans, the
Depositor, as depositor, will cause to be delivered to the Trustee or its
custodian, as specified in the related Prospectus Supplement, the related
original Cooperative note endorsed to the order of the Trustee, the original
security agreement, the proprietary lease or occupancy agreement, the
recognition agreement, an executed financing agreement and the relevant stock
certificate and related blank stock powers. The Depositor will file in the
appropriate office an assignment and a financing statement evidencing the
Trustee's security interest in each Cooperative Loan.

Unless otherwise specified in the related Prospectus Supplement, in the
Pooling and Servicing Agreement the Depositor generally will represent and
warrant to the Trustee, among other things, that (i) the information with
respect to each Mortgage Loan set forth in the schedule of Mortgage Loans
attached thereto is true and correct in all material respects; (ii) at the
date of initial issuance of the Certificates, the Depositor has good and
marketable title to the Mortgage Loans included in the Trust Fund and such
other items comprising the corpus of the Trust Fund are free and clear of any
lien, mortgage, pledge, charge, security interest or other encumbrance; (iii)
at the date of initial issuance of the Certificates, no Mortgage Loan is 30
or more days delinquent and there are no delinquent tax or assessment liens
against the property covered by the related Mortgage; and (iv) each Mortgage
Loan at the time it was made complied in all material respects with
applicable state and federal laws, including, without limitation, consumer,
usury, truth-in-lending, consumer credit protection, equal credit opportunity
and disclosure laws and with respect to any Title I Mortgage Loans, the FHA
Regulations.
43

<PAGE>

In the event that the Depositor has acquired the Mortgage Loans for a
Series, if so specified in the related Prospectus Supplement, the Depositor
may, in lieu of making the representations set forth in the preceding
paragraph, cause the entity from which such Mortgage Loans were acquired to
make such representations (other than those regarding the Depositor's title
to the Mortgage Loans, which will in all events be made by the Depositor), in
the sales agreement pursuant to which such Mortgage Loans are acquired, or if
such entity is acting as Servicer, in the Pooling and Servicing Agreement, or
if such entity is acting as a Subservicer, in its Subservicing Agreement. In
such event such representations, and the Depositor's rights against such
entity in the event of a breach thereof, will be assigned to the Trustee for
the benefit of the holders of the Certificates of such Series.

ASSIGNMENT OF CONTRACTS

The Depositor will cause the Contracts to be assigned to the Trustee,
together with principal and interest due on or with respect to the Contracts
after the date specified in the related Prospectus Supplement. Each Contract
will be identified in a loan schedule ("CONTRACT LOAN SCHEDULE") appearing as
an exhibit to the related Pooling and Servicing Agreement.

In addition, with respect to each Contract for a Manufactured Home, the
Depositor will deliver or cause to be delivered to the Trustee, the original
Contract and copies of documents and instruments related to each Contract and
the security interest in the Manufactured Home securing each Contract. To
give notice of the right, title and interest of the Certificateholders to the
Contracts, the Depositor will cause a UCC-1 financing statement to be filed
identifying the Trustee as the secured party and identifying all Contracts as
collateral. Unless otherwise specified in the related Prospectus Supplement,
the Contracts will not be stamped or otherwise marked to reflect their
assignment from the Depositor to the Trustee. Therefore, if a subsequent
purchaser were able to take physical possession of the Contracts without
notice of such assignment, the interest of the Holders of the Certificates of
the applicable Series in the Contracts could be defeated. See "Certain Legal
Aspects of the Mortgage Assets."

Unless otherwise specified in the Prospectus Supplement, the Depositor
will provide limited representations and warranties to the Trustee concerning
the Contracts. Such representations and warranties will include: (i) that the
information with respect to each Contract set forth in the Contract Loan
Schedule provides an accurate listing of the Contracts and that the
information respecting such Contracts set forth in such Contract Loan
Schedule is true and correct in all material respects at the date or dates
respecting which such information is furnished; (ii) that, immediately prior
to the conveyance of the Contracts, the Depositor had good and marketable
title to, and was sole owner of, each such Contract; and (iii) that there has
been no other sale by it of such Contract.

ASSIGNMENT OF AGENCY SECURITIES

With respect to each Series, unless otherwise specified in the related
Prospectus Supplement, the Depositor will cause any Agency Securities
included in the related Trust Fund to be registered in the name of the
Trustee. The Trustee (or its custodian as specified in the related Prospectus
Supplement) will have possession of any certificated Agency Securities.
Unless otherwise specified in the related Prospectus Supplement, the Trustee
will not be in possession of or be assignee of record of any underlying
assets for an Agency Security. Each Agency Security will be identified in a
schedule appearing as an exhibit to the related Pooling and Servicing
Agreement. The Depositor will represent and warrant to the Trustee, among
other things, the information contained in such schedule is true and correct
and that immediately prior to the transfer of the related securities to the
Trustee, the Depositor had good and marketable title to, and was the sole
owner of, each such security.

REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS AND CONTRACTS

The Trustee (or its custodian as specified in the related Prospectus
Supplement) will review the documents delivered to it with respect to the
Mortgage Loans and Contracts included in the related Trust Fund. Unless
otherwise specified in the related Prospectus Supplement, if any document is
not delivered or is found to be defective in any material respect and the
Depositor cannot deliver such document or cure such defect within 60 days
after notice thereof (which the Trustee will undertake to give within 45 days
of the delivery of such documents), and if any other party obligated to
deliver such document or cure such defect has not done so and has not
substituted or repurchased the affected Mortgage Loan or Contract, then the
Depositor will, not later than the Determination Date next succeeding the end
of such 60-day period (a) if so provided in the Prospectus Supplement remove
the affected Mortgage Loan or Contract from the Trust Fund and substitute one
or more other Mortgage Loans or Contracts therefor or (b) repurchase the
Mortgage Loan or Contract from the Trustee for a price equal to 100% of its
principal balance plus interest thereon as the date specified in the related
Prospectus Supplement, plus the

<PAGE>

amount of unreimbursed servicing advances made by the Servicer or any
Subservicer with respect to such Mortgage Loan. Unless otherwise specified
in the related Prospectus Supplement, such purchase price will be deposited
in the Collection Account on such Determination Date and such repurchase and,
if applicable, substitution obligation will constitute the sole remedy
available to Holders of the Certificates of the applicable Series or the
Trustee against the Depositor for a material defect in a document relating to
a Mortgage Loan or Contract.

If the Prospectus Supplement for a Series of Certificates so provides,
then in lieu of agreeing to repurchase or substitute Mortgage Loans or
Contracts as described above, the Depositor may obtain such an agreement from
the entity which sold such Mortgage Loans or Contracts to the Depositor,
which agreement will be assigned to the Trustee for the benefit of the
holders of the Certificates of such series.

If a REMIC election is to be made with respect to all or a portion of a
Trust Fund, there may be federal income tax limitations on the right to
substitute Mortgage Loans or Contracts as described above.

EVIDENCE AS TO COMPLIANCE

The related Pooling and Servicing Agreement will provide that on or
before a specified date after the end of each of the Servicer's fiscal years
elapsing during the term of its appointment, beginning with the first fiscal
year ending after the Closing Date, the Servicer, at its expense, will
furnish to the Trustee and certain other Persons (i) an opinion by a firm of
independent certified public accountants on the financial position of the
Servicer at the end of the relevant fiscal year and the results of operations
and changes in financial position of the Servicer for such year then ended on
the basis of an examination conducted in accordance with generally accepted
auditing standards, and (ii) if the Servicer is then servicing any Mortgage
Loans, a statement from such independent certified public accountants to the
effect that based on an examination of certain specified documents and
records relating to the servicing of the Servicer's mortgage loan portfolio
conducted substantially in compliance with the audit program for mortgages
serviced for the United States Department of Housing and Urban Development
Mortgage Audit Standards, or the Uniform Single Audit Program for Mortgage
Bankers (the "APPLICABLE ACCOUNTING STANDARDS"), such firm is of the opinion
that such servicing has been conducted in compliance with the Applicable
Accounting Standards except for (a) such exceptions as such firm shall
believe to be immaterial and (b) such other exceptions as shall be set forth
in such statement.

LIST OF CERTIFICATEHOLDERS

Upon written request of the Trustee, the Registrar for a Series of
Certificates will provide to the Trustee, within fifteen days after receipt of
such request, a list of the names and addresses of all Holders of record of
such Series as of the most recent Record Date for payment of distributions to
Holders of that Series. Upon written request of three or more Holders of
record of a Series of Certificates for purposes of communicating with other
Holders with respect to their rights under the Pooling and Servicing Agreement
for such Series, the Trustee will afford such Holders access during business
hours to the most recent list of Holders of that Series held by the Trustee.
With respect to Book Entry Certificates, the only named Holder on the
Certificate Register will be the Clearing Agency.

The Pooling and Servicing Agreement will not provide for the holding of
any annual or other meetings of Holders of Certificates.

ADMINISTRATION OF THE CERTIFICATE ACCOUNT

The Pooling and Servicing Agreement with respect to a Series will
require that the Certificate Account be any of the following: (i) an account
maintained with a depository institution the debt obligations of which (or,
in the case of a depository institution which is a part of a holding company
structure, the debt obligations of the holding company of which) have a
long-term or short-term rating acceptable to each rating agency that rated
the Certificates; (ii) an account or accounts the deposits in which are fully
insured by either the Bank Insurance Fund (the "BIF" ), the Federal Deposit
Insurance Corporation (the "FDIC") or the Savings Association Insurance Fund
(as successor to the Federal Savings and Loan Insurance Corporation) ("SAIF")
of the FDIC; (iii) a trust account (which shall be a "segregated trust
account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Trustee which
depository institution or trust company will be required to have capital and
surplus of not less than the amount specified in the related Pooling and
Servicing Agreement; or (v) an account that will not cause any rating agency
rating the Certificates of such Series to downgrade or withdraw its
then-current rating assigned to the Certificates as evidenced in writing by
such rating agency. The instruments in which amounts in the Certificate
Account

<PAGE>

may be invested are limited to United States government securities
and other investments acceptable to the rating agencies rating such series of
Certificates ("PERMITTED INSTRUMENTS"). Unless otherwise specified in the
related Prospectus Supplement, a Certificate Account may be maintained as an
interest bearing account, or the funds held therein may be invested pending
each succeeding Distribution Date in Permitted Instruments. Unless otherwise
specified in the related Prospectus Supplement, the Depositor or the Trustee
will be entitled to receive any such interest or other income earned on funds
in the Certificate Account as additional compensation. Unless otherwise
specified in the related Prospectus Supplement, the following payments and
collections received subsequent to the Cut-off Date will be deposited in the
Certificate Account:

(i) all payments on account of scheduled principal;

(ii) all payments on account of interest accruing and collected on and
after the date specified in the related Prospectus Supplement, subject to
exclusions or adjustments described in such Prospectus Supplement;

(iii) all Liquidation Proceeds net of certain amounts reimbursed to the
Subservicers or the Servicer, as described in the related Pooling and
Servicing Agreement;

(iv) all Insurance Proceeds;

(v) all proceeds of any Mortgage Loan or Contract or property acquired
in respect thereof repurchased by the Servicer, the Depositor or the
Transferor or otherwise as described above or under "Termination" below;

(vi) all amounts, if any, required to be transferred to the Certificate
Account from any Credit Enhancement for the related Series; and

(vii) all other amounts required to be deposited in the Certificate
Account pursuant to the related Pooling and Servicing Agreement.

REPORTS TO HOLDERS OF CERTIFICATES

Concurrently with each distribution on the Certificates of a Series,
unless otherwise specified in the related Prospectus Supplement, the Trustee
will furnish to Holders of such Certificates a statement generally setting
forth, to the extent applicable to such Series, among other things:

(i) the aggregate amount of such distribution allocable to principal,
separately identifying the amount allocable to each Class;

(ii) the amount of such distribution allocable to interest, separately
identifying the amount allocable to each Class;

(iii) the aggregate principal balance of each Class of the Certificates
after giving effect to distributions on such Distribution Date;

(iv) if applicable, the aggregate principal balance of any Class
Certificates which are Compound Interest Certificates after giving effect to
any increase in such principal balance that results from the accrual of
interest that is not yet distributable thereon;

(v) if applicable, the amount otherwise distributable to Holders of any
Class of Certificates that was distributed to Holders of other Classes of
Certificates;

(vi) if any Class of Certificates has priority in the right to receive
Principal Prepayments, the amount of Principal Prepayments in respect of the
related Mortgage Assets;

(vii) certain performance information, including delinquency and
foreclosure information specified in the related Pooling and Servicing
Agreement;

(viii) the amount of coverage then remaining under any Credit Enhancement;
and

(ix) all other information required to be provided pursuant to the
related Pooling and Servicing Agreement.

<PAGE>

The Servicer or the Trustee will also furnish annually customary
information deemed necessary for Holders of such Certificates to prepare
their tax returns.

EVENTS OF DEFAULT

"Events of Default" under the Pooling and Servicing Agreement with
respect to a Series will consist of (i) any failure by the Servicer to duly
observe or perform in any material respect any of its covenants or agreements
in such Pooling and Servicing Agreement materially affecting the rights of
Holders of the Certificates of such Series which continues unremedied for 60
days after the giving of written notice of such failure to the Servicer by
the Trustee or to the Servicer or the Trustee by the Holders of such
Certificates evidencing interests aggregating not less than 25% of the
affected Class of Certificates; and (ii) certain events of insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings and certain actions by the Servicer indicating its insolvency,
reorganization or inability to pay its obligations.

RIGHTS UPON EVENT OF DEFAULT

As long as an Event of Default under a Pooling and Servicing Agreement
remains unremedied by the Servicer, the Trustee, or Holders of Certificates
of each Class of Certificates affected thereby evidencing, as to each such
Class interests aggregating not less than 51%, may terminate all of the
rights and obligations of the Servicer under the Pooling and Servicing
Agreement, whereupon the Trustee, or a new Servicer appointed pursuant to the
Pooling and Servicing Agreement, will succeed to all the responsibilities,
duties and liabilities of the Servicer under the Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements.
Notwithstanding its termination as Servicer, the Servicer will be entitled to
receive amounts earned by it under the Pooling and Servicing Agreement prior
to such termination. If at the time of any such termination the Servicer is
also servicing as the Administrator, the Servicer's status as Administrator
will be simultaneously terminated by the Trustee and the Servicer's
responsibilities as such shall be transferred to the successor servicer, if
such person is then qualified to so act), or to another successor
Administrator retained by the Trustee, or to the Trustee itself if a
successor Administrator cannot be retained in a timely manner. Unless
otherwise provided in the related Prospectus Supplement, unless and until a
successor servicer is appointed, the Trustee will be required to fulfill the
duties of the Servicer.

No Holder of Certificates will have any right under the Pooling and
Servicing Agreement to institute any proceeding with respect to the Pooling
and Servicing Agreement, unless such Holder previously has given to the
Trustee written notice of default and unless the Holders of Certificates as
specified in the Prospectus Supplement have made written request to the
Trustee to institute such proceeding in its own name as Trustee thereunder
and have offered to the Trustee reasonable indemnity and the Trustee for 60
days has neglected or refused to institute any such proceedings. However, the
Trustee is under no obligation to exercise any of the trusts or powers vested
in it by the Pooling and Servicing Agreement or to make any investigation of
matters arising thereunder or to institute, conduct or defend any litigation
thereunder or in relation thereto at the request, order or direction of any
of the Holders, unless such Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may
be incurred therein or thereby.

AMENDMENT

The Pooling and Servicing Agreement with respect to a Series may be
amended by the Depositor, the Servicer and the Trustee without the consent of
the Holder of the Certificates of such Series, to cure any error or
ambiguity, to correct or supplement any provision therein which may be
defective or inconsistent with any other provision therein or to add any
other provisions with respect to matters or questions arising under the
Pooling and Servicing Agreement provided that such action will not adversely
affect in any material respect the interests of any Holders of that Series.
An amendment described above shall not be deemed to adversely affect in any
material respect the interests of the Holders of that Series if either (a) an
opinion of counsel satisfactory to the Trustee is obtained to such effect, or
(b) the person requesting the amendment obtains a letter from each of the
rating agencies then rating the Certificates of that Series to the effect
that the amendment, if made, would not result in a downgrading or withdrawal
of the rating then assigned by it to such Certificates. Notwithstanding the
foregoing, the Depositor, the Servicer and the Trustee may amend each Pooling
and Servicing Agreement without the consent of the Holders of the
Certificates of the relevant Series in order to modify, eliminate or add to
any of its provisions to such extent as may be appropriate or necessary to
maintain REMIC status of all or any portion of any Trust Fund as to which a
REMIC election has been made with respect to the applicable Certificates or
to avoid or minimize the risk of the imposition of any tax on the Trust Fund
created by such Pooling and Servicing Agreement that would be a claim against
the Trustee at any time prior to final redemption of the Certificates,
provided that the Trustee has obtained the opinion of independent counsel to
the

<PAGE>

effect that such action is necessary or appropriate to maintain REMIC status
or to avoid or minimize the risk of the imposition of such a tax.

Unless otherwise specified in the Prospectus Supplement, the Pooling and
Servicing Agreement may also be amended by the Depositor, the Servicer, and
the Trustee with the consent of the Holders of Certificates evidencing
interests aggregating in excess of 50% of the aggregate principal balance of
the Certificates of the applicable Series for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of such Pooling and Servicing Agreement or of modifying in any manner the
rights of Holders of Certificates of that Series; provided, however, that no
such amendment may (i) reduce in any manner the amount of, or delay the
timing of, collections of payments received on the related Mortgage Assets or
distributions which are required to be made on any Certificate without the
consent of the Holder of such Certificate, (ii) adversely affect in any
material respect the interests of the Holders of any Class of Certificates in
any manner other than as described in clause (i), without the consent of the
Holders of Certificates of 100% of such Class or (iii) reduce the aforesaid
percentage of Certificates of any Class required to consent to any such
amendment, without the consent of the Holders of 100% of the Certificates of
such Class then outstanding.

TERMINATION

Unless otherwise specified in the related Prospectus Supplement, the
obligations of the Depositor, as depositor, the Servicer, as servicer, and
the Trustee created by the Pooling and Servicing Agreement with respect to a
Series will terminate upon the payment to Holders of the Certificates of such
series of all amounts held by the Servicer or in the Certificate Account and
required to be paid to them pursuant to the Pooling and Servicing Agreement
after the later of (i) the maturity or other liquidation of the last Mortgage
Loan or Contract subject thereto or the disposition of all property acquired
upon foreclosure of any such Mortgage Loan or Contract or (ii) the repurchase
by the Depositor from the Trust Fund of all the outstanding Certificates or
all remaining Assets in the Trust Fund. The Pooling and Servicing Agreement
will establish the repurchase price for the Assets in the Trust Fund and the
allocation of such purchase price among the Classes of Certificates. The
exercise of such right will effect early retirement of the Certificates of
that Series, but the Depositor's right so to repurchase will be subject to
the conditions set forth in the related Prospectus Supplement. If a REMIC
election is to be made with respect to all or a portion of a Trust Fund,
there may be additional conditions to the termination of such Trust Fund
which will be described in the related Prospectus Supplement. In no event,
however, will the trust created by the Pooling and Servicing Agreement
continue beyond the expiration of 21 years from the death of the survivor of
certain persons named in the Pooling and Servicing Agreement. The Trustee
will give written notice of termination of the Pooling and Servicing
Agreement to each Holder of Certificates of the applicable Certificates, and
the final distribution will be made only upon surrender and cancellation of
the Certificates at an office or agency of the Trustee specified in such
notice of termination.

USE OF PROCEEDS

Unless otherwise specified in an applicable Prospectus Supplement,
substantially all of the net proceeds to be received from the sale of each
Series of Certificates will be applied to the simultaneous purchase of the
Mortgage Assets related to such Series or to reimburse the amounts previously
used to effect such a purchase, the costs of carrying such Mortgage Assets
until sale of the Certificates and other expenses connected with pooling the
Mortgage Assets and issuing the Certificates.

THE DEPOSITOR

Remodelers Investment Corporation (the "DEPOSITOR") was incorporated in
the State of Nevada on ____________________ as a limited purpose finance
corporation. All of its outstanding capital stock is owned by Remodelers
National Funding Corporation. The Depositor maintains its principal office
at 16901 Dallas Parkway, Suite 200, Dallas, Texas 75248. Its telephone
number is (214) 380-5995.

As specified in the related Prospectus Supplement, the Servicer with
respect to any series of Certificates evidencing interests in Mortgage Loans
or Contracts may be an affiliate of the Depositor. The Depositor anticipates
that it will acquire Mortgage Loans, Agency Securities and Contracts in the
open market or in privately negotiated transactions, which may be through or
from an affiliate.

Neither the Depositor nor any of its affiliates will insure or guarantee
the Certificates of any Series. See "Risk Factors -- Limited Assets."

<PAGE>

THE TRUSTEE

Any commercial bank or trust company serving as Trustee may have normal
banking relationships with the Depositor or the Servicer. In addition, the
Trustee will have the power and the responsibility for appointing co-trustees
or separate trustees of all or any part of the Trust Fund relating to a
particular Series of Certificates. In the event of such appointment, all
rights, powers, duties and obligations conferred or imposed upon the Trustee
by the Pooling and Servicing Agreement shall be conferred or imposed upon the
Trustee and such separate trustee or co-trustee jointly, or in any
jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee who
shall exercise and perform such rights, powers, duties and obligations solely
at the direction of the Trustee.

The Trustee will make no representations as to the validity or
sufficiency of the applicable Pooling and Servicing Agreement, the related
Certificates, or of any Mortgage Loan, Agency Security, Contract or related
document, and will not be accountable for the use or application by the
Depositor or an Transferor of any funds paid to the Depositor or such
Transferor in respect of the Certificates or the related Assets, or amounts
deposited in the related Certificate Account or deposited into any other
account for purposes of making payments or distributions to Holders. If no
Event of Default has occurred, the Trustee will be required to perform only
those duties specifically required of it under the applicable Pooling and
Servicing Agreement. However, upon receipt of the various certificates,
reports or other instruments required to be furnished to it, the Trustee will
be required to examine them to determine whether they conform to the
requirements of the applicable Pooling and Servicing Agreement.

The Trustee may resign at any time and the Depositor or the Servicer, as
applicable, may remove the Trustee if the Trustee ceases to be eligible to
continue as such under the applicable Pooling and Servicing Agreement, if the
Trustee becomes insolvent or in such other instances, if any, as are set
forth in the applicable Pooling and Servicing Agreement. Following any
resignation or removal of the Trustee, the Depositor or Servicer, as
applicable, will be obligated to appoint a successor Trustee. Any
resignation or removal of the Trustee and appointment of a successor Trustee
does not become effective until acceptance of the appointment by the
successor Trustee.

At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the
same may at the time be located, the Depositor and the Trustee acting jointly
shall have the power and shall execute and deliver all instruments to appoint
one or more Persons approved by the Trustee to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust Fund, and to vest in such Person or
Persons, in such capacity, such title to the Trust Fund, or any part thereof,
and, subject to the provisions of the Pooling and Servicing Agreement, such
powers, duties, obligations, rights and trusts as the Depositor and the
Trustee may consider necessary or desirable.

CERTAIN LEGAL ASPECTS OF THE MORTGAGE ASSETS

The following discussion contains summaries of certain legal aspects of
residential mortgage loans which are general in nature. Because such legal
aspects are governed primarily by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete nor to reflect
the laws of any particular state, nor to encompass the laws of all states in
which the security for the Mortgage Loans is situated. The summaries are
qualified in their entirety by reference to the applicable federal and state
laws governing the Mortgage Loans.

In addition, the following discussion also contains a summary of the
Title I Program, which may be applicable to certain of the Mortgage Loans and
Contracts. With respect to each Series for which the related Trust Fund
includes Contracts, the related Prospectus Supplement will contain a
discussion of certain legal aspects of manufactured housing contracts.

GENERAL LEGAL CONSIDERATIONS

<PAGE>

The Mortgage Loans are also subject to federal laws, including: (i) the
federal Truth-in-Lending Act and Regulation Z promulgated thereunder, which
require certain disclosures to the borrowers regarding the terms of the
Mortgage Loans; (ii) the Real Estate Settlement Procedures Act and Regulation
X promulgated thereunder, which require certain disclosures to the borrowers
regarding the settlement and servicing of the Mortgage Loans; (iii) the Equal
Credit Opportunity Act and Regulation B promulgated thereunder, which
prohibit discrimination on the basis of age, race, color, sex, religion,
marital status, national origin, receipt of public assistance or the exercise
of any right under the Consumer Credit Protection Act; (iv) the Fair Credit
Reporting Act, which regulates the use and reporting of information related
to the borrower's credit experience; (v) the Federal Trade Commission
Preservation of Consumers Claims and Defenses Rule, 16 C.F.R. Part 433,
regarding the preservation of a consumer's rights; (vi) the Fair Housing Act,
42 U.S.C. 3601 ET SEQ., relating to the creation and governance of the Title
I Program; (vii) the Home Ownership and Equity Protection Act; and (viii) if
applied, the Soldiers' and Sailors' Civil Relief Act of 1940, as amended
(the "RELIEF ACT").

MORTGAGES. The Mortgage Loans will be secured by either deeds of trust,
mortgages, deeds to secure debt or chattel mortgages, depending upon the
prevailing practice in the state in which the Mortgaged Property subject to a
Mortgage Loan is located. In some states, a mortgage creates a lien upon the
real property encumbered by the mortgage. In other states, the mortgage
conveys legal title to the property to the mortgagee subject to a condition
subsequent, i.e., the payment of the indebtedness secured thereby. There are
two parties to a mortgage, the mortgagor, who is the owner of the property
and usually the borrower, and the mortgagee, who is the lender. Under the
mortgage instrument, the mortgagor delivers to the mortgagee a note or bond
and the mortgage. Although a deed of trust is similar to a mortgage, a deed
of trust has three parties, the owner of the property and usually the
borrower, called the trustor (similar to a mortgagor), a lender called the
beneficiary (similar to a mortgagee), and a third-party grantee called the
trustee. Under a deed of trust, the borrower grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale,
to the trustee to secure payment of the obligation. The trustee s authority
under a deed of trust and the mortgagee's authority under a mortgage are
governed by applicable state law, the express provisions of the deed of trust
or mortgage, and, in some cases, with respect to deeds of trust, the
directions of the beneficiary. Some states use a security deed or deed to
secure debt which is similar to a deed of trust except that it has only two
parties: a grantor (similar to a mortgagor) and a grantee (similar to a
mortgagee). Mortgages, deeds of trust and deeds to secure debt generally are
not prior to liens for real estate taxes and assessments and other charges
imposed under governmental police powers. Priority with respect to
mortgages, deeds of trust and deeds to secure debt and other encumbrances
depends on their terms, the knowledge of the parties to such instrument and
generally on the order of recordation of the mortgage, deed of trust or the
deed to secure debt in the appropriate recording office.

COOPERATIVE LOANS. Certain of the Mortgage Loans may be Cooperative
Loans. The private, non-profit, cooperative apartment corporation owns all
the real property that comprises the project, including the land, separate
dwelling units and all common areas. The cooperative is directly responsible
for project management and, in most cases, payment of real estate taxes and
hazard and liability insurance. If there is a blanket mortgage on the
cooperative apartment building and/or underlying land, as is generally the
case, the cooperative, as project mortgagor, is also responsible for meeting
these mortgage obligations. A blanket mortgage is ordinarily incurred by the
cooperative in connection with the construction or purchase of the
cooperative's apartment building. The interest of the occupant under
proprietary leases or occupancy agreements to which that cooperative is a
party are generally subordinate to the interest of the holder of the blanket
mortgage in that building. If the cooperative is unable to meet the payment
obligations arising under its blanket mortgage, the mortgagee holding the
blanket mortgage could foreclose on that mortgage and terminate all
subordinate proprietary leases and occupancy agreements. In addition, the
blanket mortgage on a cooperative may provide financing in the form of a
mortgage that does not fully amortize with a significant portion of principal
being due in one lump sum at final maturity. The inability of the cooperative
to refinance this mortgage and its consequent inability to make such final
payment could lead to foreclosure by the mortgagee providing the financing. A
foreclosure in either event by the holder of the blanket mortgage could
eliminate or significantly diminish the value of any collateral held by the
lender who financed the purchase by an individual tenant-stockholder of
cooperative shares or, in the case of a pool of Mortgage Loans including
Cooperative Loans, the collateral securing the Cooperative Loans.

The cooperative is owned by tenant-stockholders who, through ownership
of stock shares or membership certificates in the corporation, receive
proprietary leases or occupancy agreements which confer exclusive rights to
occupy specific units. Generally, a tenant-stockholder of a cooperative must
make a monthly payment to the cooperative representing such
tenant-stockholder's pro rata share of the cooperative's payments for its
blanket mortgage, real property taxes, maintenance expenses and other capital
or ordinary expenses. An ownership interest in a cooperative and accompanying
occupancy rights is financed through a cooperative share loan evidenced by a
promissory note and secured by a security interest in the occupancy agreement
or proprietary lease and in the related cooperative shares. The lender takes
possession of the share certificate and

<PAGE>

a counterpart of the proprietary lease or occupancy agreement and a financing
statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue
for judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or
tenant-stockholder as an individual as provided in the security agreement
covering the assignment of the proprietary lease or occupancy agreement and
the pledge of cooperative shares.

FORECLOSURE

MORTGAGES. Foreclosure of a mortgage is generally accomplished by
judicial action. Generally, the action is initiated by the service of legal
pleadings upon all parties having an interest of record in the real property.
Delays in completion of the foreclosure may occasionally result from
difficulties in locating necessary parties defendant. Judicial foreclosure
proceedings are often not contested by any of the parties defendant.
However, when the mortgagee's right to foreclose is contested, the legal
proceedings necessary to resolve the issue can be time consuming. After the
completion of a judicial foreclosure, the court generally issues a judgment
of foreclosure and appoints a referee or other court officer to conduct the
sale of the property.

An action to foreclose a mortgage is an action to recover the mortgage
debt by enforcing the mortgagee's rights under the mortgage. Foreclosure is
regulated by statutes and rules and is subject to the court's equitable
powers. Generally, a mortgagor is bound by the terms of the mortgage note
and the mortgage as made and cannot be relieved from his default if the
mortgagee has exercised his rights in a commercially reasonable manner.
However, since a foreclosure action historically was equitable in nature the
court may exercise equitable powers to relieve a mortgagor of a default and
deny the mortgagee foreclosure on proof that either the mortgagor's default
was neither willful nor in bad faith or the mortgagee's action established a
waiver, fraud, bad faith or oppressive or unconscionable conduct such as to
warrant a court of equity to refuse affirmative relief to the mortgagee.
Under certain circumstances a court of equity may relieve the mortgagor from
an entirely technical default where such default was not willful.

A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses or counterclaims are interposed, sometimes
requiring up to several years to complete. Moreover, a non-collusive,
regularly conducted foreclosure sale may be challenged as a fraudulent
conveyance, regardless of the parties intent, if a court determines that the
sale was for less than reasonably equivalent value and such sale occurred
while the mortgagor was insolvent and within one year (or within the state
statute of limitations if the trustee in bankruptcy elects to proceed under
state fraudulent conveyance law) of the filing of bankruptcy. Similarly, a
suit against the debtor on the mortgage note may take several years and,
generally, is a remedy alternative to foreclosure, the mortgagee being
precluded from pursuing both at the same time.

In some states, mortgages may also be foreclosed by advertisement
pursuant to a power of sale provided in the mortgage. Foreclosure of a
mortgage by advertisement is essentially similar to foreclosure of a deed of
trust by nonjudicial power of sale.

Foreclosure of a deed of trust or a deed to secure debt is generally
accomplished by a non-judicial trustee's sale under a specific provision in
the deed of trust or deed to secure debt which authorizes the trustee to sell
the property upon default by the borrower under the terms of the note, deed
of trust or deed to secure debt. In some states, prior to such sale, the
trustee must record a notice of default and send a copy to the
borrower-trustor and to any person who has recorded a request for a copy of a
notice of default and notice of sale. In addition, in some states, prior to
such sale, the trustee must provide notice to any other individual having an
interest of record in the real property, including any junior lienholders.
In some states, the borrower, or any other person having a junior encumbrance
on the real estate, may, during a reinstatement period, cure the default by
paying the entire amount in arrears plus the costs and expenses incurred in
enforcing the obligations, including attorney's and trustee's fees to the
extent allowed by applicable law. Certain states may require notices of sale
to be published periodically for a prescribed period in a specified manner
prior to the date of the trustee's sale. In addition, some state laws
require that a copy of the notice of sale be posted on the property and sent
to all parties having an interest in the real property. In certain states,
foreclosure under a deed of trust may also be accomplished by judicial action
in the manner provided for foreclosure of mortgages.

In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated officer or by the trustee is
generally a public sale. Because of the difficulty a potential buyer at the
sale might have in determining the exact status of title and because the
physical condition of the property may have deteriorated during the
foreclosure

<PAGE>

proceedings, a third party may be unwilling to purchase the property at a
foreclosure sale. For these and other reasons, it is common for the lender
to purchase the property from the trustee, referee or other court officer for
an amount equal to the principal amount of the indebtedness secured by the
mortgage or deed of trust, plus accrued and unpaid interest and the expenses
of foreclosure. Generally, state law controls the amount of foreclosure
costs and expenses, including attorneys and trustee's fees, which may be
recovered by a lender. In some states there is a statutory minimum purchase
price which the lender may offer for the property. Thereafter, subject to
the right of the borrower in some states to remain in possession during the
redemption period, the lender will assume ownership of the mortgaged property
and, therefore, the burdens of ownership, including the obligation to pay
taxes, obtain casualty insurance and to make such repairs at its own expense
as are necessary to render the property suitable for sale. The lender will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may not equal
the lender's investment in the property. Any loss may be mitigated by the
receipt of any mortgage insurance proceeds.

A second mortgagee may not foreclose on the property securing a second
mortgage unless it forecloses subject to the first mortgage and any other
prior liens, in which case it must either pay the entire amount due on the
first mortgage and such other liens, prior to or at the time of the
foreclosure sale or undertake the obligation to make payments on the first
mortgage and such liens, in either event adding the amounts expended to the
balance due on the second loan, and may be subrogated to the rights of the
first mortgagee. In addition, in the event that the foreclosure of a second
mortgage triggers the enforcement of a "due-on-sale" clause, the second
mortgagee may be required to pay the full amount of the first mortgage to the
first mortgagee. Accordingly, with respect to those Mortgage Loans which are
second mortgage loans, if the lender purchases the property, the lender's
title will be subject to all senior liens and claims and certain governmental
liens.

The proceeds received by the referee or trustee from the sale are
applied first to the costs, fees and expenses of sale and then in
satisfaction of the indebtedness secured by the mortgage or deed of trust
under which the sale was conducted. Any remaining proceeds are generally
payable to the holders of junior mortgages or deeds of trust and other liens
and claims in order of their priority, whether or not the borrower is in
default. Any additional proceeds are generally payable to the mortgagor or
trustor. The payment of the proceeds to the holders of junior mortgages may
occur in the foreclosure action of the senior mortgagee; however, a junior
lienholder whose rights in the property are terminated pursuant to
foreclosure by a senior lienholder will not share in the proceeds from the
subsequent disposition of the property. Junior lienholders may also
institute legal proceedings separate from the foreclosure proceedings of the
senior lienholders.

With respect to any Series for which a REMIC election is made, the REMIC
provisions of the Code and the Pooling and Servicing Agreement may require
the Servicer to hire an independent contractor to operate any REO Property.
The costs of such operation may be significantly greater than the cost of
direct operation by the Servicer.

Some states impose prohibitions or limitations on remedies available to
the mortgagee, including the right to recover the debt from the mortgagor.
SEE "Certain Legal Aspects of the Mortgage Loans--Anti-Deficiency Legislation
and Other Limitations on Lenders".

COOPERATIVE LOANS. The cooperative shares owned by the
tenant-stockholder and pledged to the lender are, in almost all cases,
subject to restrictions on transfer as set forth in the cooperative's
Certificate of Incorporation and Bylaws, as well as the proprietary lease or
occupancy agreement, and may be canceled by the cooperative for failure by
the tenant-stockholder to pay rent or other obligations or charges owned by
such tenant-stockholder, including mechanics liens against the cooperative
apartment building incurred by such tenant-stockholder. The proprietary lease
or occupancy agreement generally permits the cooperative to terminate such
lease or agreement in the event an obligor fails to make payments or defaults
in the performance of covenants required thereunder. Typically, the lender
and the cooperative enter into a recognition agreement which establishes the
rights and obligations of both parties in the event of a default by the
tenant-stockholder on its obligations under the proprietary lease or
occupancy agreement. A default by the tenant-stockholder under the
proprietary lease or occupancy agreement will usually constitute a default
under the security agreement between the lender and the tenant-stockholder.

The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or

<PAGE>

occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from a sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under such
proprietary lease or occupancy agreement. The total amount owed to the
cooperative by the tenant-stockholder, which the lender generally cannot
restrict and does not monitor, could reduce the value of the collateral below
the outstanding principal balance of the cooperative loan and accrued and
unpaid interest thereon.

Recognition agreements also provide that in the event of a foreclosure
on a cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender
is not limited in any rights it may have to dispossess the
tenant-stockholders.

In some states, foreclosure on the cooperative shares is accomplished by
a sale in accordance with the provisions of Article 9 of the Uniform
Commercial Code (the "UCC") and the security agreement relating to those
shares. Article 9 of the UCC requires that a sale be conducted in a
commercially reasonable manner. Whether a foreclosure sale has been
conducted in a "commercially reasonable" manner will depend on the facts in
each case. In determining commercial reasonableness, a court will look to the
notice given the debtor and the method, manner, time, place and terms of the
foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to
reimbursement is subject to the right of the cooperative corporation to
receive sums due under the proprietary lease or occupancy agreement. If there
are proceeds remaining, the lender must account to the tenant-stockholder for
the surplus. Conversely, if a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the deficiency. See
"Anti-Deficiency Legislation and Other Limitations on Lenders" below.

JUNIOR LIENS; RIGHTS OF SENIOR MORTGAGEES OR BENEFICIARIES. Certain of
the Mortgage Loans, including the Title I Mortgage Loans, may be secured by
junior lien mortgages or deeds of trust. Second mortgages or deeds of trust
are generally junior to first mortgages or deeds of trust held by other
lenders, and third mortgages or deeds of trust are generally junior to first
and second mortgages or deeds of trust held by other lenders, and so forth.
The rights of the Certificateholders as the holders of a junior deed of trust
or a junior mortgage, are subordinate in lien and in payment to those of the
holder of the senior mortgage or deed of trust, including the prior rights of
the senior mortgagee or beneficiary to receive and apply hazard insurance and
condemnation proceeds and, upon default of the mortgagor, to cause a
foreclosure on the property. Upon completion of the foreclosure proceedings
by the holder of the senior mortgage, the junior mortgagee's or junior
beneficiary's lien will be extinguished unless the junior mortgagee satisfies
the defaulted senior loan or asserts its subordinate interest in a property
in foreclosure proceedings. A junior mortgagee or beneficiary in some states
may satisfy a defaulted senior lien in full and in some states may cure such
default and bring the senior loan current, in either event, adding the
amounts expended to the balance due on the junior loan. In most states,
absent a provision in the mortgage or deed of trust to the contrary, no
notice of default is required to be given to a junior mortgagee or
beneficiary. SEE "--Foreclosure" herein.

Furthermore, the terms of a junior mortgage or deed of trust are
subordinate to the terms of the senior mortgage or deed of trust. In the
event of a conflict between the terms of the senior mortgage or deed of trust
and the junior mortgage or deed of trust, the terms of the senior mortgage or
deed of trust will generally govern. Upon a failure of the mortgagor or
trustor to perform any of its obligations, the senior mortgagee or
beneficiary, subject to the terms of the senior mortgage or deed of trust,
may have the right to perform the obligation itself. Generally, all sums so
expended by the senior mortgagee or beneficiary become part of the
indebtedness secured by the senior mortgage or deed of trust. To the extent
a senior mortgagee expends such sums, such sums will generally have priority
over all sums due under the junior mortgage.

RIGHT OF REDEMPTION. The purposes of a foreclosure action are to enable
the mortgagee to realize upon its security and to bar the mortgagor, and all
persons who have an interest in the property which is subordinate to the
foreclosing mortgagee, from their "equity of redemption." The doctrine of
equity of redemption provides that, until the property covered by a mortgage
has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having an interest which is subordinate to that of
the foreclosing mortgagee have an equity of redemption and may redeem the
property by paying the entire debt with interest. In addition, in some
states, when a foreclosure action has been commenced, the redeeming party
must pay certain costs of such action. Those having an equity of redemption
must generally be made parties and duly summoned to the foreclosure action in
order for their equity of redemption to be barred.

The equity of redemption which is a non-statutory right that must be
exercised prior to foreclosure sale should be distinguished from statutory
rights of redemption. In some states, after sale pursuant to a deed of trust
or foreclosure of a

<PAGE>

mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In some
states, statutory redemption may occur only upon payment of the foreclosure
sale price. In other states, redemption may be authorized if the former
borrower pays only a portion of the sums due. The effect of a statutory
right of redemption is to diminish the ability of the lender to sell the
foreclosed property. The exercise of a right of redemption would defeat the
title of any purchaser subsequent to foreclosure or sale under a deed of
trust. Consequently, the practical effect of the redemption right is to
force the lender to maintain the property and pay the expenses of ownership
until the redemption period has expired.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS. Certain
states have imposed statutory prohibitions that limit the remedies of a
beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, statutes limit the right of the beneficiary or mortgagee to obtain a
deficiency judgment against the borrower following foreclosure or sale under
a deed of trust. A deficiency judgment is a personal judgment against the
former borrower equal in most cases to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
lender. Other statutes require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against
the borrower. In certain other states, the lender has the option of bringing
a personal action against the borrower on the debt without first exhausting
such security; however, in some of these states, the lender, following
judgment on such personal action, may be deemed to have elected a remedy and
may be precluded from exercising remedies with respect to the security.
Consequently, the practical effect of the election requirement, in those
states permitting such election, is that lenders will usually proceed against
the security first rather than bringing a personal action against the
borrower. Finally, other statutory provisions limit any deficiency judgment
against the former borrower following a judicial sale to the excess of the
outstanding debt over the fair market value of the property at the time of
the public sale. The purpose of these statutes is generally to prevent a
beneficiary or a mortgagee from obtaining a large deficiency judgment against
the former borrower as a result of low or no bids at the judicial sale.

In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the federal bankruptcy laws,
the Relief Act and state laws affording relief to debtors, may interfere with
or affect the ability of the secured mortgage lender to realize upon
collateral and/or enforce a deficiency judgment. For example, with respect
to federal bankruptcy law, a court with federal bankruptcy jurisdiction may
permit a debtor through his or her Chapter 11 or Chapter 13 rehabilitative
plan to cure a monetary default in respect of a mortgage loan on a debtor's
residence by paying arrearages within a reasonable time period and
reinstating the original mortgage loan payment schedule even though the
lender accelerated the mortgage loan and final judgment of foreclosure had
been entered in state court (provided no sale of the residence had yet
occurred) prior to the filing of the debtor's petition. Some courts with
federal bankruptcy jurisdiction have approved plans, based on the particular
facts of the reorganization case, that effected the curing of a mortgage loan
default by paying arrearages over a number of years.

Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan secured by property of the debtor may be modified.
These courts have suggested that such modifications may include reducing the
amount of each monthly payment, changing the rate of interest, altering the
repayment schedule or forgiving all or a portion of the debt. Additionally,
a federal bankruptcy court in a Chapter 11 bankruptcy case may be able to
reduce the lender's security interest to the value of the residence, thus
leaving the lender a general unsecured creditor for the difference between
the value of the residence and the outstanding balance of the loan; however,
the United States Supreme Court has recently eliminated such a risk in
Chapter 7 and Chapter 13 bankruptcy cases.

The Internal Revenue Code of 1986, as amended provides priority to
certain tax liens over the lien of a mortgage or deed of trust. In addition,
substantive requirements are imposed upon lenders in connection with the
origination and the servicing of mortgage loans by numerous federal and some
state consumer protection laws. These laws include the federal
Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal Credit
Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act, and
related statutes and regulations. These federal laws impose specific
statutory liabilities upon lenders who originate mortgage loans and who fail
to comply with the provisions of the applicable laws. In some cases, this
liability may affect assignees of the Mortgage Loans.

ENFORCEABILITY OF CERTAIN PROVISIONS. Certain of the Mortgage Loans
will contain a debt-acceleration clause, which permits the lender to
accelerate the debt upon a monetary default of the borrower, after the
applicable cure period. Courts will generally enforce clauses providing for
acceleration in the event of a material payment default. However, courts,
exercising equity jurisdiction, may refuse to allow a lender to foreclose a
mortgage or deed of trust when an acceleration of the indebtedness would be
inequitable or unjust and the circumstances would render the acceleration
unconscionable.

<PAGE>

Some courts have imposed general equitable principles to limit the
remedies available in connection with foreclosure. These equitable
principles are generally designed to relieve the borrower from the legal
effect of his defaults under the loan documents. For example, some courts
have required that the lender undertake affirmative and expensive actions to
determine the causes for the borrower's default and the likelihood that the
borrower will be able to reinstate the loan. In some cases, courts have
substituted their judgment for the lenders judgment and have required that
lenders reinstate loans or recast payment schedules in order to accommodate
borrowers who are suffering from temporary financial disability. In other
cases, courts have limited the right of lenders to foreclose if the default
under the mortgage instrument or deed of trust is not monetary, such as the
borrower's failure to adequately maintain the property or the borrower's
execution of a second mortgage or deed of trust affecting the property. The
exercise by the court of its equity powers will depend on the individual
circumstances of each case. Finally, some courts have been faced with the
issue of whether federal or state constitutional provisions reflecting due
process concerns for adequate notice require that borrowers under deeds of
trust receive notices in addition to those prescribed statutorily. For the
most part, these cases have upheld the statutory notice provisions as being
reasonable or have found that the sale by a trustee under a deed of trust or
under a mortgage having a power of sale does not involve sufficient state
action to afford constitutional protection to the borrower.

Some of the Mortgage Loans may not restrict secondary financing, thereby
permitting the borrower to use the Mortgaged Property as security for one or
more additional loans. Where the borrower encumbers the Mortgaged Property
with one or more junior liens, the senior lender is subjected to additional
risk. First, the borrower may have difficulty servicing and repaying
multiple loans. Second, acts of the senior lender which prejudice the junior
lender or impair the junior lender's security may create a superior equity in
favor of the junior lender. For example, if the borrower and the senior
lender agree to an increase in the principal amount of or the interest rate
payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any
junior loan or loans, the existence of junior loans and actions taken by
junior lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. The
bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.

Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made. In certain states, there are or may be specific limitations
upon the late charges which a lender may collect from a borrower for
delinquent payments. Late charges are typically retained by servicers as
additional servicing compensation.

A portion of the Mortgage Loans contain "due-on-sale" clauses. These
clauses permit the lender to accelerate the maturity of the loan if the
borrower sells, transfers or coveys the property. The enforceability of
these clauses has been the subject of legislation or litigation in many
states, and in some cases the enforceability of these clauses was limited or
denied. However, the Garn-St. Germain Depository Institutions Act of 1982
(the "GARN-ST. GERMAIN ACT") preempts state constitutional, statutory and
case law that prohibits the enforcement of due-on-sale clauses and permits
lenders to enforce these clauses in accordance with their terms, subject to
certain limited exceptions. The Garn-St. Germain Act does encourage
lenders to permit assumption of loans at the original rate of interest or at
some other rate less than the average of the original rate and the market
rate.

Exempted from the general rule of enforceability of due-on-sale clauses
were mortgage loans (originated other than by federal savings and loan
associations and federal savings banks) that were made or assumed during the
period beginning on the date a state, by statute or final appellate court
decision having statewide effect, prohibited the exercise of due-on-sale
clauses and ending on October 15, 1982 ("WINDOW PERIOD LOANS"). However, this
exception applied only to transfers of property underlying Window Period
Loans occurring between October 15, 1982 and October 15, 1985 and does not
restrict enforcement of a due-on-sale clause in connection with current
transfers of property underlying Window Period Loans. Due-on-sale clauses
contained in mortgage loans originated by federal savings and loan
associations or federal savings banks are fully enforceable pursuant to
regulations of the Office of Thrift Supervision (the "OTS"), as successor to
the Federal Home Loan Bank Board which preempt state law restrictions on the
enforcement of due-on-sale clauses.

The Garn-St. Germain Act also sets forth nine instances in which a
mortgage lender covered by the Garn-St. Germain Act may not exercise a
due-on-sale clause, notwithstanding the fact that transfer of the property
may have occurred. These include intra-family transfers, certain transfers
by operation of law, leases of fewer than three years and the creation of a
junior encumbrance. The Garn-St. Germain Act also grants the Director of the
Office of Thrift Supervision (successor to the Federal Home Loan Bank Board)
authority to prescribe by regulation further instances in which a due-on-sale
clause may not be exercised upon the transfer of the property. To date no
such regulations have been issued. Regulations promulgated

<PAGE>

under the Garn-St. Germain Act also prohibit the imposition of a prepayment
penalty upon the acceleration of a loan pursuant to a "due-on-sale" clause.

If interest rates were to rise above the interest rates on the Mortgage
Loans, then any inability of the Servicer or the subservicer to enforce
due-on-sale clauses may result in the Trust Fund containing a greater number
of Mortgage Loans bearing below-market interest rates than would otherwise be
the case, since a transferee of the property underlying a Mortgage Loan would
have a greater incentive in such circumstances to assume the seller's
Mortgage Loan. Any inability to enforce due-on-sale clauses may affect the
average life of the Mortgage Loans and the number of Mortgage Loans that may
be outstanding until maturity.

Upon foreclosure, courts have imposed general equitable principles.
These equitable principles are generally designed to relieve the borrower
from the legal effect of his defaults under the loan documents. Examples of
judicial remedies that have been fashioned include requirements that the
lender undertake affirmative and expensive actions to determine the causes
for the borrower's default and the likelihood that the borrower will be able
to reinstate the loan. In some cases, courts have substituted their judgment
for the lender's judgment and have required that lenders reinstate loans or
recast payment schedules in order to accommodate borrowers who are suffering
from temporary financial disability. In other cases, courts have limited the
right of the lender to foreclose if the default under the mortgage instrument
is not monetary, such as the borrower failing to adequately maintain the
property or the borrower executing a second mortgage or deed of trust
affecting the property. Finally, some courts have been faced with the issue
of whether or not federal or state constitutional provisions reflecting due
process concerns for adequate notice require that borrowers under deeds of
trust or mortgages receive notices in addition to the statutorily-prescribed
minimum. For the most part, these cases have upheld the notice provisions as
being reasonable or have found that the sale by a trustee under a deed of
trust, or under a mortgage having a power of sale, does not involve
sufficient state action to afford constitutional protections to the borrower.

ADJUSTABLE RATE LOANS. The laws of certain states may provide that
mortgage notes relating to adjustable rate loans are not negotiable
instruments under the Uniform Commercial Code. In such event, the Trustee
will not be deemed to be a "holder in due course" within the meaning of the
Uniform Commercial Code and may take such a mortgage note subject to certain
restrictions on its ability to foreclose and to certain contractual defenses
available to a mortgagor.

ENVIRONMENTAL LEGISLATION. Certain states impose a statutory lien for
associated costs on property that is the subject of a cleanup action by the
state on account of hazardous wastes or hazardous substances released or
disposed of on the property. Such a lien will generally have priority over
all subsequent liens on the property and, in certain of these states, will
have priority over prior recorded liens including the lien of a mortgage. In
addition, under federal environmental legislation and under state law in a
number of states, a secured party which takes a deed in lieu of foreclosure
or acquires a mortgaged property at a foreclosure sale or assumes active
control over the operation or management of a property so as to be deemed an
"owner" or "operator" of the property may be liable for the costs of cleaning
up a contaminated site. Although such costs could be substantial, it is
unclear whether they would be imposed on a secured lender (such as a
Certificate Trustee, a PMBS Trustee, or a Trust Fund) to homeowners. In the
event that title to a property securing a Mortgage Loan in a pool of Mortgage
Loans was acquired by a Certificate Trustee, a PMBS Trustee, or a Trust Fund
and cleanup costs were incurred in respect of the property, the Holders of
the related Certificates might realize a loss if such costs were required to
be paid. In addition, the presence of certain environmental contamination,
including, but not limited to, lead-based paint, asbestos and leaking
underground storage tanks could result in the holders of the related
Certificates realizing a loss if associated costs were required to be paid.
The Depositor, the Administrator, the Underwriters, the Transferors, the
Servicers, and any of their respective affiliates (i) have not caused any
environmental site assessments or evaluations to be conducted with respect to
any properties securing the Mortgage Loans, (ii) are not required to make any
such assessments or evaluations and (iii) make no representations or
warranties and assume no liability with respect to the absence or effect of
hazardous wastes or hazardous substances on any property or any casualty
resulting from the presence or effect of hazardous wastes or hazardous
substances.

In the event that title to a Mortgaged Property is acquired by the Trust
Fund and cleanup costs are incurred in respect of such property, the
certificateholders might realize a loss if such costs are required to be
paid. In addition, the presence of certain environmental contamination,
including, but not limited to, lead-based paint, asbestos and leaking
underground storage tanks could result in the Certificateholders realizing a
loss if any associated remedial costs are required to be paid. The
Transferor, the Depositor, the Servicer, any subservicer and any of their
respective affiliates (i) have not caused any environmental site assessments
or evaluations to be conducted with respect to any Mortgaged Property, (ii)
are not required to make any such assessments or evaluations and (iii) make
no representations or warranties and assume no liability with

<PAGE>

respect to the absence or effect of hazardous wastes or hazardous substances
on any property or any casualty resulting from the presence or effect of
hazardous wastes or hazardous substances.

TRUTH IN LENDING ACT

In September 1994, the Reigle Community Development and Regulatory
Improvement Act of 1994 (the "REIGLE ACT") was enacted which incorporates the
Home Ownership and Equity Protection Act of 1994, and which adds certain
additional provisions to Regulation Z, the implementing regulation of the
Truth-in-Lending Act ("TILA"). These provisions impose additional disclosure
and other requirements on creditors with respect to non-purchase money
mortgage loans with high interest rates or high up-front fees and charges
("covered loans"). In general, mortgage loans within the purview of the
Reigle Act have annual percentage rates over 10% greater than the yield on
Treasury Securities of comparable maturity and/or fees and points which
exceed the greater of 8% of the total loan amount or $400. The provisions of
the Reigle Act apply on a mandatory basis to all mortgage loans originated on
or after October 1, 1995. These provisions can impose specific statutory
liabilities upon creditors who fail to comply with their provisions and may
affect the enforceability of the related loans. In addition, any assignee of
a creditor would generally be subject to all claims and defenses that the
consumer could assert against the creditor, including, without limitation,
the right to rescind the mortgage loan. A substantial majority of the loans
originated or purchased by the Transferor are covered by the Reigle Act.

The Reigle Act provisions impose additional disclosure requirements on
lenders originating covered loans and prohibit lenders from originating
covered loans that are underwritten solely on the basis of the borrower's
home equity without regard to the borrower's ability to repay the loan. The
Transferor believes that only a small portion of its loans originated in
fiscal 1994 and fiscal 1995 are of the type that, unless modified, would be
prohibited by the Reigle Act. As a result of the Reigle Act provisions, with
respect to all covered loans, the Transferor applies loan underwriting
criteria that take into consideration the borrower's ability to repay.

The Reigle Act provisions also prohibit lenders from including
prepayment fee clauses in covered loans to borrowers with debt-to-income
ratios in excess of 50% or covered loans used to refinance existing loans
originated by the same lender. The Transferor reported immaterial amounts of
prepayment fee revenues in fiscal 1993, 1994 and 1995, respectively. The
Transferor will continue to collect prepayment fees on loans originated prior
to effectiveness of the Reigle Act provisions and on non-covered loans, as
well as on covered loans in permitted circumstances following the
effectiveness of the Reigle Act provisions. The Reigle Act provisions impose
other restrictions on covered loans, including restrictions on balloon
payments and negative amortization features, which the Transferor does not
believe will have a material effect on its operations.

APPLICABILITY OF USURY LAWS

Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("TITLE V"), provides that state usury
limitations shall not apply to certain types of home improvement first
mortgage loans originated by certain lenders after March 31, 1980. A similar
federal statute was in effect with respect to mortgage loans made during the
first three months of 1980. The Office of Thrift Supervision is authorized
to issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized any state to reimpose
interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision which expressly rejects application of the federal
law. In addition, even where Title V is not so rejected, any state is
authorized by the law to adopt a provision limiting discount points or other
charges on mortgage loans covered by Title V. Certain states have taken
action to reimpose interest rate limits and/or to limit discount points or
other charges.

A similar federal statute, adopted in 1976, provides federal usury
preemption with respect to Title I Mortgage Loans, such as the Title I
Mortgage Loans. This statute also permits states to reimpose interest rate
limits by passing legislation at any time after June 30, 1976. To date, no
state has enacted any reported statute to reimpose interest rate limits with
respect to any loans, mortgage or advance that is insured under Title I.

SOLDIERS' AND SAILORS' CIVIL RELIEF ACT

Generally, under the terms of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "RELIEF ACT"), a borrower who enters military
service after the origination of such borrower's Mortgage Loan (including a
borrower who is a member of the National Guard or is in reserve status at the
time of the origination of the Mortgage Loan and is later called to active
duty) may not be charged interest above an annual rate of 6% during the
period of such borrower's active duty status,

<PAGE>

unless a court orders otherwise upon application of the lender. It is
possible that such interest rate limitation or similar limitations under
state law could have an effect, for an indeterminate period of time, on the
ability of the Servicer or the subservicer to collect full amounts of
interest on certain of the Mortgage Loans. Any shortfall in interest
collections resulting from the application of the Relief Act or similar
legislation, which would not be recoverable from the related Mortgage Loans,
would result in a reduction of the amounts available for distribution to the
holders of the Offered Certificates, but the Offered Certificates would
receive the full amount otherwise distributable to such holders to the extent
that amounts are available from the credit enhancement provided for the
Offered Certificates. SEE "Risk Factors -- No Assurance of Adequacy of
Credit Enhancement" herein. In addition, the Relief Act imposes limitations
which would impair the ability of the Servicer or subservicer to foreclose on
an affected Mortgage Loan during the borrower's period of active duty status.
Thus, in the event that such a Mortgage Loan goes into default there may be
delays and losses occasioned by the inability to realize upon the related
Mortgaged Property in a timely fashion.

THE TITLE I PROGRAM

GENERAL. Sections 1 and 2(a) of the National Housing Act of 1934, as
amended (the "ACT"), authorize the creation of the Federal Housing
Administration (which is an agency within the Untied States Department of
Housing and Urban Development; such agency and department are referred to
together herein as the "FHA") and the Title I Program. Certain of the
Mortgage Loans or Contracts contained in a Trust Fund maybe loans insured
under the Title I Program. FHA Regulations contain the requirements under
which approved Title I Lenders may obtain insurance against a portion of
losses incurred with respect to eligible loans that have been originated and
serviced in accordance with FHA Regulations, up to the amount of such Title I
Lender's FHA Reserve, as described below, and subject to the terms and
conditions established under the Act and FHA Regulations. While FHA
Regulations permit the Secretary of HUD, subject to statutory limitations, to
waive a Title I Lender's noncompliance with FHA Regulations if enforcement
would impose an injustice on the lender (provided the Title I Lender has
acted in good faith, is in substantial compliance with FHA Regulations and
has credited the borrower for any excess charges), in general, an insurance
claim against the FHA will be denied if the Title I loan to which it relates
does not strictly satisfy the requirements of the Act and FHA Regulations.

Unlike certain other government loan insurance programs, loans under the
Title I Program (other than loans in excess of $25,000) are not subject to
prior review by the FHA. Under the Title I Program, the FHA disburses
insurance proceeds with respect to defaulted loans for which insurance claims
have been filed by a Title I Lender prior to any review of such loans. A
Title I Lender is required to repurchase a Title I loan from the FHA that is
determined to be ineligible for insurance after insurance claim payments for
such loan have been paid to such lender. Under the FHA Regulations, if the
Title I Lender's obligation to repurchase the Title I loan is unsatisfied,
the FHA is permitted to offset the unsatisfied obligation against future
insurance claim payments owed by the FHA to such lender. FHA Regulations
permit the FHA to disallow an insurance claim with respect to any loan that
does not qualify for insurance for a period of up to two years after the
claim is made and to require the Title I Lender that has submitted the
insurance claim to repurchase the loan. Pursuant to a letter ruling issued
by the FHA in October 1994, the FHA has stated that, as a policy, the FHA
will strive to review all insurance claim submissions in a timely manner and
limit the period of time within which it will request the repurchase of a
loan to a period of one year after claim submission. The letter further
states, however, that the FHA may find it necessary with respect to some
claim submissions to apply the foregoing two-year incontestability provision
strictly.

The proceeds of loans under the Title I Program may be used only for
permitted purposes, including, but not limited to, the alteration, repair or
improvement of residential property, the purchase of a manufactured home or
lot (or cooperative interest therein) on which to place such home or the
purchase of both a manufactured home loan and the lot (or cooperative
interest therein) on which such home is placed. Title I Program loans may be
made directly to the owners of the property to be improved or purchased
("direct loans") or with the assistance of a dealer or home improvement
contractor that will have an interest in the proceeds of the loan ("dealer
loans").

Subject to certain limitations described below, eligible Title I loans
are insured by the FHA for 90% of an amount equal to the sum of (i) the net
unpaid principal amount and the uncollected interest earned to the date of
default, (ii) interest on the unpaid loan obligation from the date of default
to the date of the initial submission of the insurance claim, plus 15
calendar days (the total period not to exceed nine months) at a rate of 7%
per annum, (iii) uncollected court costs, (iv) title examination costs, (v)
fees for required inspections by the lenders or its agents, up to $75, and
(vi) effective July 5, 1995, origination fees up to a maximum of 5% of the
loan amount. However, the insurance coverage provided by the FHA is limited
to the extent of the balance in the Title I Lender's FHA Reserve maintained
by the FHA. Accordingly if sufficient insurance coverage is available in
such FHA Reserve, then the Title I Lender bears the risk of losses on a
Title I loan for

<PAGE>

which a claim for reimbursement is paid by the FHA of at least 10% of the
unpaid principal, uncollected interest earned to the date of default,
interest from the date of default to the date of the initial claim submission
and certain expenses.

Under the Title I Program, the FHA maintains an FHA insurance coverage
reserve account (a "FHA RESERVE") for each Title I Lender. The amount in
each Title I Lender's FHA Reserve is a maximum of 10% of the amounts
disbursed, advanced or expended by a Title I Lender in originating or
purchasing eligible loans registered with the FHA for Title I Insurance, with
certain adjustments permitted or required by FHA Regulations. The balance of
such FHA Reserve is the maximum amount of insurance claims the FHA is
required to pay to the related Title I Lender. Mortgage loans to be insured
under the Title I Program will be registered for insurance by the FHA, and
the increase in Title I insurance coverage to which the Title I Lender is
entitled by reason of the reporting of such loans under the Title I Lender's
contract of insurance will be included in the FHA Reserve for the
originating Title I Lender following the receipt and acknowledgment by the
FHA of a transfer of note report on the prescribed form (the "TRANSFER
REPORT") pursuant to FHA Regulations.

Under the Title I Program the FHA will reduce the insurance coverage
available in a Title I Lender's FHA Reserve with the respect to loans insured
under such Title I Lender's contract of insurance by (i) the amount of FHA
Insurance claims approved for payment related to such loans, (ii) prior to
October 1, 1995, after a Title I Lender has held its Title I contract of
insurance for five years, the amount of the annual reduction (the "ANNUAL
REDUCTION") equal to 10% of the amount of insurance coverage contained in the
related FHA Reserve as of that date, and (iii) the amount of reduction of the
Title I Lender's FHA Reserve by reason of the sale, assignment or transfer of
loans registered under the Title I Lender's contract of insurance. Such
insurance coverage also may be reduced for any FHA insurance claims
previously disbursed to the Title I Lender that are subsequently rejected by
the FHA. On June 5, 1995, the FHA announced the elimination of Annual
Reductions, effective as of October 1, 1995.

Upon the receipt and acknowledgment by the FHA of a Transfer Report,
originations of new loans will increase a Title I Lender s insurance coverage
reserve account balance by 10% of the amount disbursed, advanced or expended
in originating such loans registered with the FHA for insurance under the
Title I Program. A Title I Lender is permitted to sell or otherwise transfer
loans reported for insurance under the Title I Program only to another Title
I Lender. Upon any such transfer, except a transfer with recourse or under a
guaranty or repurchase Agreement, the seller is required to file a Transfer
Report with the FHA reporting the transfer of such loans. Upon notification
and approval of such transfer, the FHA Reserve of the selling Title I Lender
is reduced, and the FHA Reserve of the purchasing Title I Lender is
increased, by an amount equal to the lesser of 10% of the actual purchase
price of the loans or the net unpaid principal balance of the loans, up to
the total amount of the selling Title I Lender's FHA Reserve. Thus, in the
event the selling Title I Lender's FHA Reserve was less than 10% of the
unpaid principal balance of its portfolio of loans reported for insurance
under the Title I Program prior to the sale, the seller's FHA Reserve may be
exhausted as the result of a sale of only a portion of its total portfolio,
with the result that its remaining Title I Program portfolio may be
ineligible for Title I Program benefits until the lender originates or
otherwise acquires additional loans reported for insurance under the Title I
Program. Accordingly, the insurance coverage reserves transferred to the
purchasing Title I Lender in such case will be less than 10% of the lesser of
the purchase price or the principal balance of the portfolio of loans
purchased, which may be the case with respect to the Transferor's purchase of
certain Title I Mortgage Loans and Title I Contracts from certain Title I
lenders and the transfer of the related insurance coverage from such lenders
FHA Reserves. Additionally, pursuant to FHA Regulations, not more than
$5,000 in insurance coverage shall be transferred to or from a Title I
Lender's insurance coverage reserve account during any October 1 to
September 30 fiscal year without the approval of the Secretary of HUD. Such
HUD approval is generally viewed as automatic, provided the formal
requirements for transfer are satisfied, but HUD does have the right under
FHA Regulations to withhold approval.

Unlike most other FHA insurance programs, the obligation of the FHA to
reimburse a Title I Lender for losses in the portfolio of insured loans held
by such Title I Lender is limited to the amount in an FHA Reserve maintained
on a lender-by-lender basis and not on a loan-by-loan basis. Except when to
do so would be in HUD's best interest, the FHA does not track or "earmark"
the loans within a Title I Lender s portfolio to determine whether a
reduction in such lender's FHA Reserve as the result of an insurance claim by
such lender are, in fact, attributable to the insured loan with respect to
which the claim was made. For this reason, if a Title I Lender is holding
insured loans as a fiduciary on behalf of multiple non-affiliated
beneficiaries, in order for such a lender to cause its FHA Reserve to be
reduced only by an amount to which a particular beneficiary is entitled by
reason of the insured loans beneficially held by it, the Title I Lender must
segregate or "earmark" its FHA Reserve on its own books and records according
to which beneficiary is entitled to what portion of the insurance coverage in
the Title I Lender's FHA Reserve as if the insurance coverage were not
commingled by the FHA in such FHA Reserve. If such Title I Lender continues
to submit claims with respect to loans held on behalf of a beneficiary

<PAGE>

whose portion of insurance coverage in its FHA Reserve has been exhausted,
the FHA will continue to honor such claims until all insurance coverage in
such Title I Lender's FHA Reserve has been exhausted, even though such FHA
Reserve may, in fact, be held by the Title I Lender for the benefit of a
different beneficiary than the beneficiary of the insured loans to which the
claims relate under a separate contractual agreement. In addition, under
certain FHA administrative offset regulations, the FHA may offset an
unsatisfied obligation of a Title I Lender to repurchase loans that are
determined to be ineligible for insurance against future insurance claim
payments owed by the FHA to such lender. In the case of the related Trust
Fund, if the Trustee were to hold loans insured under the Depositor's FHA
Reserve on behalf of another trust fund, the FHA were to determine that
insurance claims were paid in respect of loans ineligible for insurance that
related to such other trust fund and the Trustee, on behalf of such other
trust fund, was unable or otherwise failed to repurchase the ineligible
loans, then the FHA could offset the amount of the repurchase obligation
against insurance proceeds payable with respect to one or more Title I
Mortgage Loans or Title I Contract included in the related Trust Fund. If
the Trustee were unable to recover the amount of such offset from the other
trust fund, the Trust Fund could experience a loss as a result.

Accordingly, claims paid to the Trustee (or the Administrator, if any)
by the FHA with respect to Title I loans insured under the Depositor's FHA
Reserve other than the Title I Mortgage Loans and Title I Contracts may
reduce the FHA Insurance Amount. In the Pooling and Servicing Agreement, the
Depositor and the Trustee (or the Administrator, if any) will agree not to
submit claims to the FHA with respect to Title I loans other than the Title I
Mortgage Loans and Title I Contracts if the effect thereof would be to reduce
the FHA Insurance Amount. The Depositor has committed to use its FHA contract
of insurance under the Title I Program only to report the record ownership of
loans transferred and assigned to the Trustee pursuant to the Pooling and
Servicing Agreement and similar pooling and servicing agreements that may be
entered into by the Depositor in the future.

On the final Transfer Date, such FHA Insurance Amount will be the
maximum amount of insurance coverage in the Depositor's FHA Reserve that will
be available for the submission of claims on the Title I Mortgage Loans, and
thereafter, such FHA Insurance Amount will be decreased as a result of
payments by the FHA in respect of FHA Claims submitted for the Title I
Mortgage Loans and Title I Contracts after the Transfer Dates and as a result
of the repurchase or substitution of Title I Mortgage Loans and Title I
Contracts by the Transferor. Except in connection with the conveyance to the
Trust Fund of any Subsequent Mortgage Loans that are Title I Mortgage Loans
and the substitution of Title I Mortgage Loans and Title I Contracts, the FHA
Insurance Amount for the Title I Mortgage Loans and Title I Contracts will
not be increased for any other Title I loans, either previously or
subsequently owned by the Depositor and reported for insurance in the
Depositor s FHA Reserve.

On the final Transfer Date, the amount of FHA insurance coverage that
will have been transferred from the Transferor's FHA Reserve to the
Depositor's FHA Reserve may be less than the maximum amount of insurance
coverage transferrable which would otherwise equal 10% of the unpaid
principal balance or the purchase price, if less. However, if individual
Title I Mortgage Loans and Title I Contracts are repurchased from the
Trustee, on behalf of the Trust Fund, by the Transferor, the Servicer and/or
any Subservicer, then with respect to any individual Title I Mortgage Loan or
Title I Contract the amount of FHA insurance coverage that will be
transferred from the Trustee's FHA Reserve, in all likelihood, will be the
maximum amount of insurance coverage of 10% of the unpaid principal balance
or the purchase price, if less, until such time as the Depositor's FHA
Reserve has been reduced to a balance which is less than such maximum amount.
Accordingly, the transfer of insurance coverage from the Depositor's FHA
Reserve as the result of the repurchase of Title I Mortgage Loans and Title I
Contracts will cause a disproportionately larger reduction to the FHA
Insurance Amount for each individual Title I Mortgage Loan and Title I
Contract and if a significant amount of Title I Mortgage Loans and Title I
Contracts are repurchased, could result in a substantial reduction of such
FHA Insurance Amount and the relative percentage of such FHA Insurance Amount
to the principal balance of the Title I Mortgage Loans and Title I Contracts
remaining in the Trust Fund.

REQUIREMENTS FOR TITLE I PROPERTY IMPROVEMENT LOANS AND CONTRACTS. The
proceeds of loans originated under the Title I Program for property
improvements may be used only for improvements that substantially protect or
improve the basic habitability or utility of an eligible property. Although
Title I loans are available for several types of properties, the Title I
Mortgage Loans will include primarily one-to four-family property improvement
loans. FHA Regulations require that the borrower have at least a one-half
interest in (i) fee simple title to the real property to be improved with the
loan proceeds ("Secured Property"), (ii) a lease on the Secured Property for
a fixed term that expires no sooner than six months after the maturity date
of the property improvement loan or (iii) a properly recorded land
installment contract for the purchase of the Secured Property. Any Title I
property improvement loan originated after August 1994 in excess of $7,500
must be secured by a recorded lien on the improved property which is
evidenced by a mortgage or deed of trust executed by the borrower and

<PAGE>

all other owners in fee simple. Prior to August 1994, any Title I property
improvement loan in excess of $5,000 was required to be secured by such a
recorded lien.

The maximum principal amount of an eligible loan under the Title I
Program, must not exceed the actual cost of the project plus any authorized
fees and charges under the Title I Program as provided below; provided that
such maximum principal amount does not exceed $25,000 for a single family
property improvement loan. No single borrower is permitted to have more than
an aggregate of $25,000 in unpaid principal obligations with respect to Title
I loans without prior approval of HUD. Generally, the term of a Title I loan
that is a property improvement loan may not be less than six months nor
greater than 20 years and 32 days. A borrower may obtain multiple Title I
loans with respect to multiple properties (subject to the aforementioned
limit on loans to a single borrower), and a borrower may obtain more than one
Title I loan with respect to a single property, in each case as long as the
total outstanding balance of all Title I loans on the same property does not
exceed the maximum loan amount for the type of Title I loan thereon having
the highest permissible loan amount. If a property improvement loan (or
combination of loans on a single property) exceeds $15,000, and either (i)
the property is not owner occupied or (ii) the structure on the property was
completed within six months prior to the application for the loan, the
borrower is required to have equity in the property at least equal to the
loan amount. In all other cases, there is no requirement that the owner
contribute equity to the property other than fees and costs that may not be
added to the balance of the loan as described below.

Fees and charges that may be added to the balance of property
improvement loans include (i) architectural and engineering fees, (ii)
building permit costs, (iii) credit report costs, (vi) fees for required
appraisals (if applicable), (iv) title examination costs and (v) fees for
required inspections by the lender or its agent, up to $75. The Title I
Lender is entitled to recover the following fees and charges in connection
with a property improvement loan from the borrower as part of the borrower's
initial payment: (i) an origination fee not to exceed 1% of the loan amount,
(ii) discount points, however, after July 5, 1995, only to the extent a
lender can demonstrate a clear relationship between the charging of discount
points and some tangible benefit to the borrower such as a compensating
decrease in the interest rate being charged, (iii) recording fees, recording
taxes, filing fees and documentary stamp taxes, (iv) title insurance costs,
(v) current year tax and insurance escrow payments, (vi) fees necessary to
establish the validity of the lien, (vii) appraisal fees that are not
eligible to be financed, (viii) survey costs, (ix) handling charges for
refinancing or modification of an existing loan, up to $100, (x) fees for
approving assumption or preparing assumption agreements, not to exceed 5%,
(xi) certain fees of closing agents and (xii) such other items as may be
specified by the FHA. FHA Regulations prohibit the advancement of such fees
and charges to the borrower by any party to the transaction.

FHA Regulations distinguish between "direct loans" and "dealer loans."
A loan is a dealer loan if an approved dealer having a direct or indirect
financial interest in the transaction assists the borrower in obtaining the
loan. A loan made by the lender to the borrower without the assistance of
any party with a financial interest in the loan transaction (other than the
lender) is a "direct loan."

With respect to dealer loans, the dealer-contractor typically enters
into a consumer credit contract or note with the borrower and, after
completion of the financed improvements, assigns the contract or note to the
Title I Lender. The dealer-contractor presents the loan application to the
Title I Lender, receives the check or money order representing the loan
proceeds and may accompany the borrower to the institution for the purpose of
receiving payment. As a condition to the disbursement of the proceeds of a
dealer loan, the Title I Lender is required to obtain a completion
certificate signed by the borrower and the dealer certifying that the
improvements have been completed in accordance with the contract and that the
borrower has received no inducement from the dealer to enter into the
transaction other than discount points. The Title I Lender may enter into an
agreement under which the lender has full or partial recourse against the
dealer for a period of three years in the event the Title I Lender sustains
losses with respect to loans originated by such dealer and such loans do not
satisfy FHA Regulations. FHA Regulations require that each dealer meet
certain net worth and experience requirements and be approved by the FHA on
an annual basis. Any Title I Lender that makes dealer loans is required to
supervise and monitor the dealer's activities with respect to loans insured
under the Title I Program and to terminate a dealer's approval if the dealer
does not satisfactorily perform its contractual obligations or comply with
Title I Program requirements.

The note evidencing a property improvement loan insured under the
Title I Program is required to bear a genuine signature of the borrower and
any co-maker and co-signer, must be valid and enforceable, must be complete
and regular on its face and must have interest and principal stated
separately. The interest rate must be negotiated and agreed to by the
borrower and the lender and must be fixed for the term of the loan and
recited in the note. Interest on the Title I loan must accrue from the date
of the loan and be calculated according to the actuarial method, which
allocates payments on the loan

<PAGE>

between principal and interest such that a payment is applied first to
accrued interest and any remainder is subtracted from, or any deficiency is
added to, the unpaid principal balance.

Principal and interest on the note is required to be payable in equal
installments at least monthly except where the borrower has irregular cash
flow. The first and last payments may vary in amount from the regular
installment amount but may not exceed 150% of the regular installment amount.
The first payment may be due no later than two months from the date of the
loan (i.e., the date upon which proceeds are disbursed by the lender). Late
charges may be assessed only after fifteen days and cannot exceed the lesser
of 5% of the installment, up to a maximum of $10 and must be billed as an
additional charge to the borrower. In lieu of late charges, the note may
provide for interest to accrue on late installments on a daily basis at the
note rate. The note must include a provision for acceleration of maturity,
at the option of the holder, upon a default by the borrower and a provision
permitting prepayment in part or in full without penalty. The Title I Lender
must assure that the note and all other documents evidencing the loan are in
compliance with applicable Federal, state and local laws.

A written but unrecorded modification agreement executed by the borrower
may be used in lieu of refinancing a delinquent or defaulted loan to reduce
or increase the installment payment, but not to increase the term or interest
rate. A written modification agreement may also be used to refinance a loan
in order to reduce the interest rate, provided the loan is current.
Alternatively, the lender may negotiate an informal repayment plan for the
borrower to cure a temporary delinquency within a short period of time by
sending a letter to the borrower reciting the terms of the agreement. The
lender may not release any party from liability under the note or any lien
securing an insured loan without prior FHA approval.

FHA Regulations do not require that the borrower obtain title or fire
and casualty insurance as a condition to obtaining loan, except with respect
to manufactured home loans. If the property is located in a flood hazard
area, however, flood insurance in an amount at least equal to the loan amount
is required at the date of loan disbursement. The Borrower is required to
maintain flood insurance of at least the unpaid balance of the loan (or the
value of the property if state law so limits the amount of flood insurance).

REQUIREMENTS FOR TITLE I MANUFACTURED HOME CONTRACTS. The maximum
principal amount for any Title I Contract for a Manufactured Home must not
exceed the sum of certain itemized amounts, which include a specified
percentage of the purchase price of the manufactured home depending on
whether it is a new or existing home; provided that such maximum amount does
not exceed the following loan amounts: (i) $48,600 for a new or existing
manufactured home purchase loan; (ii) $16,200 for a manufactured home lot
purchase; and (iii) $64,800 for a combination loan (i.e. a loan to purchase a
new or existing manufactured home and the lot for such home). Generally, the
term of a Title I Contract for a Manufacture Home may not be less than six
months nor greater than 20 years and 32 days, except that the maximum term of
a manufactured home lot loan is limited to 15 years and 32 days and the
maximum term of a multimodule manufactured home and lot in combination is
limited to 25 years and 32 days.

Borrower eligibility for a Title I Contract for a Manufactured Home
requires that the borrower become the owner of the property to be financed
with such loan and occupy the manufactured home as the borrower's principal
residence, except for a manufactured home lot loan which allows six months
from the date of the loan to occupy the home as the borrower's principal
residence. If a manufactured home is classified as realty, then ownership of
the home must be in fee simple, and also, the ownership of the manufactured
home lot must be in fee simple, except for a lot which consists of a share in
a cooperative association that owns and operates a manufactured home park.
The borrower's minimum cash down payment requirement to obtain financing
through a Title I Contract for a Manufactured Home is as follows: (i) at
least 5% of the first $5,000 and 10% of the balance of the purchase price of
a new manufactured home and at least 10% of the purchase price of an existing
manufactured home for a manufactured home purchase loan, or in lieu of a full
or partial cash down payment, the trade-in of the borrower's equity in an
existing manufactured home; (ii) at least 10% of the purchase price and
development costs of a lot for a manufactured home lot loan; and (iii) at
least 5% of the first $5,000 and 10% of the balance of the purchase price of
the manufactured home and lot for a combination loan.

Any manufactured home financed by a Title I Contract must be certified
by the manufacturer to have been constructed in compliance with the National
Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C.
Sections 5401-5426), so as to conform to all applicable Federal construction
and safety standards, and with respect to the purchase of a new manufactured
home, the manufacturer must furnish the borrower with a one year written
warranty on a HUD approved form which obligates the manufacturer to correct
any nonconformity with all applicable Federal construction and safety
standards or any defects in materials or workmanship which become evident
within one year after the date of delivery. The regulations under the Title I
Program set forth certain additional requirements relating to the
construction, transportation

<PAGE>

and installation of any manufactured home and standards for the manufactured
homesite financed by any Title I Contract. The proceeds from a Title I
Contract for a Manufactured Home may be used as follows: the purchase or
refinancing of a manufactured home, a suitably developed lot for a
manufactured home already owned by the borrower or a manufactured home and
suitably developed lot for the home in combination; or the refinancing of an
existing manufactured home already owned by the borrower in connection with
the purchase of a manufactured home lot or an existing lot already owned by
the borrower in connection with the purchase of a manufactured home. In
addition, the proceeds for a Title I Contract for a Manufactured Home which
is a manufactured home purchase loan may be used for the purchase,
construction or installation of a garage, carport, patio or other comparable
appurtenance to the manufactured home, and the proceeds for a Title I
Contract for a Manufactured Home which is a combination loan may be used for
the purchase, construction or installation of a foundation, garage, carport,
patio or other comparable appurtenance to the manufactured home. The
proceeds from a Title I Contract for a Manufactured Home cannot be used for
the purchase of furniture or the financing of any items and activities which
are set forth on the list published by the Secretary of HUD as amended from
time to time.

Any Title I Contract for a Manufactured Home must be secured by a
recorded lien on the manufactured home (or lot or home and lot, as
appropriate), its furnishings, equipment, accessories and appurtenance, which
lien must be a first lien, superior to any other lien on the property which
is evidenced by a properly recorded financing statement, a properly recorded
security instrument executed by the borrower and any other owner of the
property or other acceptable instrument. With respect to any Title I
Contract involving a manufactured home purchase loan or combination loan and
the sale of the manufactured home by a dealer, the lender or its agent (other
than a manufactured home dealer) must conduct a site-of-placement inspection
within 60 days after the date of the loan to verify that the terms and
conditions of the purchase contract have been met, the manufactured home and
any options and appurtenances included in the purchase price or financed with
the loan have been delivered and installed and the placement certificate
executed by the borrower and the dealer is in order.

TITLE I UNDERWRITING REQUIREMENTS. FHA Regulations require that, before
making a loan insured under the Title I Program, a Title I Lender exercise
prudence and diligence in determining whether the borrower and any co-maker
or co-signer is solvent and an acceptable credit risk with a reasonable
ability to make payments on the loan obligation. Prior to loan approval, the
Title I Lender is required to satisfy specified credit underwriting
requirements and to keep documentation supporting its credit determination.
As part of its credit underwriting, the Title I Lender must obtain the
following: (i) a dated credit application executed by the borrower, any
co-maker and any co-signer, (ii) written verification of current employment
and current income of the borrower and any co-maker or co-signer, (iii) a
consumer credit report stating the credit accounts and payment history of the
borrower and any co-maker or co-signer, (iv) on loans in excess of $5,000,
written evidence that the borrower is not over 30 days delinquent on any
senior lien instruments encumbering the improved property, (v) verification
whether the borrower is in default on any obligation owed to or insured or
guaranteed by the Federal Government and (vi) written verification of the
source of funds for any initial payment required of the borrower if such
payment is in excess of 5% of the loan. Before making a final credit
determination, the lender is required to conduct a face-to-face or telephone
interview with the borrower and any co-maker or co-signer to resolve any
discrepancies in the information on the credit application and to assure that
the information is accurate and complete. The Title I Lender's files must
contain, among other things, the note or other debt instrument, the lien
instrument and a copy of the property improvement contract (in the case of a
dealer loan) or a detailed written description of the work to be performed,
the materials to be furnished and the estimated cost (for a loan not
involving a dealer or contractor).

The Title I Lender is required to satisfy itself that the borrower's
income is adequate to make the payments required under the loan and to pay
the borrower's housing and other recurring expenses. The borrower's housing
and other recurring expenses generally may not exceed a maximum percentage of
gross income as published from time to time in the Federal Register. The
Title I Lender is required to document any compensating factors that support
the approval of the loan if such expense-to-income ratios are not satisfied.
A Title I Lender is prohibited from approving a loan under the Title I
Program without the approval of the FHA if the lender has knowledge that the
borrower is past due more than 30 days under the original terms of an
obligation owed to or insured or guaranteed by the Federal Government or the
borrower has made material misstatements of fact on applications for loans or
other assistance.

UNDER THE TITLE I PROGRAM, THE FHA DOES NOT REVIEW OR APPROVE FOR
QUALIFICATION FOR INSURANCE THE INDIVIDUAL LOAN INSURED THEREUNDER AT THE
TIME OF APPROVAL BY THE LENDING INSTITUTION (AS IS TYPICALLY THE CASE WITH
OTHER FEDERAL LOAN INSURANCE PROGRAMS). If, after a loan has been made and
reported for insurance under the Title I Program, a Title I Lender discovers
any material misstatement of fact or that the loan proceeds have been misused
by the borrower, dealer or any other party, such Title I Lender is required
promptly to report such finding to the FHA. In such case, provided that the
validity of any lien on the property has not been impaired, the insurance of
the loan under the Title I Program will not be

<PAGE>

affected unless such material misstatement of facts or misuse of loan
proceeds was caused by (or was knowingly sanctioned by) such Title I Lender
or its employees.

CLAIMS PROCEDURES UNDER TITLE I. The term "default" is defined under
FHA Regulations as the failure of the borrower to make any payment due under
the note for a period of 30 days after such payment is due. The date of
default is considered to be the date 30 days after the borrower's first
failure to make an installment payment on the note that is not covered by
subsequent payments applied to overdue installments in the order they became
due. When a loan reported for insurance under the Title I Program goes into
default, a Title I Lender is required to contact the borrower and any
co-maker and co-signer by telephone or in person to determine the reasons for
the default and to seek a cure. If such Title I Lender is not able to effect
a cure after diligent efforts, it may provide the borrower with a notice of
default stating that the loan will be accelerated in 30 days if the loan is
not brought current or the borrower does not enter into a loan modification
agreement or repayment plan. The notice of default must meet certain
requirements set forth in the FHA Regulations and must conform to applicable
state law provisions. Such Title I Lender is permitted to rescind the
acceleration of maturity of the loan only if the borrower brings the loan
current, executes a modification agreement or agrees to an acceptable
repayment plan.

Following acceleration of maturity of a secured property improvement
loan, a Title I Lender has the option to proceed against the security or make
a claim under its contract of insurance. If a Title I Lender chooses to
proceed against the Secured Property under a security instrument (or if it
accepts a voluntary conveyance or surrender of the Secured Property), (i) the
Title I Lender must proceed against the loan security by foreclosure and
acquire good, marketable title to the property securing the loan and (ii) the
Title I Lender must take all actions necessary under applicable law to
preserve its rights, if any, to obtain a deficiency judgment against the
borrower, provided however, the Title I Lender may still file an FHA
Insurance claim, but only with the prior approval of the Secretary of HUD.

If a Title I Lender files an insurance claim with the FHA under the
Title I Program, the FHA reviews the claim, the complete loan file,
certification of compliance with applicable state and local laws in carrying
out any foreclosure or repossession, and where the borrower is in bankruptcy
or deceased, evidence that the lender has properly filed proofs of claims.
Generally, a Title I Lender must file its claim of insurance with the FHA not
later than nine months after the date of default. Concurrently with filing
the insurance claim, such Title I Lender is required to assign to the United
States of America it's entire interest in the note (or a judgment in lieu of
the note), in any securities held and in any claims filed in any legal
proceedings. If, at the time the note is assigned to the United States, the
Secretary of HUD has reason to believe that the note is not valid or
enforceable against the borrower, the FHA may deny the claim and reassign the
note to the Title I Lender. If either such defect is discovered after the FHA
has paid a claim, the FHA may require the Title I Lender to repurchase the
paid claim and to accept an assignment of the loan note. If the Title I
Lender subsequently obtains a valid and enforceable judgment against the
borrower, it may resubmit a new insurance claim with an assignment of the
judgment. The FHA may contest any insurance claim previously paid by it and
make a demand for repurchase of the loan with respect to which the claim was
paid at any time up to two years from the date the claim was certified for
payment and may do so thereafter in the event of fraud or misrepresentation
on the part of the Title I Lender.

A claim for reimbursement of loss with respect to a loan eligible for
insurance under the Title I Program is required to be made on an FHA-approved
form executed by a duly qualified officer of the Title I Lender and must be
accompanied by copies of certain relevant documents and documentation
specified in the FHA Regulations to support the claim. The Title I Lender is
required, among other things, to document its efforts to effect recourse
against any dealer in accordance with any recourse agreement with such
dealer. If the loan is subject to an unsatisfied dealer recourse agreement
claim, the Title I Lender is also required to assign its rights under such
recourse agreement. The FHA has the right to deny any claim for insurance in
whole or in part based upon a violation of the FHA Regulations unless a
waiver of compliance is granted. The Title I Lender is permitted to appeal
any such claim denial and resubmit the claim within six months of the date of
the claim denial, subject to a reprocessing fee. The Pooling and Servicing
Agreement provides that the Trustee (or the Administrator) shall submit an
FHA Claim with respect to any Title I Mortgage Loan or Title I Contract that
goes into default if the default cannot be cured.

If, as a result of the delay in the transfer of the FHA Insurance
described above, FHA Insurance is not available with respect to any defaulted
Title I Mortgage Loan or Title I Contract at the time it goes into default,
then the amount required to make interest payments to the Certificateholders
with respect to the principal amount thereof, until such FHA Insurance
becomes available and a claim for insurance can be made, if at all, will be
paid from other amounts, if any, available in the Certificate Account.

<PAGE>

NO RIGHTS OF CERTIFICATEHOLDERS AGAINST FHA. Because the Trust Fund and
the Certificateholders will not hold an FHA contract of insurance, the FHA
will not recognize the Trust Fund or the Certificateholders as the owners of
the Title I Mortgage Loans, Title I Contracts or any portion thereof,
entitled to submit FHA Claims to the FHA. Accordingly, the Trust Fund and
the Certificateholders will have no direct right to receive insurance
payments from the FHA. In the event the Trustee (or the Administrator, if
any) submits an FHA Claim to the FHA and the FHA approves payment of such FHA
Claim, the related FHA Insurance Proceeds will be payable only to the Trustee
or to the Administrator, if any, as agent and attorney-in-fact for the
Trustee. The Certificateholders rights relating to the receipt of payment
from and the administration, processing and submissions of FHA Claims by the
Trustee or the Administrator, if any, are limited and governed by the related
Pooling and Servicing Agreement and FHA Claims Administration Agreement and
these functions are obligations of the Trustee and the Administrator, if any,
not the FHA.

LEGAL INVESTMENT MATTERS

Unless otherwise specified in the related Prospectus Supplement, the
Certificates of a Series will not constitute mortgage related securities
under the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA") because
a substantial number of the Mortgage Loans are secured by liens on real
estate that are not first liens, as required by SMMEA. Accordingly, many
institutions with legal authority to invest in mortgage related securities
may not be legally authorized to invest in the Offered Certificates.

Institutions whose investment activities are subject to legal investment
laws or regulations or review by certain regulatory authorities may be
subject to restrictions on investment in certain Classes of the Certificates.
Any financial institution which is subject to the jurisdiction of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation ("FDIC"), the Office of
Thrift Supervision ("OTS"), the National Credit Union Administration ("NCUA"),
or other federal or state agencies with similar authority should review
any applicable rules, guidelines and regulations prior to purchasing the
Certificates. The Federal Financial Institutions Examination Council, for
example, has issued a Supervisory Policy Statement on Securities Activities
effective February 10, 1992 (the "POLICY STATEMENT"). The Policy Statement
has been adopted by the Comptroller of the Currency, the Federal Reserve
Board, the FDIC, the OTS, and the NCUA (with certain modifications), with
respect to the depository institutions that they regulate. The Policy
Statement prohibits depository institutions from investing in certain
high-risk mortgage securities (including securities such as certain Classes
of Certificates), except under limited circumstances, and sets forth certain
investment practices deemed to be unsuitable for regulated institutions. The
NCUA issued final regulations effective December 2, 1991 that restrict and in
some instances prohibit the investment by federal credit unions in certain
types of mortgage related securities.

The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to prudent investor provisions, percentage-of-assets limits and
provisions which may restrict or prohibit investment in securities which are
not interest bearing or income paying, or in securities which are issued
in book-entry form.

Investors should consult their own legal advisors in determining whether
and to what extent the Certificates constitute legal investments for such
investors.

ERISA CONSIDERATIONS

The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose requirements on employee benefit plans
(and on certain other retirement plans and arrangements, including individual
retirement accounts and annuities, Keogh plans and collective investment
funds and separate accounts in which such plans, accounts or arrangements are
invested) (collectively, "PLANS") subject to ERISA and Section 4975 of the
Code and on persons who are fiduciaries with respect to such Plans. Among
other things, ERISA requires that the assets of Plans be held in trust and
that the trustee, or other duly authorized fiduciary, have exclusive
authority and discretion to manage and control the assets of such Plans.
ERISA also imposes certain duties on persons who are fiduciaries of Plans.
Under ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a Plan is considered to be a
fiduciary of such Plan (subject to certain exceptions not here relevant). In
addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
("PROHIBITED TRANSACTIONS") involving Plan assets and persons ("PARTIES IN
INTEREST") having certain specified relationships to a Plan and imposes
additional prohibitions where Parties in Interest are fiduciaries with
respect to such Plan. Section 4975 of the Code

<PAGE>

provides many requirements and prohibitions similar to those under ERISA and
applies excise taxes on persons engaged in Prohibited Transactions.

The United States Department of Labor (the "DOL") has issued regulations
concerning the definition of what constitutes the assets of a Plan (DOL Reg.
Section 2510.3-101, the "PLAN ASSET REGULATIONS") Under the Plan Asset
Regulations, the underlying assets and properties of corporations,
partnerships and certain other entities in which a Plan makes an equity
investment could be deemed for purposes of ERISA to be assets of the
investing Plan in certain circumstances. In such case, the fiduciary making
such an investment for the Plan could be deemed to have delegated his or her
asset management responsibility, and the underlying assets and properties
could be subject to ERISA reporting and disclosure. The Certificates of a
Series will be treated as equity for purposes of ERISA. Certain exceptions
to the regulation may apply in the case of a Plan's investment in the
Certificates that constitute equity investments, but the Depositor cannot
predict in advance whether such exceptions apply due to the factual nature of
the conditions to be met. Accordingly, because the Mortgage Loans or Agency
Securities may be deemed Plan assets of each Plan that purchases such
Certificates, an investment in such Certificates by a Plan might give rise to
a prohibited transaction under ERISA Sections 406 and 407 and be subject to
an excise tax under Code Section 4975 unless a statutory or administrative
exemption applies.

DOL Prohibited Transaction Class Exemption 83-1 ("PTCE 83-1") exempts
from ERISA's prohibited transaction rules certain transactions relating to
the operation of residential mortgage pool investment trusts and the
purchase, sale and holding of mortgage pool pass-through certificates in
the initial issuance of such certificates. PTCE 83-1 permits, subject to
certain conditions, transactions which might otherwise be prohibited between
Plans and Parties in Interest with respect to those Plans involving the
origination, maintenance and termination of mortgage pools consisting of
mortgage loans secured by first or second mortgages or deeds of trust on
single-family residential property, and the acquisition and holding of
certain mortgage pool pass-through certificates representing an interest in
such mortgage pools by Plans.

PTCE 83-1 sets forth three general conditions which must be satisfied
for any transaction to be eligible for exemption: (i) the maintenance of a
system of insurance or other protection for the pooled mortgage loans and
property securing such loans, and for indemnifying certificateholders against
reductions in pass-through payments due to property damage or defaults in
loan payments in an amount not less than the greater of one percent of the
aggregate principal balance of all covered pooled mortgage loans or the
principal balance of the largest covered pooled mortgage loan; (ii) the
existence of a pool trustee who is not an affiliate of the pool sponsor; and
(iii) a limitation on the amount of the payments retained by the pool
sponsor, together with other funds inuring to its benefit, to not more than
adequate consideration for selling the mortgage loans plus reasonable
compensation for services provided by the pool sponsor to the Mortgage Pool.

Although the Trustee for any series of Certificates will be unaffiliated
with the Depositor, there can be no assurance that the system of insurance or
subordination will meet the general or specific conditions referred to above.
In addition, the nature of a Trust Fund's assets or the characteristics of
one or more classes of the related series of Certificates may not be included
within the scope of PTCE 83-1 or any other class exemption under ERISA. The
Prospectus Supplement will provide additional information with respect to the
application of ERISA and the Code to the related Certificates.

Several underwriters of mortgage-backed securities have applied for and
obtained ERISA prohibited transactions exemptions which are in some respects
broader than PTCE 83-1. Such exemptions can only apply to mortgage-backed
securities which, among other conditions, are sold in an offering with
respect to which such underwriter serves as the sole or a managing
underwriter, or as a selling or placement agent. Several other underwriters
have applied for similar exemptions. If such an exemption might be applicable
to a Series of Certificates, the related Prospectus Supplement will refer to
such possibility.

Each Plan fiduciary who is responsible for making the investment
decisions whether to purchase or commit to purchase and to hold Certificates
must make its own determination as to whether the general and the specific
conditions of PTCE 83-1 have been satisfied, or as to the availability of any
other prohibited transaction exemptions. Each Plan fiduciary should also
determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in the Certificates is
appropriate for the Plan, taking into account the overall investment policy
of the Plan and the composition of the Plan's investment portfolio.

Any Plan proposing to invest in Certificates should consult with its
counsel to confirm that such investment will not result in a Prohibited
Transaction and will satisfy the other requirements of ERISA and the Code.

<PAGE>

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a general discussion of the anticipated material
federal income tax consequences of the purchase, ownership and disposition of
Certificates. The discussion below does not purport to address all federal
income tax consequences that may be applicable to particular categories of
investors, some of which may be subject to special rules. The authorities on
which this discussion is based are subject to change or differing
interpretations, and any such change or interpretation could apply
retroactively. This discussion reflects the enactment of the Tax Reform Act
of 1986 (the "1986 ACT"), the Technical and Miscellaneous Revenue Act of 1988
("TAMRA") and the Revenue Reconciliation Act of 1993, as well as final
Treasury regulations concerning REMICs ("FINAL REMIC REGULATIONS")
promulgated by the U.S. Department of the Treasury on December 23, 1992.
Investors should consult their own tax advisors in determining the federal,
state, local and any other tax consequences to them of the purchase,
ownership and disposition of Certificates, particularly with respect to
federal income tax changes effected by the 1986 Act, TAMRA and the Final
REMIC Regulations. The Prospectus Supplement for each series of Certificates
will discuss any special tax consideration applicable to any Class or Classes
of Certificates of such Series, and the discussion below is qualified by any
such discussion in the related Prospectus Supplement.

For purposes of this discussion, where the applicable Prospectus
Supplement provides for a fixed retained yield with respect to the Mortgage
Loans, Agency Securities or Contracts underlying a Series of Certificates,
references to the Mortgage Loans, Agency Securities or Contracts will be
deemed to refer to that portion of the Mortgage Loans, Agency Securities or
Contracts held by the Trust Fund which does not include the fixed retained
yield.

FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES

GENERAL

With respect to a particular Series of Certificates, an election may be
made to treat the Trust Fund or one or more segregated pools of assets
therein as one or more REMICs within the meaning of Code Section 860D. A
Trust Fund or a portion or portions thereof as to which a REMIC election will
be made will be referred to as a "REMIC POOL." For purposes of this
discussion, Certificates of a Series as to which one or more REMIC elections
are made are referred to as "REMIC CERTIFICATES" and will consist of one or
more Classes of "REGULAR CERTIFICATES" and one Class of "RESIDUAL
CERTIFICATES" in the case of each REMIC Pool. Qualification as a REMIC
requires ongoing compliance with certain conditions. With respect to each
Series of REMIC Certificates, Andrews & Kurth L.L.P. ("COUNSEL TO THE
DEPOSITOR"), has advised the Depositor that in the firm's opinion, assuming
(i) the making of an appropriate election, (ii) compliance with the Pooling
and Servicing Agreement, and (iii) continuing compliance with the applicable
provisions of the Code, as it may be amended from time to time, and any
applicable Treasury regulations adopted thereunder, each REMIC Pool will
qualify as a REMIC. In such case, the Regular Certificates will be considered
to be "regular interests" in the REMIC Pool and generally will be treated for
federal income tax purposes as if they were newly originated debt
instruments, and the Residual Certificates will be considered to be "residual
interests" in the REMIC Pool. The Prospectus Supplement for each Series of
Certificates will indicate whether one or more REMIC elections with respect
to the related Trust Fund will be made, in which event references to "REMIC"
or "REMIC Pool" herein shall be deemed to refer to each such REMIC Pool. For
purposes of this discussion, unless otherwise specified herein or in the
applicable Prospectus Supplement, the term "Mortgage Loans" will be used to
refer to Mortgage Loans, Agency Securities and Contracts.

STATUS OF REMIC CERTIFICATES

REMIC Certificates held by a mutual savings bank or a domestic building
and loan association (a "THRIFT INSTITUTION") will constitute "qualifying
real property loans" within the meaning of Code Section 593(d)(1) in the same
proportion that the assets of the REMIC Pool would be so treated. REMIC
Certificates held by a domestic building and loan association will constitute
"a regular or residual interest in a REMIC" within the meaning of Code Section
7701(a)(19)(C)(xi) in the same proportion that the assets of the REMIC Pool
would be treated as "loans . . . secured by an interest in real property"
within the meaning of Code Section 7701(a)(19)(C)(v) or as other assets
described in Code Section 7701(a)(19)(C). REMIC Certificates held by a real
estate investment trust (a "REIT") will constitute real estate assets
within the meaning of Code Section 856(c)(5)(A), and interest on the REMIC
Certificates will be considered "interest on obligations secured by mortgages
on real property or on interests in real property" within the meaning of Code
Section 856(c)(3)(B) in the same proportion that, for both purposes, the
assets of the REMIC Pool would be so treated. However, if at all times 95% or
more of the assets of the REMIC Pool constitute qualifying assets for Thrift
Institutions and REITs, the REMIC Certificates will be treated entirely as
qualifying assets for such entities (and the income will be treated entirely
as qualifying income). Moreover, the Final

<PAGE>

REMIC Regulations provide that, for purposes of Code Sections 593(d)(1) and
856(c)(5)(A), payments of principal and interest on the Mortgage Loans that
are reinvested pending distribution to holders of REMIC Certificates
constitute qualifying assets for such entities. Where two REMIC Pools are
part of a tiered structure they will be treated as one REMIC for purposes of
the tests described above respecting asset ownership of more or less than
95%. Notwithstanding the foregoing, however, REMIC income received by a REIT
owning a residual interest in a REMIC Pool could be treated in part as
non-qualifying REIT income if the REMIC Pool holds Mortgage Loans with
respect to which income is contingent on mortgagor profits or property
appreciation. In addition, if the assets of the REMIC include buy-down
Mortgage Loans, it is possible that the percentage of such assets
constituting "qualifying real property loans" or "loans . . . secured by an
interest in real property" for purposes of Code Sections 593(d)(1) and
7701(a)(19)(C)(v), respectively, may be required to be reduced by the amount
of the related buy-down funds. REMIC Certificates held by a regulated
investment company will not constitute "Government securities" within the
meaning of Code Section 851(b)(4)(A)(i). REMIC Certificates held by certain
financial institutions will constitute an "evidence of indebtedness" within
the meaning of Code Section 582(c)(1). However, REMIC Regular Certificates
acquired by another REMIC on its Startup Day (as defined below) in exchange
for regular or residual interests in the REMIC will constitute "qualified
mortgages" within the meaning of Code Section 860G(a)(3).

QUALIFICATION AS A REMIC

In order for the REMIC Pool to qualify as a REMIC, there must be ongoing
compliance on the part of the REMIC Pool with the requirements set forth in
the Code. The REMIC Pool must fulfill an asset test, which requires that no
more than a de minimis amount of the assets of the REMIC Pool, as of the
close of the third calendar month beginning after the "STARTUP DAY" (which
for purposes of this discussion is the date of issuance of the REMIC
Certificates) and at all times thereafter, may consist of assets other than
"qualified mortgages" and "permitted investments." The Final REMIC Regulations
provide a "safe harbor" pursuant to which the de minimis requirement will be
met if at all times the aggregate adjusted basis of any nonqualified assets
(i.e. , assets other than qualified mortgages and permitted investments) is
less than 1% of the aggregate adjusted basis of all the REMIC Pool's assets.

If a REMIC Pool fails to comply with one or more of the requirements of
the Code for REMIC status during any taxable year, the REMIC Pool will not be
treated as a REMIC for such year and thereafter. In this event, the
classification of the REMIC for federal income tax purposes is uncertain. The
REMIC Pool might be entitled to treatment as a grantor trust under the rules
described in "Federal Income Tax Consequences for Certificates as to Which No
REMIC Election Is Made" herein. In that case, no entity-level tax would be
imposed on the REMIC Pool. Alternatively, the Regular Certificates may
continue to be treated as debt instruments for federal income tax purposes;
but the REMIC Pool could be treated as a taxable mortgage pool (a "TMP"). If
the REMIC Pool is treated as a TMP, any residual income of the REMIC Pool
(i.e. , income from the Mortgage Loans less interest and original issue
discount expense allocable to the Regular Certificates and any administrative
expenses of the REMIC Pool) would be subject to corporate income tax at the
REMIC Pool level. On the other hand, an entity with multiple classes of
ownership interests may be treated as a separate association taxable as a
corporation under Treasury regulations, and the Regular Certificates may be
treated as equity interests therein. The Code, however, authorizes the
Treasury Department to issue regulations that address situations where
failure to meet one or more of the requirements for REMIC status occurs
inadvertently and in good faith, and disqualification of the REMIC Pool would
occur absent regulatory relief. Investors should be aware, however, that the
Conference Committee Report to the 1986 Act (the "COMMITTEE REPORT")
indicates that the relief may be accompanied by sanctions, such as the
imposition of a corporate tax on all or a portion of the REMIC Pool's income
for the period of time in which the requirements for REMIC status are not
satisfied.

TAXATION OF REGULAR CERTIFICATES

GENERAL

Payments received by holders of Regular Certificates generally should be
accorded the same tax treatment under the Code as payments received on
ordinary taxable corporate debt instruments. In general, interest, original
issue discount and market discount on a Regular Certificate will be treated
as ordinary income to a holder of the Regular Certificate (the "REGULAR
CERTIFICATEHOLDER") as they accrue, and principal payments on a Regular
Certificate will be treated as a return of capital to the extent of the
Regular Certificateholder's basis in the Regular Certificate allocable
thereto. Regular Certificateholders must use the accrual method of accounting
with regard to Regular Certificates, regardless of the method of accounting
otherwise used by such Regular Certificateholders.

<PAGE>

ORIGINAL ISSUE DISCOUNT

Regular Certificates may be issued with "original issue discount" within
the meaning of Code Section 1273(a). Holders of any class of Regular
Certificates having original issue discount generally must include original
issue discount in ordinary income for federal income tax purposes as it
accrues, in accordance with a constant interest method that takes into
account the compounding of interest, in advance of receipt of the cash or a
portion of the cash attributable to such income. Based in part on Treasury
regulations issued on January 27, 1994 under Code Sections 1271 through 1273
and 1275 (the "OID REGULATIONS") and in part on the provisions of the 1986
Act, the Depositor anticipates that the amount of original issue discount
required to be included in a Regular Certificateholder's income in any
taxable year will be computed in a manner substantially as described below.
In general the OID Regulations apply to debt instruments issued on or after
April 4, 1994, except that taxpayers may rely on the OID Regulations for debt
instruments issued after December 21, 1992. Alternatively, proposed Treasury
regulations issued December 21, 1992 may be treated as authority for debt
instruments issued after December 21, 1992 and prior to April 4, 1994, and
proposed Treasury regulations issued in 1986 and 1991 may be treated as
authority upon for instruments issued before December 21, 1992. Regular
Certificateholders should be aware, however, that the OID Regulations either
do not address, or are subject to varying interpretations with regard to,
several issues relevant to securities, such as the Regular Certificates, that
are subject to prepayment. The 1986 Act requires that the amount and rate of
accrual or original issue discount be calculated based on a reasonable
assumed prepayment rate for the Mortgage Loans in a manner prescribed by
regulations not yet issued ("PREPAYMENT ASSUMPTION") and provides for
adjusting the amount and rate of accrual of such discount where the actual
prepayment rate differs from the Prepayment Assumption. The Committee Report
indicates that the regulations will require that the Prepayment Assumption be
the prepayment assumption that is used in determining the initial offering
price of such Certificates. The Prospectus Supplement for each Series of
such Certificates will specify the Prepayment Assumption determined by the
Depositor for the purposes of determining the amount and rate of accrual of
original issue discount. No representation is made that the Certificates will
prepay at the Prepayment Assumption or at any other rate. Moreover, the OID
Regulations include an anti-abuse rule allowing the Internal Revenue Service
("IRS") to apply or depart from the OID Regulations where necessary or
appropriate to ensure a reasonable tax result in light of the applicable
statutory provisions. A tax result will not be considered unreasonable under
the anti-abuse rule in the absence of a substantial effect on the present
value of a taxpayer's tax liability. Investors are advised to consult their
own tax advisors as to the discussion herein and the appropriate method for
reporting interest and original issue discount with respect to the Regular
Certificates.

Under the OID Regulations, each Regular Certificate (except to the
extent described below with respect to a Regular Certificate on which
distributions of principal are made in a single installment or upon an
earlier distribution by lot of a specified principal amount upon the request
of a Regular Certificateholder or by random lot (a "RETAIL CLASS CERTIFICATE"))
will be treated as a single installment obligation for purposes of
determining the original issue discount includible in a Regular
Certificateholder's income. The total amount of original issue discount on a
Regular Certificate is the excess of the "stated redemption price at maturity"
of the Regular Certificate over its "issue price." The issue price of a
Regular Certificate is the first price at which a substantial amount of
Regular Certificates of that class are first sold (other than to bond houses,
brokers, underwriters and wholesalers). Unless specified otherwise in the
Prospectus Supplement, the Depositor will determine original issue discount
by including the amount paid by an initial Regular Certificateholder for
accrued interest that relates to a period prior to the issue date of the
Regular Certificate in the issue price of a Regular Certificate and will
include in the stated redemption price at maturity any interest paid on the
first Distribution Date to the extent such interest is attributable to a
period in excess of the number of days between the issue date and such first
Distribution Date. The stated redemption price at maturity of a Regular
Certificate always includes the original principal amount of the Regular
Certificate, but generally will not include distributions of stated interest
if such interest distributions constitute "qualified stated interest." Under
the OID Regulations, qualified stated interest generally means stated
interest that is unconditionally payable in cash or in property (other than
debt instruments of the issuer), or that will be constructively received, at
least annually at a single fixed rate. Special rules apply for variable rate
Regular Certificates as described below. Any stated interest in excess of the
qualified stated interest is included in the stated redemption price at
maturity. If the amount of original issue discount is "de minimis" as
described below, the amount of original issue discount is treated as zero,
and all stated interest is treated as qualified stated interest.
Distributions of interest on Regular Certificates with respect to which
deferred interest will accrue may not constitute qualified stated interest,
in which case the stated redemption price at maturity of such Regular
Certificates includes all distributions of interest as well as principal
thereon. Moreover, if the interval between the issue date and the first
Distribution Date on a Regular Certificate is longer than the interval
between subsequent Distribution Dates (and interest paid on the first
Distribution Date is less than would have been earned if the stated interest
rate were applied to outstanding principal during each day in such interval),
the stated interest distributions on such Regular Certificate technically do
not constitute qualified stated interest. The OID Regulations provide that in
such case a special rule, applying solely for the purpose of determining

<PAGE>

whether original issue discount is de minimis, provides that the interest
shortfall for the long first period (i.e., the interest that would have been
earned if interest had been paid on the first Distribution Date for each day
the Regular Certificate was outstanding) is treated as original issue
discount assuming the stated interest would otherwise be qualified stated
interest. Also in such case the stated redemption price at maturity is
treated as equal to the issue price plus the greater of the amount of
foregone interest or the excess, if any, of the Certificate's stated
principal amount over its issue price. The OID Regulations indicate that all
interest on a long first period Regular Certificate that is issued with
non-de minimis original issue discount will be included in the Regular
Certificate's stated redemption price at maturity. Regular Certificateholders
should consult their own tax advisors to determine the issue price and stated
redemption price at maturity of a Regular Certificate.

Under a de minimis rule, original issue discount on a Regular
Certificate will be considered to be zero if such original issue discount is
less than 0.25% of the stated redemption price at maturity of the Regular
Certificate multiplied by the weighted average maturity of the Regular
Certificate. For this purpose, the weighted average maturity of the Regular
Certificate is computed as the sum of the amounts determined by multiplying
the number of full years (i.e., rounding down partial years) from the issue
date until each distribution in reduction of stated redemption price at
maturity is scheduled to be made by a fraction, the numerator of which is the
amount of each distribution included in the stated redemption price at
maturity of the Regular Certificate and the denominator of which is the
stated redemption price at maturity of the Regular Certificate. Although
currently unclear, it appears that the schedule of such distributions should
be determined in accordance with the Prepayment Assumption. In addition, if
the original issue discount is de minimis all stated interest (including
stated interest that would otherwise be treated as original issue discount)
is treated as qualified stated interest. Unless the Holder of a Regular
Certificate elects to accrue all discount under a constant yield to maturity
method, as described below, the holder of a debt instrument includes any de
minimis original issue discount in income pro rata as capital gain recognized
on retirement of the Regular Certificate as stated principal payments are
received. If a subsequent Holder of a Regular Certificate issued with de
minimis original issue discount purchases the Regular Certificate at a
premium, the subsequent Holder does not include any original issue discount
in income. If a subsequent Holder purchases such Regular Certificate at a
discount all discount is reported as market discount, as described below.

Of the total amount of original issue discount on a Regular Certificate,
the Regular Certificateholder generally must include in gross income for any
taxable year the sum of the "daily portions," as defined below, of the
original issue discount on the Regular Certificate accrued during an accrual
period for each day on which he holds the Regular Certificate, including the
date of purchase but excluding the date of disposition. Although not free
from doubt, the Depositor intends to treat the monthly period ending on the
day before each Distribution Date as the accrual period, rather than the
monthly period corresponding to the prior calendar month. With respect to
each Regular Certificate, a calculation will be made of the original issue
discount that accrues during each successive full accrual period (or shorter
period from the date of original issue) that ends on the day before the
related Distribution Date for the Regular Certificate. The original issue
discount accruing in a full accrual period would be the excess, if any, of
(i) the sum of (a) the present value of all of the remaining distributions to
be made on the Regular Certificate as of the end of that accrual period that
are included in the Regular Certificate's stated redemption price at maturity
and (b) the distributions made on the Regular Certificate during the accrual
period that are included in the Regular Certificate's stated redemption price
at maturity, over (ii) the adjusted issue price of the Regular Certificate at
the beginning of the accrual period. The present value of the remaining
distributions referred to in the preceding sentence is calculated based on
(i) the yield to maturity of the Regular Certificate at the issue date giving
the effect to the Prepayment Assumption, (ii) events (including actual
prepayments) that have occurred prior to the end of the accrual period and
(iii) the Prepayment Assumption. The effect of these rules is to adjust the
rate of original issue discount accrual to correspond to the actual
prepayment experience. For these purposes, the adjusted issue price of a
Regular Certificate at the beginning of any accrual period equals the issue
price of the Regular Certificate, increased by the aggregate amount of
original issue discount with respect to the Regular Certificate that accrued
in all prior accrual periods and reduced by the amount of distributions
included in the Regular Certificate's stated redemption price at maturity
that were made on the Regular Certificate in such prior periods. The original
issue discount accruing during any accrual period (as determined in this
paragraph) will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full accrual
period, the daily portions of original issue discount must be determined
using a reasonable method.

Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for
any period) if the prepayments are slower than the Prepayment Assumption. To
the extent specified in the applicable Prospectus Supplement, an increase in
prepayments on the Mortgage Loans with respect to a Series of Regular
Certificates

<PAGE>

can result in both a change in the priority of principal payments with
respect to certain Classes of Regular Certificates and either an increase or
decrease in the daily portions of original issue discount with respect to
such Regular Certificates.

In the case of a Retail Class Certificate, the yield to maturity of such
Certificate will be determined based upon the anticipated payment
characteristics of the Class as a whole under the Prepayment Assumption. In
general, the original issue discount accruing on each Retail Class
Certificate in a full accrual period would be its allocable share of the
original issue discount with respect to the entire Class, as determined in
accordance with the preceding paragraph. However, in the case of a
distribution of the entire principal amount of any Retail Class Certificate
(or portion thereof), (a) the remaining unaccrued original issue discount
allocable to such Certificate (or to such portion) will accrue at the time of
such distribution, and (b) the accrual of original issue discount allocable
to each remaining Certificate of such Class (or the remaining principal
amount of a Retail Class Certificate after a distribution in reduction of a
portion of its principal amount has been received) will be adjusted by
reducing the present value of the remaining payments on such Class and the
adjusted issue price of such Class to the extent attributable to the portion
of the principal amount thereof that was distributed.

A subsequent holder of a Certificate issued with original issue discount
who purchases the Certificate at a cost less than the remaining stated
redemption price at maturity will also be required to include in gross income
the sum of the daily portions of original issue discount on the Certificate.
In computing the daily portions of original issue discount for a subsequent
purchaser (as well as an initial purchaser who purchases a Certificate at a
price higher than the issue price but less than the stated redemption price
at maturity), however, the daily portion for any day is reduced by the amount
that would be the daily portion for such day (computed in accordance with the
rules set forth above) multiplied by a fraction, the numerator of which is
the amount, if any, by which the price paid by such purchaser for the Regular
Certificate exceeds the excess of (i) the sum of its issue price and the
aggregate amount of original issue discount that would have been includible
in the gross income of an original holder of the Regular Certificate who
purchased the Regular Certificate at its issue price, over (ii) the amount of
any prior distributions included in the stated redemption price at maturity,
and the denominator of which is the sum of the daily portions for such
Regular Certificate (computed in accordance with the rules set forth above)
for all days beginning on the date after the date of purchase and ending on
the date on which the remaining principal amount of such Regular Certificate
is expected to be reduced to zero under the Prepayment Assumption.
Alternatively, such a subsequent holder may accrue original issue discount by
treating the purchase as a purchase at original issuance and applying the
constant yield to maturity method.

The OID Regulations provide that a holder that acquires a Regular
Certificate on or after April 4, 1994 may elect to include in gross income
all stated interest, original issue discount, de minimis original issue
discount, market discount (as described below under "Market Discount"), de
minimis market discount and unstated interest (as adjusted for any
amortizable bond premium or acquisition premium) currently as it accrues
using the constant yield to maturity method. If such an election were made
with respect to a Regular Certificate with market discount, the Regular
Certificateholder would be deemed to have made an election to include in
income currently market discount with respect to all other debt instruments
having market discount that such Regular Certificateholder acquires during
the year of the election or thereafter. Similarly, a Regular
Certificateholder that makes this election for a Regular Certificate that is
acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Regular Certificateholder owns or acquires. The election to
accrue interest, discount and premium on a constant yield method with respect
to a Regular Certificate can not be revoked without the consent of the IRS.

Regular Certificates may provide for interest based on a variable rate.
The OID Regulations provide special rules for variable rate instruments that
meet three requirements. First, the issue price must not exceed the
noncontingent principal payments by more than the lesser of (i) 1.5% of the
product of the noncontingent principal payments and the weighted average
maturity or (ii) 15% of the noncontingent principal payments. Second, the
instrument must provide for stated interest (compounded or paid at least
annually) at (i) one or more qualified floating rates, (ii) a single fixed
rate and a single objective rate that is a qualified inverse floating rate,
(iii) a single fixed rate and one or more qualified floating rates; or (iv) a
single objective rate. Third, the instrument must provide that each qualified
floating rate or objective rate in effect during the term of the Regular
Certificate is set at a current value of that rate (one occurring in the
interval beginning three months before and ending one year after the rate is
first in effect on the Regular Certificate). If interest on a Regular
Certificate is stated at a fixed rate for an initial period of less than 1
year followed by a variable rate that is either a qualified floating rate or
an objective rate and the value of the variable rate on the issue date is
intended to approximate the fixed rate, the fixed rate and the variable rate
together constitute a single qualified floating rate or objective rate. A
rate is a qualified floating rate if variations in the rate can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds in the Regular Certificate's currency denomination. A multiple of a
qualified floating rate is not a qualified floating rate unless

<PAGE>

it is a rate equal to (i) the product of a qualified floating rate as
described in the previous sentence and a positive number not greater than
1.35, or (ii) a product described in (i) increased or decreased by a fixed
rate. A variable rate is not a qualified floating rate if it is subject to a
cap, floor or a restriction on the amount of increase or decrease in stated
interest rate (governor) unless: (i) the cap, floor or governor is fixed
throughout the Regular Certificate's term, (ii) the cap or floor is not
reasonably expected to cause the yield on the Regular Certificate to be
significantly less or more, respectively, than the expected yield without the
cap or floor, or (iii) the governor is not reasonably expected to cause the
yield to be significantly more or less than the expected yield without the
governor. An objective rate is a rate that is determined using a single fixed
formula and is based on (i) the yield or changes in price of actively traded
personal property, (ii) one or more qualified floating rates, (iii) a rate
that would be a qualified rate if the Regular Certificate were denominated in
another currency or (iv) a combination of such rates. An objective rate is a
qualified inverse floating rate if the rate is equal to a fixed rate minus a
qualified floating rate in which the variations of such rate can reasonably
be expected to inversely reflect contemporaneous variations in the cost of
newly borrowed funds. However, a variable rate is not an objective rate if it
is reasonably expected that the average value of the rate during the first
half of the Regular Certificate's term will be significantly less or greater
than the average value of the rate during the final half of the Regular
Certificate's term.

If a variable rate Regular Certificate provides for stated interest at a
single qualified floating rate or objective rate that is unconditionally
payable in cash or property at least annually (i) all stated interest is
qualified stated interest, (ii) the amount of original issue discount, if
any, is determined as if the Regular Certificate had a fixed rate equal to
(A) in the case of a qualified floating rate or qualified inverse floating
rate, the value on the issue date of the qualified floating rate or qualified
inverse floating rate or (B) in the case of any other objective rate, a fixed
rate that reflects the yield that is reasonably expected for the Regular
Certificate. If a variable rate Regular Certificate is not described in the
previous sentence, the Regular Certificate is treated as a fixed rate Regular
Certificate with a fixed rate substitute or substitutes equal to the value of
the qualified floating rates or qualified inverse floating rate at the date
of issue or, in the case of a Regular Certificate having an objective rate at
a fixed rate that reflects the yield reasonably expected for the Regular
Certificate. Qualified stated interest or original issue discount allocable
to an accrual period is adjusted to reflect differences in the interest
actually accrued or paid compared to the interest accrued or paid at the
fixed rate substitute. If a variable rate Regular Certificate provides for
stated interest either at one or more qualified floating rates or at a
qualified inverse floating rate and also provides for interest at an initial
fixed rate that is not intended to approximate the related floating rate or
is fixed for a period of one year or more, original issue discount is
determined as described in the previous two sentences except that the Regular
Certificate is treated as if it provided for a qualified floating rate or
qualified inverse floating rate, as applicable, rather than a fixed rate. The
substitute rate must be one such that the fair market value of the Regular
Certificate would be approximately the same as the fair market value of the
hypothetical certificate.

Under the OID Regulations, a variable rate Regular Certificate not
qualifying for treatment under the variable rate rules described above is
subject to the contingent payment rules. Proposed regulations dealing with
contingent payment debt obligations were issued December 15, 1994 (the
"PROPOSED REGULATIONS"), and replace former proposed regulations addressing
the same topic that were issued on April 8, 1986 (the "FORMER PROPOSED
REGULATIONS"), so that the former proposed regulations have been
retroactively withdrawn. The Proposed Regulations are proposed to be
effective for debt obligations issued on or after the date that is 60 days
following the promulgation of the regulations in final form. Because the
former proposed regulations never came into effect, however, the Proposed
Regulations provide the only regulatory guidance in this area and by their
terms do not apply to REMIC regular interests. However, the following
paragraph describes the applicable of the Proposed Regulations as a method
that may be considered reasonable.

The Proposed Regulations apply a "noncontingent bond method" to a
Regular Certificate that is publicly traded or that is issued for cash or
publicly traded property. Under the noncontingent bond method, the Depositor
is required to construct a projected payment schedule for the Regular
Certificate consisting of all noncontingent payments and a projected amount
for each contingent payment. The Depositor is required to determine interest
expense, and a Regular Certificateholder is required to determine interest
income, according to the projected payment schedule formulated by the
Depositor. Interest generally is accrued under the noncontingent bond method
according to generally applicable rules of the OID Regulations as described
above. Adjustments in the Regular Certificate's issue price and the Regular
Certificateholder's basis are determined as if the projected payment schedule
were the actual payment schedule for the Regular Certificate. If the actual
amount of a contingent payment differs from the projected amount of the
payment, adjustments to interest accrual are generally taken into account at
the time the payment is made in order to reflect this difference. Gain or
loss recognized by a Regular Certificateholder on the sale, exchange, or
retirement of the Regular Certificate generally will be treated as interest
income or ordinary loss to the Regular Certificateholder. A loss will be
treated as ordinary, however, only up to the amount of the Regular
Certificateholder's total interest inclusions with respect to the Regular
Certificate that were not offset by previous

<PAGE>

adjustments. Any additional loss generally will be a capital loss. Investors
are urged to consult their tax advisors as to the proper accrual of original
issue discount (including stated interest) on the Regular Certificates,
including Regular Certificates which may be subject to the contingent payment
rules.

Although unclear at present, the Depositor intends to treat Certificates
bearing an interest rate that is a weighted average of the net interest rates
on the Mortgage Loans or the mortgage loans underlying the Mortgage Assets
as having qualified stated interest if the Mortgage Loans or the underlying
mortgage loans are adjustable rate mortgage loans. In such case, the
applicable index used to compute interest on the Mortgage Loans in effect on
the issue date (or possibly the pricing date) will be deemed to be in effect
beginning with the period in which the first weighted average adjustment date
occurring after the issue date occurs. If the Certificate interest rate for
one or more periods is less than it would be based upon the fully indexed
rate, the excess of the interest payments projected at the assumed index over
interest projected at such initial rate will be tested under the DE MINIMIS
rules as described above. Adjustments will be made in each accrual period
increasing or decreasing the amount of ordinary income reportable to reflect
the actual interest rate on the Certificates. It is possible, however, that
the IRS may treat some or all of the interest on Certificates with a weighted
average rate as taxable under the rules relating to obligations providing for
contingent payments. Such treatment may affect the timing of income accruals
on such Certificates.

It is not clear how income should be accrued with respect to Regular
Certificates issued at a significant premium and with respect to REMIC
Certificates, the payments on which consist primarily of a specified portion
of the interest payments on qualified mortgages held by the REMIC ("PREMIUM
REMIC REGULAR CERTIFICATES"). One method of income accrual would be to treat
the Premium REMIC Regular Certificate as a Certificate having qualified
stated interest purchased at a premium equal to the excess of the price paid
by such holder for the Premium REMIC Regular Certificate over its stated
principal amount. Under this approach, a holder would be entitled to
amortize such premium only if it has in effect an election under Section 171
of the Code with respect to all bonds held by such holder, as described
below. Alternatively, all of the income derived from a Premium REMIC Regular
Certificate could be reported as original issue discount by treating all
future payments under the Prepayment Assumption as fixed payments, in which
case the amount and rate of accrual of original issue discount would be
computed by treating the Premium REMIC Regular Certificate as a Certificate
which has no qualified stated interest, as described above. Finally, the IRS
could assert that the Premium REMIC Regular Certificates should be taxable
under the contingent payment rules governing securities issued with
contingent payments.

MARKET DISCOUNT

A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Sections 1276 through 1278. Under these sections and
the principles applied by the OID Regulations in the context of original
issue discount, "market discount" is the amount by which a subsequent
purchaser's initial basis in the Regular Certificate (i) is exceeded by the
stated redemption price at maturity of the Regular Certificate or (ii) in the
case of a Regular Certificate having original issue discount, is exceeded by
the sum of the issue price of such Regular Certificate plus any original
issue discount that would have previously accrued thereon if held by an
original Regular Certificateholder (who purchased the Regular Certificate at
its issue price), in either case less any prior distributions included in the
stated redemption price at maturity of such Regular Certificate. Such
purchaser generally will be required to recognize accrued market discount as
ordinary income as distributions includible in the stated redemption price at
maturity of such Regular Certificate are received, in an amount not exceeding
any such distribution. That recognition rule would apply regardless of
whether the purchaser is a cash-basis or accrual-basis taxpayer. Such market
discount would accrue in a manner to be provided in Treasury regulations and
should take into account the Prepayment Assumption. The Committee Report
provides that until such regulations are issued, such market discount would
accrue either (i) on the basis of a constant interest rate or (ii) in the
ratio of stated interest allocable to the relevant period to the sum of the
interest for such period plus the remaining interest as of the end of such
period, or in the case of a Regular Certificate issued with original issue
discount, in the ratio of original issue discount accrued for the relevant
period to the sum of the original issue discount accrued for such period plus
the remaining original issue discount as of the end of such period. Such
purchaser also generally will be required to treat a portion of any gain on a
sale or exchange of the Regular Certificate as ordinary income to the extent
of the market discount accrued to the date of disposition under one of the
foregoing methods, less any accrued market discount previously reported as
ordinary income as partial distributions in reduction of the stated
redemption price at maturity were received. Such purchaser will be required
to defer the deduction of a portion of the excess of the interest paid or
accrued on indebtedness incurred to purchase or carry a Regular Certificate
over the interest distributable thereon. The deferred portion of such
interest expense in any taxable year generally will not exceed the accrued
market discount on the Regular Certificate for such year. Any such deferred
interest expense is, in general, allowed as a deduction not later than the
year in which the related market discount income is recognized or the Regular

<PAGE>

Certificate is disposed of. As an alternative to the inclusion of market
discount in income on the foregoing basis, the Regular Certificateholder may
elect to include market discount in income currently as it accrues on all
market discount instruments acquired by such Regular Certificateholder in
that taxable year or thereafter, in which case the interest deferral rule
will not apply. In Revenue Procedure 92-67, the IRS set forth procedures for
taxpayers (1) electing under Section 1278(b) of the Code to include market
discount in income currently, (2) electing under rules of Section 1276(b) of
the Code to use a constant interest rate to determine accrued market discount
on a security where the holder of the security is required to determine the
amount of accrued market discount at a time prior to the holder's disposition
of the security, and (3) requesting consent to revoke an election under
Section 1278(b) of the Code.

By analogy to the OID Regulations, market discount with respect to a
Regular Certificate will be considered to be zero if such market discount is
less than 0.25% of the remaining stated redemption price at maturity of such
Regular Certificate multiplied by the weighted average maturity of the
Regular Certificate (determined as described above under "Original Issue
Discount") remaining after the date of purchase. Treasury regulations
implementing the market discount rules have not yet been issued, and
therefore investors should consult their own tax advisors regarding the
application of these rules as well as the advisability of making any of the
elections with respect thereto.

PREMIUM

A Regular Certificate purchased at a cost greater than its remaining
stated redemption price at maturity generally is considered to be purchased
at a premium. If the Regular Certificateholder holds such Regular Certificate
as a "capital asset" within the meaning of Code Section 1221, the Regular
Certificateholder may elect under Code Section 171 to amortize such premium
under a constant yield method that reflects compounding based on the interval
between payments on the Regular Certificates. The Committee Report indicates
a Congressional intent that the same rules that apply to the accrual of
market discount on installment obligations will also apply to amortizing bond
premium under Code Section 171 on installment obligations such as the Regular
Certificates, although it is unclear whether the alternatives to the constant
interest method described above under "Market Discount" are available. Except
as otherwise provided in Treasury regulations yet to be issued, such
amortizable bond premium will be treated as an offset to interest income on a
Regular Certificate rather than as a separate deduction item. This election,
once made, applies to all taxable obligations held by the taxpayer at the
beginning of the first taxable year to which such election applies and to all
taxable debt obligations thereafter acquired and is binding on such taxpayer
in all subsequent years. Purchasers who pay a premium for their Regular
Certificates should consult their tax advisors regarding the election to
amortize premium and the method to be employed.

SALE OR EXCHANGE OF REGULAR CERTIFICATES

If a Regular Certificateholder sells or exchanges a Regular Certificate,
the Regular Certificateholder will recognize gain or loss equal to the
difference, if any, between the amount received and his adjusted basis in the
Regular Certificate. The adjusted basis of a Regular Certificate generally
will equal the cost of the Regular Certificate to the seller, increased by
any original issue discount or market discount previously included in the
seller's gross income with respect to the Regular Certificate and reduced by
amounts included in the stated redemption price at maturity of the Regular
Certificate that were previously received by the seller and by any amortized
premium.

Except as described in this paragraph, under "Original Issue Discount"
and under "Market Discount," any gain or loss on the sale or exchange of a
Regular Certificate realized by an investor who holds the Regular Certificate
as a capital asset will be capital gain or loss and will be long-term or
short-term depending on whether the Regular Certificate has been held for the
long-term capital gain holding period (currently more than one year). Gain
from the disposition of a Regular Certificate that might otherwise be capital
gain will be treated as ordinary income (i) if a Regular Certificate is held
as part of a "conversion transaction" as defined in Code Section 1258(c), up
to the amount of interest that would have accrued on the Regular
Certificateholder's net investment in the conversion transaction at 120% of
the appropriate applicable Federal rate under Code Section 1274(d) in effect
at the time the taxpayer entered into the transaction minus any amount
previously treated as ordinary income with respect to any prior disposition
of property that was held as part of such transaction, (ii) in the case of a
non-corporate taxpayer, to the extent such taxpayer has made an election
under Code Section 163(d)(4) to have net capital gains taxed as investment
income at ordinary income rates, or (iii) in the case of a Regular
Certificate (issued by a REMIC) to the extent that such gain does not exceed
the excess, if any, of (a) the amount that would have been includible in the
gross income of the holder if his yield on such Regular Certificate were 110%
of the applicable Federal rate under Code Section 1274(d) as of the date of
purchase, over (b) the amount of income actually includible in the gross
income of such holder with respect to the Regular Certificate. Although the
legislative history to the 1986 Act indicates that the portion of the gain
from

<PAGE>

disposition of a Regular Certificate that will be recharacterized as ordinary
income under clause (iii) is limited to the amount of original issue discount
(if any) on the Regular Certificate that was not previously includible in
income, the applicable Code provision contains no such limitation. In
addition, gain or loss recognized from the sale of a Regular Certificate by
certain banks or thrift institutions will be treated as ordinary income or
loss pursuant to Code Section 582(c). In the case of a Regular Certificate
subject to the new contingent payment rules issued on January 19, 1993 as
described above under "Original Issue Discount," any gain on the sale or
exchange of such Certificate is treated as interest income.

TAXATION OF RESIDUAL CERTIFICATES

TAXATION OF REMIC INCOME

Generally, the "daily portions" of REMIC taxable income or net loss will
be includible as ordinary income or loss in determining the federal taxable
income of holders of Residual Certificates ("RESIDUAL CERTIFICATEHOLDERS"),
and will not be taxed separately to the REMIC Pool. The daily portions of
REMIC taxable income or net loss of a Residual Certificateholder are
determined by allocating the REMIC Pool s taxable income or net loss for each
calendar quarter ratably to each day in such quarter and by allocating such
daily portion among the Residual Certificateholders in proportion to their
respective holdings of Residual Certificates in the REMIC Pool on such day.
REMIC taxable income is generally determined in the same manner as the
taxable income of an individual using a calendar year and the accrual method
of accounting, except that (i) the limitation on deductibility of investment
interest expense and expenses for the production of income do not apply, (ii)
all bad loans will be deductible as business bad debts and (iii) the
limitation on the deductibility of interest and expenses related to
tax-exempt income will apply. REMIC taxable income generally means the REMIC
Pool's gross income, including interest, original issue discount income and
market discount income, if any, on the Mortgage Loans, plus income on
reinvestment of cash flows and reserve assets, minus deductions, including
interest and original issue discount expense on the Regular Certificates,
servicing fees on the Mortgage Loans and other administrative expenses of the
REMIC Pool, amortization of premium, if any, with respect to the Mortgage
Loans, and any tax imposed on the REMIC's income from foreclosure property.
The requirement that Residual Certificateholders report their pro rata share
of taxable income or net loss of the REMIC Pool will continue until there are
no Certificates of any Class of the related Series outstanding.

The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship
between the timing of recognition of interest and original issue discount or
market discount income or amortization of premium with respect to the
Mortgage Loans, on the one hand, and the timing of deductions for interest
(including original issue discount) on the Regular Certificates, on the other
hand. Because of the way REMIC taxable income is calculated, a Residual
Certificateholder may recognize "phantom" income (i.e., income recognized
for tax purposes in excess of income as determined under financial accounting
or economic principles) which will be matched in later years by a
corresponding tax loss or reduction in taxable income, but which could lower
the yield to Residual Certificateholders due to the lower present value of
such loss or reduction. For example, if an interest in the Mortgage Loans is
acquired by the REMIC Pool at a discount, and one or more of such Mortgage
Loans is prepaid, the Residual Certificateholder may recognize taxable income
without being entitled to receive a corresponding amount of cash because (i)
the prepayment may be used in whole or in part to make distributions in
reduction of principal on the Regular Certificates and (ii) the discount
income on the Mortgage Loans which is includible in the REMIC's taxable
income may exceed the interest and discount deduction allowed to the REMIC
upon such distributions on the Regular Certificates. When there is more than
one class of Regular Certificates that distribute principal sequentially,
this mismatching of income and deductions is particularly likely to occur in
the early years following issuance of the Regular Certificates when
distributions in reduction of principal are being made in respect of earlier
maturing classes of Regular Certificates to the extent that such classes are
not issued with substantial discount. If taxable income attributable to such
a mismatching is realized, in general, losses would be allowed in later years
as distributions on the later classes of Regular Certificates are made.
Taxable income may also be greater in earlier years than in later years as a
result of the fact that interest expense deductions, expressed as a
percentage of the outstanding principal amount of such a Series of Regular
Certificates, may increase over time as distributions in reduction of
principal are made on the lower yielding classes of Regular Certificates,
whereas interest income with respect to any given Mortgage Loan will remain
constant over time as a percentage of the outstanding principal amount of
that loan. Consequently, Residual Certificateholders must have sufficient
other sources of cash to pay any federal, state or local income taxes due as
a result of such mismatching or unrelated deductions against which to offset
such income. Prospective investors should be aware, however, that a portion
of such income may be ineligible for offset by such investor's unrelated
deductions. See the discussion of "excess inclusions" below under
"Limitations on Offset or Exemption of REMIC Income; Excess Inclusions." The
timing of such mismatching of income and deductions described in this
paragraph, if present with respect to a Series of Certificates, may have a
significant adverse effect upon the Residual Certificateholder's after-tax
rate of return. In addition, a Residual

<PAGE>

Certificateholder's taxable income during certain periods may exceed the
income reflected by such Residual Certificateholder for such periods in
accordance with generally accepted accounting principles. Investors should
consult their own advisors concerning the proper tax and accounting treatment
of their investment in Residual Certificates.

BASIS AND LOSSES

The amount of any net loss of the REMIC Pool that may be taken into
account by the Residual Certificateholder is limited to the adjusted basis of
the Residual Certificate as of the close of the quarter (or time of
disposition of the Residual Certificate if earlier), determined without
taking into account the net loss for the quarter. The initial adjusted basis
of a purchaser of a Residual Certificate is the amount paid for such Residual
Certificate. Such adjusted basis will be increased by the amount of taxable
income of the REMIC Pool reportable by the Residual Certificateholder and
decreased by the amount of loss of the REMIC Pool reportable by the Residual
Certificateholder. A cash distribution from the REMIC Pool also will reduce
such adjusted basis (but not below zero). Any loss that is disallowed on
account of this limitation may be carried over indefinitely with respect to
the Residual Certificateholder as to whom such loss was disallowed and may be
used by such Residual Certificateholder only to offset any income generated
by the same REMIC Pool. The ability of a Residual Certificateholder to deduct
net losses with respect to a Residual Certificate may be subject to
additional limitations under the Code, as to which Residual
Certificateholders should consult their tax advisors.

A Residual Certificateholder will not be permitted to amortize directly
the cost of its Residual Certificate as an offset to its share of the taxable
income of the related REMIC Pool. However, such taxable income will not
include cash received by the REMIC Pool that represents a recovery of the
REMIC Pool's basis in its assets. Such recovery of basis by the REMIC Pool
will have the effect of amortization of the issue price of the Residual
Certificates over their life. However, in view of the possible acceleration
of the income of Residual Certificateholders described above under "Taxation
of REMIC Income," the period of time over which such issue price is
effectively amortized may be longer than the economic life of the Residual
Certificates.

If a Residual Certificate has a negative value, it is not clear whether
its issue price would be considered to be zero or such negative amount for
purposes of determining the REMIC Pool's basis in its assets. The Final REMIC
Regulations do not address whether residual interests could have a negative
basis and a negative issue price. The Depositor does not intend to treat a
Class of Residual Certificates as having a value of less than zero for
purposes of determining the bases of the related REMIC Pool in its assets.

Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate
is greater that the corresponding portion of the REMIC Pool's basis in the
Mortgage Loans or the Mortgage Loans underlying the Agency Securities, the
Residual Certificateholder will not recover a portion of such basis until
termination of the REMIC Pool unless Treasury regulations yet to be issued
provide for periodic adjustments to the REMIC income otherwise reportable by
such holder. The Final REMIC Regulations do not so provide. See "Treatment of
Certain Items of REMIC Income and Expense -- Market Discount" below
regarding the basis of Mortgage Loans to the REMIC Pool and Sale or Exchange
of a Residual Certificate below regarding possible treatment of a loss upon
termination of the REMIC Pool as a capital loss.

TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE

ORIGINAL ISSUE DISCOUNT. Generally, the REMIC Pool's deductions for
original issue discount will be determined in the same manner as original
issue discount income on Regular Certificates as described above under
"Taxation of Regular Certificates -- Original Issue Discount," without regard
to the de minimis rule described therein.

MARKET DISCOUNT. The REMIC Pool will have market discount income in
respect of Mortgage Loans if, in general, the basis of the REMIC Pool in such
Mortgage Loans is exceeded by their unpaid principal balances. The REMIC
Pool's basis in such Mortgage Loans is generally the fair market value of the
Mortgage Loans immediately after the transfer thereof to the REMIC Pool. The
Final REMIC Regulations provide that such basis is equal in the aggregate to
the issue prices of all regular and residual interests in the REMIC Pool. In
respect of Mortgage Loans that have market discount to which Code Section
1276 applies, the accrued portion of such market discount would be recognized
currently by the REMIC as an item of ordinary income. Market discount income
generally should accrue in the manner described above under "Taxation of
Regular Certificates -- Market Discount."

<PAGE>

PREMIUM. Generally, if the basis of the REMIC Pool in the Mortgage
Loans exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired such Mortgage Loans at a premium equal to the
amount of such excess. As stated above, the REMIC Pool's basis in Mortgage
Loans is the fair market value of the Mortgage Loans, based on the aggregate
of the issue prices of the regular and residual interests in the REMIC Pool
immediately after the transfer thereof to the REMIC Pool. In a manner
analogous to the discussion above under "Taxation of Regular Certificates --
Premium," a person that holds a Mortgage Loan as a capital asset under Code
Section 1221 may elect under Code Section 171 to amortize premium on Mortgage
Loans originated after September 27, 1985 under a constant yield method.
Amortizable bond premium will be treated as an offset to interest income on
the Mortgage Loans, rather than as a separate deduction item. Because
substantially all of the mortgagors with respect to the Mortgage Loans are
expected to be individuals, Code Section 171 will not be available for
premium on Mortgage Loans originated on or prior to September 27, 1985.
Premium with respect to such Mortgage Loans may be deductible in accordance
with a reasonable method regularly employed by the holder thereof. The
allocation of such premium pro rata among principal payments should be
considered a reasonable method; however, the IRS may argue that such premium
should be allocated in a different manner, such as allocating such premium
entirely to the final payment of principal.

LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME; EXCESS INCLUSIONS

A portion of the income allocable to a Residual Certificate (referred to
in the Code as an "excess inclusion") for any calendar quarter, with an
exception discussed below for certain thrift institutions, will be subject to
federal income tax in all events. Thus, for example, an excess inclusion (i)
cannot, except as described below, be offset by any unrelated losses or loss
carryovers of a Residual Certificateholder, (ii) will be treated as
unrelated business taxable income within the meaning of Code Section 512 if
the Residual Certificateholder is a pension fund or any other organization
that is subject to tax only on its unrelated business taxable income and
(iii) is not eligible for any reduction in the rate of withholding tax in the
case of a Residual Certificateholder that is a foreign investor, as further
discussed in "Taxation of Certain Foreign Investors -- Residual Certificates"
below. Except as discussed below with respect to excess inclusions from
Residual Certificates without "significant value," this general rule does not
apply to thrift institutions to which Code Section 593 applies. For this
purpose a thrift institution and its qualified subsidiary are considered a
single corporation. A qualified subsidiary is one all of the stock of which,
and substantially all of the debt of which, is held by the thrift institution
and which is organized and operating exclusively in connection with the
organization and operation of one or more REMICs. Except in the case of a
thrift institution (including qualified subsidiaries) members of an
affiliated group are treated as one corporation for purposes of applying the
limitations on offset of excess inclusion income.

Except as discussed in the following paragraph, with respect to excess
inclusions from Residual Certificates without "significant value," for any
Residual Certificateholder, the excess inclusion for any calendar quarter is
the excess, if any, of (i) the income of such Residual Certificateholder for
that calendar quarter from its Residual Certificate, over (ii) the sum of the
"daily accruals" (as defined below) for all days during the calendar quarter
on which the Residual Certificateholder holds such Residual Certificate. For
this purpose, the daily accruals with respect to a Residual Certificate are
determined by allocating to each day in the calendar quarter its ratable
portion of the product of the "adjusted issue price" (as defined below) of
the Residual Certificate at the beginning of the calendar quarter and 120
percent of the "Federal long-term rate" in effect at the time the Residual
Certificate is issued. For this purpose, the "ADJUSTED ISSUE PRICE" of a
Residual Certificate at the beginning of any calendar quarter equals the
issue price of the Residual Certificate (adjusted for contributions),
increased by the amount of daily accruals for all prior quarters, and
decreased (but not below zero) by the aggregate amount of payments made on
the Residual Certificate before the beginning of such quarter. The Federal
long-term rate is an average of current yields on Treasury securities with a
remaining term of greater than nine years, computed and published monthly by
the IRS.

The Code provides that to the extent provided in regulations, as an
exception to the general rule described above, the entire amount of income
accruing on a Residual Certificate will be treated as an excess inclusion if
the Residual Certificates in the aggregate are considered not to have
significant value." The Treasury Department has not yet provided regulations
in this respect and the Final REMIC Regulations did not adopt this rule.
However, the exception from the excess inclusion rules applicable to thrift
institutions does not apply if the Residual Certificates do not have
significant value. Under the Final REMIC Regulations, the Residual
Certificates will have significant value if: (i) the aggregate of the issue
prices of the Residual Certificates is at least two percent of the aggregate
of the issue prices of all Regular Certificates and Residual Certificates in
the REMIC and (ii) the anticipated weighted average life of the Residual
Certificates is at least 20 percent of the REMIC's anticipated weighted
average life based on the prepayment and reinvestment assumptions used in
pricing the transaction and any required or permitted clean up calls or any
required qualified liquidation. Although not entirely clear, the Final REMIC
Regulations indicate that the significant

<PAGE>

value determination is made only on the Startup Day. The anticipated weighted
average life of a Residual Certificate with a principal balance and a market
rate of interest is computed by multiplying the amount of each expected
principal payment by the number of years (or fractions thereof) from the
Startup Day, adding these sums and dividing by the total principal expected
to be paid on such Residual Certificate based on the relevant prepayment
assumption and expected reinvestment income. The anticipated weighted average
life of a Residual Certificate with either no specified principal balance or
a principal balance and rights to interest payments disproportionate to such
principal balance, would be computed under the formula described above but
would include all payments expected on the Residual Certificate instead of
only the principal payments. The anticipated weighted average life of a REMIC
is a weighted average of the anticipated weighted average lives of all
classes of interests in the REMIC.

Under Treasury regulations to be promulgated, a portion of the dividends
paid by a REIT which owns a Residual Certificate are to be designated as
excess inclusions in an amount corresponding to the Residual Certificate's
allocable share of the excess inclusions. Similar rules apply in the case of
regulated investment companies, common trust funds and cooperatives. Thus,
investors in such entities which own a Residual Certificate will be subject
to the limitations on excess inclusions described above. The Final REMIC
Regulations do not provide guidance on this issue.

MARK TO MARKET RULES

Under IRS temporary regulations, a "negative value" REMIC residual
interest is not a security for purposes of the mark-to-market rules under the
Code. A negative value REMIC residual interest is a REMIC residual interest
whose present value of anticipated tax liabilities exceeds the present value
of the expected future distributions, as determined on the date of
acquisition of the REMIC residual interest. For purposes of the temporary
regulations, the present value of anticipated tax liabilities is determined
net of any anticipated tax savings associated with holding the residual
interest as the REMIC generates losses. It is possible that a Residual
Certificate may constitute a negative value REMIC residual interest. Such
temporary regulations provide the IRS with the authority to treat any
Residual Certificate having substantially the same economic effect as a
"negative value" residual interest as a "negative value" residual interest.
The IRS may also issue final regulations which may retroactively treat a
REMIC residual interest as a negative value REMIC residual interest. The
IRS has also issued proposed regulations that provide that all REMIC residual
interests are not considered securities for purposes of the mark-to-market
rules.

TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES

DISQUALIFIED ORGANIZATIONS. If legal title or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as
defined below), a tax would be imposed in an amount equal to the product of
(i) the present value of the total anticipated excess inclusions with respect
to such Residual Certificate for periods after the transfer and (ii) the
highest marginal federal income tax rate applicable to corporations. The
Final REMIC Regulations provide that the anticipated excess inclusions are
based on actual prepayment experience to the date of the transfer and
projected payments based on the Prepayment Assumption. The present value
discount rate equals the applicable Federal rate under Code Section 1274(d)
that would apply to a debt instrument that was issued on the date the
Disqualified Organization acquired the Residual Certificate and whose term
ended on the close of the last quarter in which excess inclusions were
expected to accrue with respect to the Residual Certificate. Such a tax
generally would be imposed on the transferor of the Residual Certificate,
except that where such transfer is through an agent (including a broker,
nominee, or other middleman) for a Disqualified Organization, the tax would
instead be imposed on such agent. However, a transferor of a Residual
Certificate would in no event be liable for such tax with respect to a
transfer if the transferee furnishes to the transferor an affidavit that the
transferee is not a Disqualified Organization and, as of the time of the
transfer, the transferor does not have actual knowledge that such affidavit
is false. The tax also may be waived by the Treasury Department if the
Disqualified Organization promptly disposes of the Residual Certificate and
the transferor pays income tax at the highest corporate rate on the excess
inclusions for the period the Residual Certificate is actually held by the
Disqualified Organization.

In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
such entity, then a tax is imposed on such entity equal to the product of (i)
the amount of excess inclusions that are allocable to the interest in the
Pass-Through Entity during the period such interest is held by such
Disqualified Organization, and (ii) the highest marginal federal corporate
income tax rate. Such tax would be deductible from the ordinary gross income
of the Pass-Through Entity for the taxable year. The Pass-Through Entity
would not be liable for such tax if it has received an affidavit from such
record holder that (i) states under penalty of perjury that it is not a
Disqualified Organization or (ii) furnishes a social security number

<PAGE>

and states under penalties of perjury that the social security number is that
of the transferee, provided that during the period such person is the record
holder of the Residual Certificate, the Pass-Through Entity does not have
actual knowledge that such affidavit is false.

For these purposes, (i) "DISQUALIFIED ORGANIZATION" means the United
States, any state or political subdivision thereof, any foreign government,
any international organization, any agency or instrumentality of any of the
foregoing (provided, that such term does not include an instrumentality if
all of its activities are subject to tax and a majority of its board of
directors is not selected by any such governmental entity), any cooperative
organization furnishing electric energy or providing telephone service to
persons in rural areas as described in Code Section 1381(a)(2)(C), and any
organization (other than a farmers' cooperative described in Code Section
521) that is exempt from taxation under the Code unless such organization is
subject to the tax on unrelated business income imposed by Code Section 511,
and (ii) "PASS-THROUGH ENTITY" means any regulated investment company, real
estate investment trust, common trust fund, partnership, trust or estate and
certain corporations operating on a cooperative basis. Except as may be
provided in Treasury regulations yet to be issued, any person holding an
interest in a Pass-Through Entity as a nominee for another will, with respect
to such interest, be treated as a Pass-Through Entity.

The Pooling and Servicing Agreement with respect to a Series of
Certificates will provide that neither legal title nor beneficial interest in
a Residual Certificate may be transferred or registered unless (i) the
proposed transferee provides to the Depositor and the Trustee an affidavit to
the effect that such transferee is not a Disqualified Organization, is not
purchasing such Residual Certificates on behalf of a Disqualified
Organization (i.e., as a broker, nominee or middleman thereof) and is not an
entity that holds REMIC residual securities as nominee to facilitate the
clearance and settlement of such securities through electronic book-entry
changes in accounts of participating organizations and (ii) the transferor
provides a statement in writing to the Depositor and the Trustee that it has
no actual knowledge that such affidavit is false. Moreover, the Pooling and
Servicing Agreement will provide that any attempted or purported transfer in
violation of these transfer restrictions will be null and void and will vest
no rights in any purported transferee. Each Residual Certificate with respect
to a Series will bear a legend referring to such restrictions on transfer,
and each Residual Certificateholder will be deemed to have agreed, as a
condition of ownership thereof, to any amendments to the related Pooling and
Servicing Agreement required under the Code or applicable Treasury
regulations to effectuate the foregoing restrictions. Information necessary
to compute an applicable excise tax must be furnished to the IRS and to the
requesting party within 60 days of the request, and the Depositor or the
Trustee may charge a fee for computing and providing such information.

NONECONOMIC RESIDUAL INTERESTS. The Final REMIC Regulations would
disregard certain transfers of Residual Certificates, in which case the
transferor would continue to be treated as the owner of the Residual
Certificates and thus would continue to be subject to tax on its allocable
portion of the net income of the REMIC Pool. Under the Final REMIC
Regulations, a transfer of a "noneconomic residual interest" (defined below)
to a Residual Certificateholder (other than a Residual Certificateholder who
is not a United States Person, as defined below under "Foreign Investors") is
disregarded for all federal income tax purposes unless no significant purpose
of the transfer is to enable the transferor to impede the assessment or
collection of tax. A residual interest in a REMIC (including a residual
interest with a positive value at issuance) is a "NONECONOMIC RESIDUAL
INTEREST" unless, at the time of the transfer, (i) the present value of the
expected future distributions on the residual interest at least equals the
product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the
transfer occurs, and (ii) the transferor reasonably expects that the
transferee will receive distributions from the REMIC at or after the time at
which taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. The anticipated excess inclusions
and the present value rate are determined in the same manner as set forth
above under "Disqualified Organizations." A significant purpose to impede the
assessment or collection of tax exists if the transferor, at the time of the
transfer, either knew or should have known (had "IMPROPER KNOWLEDGE") that
the transferee would be unwilling or unable to pay taxes due on its share of
the taxable income of the REMIC. Under the Final REMIC Regulations, a
transferor is presumed not to have improper knowledge if (i) the transferor
conducted, at the time of the transfer, a reasonable investigation of the
financial condition of the transferee and, as a result of the investigation,
the transferor found that the transferee had historically paid its debts as
they came due and found no significant evidence to indicate that the
transferee will not continue to pay its debts as they come due in the future;
and (ii) the transferee represents to the transferor that it understands
that, as the holder of the noneconomic residual interest, the transferee may
incur tax liabilities in excess of any cash flows generated by the residual
interest and that the transferee intends to pay taxes associated with holding
of residual interest as they become due. The Pooling and Servicing Agreement
will require the transferee of a Residual Certificate to state as part of the
affidavit described above under the heading "Disqualified Organizations" that
such transferee (i) has historically paid its debts as they come due, (ii)
intends to continue to pay its debts as they come due in the future, (iii)
understands that, as the holder of a noneconomic Residual Certificate,

<PAGE>

it may incur tax liabilities in excess of any cash flows generated by the
Residual Certificate, and (iv) intends to pay any and all taxes associated
with holding the Residual Certificate as they become due. The transferor must
have no reason to believe that such statement is untrue.

FOREIGN INVESTORS. The Final REMIC Regulations provide that the
transfer of a Residual Certificate that has "tax avoidance potential" to a
"foreign person" will be disregarded for all federal tax purposes. This rule
appears intended to apply to a transferee who is not a "United States Person"
(as defined below), unless such transferee's income is effectively connected
with the conduct of a trade or business within the United States. A Residual
Certificate is deemed to have tax avoidance potential unless, at the time of
the transfer, the transferor reasonably expects that, for each excess
inclusion, (i) the REMIC Pool will distribute to the transferee residual
interest holder an amount that will equal at least 30% of the excess
inclusions and (ii) that each such amount will be distributed at or after the
time at which the excess inclusion accrues and not later than the close of
the calendar year following the calendar year of accrual. If the Non-United
States Person transfers the Residual Certificate back to a United States
Person, the transfer will be disregarded and the foreign transferor will
continue to be treated as the owner unless arrangements are made so that the
transfer does not have the effect of allowing the transferor to avoid tax on
accrued excess inclusions.

The Prospectus Supplement relating to a Series of Certificates may
provide that a Residual Certificate may not be purchased by or transferred to
any person that is not a United States Person or may describe the
circumstances and restrictions pursuant to which such a transfer may be made.
The term "UNITED STATES PERSON" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof or
an estate or trust that is subject to United States federal income tax
regardless of the source of its income.

SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE

Upon the sale or exchange of a Residual Certificate, the Residual
Certificateholder will recognize gain or loss equal to the excess, if any, of
the amount realized over the adjusted basis (as described above under "Basis
and Losses") of such Residual Certificateholder in such Residual Certificate
at the time of the sale or exchange. In addition to reporting the taxable
income of the REMIC Pool, a Residual Certificateholder will have taxable
income to the extent that any cash distribution to him from the REMIC Pool
exceeds such adjusted basis on that Distribution Date or Payment Date. Such
income will be treated as gain from the sale or exchange of the Residual
Certificate. It is possible that the termination of the REMIC Pool may be
treated as a sale or exchange of a Residual Certificateholder's Residual
Certificate, in which case, if the Residual Certificateholder has an adjusted
basis in his Residual Certificate remaining when his interest in the REMIC
Pool terminates, and if he holds such Residual Certificate as a capital asset
under Code Section 1221, then he will recognize a capital loss at that time
in the amount of such remaining adjusted basis.

The Committee Report provides that, except as provided in Treasury
regulations yet to be issued, the wash sale rules of Code Section 1091 will
apply to dispositions of Residual Certificates. Consequently, losses on
dispositions of Residual Certificates will be disallowed where the seller of
the Residual Certificate, during the period beginning six months before the
sale or disposition of the Residual Certificate and ending six months after
such sale or disposition, acquires (or enters into any other transaction that
results in the application of Code Section 1091) any residual interest in any
REMIC or any interest in a "taxable mortgage pool" (such as a non-REMIC owner
trust) that is economically comparable to a Residual Certificate. In any
event, any loss realized by a Residual Certificateholder on the sale will not
be deductible, but, instead, will increase such Residual Certificateholder's
adjusted basis in the newly acquired assets.

TAXES THAT MAY BE IMPOSED ON THE REMIC POOL

PROHIBITED TRANSACTIONS. Net income from certain transactions by the
REMIC Pool, called prohibited transactions, will not be part of the
calculation of income or loss includible in the federal income tax returns of
Residual Certificateholders, but rather will be taxed directly to the REMIC
Pool at a 100% rate. Prohibited transactions generally include (i) the
disposition of a qualified mortgage other than for (a) substitution within
two years of the Startup Day for a defective (including a defaulted)
obligation (or repurchase in lieu of substitution of a defective (including a
defaulted) obligation at any time) or for any qualified mortgage within three
months of the Startup Day, (b) foreclosure, default or imminent default of a
qualified mortgage, (c) bankruptcy or insolvency of the REMIC Pool or (d) a
qualified (complete) liquidation, (ii) the receipt of income from assets that
are not the type of mortgages or investments that the REMIC Pool is permitted
to hold, (iii) the receipt of compensation for services or (iv) the receipt
of gain from disposition of cash flow investments other than pursuant to a

<PAGE>

qualified liquidation. Notwithstanding (i) and (iv), it is not a prohibited
transaction to sell REMIC Pool property to prevent a default on Regular
Certificates as a result of a default on qualified mortgages or to facilitate
a clean-up call (generally, an optional termination to save administrative
costs when no more than a small percentage of the Certificates is
outstanding). The Final REMIC Regulations indicate that the modification of a
Mortgage Loan generally will not be treated as a disposition if it is
occasioned by a default or reasonably foreseeable default, an assumption of
the Mortgage Loan, the waiver of a due-on-sale or encumbrance clause or the
conversion of an interest rate by a mortgagor pursuant to the terms of a
convertible adjustable rate Mortgage Loan. Final REMIC Regulations also
provide that the modification of mortgage loans underlying pass-through
certificates will not be treated as a modification of the Agency Securities,
provided that the trust issuing the pass-through certificates was not created
to avoid prohibited transaction rules.

CONTRIBUTIONS TO THE REMIC POOL AFTER THE STARTUP DAY. In general, the
REMIC Pool will be subject to a tax at a 100% rate on the value of any
property contributed to the REMIC Pool after the Startup Day. Exceptions are
provided for cash contributions to the REMIC Pool (i) during the three months
following the Startup Day, (ii) made to a qualified reserve fund by a
Residual Certificateholder, (iii) in the nature of a guarantee, (iv) made to
facilitate a qualified liquidation or clean-up call and (v) as otherwise
permitted in Treasury regulations yet to be issued.

NET INCOME FROM FORECLOSURE PROPERTY. The REMIC Pool will be subject to
federal income tax at the highest corporate rate on "net income from
foreclosure property," determined by reference to the rules applicable to
real estate investment trusts. Generally, property acquired by the REMIC Pool
through foreclosure or deed in lieu of foreclosure would be treated as
"foreclosure property" for a period of two years, with possible extensions.
Net income from foreclosure property generally means (i) gain from the sale
of a foreclosure property that is inventory property and (ii) gross income
from foreclosure property other than qualifying rents and other qualifying
income for a real estate investment trust.

LIQUIDATION OF THE REMIC POOL

If a REMIC Pool and the Trustee adopt a plan of complete liquidation,
within the meaning of Code Section 860F(a)(4)(A)(i) and sell all of the REMIC
Pool's assets (other than cash) within a 90-day period beginning on the date
of the adoption of the plan of liquidation, any gain on the sale of its
assets will not result in a prohibited transaction tax, provided that the
REMIC Pool credits or distributes in liquidation all of the sale proceeds
plus its cash (other than amounts retained to meet claims against the REMIC
Pool) to holders of Regular Certificates and Residual Certificateholders
within the 90-day period.

ADMINISTRATIVE MATTERS

The REMIC Pool will be required to maintain its books on a calendar year
basis and to file federal income tax returns for federal income tax purposes
in a manner similar to a partnership. The form for such income tax return is
Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return.
Treasury regulations provide that, except where there is a single Residual
Certificateholder for an entire taxable year, the REMIC Pool generally will
be subject to the procedural and administrative rules of the Code applicable
to partnerships, including the determination by the IRS of any adjustments
to, among other things, items of REMIC income, gain, loss, deduction or
credit in a unified administrative proceeding. Generally, the Depositor or
the Trustee will be obligated to act as "tax matters person," as defined in
applicable Treasury regulations, with respect to the REMIC Pool, in its
capacity as either Residual Certificateholder or agent of the Residual
Certificateholders. If the Code or applicable Treasury regulations do not
permit the Depositor or the Trustee to act as tax matters person in its
capacity as agent of the Residual Certificateholders, the Residual
Certificateholder chosen by the Residual Certificateholders or such other
person specified pursuant to Treasury regulations will be required to act as
tax matters person.

Treasury regulations provide that a holder of a Residual Certificate is
not required to treat items on its return consistently with their treatment
on the REMIC Pool's return if a holder owns 100% of the Residual Certificates
for the entire calendar year. Otherwise, each holder of a Residual
Certificate is required to treat items on its return consistently with their
treatment on the REMIC Pool's return, unless the holder of a Residual
Certificate either files a statement identifying the inconsistency or
establishes that the inconsistency resulted from incorrect information
received from the REMIC Pool. The IRS may assess a deficiency resulting from
a failure to comply with the consistency requirement without instituting an
administrative proceeding at the REMIC Pool level.

<PAGE>

LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES

An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a
taxable year of an individual taxpayer will be reduced by the lesser of (i)
3% of the excess, if any, of adjusted gross income over $114,700 for 1995 and
adjusted yearly for inflation ($57,350 for 1995 and adjusted yearly for
inflation, in the case of a married individual filing a separate return), or
(ii) 80% of the amount of itemized deductions otherwise allowable for such
year. In the case of a REMIC Pool, such deductions may include deductions
under Code Section 212 for servicing fees and all administrative and other
expenses relating to the REMIC Pool or any similar expenses allocated to the
REMIC Pool with respect to a regular interest it holds in another REMIC. Such
investors who hold REMIC Certificates either directly or indirectly through
certain pass-through entities may have their pro rata share of such expenses
allocated to them as additional gross income, but may be subject to such
limitation on deductions. In addition, such expenses are not deductible at
all for purposes of computing the alternative minimum tax, and may cause such
investors to be subject to significant additional tax liability. Treasury
regulations provide that the additional gross income and corresponding amount
of expenses generally are to be allocated entirely to the holders of Residual
Certificates in the case of a REMIC Pool that would not qualify as a fixed
investment trust in the absence of a REMIC election. However, such additional
gross income and limitation on deductions will apply to the allocable portion
of such expenses to holders of Regular Certificates, as well as holders of
Residual Certificates, where such Regular Certificates are issued in a manner
that is similar to pass-through certificates in a fixed investment trust. In
general, such allocable portion will be determined based on the ratio that a
REMIC Certificateholder's income, determined on a daily basis, bears to the
income of all holders of Regular Certificates and Residual Certificates with
respect to a REMIC Pool. As a result, individuals, estates or trusts holding
REMIC Certificates (either directly or indirectly through a grantor trust,
partnership, S corporation, REMIC, or certain other pass-through entities
described in the foregoing Treasury regulations) may have taxable income in
excess of the interest income at the pass-through rate or Bond interest rate
on Regular Certificates that are issued in a single class or otherwise
consistently with fixed investment trust status or in excess of cash
distributions for the related period on Residual Certificates.

TAXATION OF CERTAIN FOREIGN INVESTORS

REGULAR CERTIFICATES

Interest, including original issue discount, distributable to Regular
Certificateholders who are nonresident aliens, foreign corporations, or other
Non-United States Persons (as defined below), will be considered "portfolio
interest" and therefore, generally will not be subject to 30% United States
withholding tax, provided that such Non-United States Person (i) is not a
"10-percent shareholders" within the meaning of Code Section 871(h)(3)(B) or a
controlled foreign corporation described in Code Section 881(c)(3)(C) and
(ii) provides the Trustee, or the person who would otherwise be required to
withhold tax from such distributions under Code Section 1441 or 1442, with an
appropriate statement, signed under penalties of perjury, identifying the
beneficial owner and stating, among other things, that the beneficial owner
of the Regular Certificate is a Non-United States Person. If such statement,
or any other required statement, is not provided, 30% withholding will apply
unless reduced or eliminated pursuant to an applicable tax treaty or unless
the interest on the Regular Certificate is effectively connected with the
conduct of a trade or business within the United States by such Non-United
States Person. In the latter case, such Non-United States Person will be
subject to United States federal income tax at regular rates. Investors who
are Non-United States Persons should consult their own tax advisors regarding
the specific tax consequences to them of owning a Regular Certificate. The
term "NON-UNITED STATES PERSON" means any person who is not a United States
Person. Payments on Regular Certificates may subject a Non-United States
Person to United States federal income and withholding tax where such foreign
person also owns, actually or constructively, Residual Certificates issued by
the same REMIC, notwithstanding compliance with the certification
requirements discussed above.

RESIDUAL CERTIFICATES

The Committee Report indicates that amounts paid to Residual
Certificateholders who are Non-United States Persons are treated as interest
for purposes of the 30% (or lower treaty rate) United States withholding tax.
Treasury regulations provide that amounts distributed to Residual
Certificateholders qualify as "portfolio interest," subject to the conditions
described in "Regular Certificates" above, but only to the extent that (i)
the Mortgage Loans were issued after July 18, 1984 and (ii) the Trust Fund or
segregated pool of assets therein (as to which a separate REMIC election will
be made), to which the Residual Certificate relates, consists of obligations
issued in "registered form" within the meaning of Code Section

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163(f)(1). Generally, Mortgage Loans will not be, but certificated regular
interests in another REMIC Pool will be, considered obligations issued in
registered form. Furthermore, a Residual Certificateholder will not be
entitled to any exemption from the 30% withholding tax (or lower treaty rate)
to the extent of that portion of REMIC taxable income that constitutes an
"excess inclusion." See "Taxation of Residual Certificates -- Limitations on
Offset or Exemption of REMIC Income; Excess Inclusions." If the amounts paid
to Residual Certificateholders who are Non-United States Persons are
effectively connected with the conduct of a trade or business within the
United States by such Non-United States Persons, 30% (or lower treaty rate)
withholding will not apply. Instead, the amounts paid to such Non-United
States Persons will be subject to United States federal income tax at regular
rates. If 30% (or lower treaty rate) withholding is applicable, such amounts
generally will be taken into account for purposes of withholding only when
paid or otherwise distributed (or when the Residual Certificate is disposed
of) under rules similar to withholding upon disposition of debt instruments
that have original issue discount. See "Taxation of Residual Certificates --
Tax-Related Restrictions on Transfer of Residual Certificates -- Foreign
Investors" above concerning the disregard of certain transfers having "tax
avoidance potential." Investors who are Non-United States Persons should
consult their own tax advisors regarding the specific tax consequences to
them of owning Residual Certificates.

BACKUP WITHHOLDING

Distributions made on the Regular Certificates, and proceeds from the
sale of the Regular Certificates to or through certain brokers, may be
subject to a "backup" withholding tax under Code Section 3406 of 31% on
"reportable payments" (including interest distributions, original issue
discount, and, under certain circumstances, principal distributions) unless
the Regular Certificateholder complies with certain reporting and/or
certification procedures, including the provision of its taxpayer
identification number to the Trustee, its agent or the broker who effected
the sale of the Regular Certificate, or such Certificateholder is otherwise
an exempt recipient under applicable provisions of the Code. Any amounts to
be withheld from distribution on the Regular Certificates would be refunded
by the IRS or allowed as a credit against the Regular Certificateholder's
federal income tax liability.

REPORTING REQUIREMENTS

Reports of accrued interest and original issue discount will be made
annually to the IRS and to individuals, estates, non-exempt and
non-charitable trusts, and partnerships who are either holders of record of
Regular Certificates or beneficial owners who own Regular Certificates
through a broker or middleman as nominee. All brokers, nominees and all other
non-exempt holders of record of Regular Certificates (including corporations,
non-calendar year taxpayers, securities or commodities dealers, real estate
investment trusts, investment companies, common trust funds, thrift
institutions and charitable trusts) may request such information for any
calendar quarter by telephone or in writing by contacting the person
designated in IRS Publication 938 with respect to a particular Series of
Regular Certificates. Holders through nominees must request such information
from the nominee. Treasury regulations provide that information necessary to
compute the accrual of any market discount on the Regular Certificates must
also be furnished.

The IRS's Form 1066 has an accompanying Schedule Q, Quarterly Notice to
Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC Pool
to each Residual Certificateholder by the end of the month following the
close of each calendar quarter (41 days after the end of a quarter under
proposed Treasury regulations) in which the REMIC Pool is in existence.

Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the IRS concerning Code Section 67
expenses (see "Limitations on Deduction of Certain Expenses" above) allocable
to such holders. Furthermore, under such regulations, information must be
furnished quarterly to Residual Certificateholders, furnished annually to
holders of Regular Certificates, and filed annually with the IRS concerning
the percentage of the REMIC Pool's assets meeting the qualified asset tests
described above under "Status of REMIC Certificates."

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FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES AS TO
WHICH NO REMIC ELECTION IS MADE

STANDARD CERTIFICATES

GENERAL

With respect a Series of Certificates issued under an Agreement for
which no election is made to treat the related Trust Fund (or a segregated
pool of assets therein) as a REMIC, the Trust Fund will be classified as a
grantor trust under subpart E, Part 1 of subchapter J of Chapter 1 of
Subtitle A of the Code and not as an association taxable as a corporation.
Where there is no fixed retained yield with respect to the Mortgage Loans
underlying the Certificates of such a Series, and where such Certificates are
not designated as "Stripped Securities," the holder of each such Certificates
in such Series will be treated as the owner of a pro rata undivided interest
in the ordinary income and corpus portions of the Trust Fund represented by
his Certificate and will be considered the beneficial owner of a pro rata
undivided interest in each of the Mortgage Loans, subject to the discussion
below under "Premium and Discount -- Recharacterization of Servicing Fees."
Accordingly, the holder of a Certificate of a particular Series will be
required to report on its federal income tax return its pro rata share of the
entire income from the Mortgage Loans represented by its Certificate,
including interest at the coupon rate on such Mortgage Loans, original issue
discount (if any), prepayment fees, assumption fees, and late payment charges
received by the Depositor or another service provider, in accordance with
such Certificateholder's method of accounting. A Certificateholder generally
will be able to deduct its share of servicing fees and all administrative and
other expenses of the Trust Fund in accordance with his method of accounting,
provided that such amounts are reasonable compensation for services rendered
to that Trust Fund. However, investors who are individuals, estates or trusts
who own Certificates, either directly or indirectly through certain
pass-through entities, will be subject to limitation with respect to certain
itemized deductions described in Code Section 67, including deductions under
Code Section 212 for servicing fees and all such administrative and other
expenses of the Trust Fund, to the extent that such deductions, in the
aggregate, do not exceed two percent of an investor's adjusted gross income.
In addition, Code Section 68 provides that itemized deductions otherwise
allowable for a taxable year of an individual taxpayer will be reduced by the
lesser of (i) 3% of the excess, if any, of adjusted gross income over
$114,700 for 1995, adjusted yearly for inflation ($57,350 for 1995, adjusted
yearly for inflation, in the case of a married individual filing a separate
return), or (ii) 80% of the amount of itemized deductions otherwise allowable
for such year. As a result such investors holding Certificates, directly or
indirectly through a pass-through entity, may have aggregate taxable income
in excess of the aggregate amount of cash received on such Certificates with
respect to interest at the pass-through rate on such Certificates or discount
thereon. In addition, such expenses are not deductible at all for purposes of
computing the alternative minimum tax, and may cause such investors to be
subject to significant additional tax liability. Moreover, where there is
fixed retained yield with respect to the Mortgage Loans underlying a Series
of Certificates or where the servicing fees are in excess of reasonable
servicing compensation, the transaction will be subject to the application of
the "stripped bond" and "stripped coupon" rules of the Code, as described
below under "Stripped Certificates" and "Premium and Discount --
Recharacterization of Servicing Fees," respectively.

TAX STATUS

Counsel for the Depositor has advised the Depositor with respect to
Certificates described under this subsection "Standard Certificates" that:

1. A Certificate owned by a "domestic building and loan association"
within the meaning of Code Section 7701(a)(19) will be considered to
represent "loans . . . secured by an interest in real property" within the
meaning of Code Section 7701(a)(19)(C)(v), provided that the real property
securing the Mortgage Loans represented by that Certificate is of the type
described in such section of the Code.

2. A Certificate owned by a financial institution described in Code
Section 593(a) will be considered to represent "qualifying real property
loans" within the meaning of Code Section 593(d)(1), provided that the real
property securing the Mortgage Loans represented by that Certificate is of
the type described in such section of the Code.

3. A Certificate owned by a real estate investment trust will be
considered to represent "real estate assets" within the meaning of Code
Section 856(c)(5)(A) to the extent that the assets of the related Trust Fund
consist of qualified assets, and interest income on such assets will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B).

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4. A Certificate owned by a REMIC will be considered to represent an
"obligation (including any participation or certificate of beneficial
ownership therein) which is principally secured by an interest in real
property" within the meaning of Code Section 860G(a)(3)(A) to the extent that
the assets of the related Trust Fund consist of qualified mortgages within
the meaning of Code Section 860G(a)(3).

An issue arises as to whether buy-down Mortgage Loans may be
characterized in their entirety under the Code provisions cited in the
immediately preceding paragraph. Code Section 593(d)(1)(C) provides that the
term "qualifying real property loan" does not include a loan "to the extent
secured by a deposit in or share of the taxpayer." The application of this
provision to a buy-down fund with respect to a buy-down Mortgage Loan is
uncertain, but may require that a taxpayer's investment in a buy-down
Mortgage Loan be reduced by the buy-down fund. As to the treatment of
buy-down Mortgage Loans as "qualifying real property loans" under Code
Section 593(d)(1) if the exception of Code Section 593(d)(1)(C) is
inapplicable, as "loans . . . secured by an interest in real property" under
Code Section 7701(a)(19)(C)(v), as "real estate assets" under Code Section
856(c)(5)(A), and as "obligations . . . principally secured by an interest in
real property" under Code Section 860G(a)(3)(A), there is indirect authority
supporting treatment of an investment in a buy-down Mortgage Loan as entirely
secured by real property if the fair market value of the real property
securing the loan exceeds the principal amount of the loan at the time of
issuance or acquisition, as the case may be. There is no assurance that the
treatment described above is proper. Accordingly, Certificateholders are
urged to consult their own tax advisors concerning the effects of such
arrangements on the characterization of such Certificateholder's investment
for federal income tax purposes.

PREMIUM AND DISCOUNT

Certificateholders are advised to consult with their tax advisors as to
the federal income tax treatment of premium and discount arising either upon
initial acquisition of Certificates or thereafter.

PREMIUM. The treatment of premium incurred upon the purchase of a
Certificate will be determined generally as described above under "Federal
Income Tax Consequences for REMIC Certificates -- Taxation of Residual
Certificates -- Treatment of Certain Items of REMIC Income and Expense --
Premium."

ORIGINAL ISSUE DISCOUNT. The IRS has stated in published rulings that,
in circumstances similar to those described herein, the original issue
discount rules will be applicable to a Certificateholder's interest in those
Mortgage Loans as to which the conditions for the application of those
sections are met. Rules regarding periodic inclusion of original issue
discount income are applicable to mortgages of corporations originated after
May 27, 1969, mortgages of noncorporate mortgagors (other than individuals)
originated after July 1, 1982, and mortgages of individuals originated after
March 2, 1984. Such original issue discount could arise by the charging of
points by the originator of the mortgages in an amount greater than a
statutory de minimis exception, to the extent that the points are not for
services provided by the lender. It is generally not anticipated that
adjustable rate Mortgage Loans will be treated as issued with original issue
discount. However, the application of the OID Regulations to adjustable rate
mortgage loans with incentive interest rates or annual or lifetime interest
rate caps may result in original issue discount.

Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant yield method that takes into account
the compounding of interest, in advance of the cash attributable to such
income. However, Code Section 1272 provides for a reduction in the amount of
original issue discount includible in the income of a holder of an obligation
that acquires the obligation after its initial issuance at a price greater
than the sum of the original issue price and the previously accrued original
issue discount, less prior payments of principal. Accordingly, if such
Mortgage Loans acquired by a Certificateholder are purchased at a price equal
to the then unpaid principal amount of such Mortgage Loans, no original issue
discount attributable to the difference between the issue price and the
original principal amount of such Mortgage Loans (i.e., points) will be
includible by such holder.

MARKET DISCOUNT. Certificateholders also will be subject to the market
discount rules to the extent that the conditions for application of those
sections are met. Market discount on the Mortgage Loans will be determined
and will be reported as ordinary income generally in the manner described
above under "Federal Income Tax Consequences for REMIC Certificates --
Taxation of Residual Certificates --Treatment of Certain Items of REMIC
Income and Expense -- Market Discount."

Recharacterization of Servicing Fees. If the servicing fees paid to
Servicers were deemed to exceed reasonable servicing compensation, the amount
of such excess would be nondeductible under Code Section 162 or 212. In this
regard, there are no authoritative guidelines for federal income tax purposes
as to either the maximum amount of servicing

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compensation that may be considered reasonable in the context of this or
similar transactions or whether, in the case of the Certificates, the
reasonableness of servicing compensation should be determined on a weighted
average or loan-by-loan basis. If a loan- by-loan basis is appropriate, the
likelihood that such amount would exceed reasonable servicing compensation as
to some of the Mortgage Loans would be increased. Recently issued IRS
guidance indicates that a servicing fee in excess of reasonable compensation
("EXCESS SERVICING") will cause the Mortgage Loans to be treated under the
"stripped bond" rules. Such guidance provides safe harbors for servicing
deemed to be reasonable and requires taxpayers to demonstrate that the value
of servicing fees in excess of such amounts is not greater than the value of
the services provided.

Accordingly, if the IRS's approach is upheld, a servicer that receives a
servicing fee in excess of such amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the Mortgage
Loans. Under the rules of Code Section 1286, the separation of ownership of
the right to receive some or all of the interest payments on an obligation
from the right to receive some or all of the principal payments on the
obligation would result in treatment of such Mortgage Loans as stripped
coupons and stripped bonds. While Certificateholders would still be
treated as owners of beneficial interests in a grantor trust for federal
income tax purposes, the corpus of such trust could be viewed as excluding
the portion of the Mortgage Loans the ownership of which is attributed to a
servicer, or as including such portion as a second class of equitable
interest. Applicable Treasury regulations treat such an arrangement as a
fixed investment trust, since the multiple classes of trust interests should
be treated as merely facilitating direct investments in the trust assets and
the existence of multiple classes of ownership interests is incidental to
that purpose. In general, such a recharacterization should not have any
significant effect upon the timing or amount of income reported by a
Certificateholder, except that the income reported by a cash method holder
may be slightly accelerated. See "Stripped Certificates" below for a further
description of the federal income tax treatment of stripped bonds and
stripped coupons.

In the alternative, the amount, if any, by which the servicing fees paid
to the servicers are deemed to exceed reasonable compensation for servicing
could be treated as deferred payments of purchase price by the
Certificateholders to purchase an undivided interest in the Mortgage Loans.
In such event, the present value of such additional payments might be
included in the Certificateholder's basis in such undivided interests for
purposes of determining whether the Certificate was acquired at a discount,
at par, or at a premium. Under this alternative, Certificateholders may also
be entitled to a deduction for unstated interest with respect to each
deferred payment. The Internal Revenue Service may take the position that the
specific statutory provisions of Code Section 1286 described above override
the alternative described in this paragraph. Certificateholders are advised
to consult their tax advisors as to the proper treatment of the amounts paid
to the servicers as set forth herein as servicing compensation or under
either of the alternatives set forth above.

SALE OR EXCHANGE OF CERTIFICATES

Upon sale or exchange of a Certificate, a Certificateholder will
recognize gain or loss equal to the difference between the amount realized on
the sale and its aggregate adjusted basis in the Mortgage Loans and other
assets represented by the Certificate. In general, the aggregate adjusted
basis will equal the Certificateholder's cost for the Certificate, increased
by the amount of any income previously reported with respect to the
Certificate and decreased by the amount of any losses previously reported
with respect to the Certificate and the amount of any distributions received
thereon. Except as provided above with respect to market discount on any
Mortgage Loans, and except for certain financial institutions subject to the
provisions of Code Section 582(c), any such gain or loss would be capital
gain or loss if the Certificate was held as a capital asset.

STRIPPED CERTIFICATES

GENERAL

Pursuant to Code Section 1286, the separation of ownership of the right
to receive some or all of the principal payments on an obligation from
ownership of the right to receive some or all of the interest payments
results in the creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect to interest payments. For
purposes of this discussion, Certificates for which no REMIC election is made
and that are subject to those rules will be referred to as Stripped
Certificates. The Certificates will be subject to those rules if (i) the
Depositor or any of its affiliates retains (for its own account or for
purposes of resale), in the form of fixed retained yield or otherwise, an
ownership interest in a portion of the payments on the Mortgage Loans, (ii)
the Depositor, any of its affiliates or a servicer is treated as having an
ownership interest in the Mortgage Loans to the extent it is paid (or
retains) servicing compensation in an amount greater than reasonable
consideration for servicing the Mortgage Loans (see "Standard Certificates --
Premium and Discount -- Recharacterization

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of the Servicing Fees" above) or (iii) Classes of Certificates are issued in
two or more Classes or subclasses representing the right to non-pro-rata
percentages of the interest and principal payments on the Mortgage Loans.

In general, a holder of a Stripped Certificate will be considered to own
"stripped bonds "with respect to its pro rata share of all or a portion of
the principal payments on each Mortgage Loan and/or "stripped coupons" with
respect to its pro rata share of all or a portion of the interest payments on
each Mortgage Loan, including the Stripped Certificate's allocable share of
the servicing fees paid, to the extent that such fees represent reasonable
compensation for services rendered. See discussion above under "Standard
Certificates -- Premium and Discount -- Recharacterization of Servicing
Fees." For this purpose the servicing fees will be allocated to the Stripped
Certificates in proportion to the respective offering price of each class (or
subclass) of Stripped Certificates. The holder of a Stripped Certificate
generally will be entitled to a deduction each year in respect of the
servicing fees, as described above under "Standard Certificates -- General,"
subject to the limitation described therein.

Code Section 1286 treats a stripped bond or a stripped coupon generally
as a new obligation issued (i) on the date that the stripped interest is
purchased and (ii) at a price equal to its purchase price or, if more than
one stripped interest is purchased, the share of the purchase price allocable
to such stripped interest. Each stripped interest generally will have
original issue discount equal to the excess of its stated redemption price at
maturity (or, in the case of a stripped coupon, the amount payable on the due
date of such coupon) over its issue price. Although the treatment of Stripped
Certificates for federal income tax purposes is not clear in certain respects
at this time, particularly where such Stripped Certificates are issued with
respect to a Trust Fund containing variable-rate Mortgage Loans, the
Depositor has been advised by counsel that (i) the Trust Fund will be treated
as a grantor trust under subpart E, Part 1 of subchapter J of Chapter 1 of
Subtitle A of the Code and not as an association taxable as a corporation,
and (ii) each Stripped Certificate should be treated as a single installment
obligation for purposes of calculating original issue discount and gain or
loss on disposition. This treatment is based on the interrelationship of Code
Section 1286 and the regulations thereunder, Code Sections 1272 through 1275,
and the OID Regulations. While under Code Section 1286 computations with
respect to Stripped Certificates arguably should be made in one of the ways
described below under "Taxation of Stripped Certificates -- Possible
Alternative Characterizations," the OID Regulations state, in general, that
all debt instruments issued in connection with the same transaction must be
treated as a single debt instrument. The Trustee will make and report all
computations described below using this aggregate approach, unless
substantial legal authority requires otherwise.

Furthermore, final Treasury regulations issued December 28, 1992 support
the treatment of a Stripped Certificate as a single debt instrument issued on
the date it is originated for purposes of calculating any original issue
discount. The preamble to such regulations states that such regulations are
premised on the assumption that an aggregation approach is appropriate in
determining whether original issue discount on a stripped bond or stripped
coupon is de minimis. In addition, under these regulations, a Stripped
Certificate that represents a right to payments of both interest and
principal may be viewed either as issued with original issue discount or
market discount (as described below), at a de minimis original issue
discount, or, presumably, at a premium. The preamble to such regulations also
provide that such regulations are premised on the assumption that generally
the interest component of such a Stripped Certificate would be treated as
stated interest under the OID Regulations. Further, the regulations provide
that the purchaser of such a Stripped Certificate may be required to account
for any discount as market discount rather than original issue discount if
either (i) the initial discount with respect to the Stripped Certificate was
treated as zero under the de minimis rule or (ii) no more than 100 basis
points in excess of reasonable servicing is stripped off the related Mortgage
Loans. Any such market discount would be reportable as described above under
"Federal Income Tax Consequences for REMIC Certificates -- Taxation of Regular
Certificates -- Market Discount," without regard to the de minimis rule
therein.

STATUS OF STRIPPED CERTIFICATES

No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as
that of the Mortgage Loans. Although the issue is not free from doubt,
counsel has advised the Depositor that Stripped Certificates owned by
applicable holders should be considered to represent "qualifying real
property loans" within the meaning of Code Section 593(d)(1), "real estate"
assets" within the meaning of Code Section 856(c)(A), "obligations . . .
principally secured by an interest in real property" within the meaning of
Code Section 860G(a)(3)(A), and loans . . . secured by an interest in real
property" within the meaning of Code Section 7701(a)(19)(C)(v), and interest
(including original issue discount) income attributable to Stripped
Certificates should be considered to represent "interest on obligations
secured by mortgages on real property" within the meaning of Code Section
856(c)(3)(B), provided that in each

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case the Mortgage Loans and interest on such Mortgage Loans qualify for such
treatment. The application of such Code provisions to buy-down Mortgage Loans
is uncertain. See "Standard Certificates -- Tax Status" above.

TAXATION OF STRIPPED CERTIFICATES

ORIGINAL ISSUE DISCOUNT. Except as described above under "General,"
each Stripped Certificate will be considered to have been issued (i) on the
date that the stripped interest is purchased and (ii) at a price equal to its
purchase price or, if more than one stripped interest is purchased, the share
of the purchase price allocable to such stripped interest. Each stripped
interest generally will have original issue discount equal to the excess of
its stated redemption price at maturity (or, in the case of a stripped
coupon, the amount payable on the due date of such coupon) over its issue
price. Original issue discount with respect to a Stripped Certificate must be
included in ordinary income as it accrues, in accordance with a constant
yield method that takes into account the compounding of interest, which may
be prior to the receipt of the cash attributable to such income. Based in
part on the OID Regulations and the amendments to the original issue discount
sections of the Code made by the 1986 Act, counsel has advised the Depositor
that the amount of original issue discount required to be included in the
income of a holder of a Stripped Certificate (referred to in this discussion
as a "Stripped Certificateholder") in any taxable year likely will be
computed generally as described above under "Federal Income Tax Consequences
for REMIC Certificates -- Taxation of Regular Certificates -- Original Issue
Discount." However, with the apparent exception of a Stripped Certificate
issued with de minimis original issue discount, as described above under
"General," the issue price of a Stripped Certificate will be the purchase
price paid by each holder thereof, and the stated redemption price at
maturity will include the aggregate amount of the payments to be made on the
Stripped Certificate to such Stripped Certificateholder, presumable under the
Prepayment Assumption, other than amounts treated as qualified stated
interest.

If the Mortgage Loans prepay at a rate either faster or slower than that
under the Prepayment Assumption, a Stripped Certificateholder's recognition
of original issue discount will be either accelerated or decelerated and the
amount of such original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each
Mortgage Loan represented by such Stripped Certificateholder's Stripped
Certificate. While the matter is not free from doubt, the holder of a
Stripped Certificate should be entitled in the year that it becomes certain
(assuming no further prepayments) that the holder will not recover a portion
of its adjusted basis in such Stripped Certificate to recognize an ordinary
loss equal to such portion of unrecoverable basis.

POSSIBLE ALTERNATIVE CHARACTERIZATIONS. As an alternative to the method
described above, the fact that some or all of the interest payments with
respect to the Stripped Certificates will not be made if the Mortgage Loans
are prepaid could lead to the interpretation that such interest payments are
"contingent" within the meaning of the OID Regulations. Under the rules of
the OID Regulations relating to contingent payments, a projected payment
schedule for the Stripped Certificates would be constructed by the Depositor.
Interest accrual and adjustments relating to the Stripped Certificates would
be determined under the general rules of the noncontingent bond method
described above. While not free from doubt, counsel for the Depositor
believes that uncertainty as to the payment of interest arising as a result
of the possibility of prepayment of the Mortgage Loans should not cause the
contingent payment rules under the OID Regulations to apply to interest with
respect to the Stripped Certificates.

SALE OR EXCHANGE OF STRIPPED CERTIFICATES. Sale or exchange of a
Stripped Certificate prior to its maturity will result in gain or loss equal
to the difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in such Stripped Certificate, as described
above under "Federal Income Tax Consequences for REMIC Certificates --
Taxation of Regular Certificates -- Sale or Exchange of Regular Certificates."
To the extent that a subsequent purchaser's purchase price is exceeded by
the remaining payments on the Stripped Certificates, such subsequent
purchaser will be required for federal income tax purposes to accrue and
report such excess as if it were original issue discount in the manner
described above. It is not clear for this purpose whether the assumed
prepayment rate that is to be used in the case of a Stripped
Certificateholder other than original Stripped Certificateholder should be
the Prepayment Assumption or a new rate based on the circumstances at the
date of subsequent purchase.

PURCHASE OF MORE THAN ONE CLASS OF STRIPPED CERTIFICATES. Where an
investor purchases more than one class of Stripped Certificates, it is
currently unclear whether for federal income tax purposes such classes of
Stripped Certificates should be treated separately or aggregated for purposes
of the rules described above.

88
<PAGE>

Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income
tax purposes.

REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

The Trustee will furnish, within a reasonable time after the end of each
calendar year, to each Certificateholder or Stripped Certificateholder at any
time during such year, such information (prepared on the basis described
above) as the Trustee deems to be necessary or desirable to enable such
Certificateholders to prepare their federal income tax returns. Such
information will include the amount of original issue discount accrued on
Certificates held by persons other than Certificateholders exempted from the
reporting requirements. The amounts required to be reported by the Trustee
may not be equal to the proper amount of original issue discount required to
be reported as taxable income by a Certificateholder, other than an original
Certificateholder. The Trustee will also file such original issue discount
information with the IRS. If a Certificateholder fails to supply an accurate
taxpayer identification number or if the Secretary of the Treasury determines
that a Certificateholder has not reported all interest and dividend income
required to be shown on his federal income tax return, 31% backup withholding
may be required in respect of any reportable payments, as described above
under "Federal Income Tax Consequences for REMIC Certificates -- Backup
Withholding."

TAXATION OF CERTAIN FOREIGN INVESTORS

To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or original issue
discount paid by the person required to withhold tax under Code Section 1441
or 1442 to nonresident aliens, foreign corporations, or other Non-United
States Persons generally will be subject to 30% United States withholding
tax, or such lower rate as may be provided for interest by an applicable tax
treaty. Accrued original issue discount recognized by the Certificateholder
on the sale or exchange of such a Certificate also will be subject to federal
income tax at the same rate.

Treasury regulations provide that interest or original issue discount
paid by the Trustee or other withholding agent to a Non-United States Person
evidencing ownership interest in Mortgage Loans issued after July 18, 1984
will be "portfolio interest" and will be treated in the manner, and such
persons will be subject to the same certification requirements described
above under "Federal Income Tax Consequences for REMIC Certificates --
Taxation of Certain Foreign Investors -- Regular Certificates."

STATE TAX CONSEQUENCES

In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences" herein, potential investors should consider
the state income tax consequences of the acquisition, ownership, and
disposition of the Offered Certificates. State income tax law may differ
substantially from the corresponding federal tax law, and this discussion
does not purport to describe any aspect of the income tax laws of any state.
Therefore, potential investors should consult their own tax advisors with
respect to the various tax consequences of investment in the Offered
Certificates.

PLAN OF DISTRIBUTION

Certificates are being offered hereby in series through one or more
underwriters or groups of underwriters (the "UNDERWRITERS"). The related
Prospectus Supplement will set forth the terms of offering of a Series of
Certificates, including the public offering or purchase price of each Class
of Certificates of such Series being offered thereby or the method by which
such price will be determined and the net proceeds to the Depositor from the
sale of each such Class. Such Certificates will be acquired by the
Underwriters for their own account and may be resold from time to time in one
or more transactions including negotiated transactions, at fixed public
offering prices or at varying prices to be determined at the time of sale or
at the time of commitment therefor. The managing Underwriter or Underwriters
with respect to the offer and sale of a particular Series of Certificates
will be set forth on the cover of the Prospectus Supplement relating to such
Series and the members of the underwriting syndicate, if any, will be named
in such Prospectus Supplement.

In connection with the Sale of the Certificates, Underwriters may
receive compensation from the related Transferor or the Depositor or from
purchasers of the Certificates in the form of discounts, concessions or
commissions. Underwriters and dealers participating in the distribution of
the Certificates may be deemed to be Underwriters in connection with such

89
<PAGE>

Certificates, and any discounts or commissions received by them from the
related Transferor or the Depositor and any profit on the resale of
Certificates by them may be deemed to be underwriting discounts and
commissions under the Securities Act. The Prospectus Supplement will
describe any such compensation paid by the related Transferor or the
Depositor.

It is anticipated that the underwriting agreement pertaining to the sale
of any Series of Certificates will provide that the obligations of the
Underwriters will be subject to certain conditions precedent, that the
Underwriters will be obligated to purchase all such Certificates if any are
purchased and that the related Transferor or the Depositor will indemnify the
underwriters against certain civil liabilities, including liabilities under
the Securities Act, as amended.

LEGAL MATTERS

The legality of the Certificates and certain federal income tax matters
will be passed upon for the Depositor by Andrews & Kurth L.L.P., Dallas,
Texas, and for the Underwriters by ______________________________.

FINANCIAL INFORMATION AND ADDITIONAL INFORMATION

A new Trust Fund will be formed with respect to each Series of
Certificates. No Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related Series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.

Copies of the Registration Statement to which this Prospectus forms a
part and the exhibits thereto are on file at the offices of the Securities
and Exchange Commission in Washington, D.C., and may be obtained at rates
prescribed by the Commission upon request to the Commission and inspected,
without charge, at the offices of the Commission.

Copies of FHLMC's most recent Offering Circular for FHLMC Certificates,
FHLMC's Information Statement and most recent Supplement thereto and any
quarterly report made available by FHLMC can be obtained in writing or
calling FHLMC's Investor Relations Department at 8200 Jones Branch Drive,
McLean, Virginia 22102 (800-336-FMPC). The Depositor did not participate in
the preparation of FHLMC's Offering Circular, Information Statement or any
Supplement thereto or any such quarterly report.

Copies of FNMA's most recent Prospectus for FNMA Certificates and FNMA's
annual report and quarterly financial statements as well as other financial
information are available from the Vice President for Investor Relations of
FNMA, 3900 Wisconsin Avenue, N.W., Washington, D.C. 20016 (202-752-7585). The
Depositor did not participate in the preparation of FNMA's Prospectus or any
such report, financial statement or other financial information.

<PAGE>

LIST OF SIGNIFICANT TERMS

<PAGE>

NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRE-SENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
ISSUER, ANY AFFILIATE OF THE ISSUER OR ANY UNDERWRITER. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHO IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH STATE. THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.

TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

PAGE

Summary of Terms of the Certificates ..............................
Risk Factors ......................................................
Use of Proceeds ...................................................
The Mortgage Loan Pool ............................................
The Guaranty Policy ...............................................
The Depositor .....................................................
The Transferor and Servicer .......................................
Certain Yield, Prepayment and
Weighted Average Life Considerations ............................
Description of the Certificates ...................................
Description of Book Entry Procedures ..............................
Certain Federal Income Tax Consequences ...........................
ERISA Considerations ..............................................
Legal Investment ..................................................
Ratings ...........................................................
Legal Matters .....................................................
Underwriting ......................................................

PROSPECTUS

Prospectus Supplement and Current Report on Form 8-K ..............
Available Information .............................................
Incorporation of Certain Documents by Reference ...................
Summary of Terms ..................................................
Risk Factors ......................................................
Description of the Certificates ...................................
Assets Underlying the Certificates ................................
Credit Enhancement ................................................
Servicing of the Mortgage Loans and Contracts .....................
The Pooling and Servicing Agreement ...............................
Use of Proceeds ...................................................
The Depositor .....................................................
The Trustee .......................................................
Certain Legal Aspects of the Mortgage Assets ......................
Legal Investment Matters ..........................................
ERISA Considerations ..............................................
Certain Federal Income Tax Consequences ...........................
State Tax Consequences ............................................
Plan of Distribution ..............................................
Legal Matters .....................................................
Financial Information and Additional Information ..................
Experts ...........................................................

Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a
Prospectus Supplement and Prospectus. This obligation is in addition to
the obligation of dealers to deliver a Prospectus Supplement and
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

$____________________

REMODELERS INVESTMENT CORPORATION

ASSET-BACKED CERTIFICATES
SERIES 199__-__

PROSPECTUS SUPPLEMENT

[UNDERWRITER]

[_____________, 199__]

<PAGE>

PART II

INFORMATION NOT REQUIRED TO BE IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Estimated expenses in connection with the issuance and distribution of
the securities, other than underwriting discounts and commissions*, are as
follows:

<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission . . . . . . . . . $**
Printing and Engraving Expenses. . . . . . . . . . . . . . . . . . . . . $**
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . $**
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . $**
Trustee Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . $**
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . $**
Rating Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . $**
Miscellaneous Expenses . . . . . . . . . . . . . . . . . . . . . . . . . $**
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $**

</TABLE>

_____________
* To be provided for each Series of Certificates on the cover
page of the related Prospectus Supplement.

** To be provided by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The form of Underwriting Agreement filed as Exhibit 1.1 hereto will
provide for indemnification of the officers and directors of Remodelers
Investment Corporation (the "COMPANY") and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act of 1933 or
Section 20 of the Securities and Exchange Act of 1934 as follows:

(i) against any and all losses, liabilities, claims, damages and
expenses, joint or several, or actions in respect thereof, whatsoever
arising out of any untrue statements or omissions, or alleged untrue
statements or omissions made in the Registration Statement (or any
amendment or supplement thereto), or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by and with respect to the
Underwriter expressly for use in the Registration Statement (or any
amendment or supplement thereto) or the Prospectus (or any amendment or
supplement thereto);

(ii) against any and all loss, liability, claim, damage and
expense, joint or several, or actions in respect thereof, whatsoever to
the extent of the aggregate amount of any judgment rendered or the
aggregate amount paid in settlement of any litigation, or relating to any
investigation or proceeding by any governmental agency or body or third
party, commenced or threatened, or relating to any claim whatsoever, in
any such case based upon any such untrue statement or omission, or any
such alleged untrue statement or omission; and

(iii) against any and all expense whatsoever (including the fees
and disbursements of counsel) incurred in investigation, preparing for,
or defending against any litigation or investigation or proceeding by any
governmental agency or body or third party, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above.

The Articles of Incorporation and By-Laws of the Company (Exhibit 3.1
and 3.2, respectively) provide that the Company shall indemnify its officers
and directors and may, in the discretion of the Board of Directors, indemnify
its other employees and agents to the fullest extent permitted by Nevada
statutory and decisional law if any such person

II-1
<PAGE>

was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee or agent of another company,
partnership, joint venture, trust, limited liability company or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.

ITEM 16. EXHIBITS

Exhibit
Number
- --------

<S> <C>
**1.1 Form of Underwriting Agreement

*3.1 Amended and Restated Articles of Incorporation of Remodelers
Investment Corporation

*3.2 By-Laws

*4.1 Form of Pooling and Servicing Agreement

*5.1 Opinion of Andrews & Kurth L.L.P. regarding the legality of
the Certificates

*8.1 Opinion of Andrews & Kurth L.L.P. regarding tax matters

**10.1 Representative Form of Mortgage Note

**10.2 Representative Form of Mortgage

**10.3 Representative Form of Mortgage Note -- Title I Loan

**10.4 Representative Form of Contract and Trust Deed -- Title I Loan

*10.5 Specimen of Certificate Insurance Policy

*10.6 Form of Subservicing Agreement

*10.7 Form of Loan Sale Agreement

*10.8 Form of Agreement with Clearing Agency

*23.1 Consent of Andrews & Kurth L.L.P. (included as part of
Exhibits 5.1 and 8.1)

*24.1 Power of Attorney (set forth on Page II-__ hereof)

*99.1 Form of Prospectus Supplement (filed with the Prospectus)
</TABLE>
___________________
* Filed herewith.

** To be filed by amendment.

ITEM 17. UNDERTAKINGS

(a) The Company hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933 (the "SECURITIES ACT"); (ii) to reflect in the prospectus any
facts or events arising after

II-2
<PAGE>

the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in
this Registration Statement; provided, however, that no such
post-effective amendment shall be required in the information which would
be required by clauses (i) and (ii) is contained in periodic reports filed
by the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") that are incorporated by
reference in this Registration Statement.

(2) That for the purpose of determining any liability under the
1933 Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.

(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual
report pursuant to section 13(a) or section 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of competent jurisdiction
the question whether such indemnification by it is against public policy as
expressed int he 1933 Act and will be governed by the final adjudication of
such issue.

II-3

<PAGE>

SIGNATURES

Pursuant to the requirements of the 1933 Act, the Company certifies that
it has reasonable grounds to believe that it meets all of the requirements
for filling on Form S-3 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the
City of Dallas, State of Texas, on the 22nd day of December, 1995.

REMODELERS INVESTMENT CORPORATION

By: /s/ Daniel T. Phillips*
---------------------------------------
Daniel T. Phillips
President

Each person whose signature appears below does hereby make, constitute
and appoint Daniel T. Phillips his true and lawful attorney with full power
of substitution to execute, deliver and file with the Securities and Exchange
Commission, for and on his behalf, and in his capacity or capacities as
stated below, any amendments (including post-effective amendments) to the
Registration Statement with all exhibits thereto, making such changes in the
Registration Statement as the Company deems appropriate.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ----- -----
<S> <C> <C>

/s/ Daniel T. Phillips* Director and President December 22, 1995
- ------------------------------
Daniel T. Phillips

/s/ Ronald M. Mankoff* Director, Vice President December 22, 1995
- ------------------------------ and Secretary
Ronald M. Mankoff

/s/ Larry G. Studinski* Director December 22, 1995
- ------------------------------
Larry G. Studinski

By: /s/ Daniel T. Phillips*
-------------------------------
Daniel T. Phillips,
Attorney-in-Fact
</TABLE>

II-4

<PAGE>

EXHIBIT 3.1

<PAGE>

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
REMODELERS INVESTMENT CORPORATION

FIRST: The name of the corporation is REMODELERS INVESTMENT CORPORATION
(the "CORPORATION").

SECOND: Its registered office in the State of Nevada is located at One
East First Street, Reno, Nevada 89501. The name of its resident agent at
that address is The Corporation Trust Company of Nevada.

THIRD: The period of its duration is perpetual.

FOURTH: The sole purpose for which the Corporation is organized is to
engage in the following activities:

(a) to purchase or otherwise acquire, own, hold, sell, transfer,
assign, pledge, finance, refinance and otherwise deal with (i) mortgage
loans, certificates or other securities guaranteed by the Government National
Mortgage Association; (ii) mortgage loans, certificates or other securities
issued or guaranteed by the Federal National Mortgage Association; (iii)
mortgage loans, certificates or other securities issued or guaranteed by the
Federal Home Loan Mortgage Corporation; and (iv) mortgage loans (including,
among others, single family loans, manufactured housing contracts, Title I
loans, and senior and junior mortgage liens), mortgage pass-through
certificates, collateralized mortgage obligations, subordinated classes or
residual interests issued by any Person or entity, or any other types of
mortgage-related securities (collectively, clauses (i) through (iv) are
referred to as the "MORTGAGE COLLATERAL");

As used herein, the term "Person" means any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.

(b) to authorize, issue, hold, retain an interest in (including a
subordinated interest), sell, deliver or otherwise deal with (i) bonds, notes
or other obligations secured primarily by one or more types, as described in
paragraph (a) of this Article FOURTH, of Mortgage Collateral ("BONDS") or
(ii) pass-through or participation certificates which evidence an interest in
pools of Mortgage Collateral ("PASS-THROUGH CERTIFICATES");

(c) to act as settlor or depositor of trusts formed to issue Bonds or
Pass-Through Certificates and to invest in or sell the beneficial interest in
such trusts;

(d) to use proceeds of the sale of Bonds or Pass-Through Certificates
in connection with the funding or acquisition of Mortgage Collateral;

<PAGE>

(e) to transfer, pledge or assign the rights to any amounts remitted or
to be remitted to the Corporation by any trustee under an indenture, pooling
and servicing agreement, trust agreement or other agreement entered into with
the Corporation in connection with the issuance of the Bonds or Pass-Through
Certificates by the Corporation or by any trust or partnership established by
the Corporation;

(f) to engage in and perform any actions which are necessary or
appropriate to (i) establish to the satisfaction of the Secretary of Housing
and Urban Development that the Corporation meets and will continue to meet
the requirements for approval as an eligible lender participating in the
programs under Title I of the National Housing Act or (ii) qualify under any
other programs relating to Mortgage Collateral; and

(g) to engage in any activity and to exercise any powers permitted to
corporations under the laws of the State of Nevada which are incidental to
the foregoing and necessary or convenient to accomplish the foregoing,
including the ability to hold or make such interim investments as may be
required to be pledged by the Corporation as a condition to receiving the
desired rating on any Bonds or Pass-Through Certificates issued by the
Corporation pursuant to paragraph (b) of this Article FOURTH, plus any
investment income on such investments, with such investments to include any
investments permitted under any indenture pursuant to which the Corporation
shall issue Bonds or under any pooling and servicing agreement or other
agreement pursuant to which the Corporation shall issue Pass-Through
Certificates.

FIFTH: The Corporation shall have the authority to issue one class of
shares to be designated "common". The total number of shares which the
Corporation is authorized to issue is One Thousand (1,000). The number of
common shares authorized is One Thousand (1,000) shares and the par value of
each share is One Cent ($.01).

SIXTH: The governing board of this Corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the bylaws of this
Corporation.

SEVENTH: The names and addresses of the current board of directors,
which is two in number, are as follows:

NAME ADDRESS
---- -------
Daniel T. Phillips 16901 Dallas Parkway, Suite 200
Dallas, Texas 75248

Ronald M. Mankoff 16901 Dallas Parkway, Suite 200
Dallas, Texas 75248

-2-

<PAGE>

EIGHTH: The power to adopt, alter, amend, or repeal the Bylaws of the
Corporation is hereby delegated to the Board of Directors and such power
shall be deemed to be vested exclusively in the Board of Directors and shall
not be exercised by the shareholders.

NINTH: No shareholder shall have preemptive right to acquire any shares
or securities of any kind, whether now or hereafter authorized, which may at
any time be issued, sold or offered for sale by the Corporation.

TENTH: No shareholder shall have the right to cumulate his or her votes
in an election of directors or for any other matter(s) to be voted upon by
the shareholders of the Corporation.

ELEVENTH: Notwithstanding any provision of the General Corporation Law
of the State of Nevada, now or hereafter in force, requiring for any purpose
the affirmative vote of two-thirds, or any other percentage, of the
outstanding shares entitled by law to vote thereon, or of the outstanding
shares of a class and series entitled by law to vote thereon, such action
may, to the extent permitted by law, be authorized and taken by the
affirmative vote of the holders of a majority of such outstanding shares, or
such outstanding shares of a class or series, as applicable. Except as
provided in the preceding sentence, or as otherwise required by law, the vote
of the holders of a majority of the shares entitled to vote and represented
in person or by proxy at any shareholders' meeting at which a quorum is
present shall be the act of the shareholders' meeting.

TWELFTH: To the fullest extent permitted by Nevada statutory or
decisional law, as the same exists or may hereafter be amended or
interpreted, a director of the Corporation shall not be liable to the
Corporation or its shareholders for any act or omission in such director's
capacity as a director. Any repeal or amendment of this Article, or any
adoption of any other provision of these Articles of Incorporation,
inconsistent with this Article, by the shareholders of the Corporation shall
be prospective only and shall not adversely affect any limitation on the
liability to the Corporation or its shareholders of a director of the
Corporation existing at the time of such repeal or amendment or such adoption
of an inconsistent provision.

THIRTEENTH: The Corporation shall indemnify its officers and directors
and may, in the discretion of the Board of Directors, indemnify its other
employees and agents to the fullest extent permitted by Nevada statutory and
decisional law if any such person was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee or agent of another Corporation, partnership,
joint venture, trust, limited liability company, or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding. Such right of indemnification shall not be
deemed exclusive of any other rights to which such person may be entitled
under any bylaws, agreement, vote of shareholders, or otherwise.

-3-

<PAGE>

FOURTEENTH: Any action which may be taken at any annual or special
meeting of shareholders of the Corporation may be taken without a meeting,
without prior notice, and without a vote, if a written consent or consents,
setting forth the action so taken, shall be signed by the holders of shares
having not less than the minimum number of votes necessary to take such
action at a meeting at which the holders of all shares entitled to vote on
the action were present and voted.

FIFTEENTH: Subject to the limitation in Article SIXTEENTH of these
Amended and Restated Articles of Incorporation, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in these
Amended and Restated Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.

SIXTEENTH: (a) At all times at which the directors of the Corporation
shall take, or shall be required to take, any action with respect to the
Bonds or Pass-Through Certificates and until such time as no Bonds or
Pass-Through Certificates are outstanding, there shall be at least one
Independent Director. An "Independent Director" shall be an individual who,
except in his or her capacity as an Independent Director of the Corporation
is not, and has not been during the two years immediately before such
individual's appointment as an Independent Director, (i) a stockholder,
director, partner, officer, or employee of the Corporation or its Affiliates;
(ii) affiliated with a significant customer or supplier of the Corporation or
its Affiliates; (iii) a spouse, parent, sibling, or child of any person
described by (i) or (ii) above; provided, however, that an individual shall
not be deemed to be ineligible to be an Independent Director solely because
such individual owns 1% or less of the outstanding stock of an Affiliate that
is a publicly-traded company.

As used herein, the term "Affiliate" shall mean any Person other than
the Corporation (i) which owns beneficially, directly or indirectly, any
outstanding shares of the Corporation's stock, or (ii) which controls or is
under common control with the Corporation. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of voting securities, by contract or otherwise.

(b) With the consent of the initial and current sole stockholder of the
Corporation, which consent the initial stockholder believes to be in the best
interest of the initial stockholder and the Corporation, no Independent
Director shall, with regard to any action to be taken under or in connection
with this Article SIXTEENTH, owe a fiduciary duty or other obligation to the
initial stockholder nor to any successor stockholders (except as may
specifically be required by the statutory law of any applicable
jurisdiction), and every stockholder, including each successor stockholder,
shall consent to the foregoing by virtue of such stockholder's purchase of
shares of capital stock of the Corporation, no further act or deed of any
stockholder being required to evidence such consent. Instead, such
director's fiduciary duty and other obligations with regard to such action
under or in connection with this Article SIXTEENTH shall be owed to the
Corporation (including its creditors). In addition, no Independent Director
may be removed unless his or her successor has been elected.

-4-

<PAGE>

(c) Notwithstanding any other provision of these Amended and Restated
Articles of Incorporation and any provision of law that otherwise so empowers
the Corporation, and so long as any Bonds or Pass-Through Certificates remain
outstanding and not paid in full, the Corporation shall not, without the
unanimous consent of the Board of Directors, including the Independent
Directors, do any of the following:

(i) engage in any business or activity other than those set forth in
Article FOURTH;

(ii) incur or assume any indebtedness except for (a) such
indebtedness that (i) may be incurred by the Corporation in
connection with the issuance of Bonds or Pass-Through
Certificates and (ii) provides for recourse solely to the
assets pledged to secure such indebtedness or provides for no
recourse to the Corporation and does not constitute a claim
against the Corporation in the event that its assets are
insufficient to repay such indebtedness; and (b) indebtedness
that by its terms (i) is fully subordinated to any Bonds and
(ii) provides that the holder thereof may not cause the filing
of a petition in bankruptcy or take any similar action against
the Corporation until at least 121 days after the last day on
which any Bond is outstanding;

(iii) dissolve or liquidate, in whole or in part;

(iv) consolidate or merge with or into any other Person or convey
or transfer or lease its property and assets substantially as
an entirety to any Person;

(v) institute proceedings to be adjudicated bankrupt or insolvent,
or consent to the institution or bankruptcy or insolvency
proceedings against the Corporation, or file a petition
seeking or consenting to reorganization or relief under any
applicable federal or state law relating to bankruptcy, or
consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, or other similar official of
the Corporation or a substantial part of the property of the
Corporation, or make any assignment for the benefit of
creditors, or admit in writing its inability to pay its debts
generally as they become due, or take corporate action in
furtherance of any such action; or

(vi) amend Articles FOURTH, FIFTEENTH or SIXTEENTH of these Amended
and Restated Articles of Incorporation.

So long as any obligation with respect to the Bonds or Pass-Through
Certificates remains outstanding and not paid in full, the Corporation shall
have no authority to take any action in items (i) through (iv) and (vi) above
without the written consent of the majority of the holders of such Bonds
and/or Pass-Through Certificates.

Pursuant to the Nevada General Corporation Law, the amendments to the
Articles of Incorporation as set forth in these Amended and Restated Articles
of Incorporation were

-5-

<PAGE>

unanimously approved by Written Consent of the Sole Stockholder, dated
December 14, 1995, following the recommendation of the Board of Directors via
a Unanimous Written Consent of the Board of Directors, dated December 14,
1995. This Certificate sets forth the Articles of Incorporation as amended
and is executed by the President and the Secretary of the Corporation this
15th day of December, 1995.

------------------------------------
By: Daniel T. Phillips
President

------------------------------------
By: Ronald M. Mankoff
Secretary

-6-

<PAGE>

THE STATE OF TEXAS )
)
COUNTY OF DALLAS )

BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Daniel T. Phillips, known to me to be the person and
officer whose name is subscribed to the foregoing instrument and acknowledged
to me that the same was the properly authorized act of the said Remodelers
Investment Corporation, a Nevada corporation.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of December,
1995.

------------------------------------
Notary Public, State of Texas
Commission Expires:

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

THE STATE OF TEXAS )
)
COUNTY OF DALLAS )

BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared Ronald M. Mankoff, known to me to be the person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me that
the same was the properly authorized act of the said Remodelers Investment
Corporation, a Nevada corporation.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _____ day of December,
1995.

------------------------------------
Notary Public, State of Texas
Commission Expires:

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

-7-

<PAGE>

EXHIBIT 3.2

<PAGE>

______________________________________________________________________________

BYLAWS

REMODELERS INVESTMENT CORPORATION

A NEVADA CORPORATION

______________________________________________________________________________

<PAGE>

INDEX TO BYLAWS
OF
REMODELERS INVESTMENT CORPORATION

CAPTION PAGE
- ------- ----
ARTICLE I - OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.01 Registered Office. . . . . . . . . . . . . . . . . . . . . 1
1.02 Other Offices. . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II - MEETINGS OF THE SHAREHOLDERS. . . . . . . . . . . . . . . . . 1

2.01 Place of Meetings. . . . . . . . . . . . . . . . . . . . . 1
2.02 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . 1
2.03 Special Meeting. . . . . . . . . . . . . . . . . . . . . . 1
2.04 Notice of Annual or of Special Meeting . . . . . . . . . . 1
2.05 Business at Special Meeting. . . . . . . . . . . . . . . . 2
2.06 Quorum of Shareholders . . . . . . . . . . . . . . . . . . 2
2.07 Voting on Matters Other Than the Election of Directors . . 2
2.08 Voting in the Election of Directors. . . . . . . . . . . . 2
2.09 Voting of Shares . . . . . . . . . . . . . . . . . . . . . 2
2.10 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.11 Voting List. . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 Action by Written Consent Without a Meeting. . . . . . . . 3

ARTICLE III - BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . 3

3.01 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.02 Election and Number of Directors . . . . . . . . . . . . . 3
3.03 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.04 Quorum of Directors. . . . . . . . . . . . . . . . . . . . 4
3.05 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . 4
3.06 Resignation and Removal. . . . . . . . . . . . . . . . . . 4
3.07 Compensation of Directors. . . . . . . . . . . . . . . . . 4
3.08 Interested Directors . . . . . . . . . . . . . . . . . . . 4

ARTICLE IV - MEETINGS OF TIRE BOARD. . . . . . . . . . . . . . . . . . . . 5

4.01 First Meeting. . . . . . . . . . . . . . . . . . . . . . . 5
4.02 Regular Meetings . . . . . . . . . . . . . . . . . . . . . 5

(i)

<PAGE>

4.03 Special Meetings . . . . . . . . . . . . . . . . . . . . . 5
4.04 Business at Regular or Special Meeting . . . . . . . . . . 5
4.05 Quorum of Directors. . . . . . . . . . . . . . . . . . . . 5
4.06 Act of Directors' Meeting. . . . . . . . . . . . . . . . . 5
4.07 Action by Written Consent Without a Meeting. . . . . . . . 5

ARTICLE V - COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE VI - NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

6.01 Methods of Giving Notice . . . . . . . . . . . . . . . . . 6
6.02 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . 7
6.03 Attendance as Waiver . . . . . . . . . . . . . . . . . . . 7

ARTICLE VII - AUTHORITY FOR TELEPHONE MEETING. . . . . . . . . . . . . . . 7

ARTICLE VIII - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . 7

8.01 Executive Officers . . . . . . . . . . . . . . . . . . . . 7
8.02 Election and Qualification . . . . . . . . . . . . . . . . 7
8.03 Other Officers and Agents. . . . . . . . . . . . . . . . . 7
8.04 Term, Removal and Vacancies. . . . . . . . . . . . . . . . 7
8.05 Chairman of the Board. . . . . . . . . . . . . . . . . . . 8
8.06 Chief Executive Officer. . . . . . . . . . . . . . . . . . 8
8.07 President. . . . . . . . . . . . . . . . . . . . . . . . . 8
8.08 Executive Vice Presidents and Vice Presidents. . . . . . . 8
8.09 Secretary. . . . . . . . . . . . . . . . . . . . . . . . . 8
8.10 Assistant Secretaries. . . . . . . . . . . . . . . . . . . 8
8.11 Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . 8
8.12 Assistant Treasurers . . . . . . . . . . . . . . . . . . . 9
8.13 Officer's Bond . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IX - INDEMNIFICATION OF OFFICERS AND DIRECTORS . . . . . . . . . . 9

9.01 General Provision. . . . . . . . . . . . . . . . . . . . . 9
9.02 Determination. . . . . . . . . . . . . . . . . . . . . . . 9
9.03 Prevailing Officer or Director . . . . . . . . . . . . . . 10
9.04 Limitation . . . . . . . . . . . . . . . . . . . . . . . . 10
9.05 Liability. . . . . . . . . . . . . . . . . . . . . . . . . 10
9.06 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.07 Reimbursement in Advance . . . . . . . . . . . . . . . . . 10
9.08 Reimbursement. . . . . . . . . . . . . . . . . . . . . . . 11
9.09 Notice to Shareholders . . . . . . . . . . . . . . . . . . 11

(ii)

<PAGE>

9.10 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE X - CERTIFICATES FOR SHARES. . . . . . . . . . . . . . . . . . . . 11

10.01 Certificates Representing Shares . . . . . . . . . . . . . 11
10.02 Restriction on Transfer of Shares. . . . . . . . . . . . . 12
10.03 Transfer of Shares . . . . . . . . . . . . . . . . . . . . 13
10.04 Lost, Stolen or Destroyed Certificates . . . . . . . . . . 13
10.05 Registered Holders as Owners . . . . . . . . . . . . . . . 13
10.06 Closing of Share Transfer Records and Fixing Record Date . 13
10.07 Fixing Record Dates for Consents to Action . . . . . . . . 14

ARTICLE XI - BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . 14

11.01 Minutes and Original Issuance Records. . . . . . . . . . . 14
11.02 Demand for Examination . . . . . . . . . . . . . . . . . . 15
11.03 Written Request for Annual Statements. . . . . . . . . . . 15

ARTICLE XII - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . 15

12.01 Distributions. . . . . . . . . . . . . . . . . . . . . . . 15
12.02 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.03 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.04 Checks . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.05 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE XIII - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 16

(iii)

<PAGE>

BYLAWS

REMODELERS INVESTMENT CORPORATION

ARTICLE I

OFFICES

1.01 REGISTERED OFFICE. The registered office shall be located at One
East First Street, Reno, Nevada 89501.

1.02 OTHER OFFICES. The corporation also may have offices at such
other places a the Board of Directors may from time to time determine or as
the business of the Corporation may require.

ARTICLE II

MEETINGS OF THE SHAREHOLDERS

2.01 PLACE OF MEETINGS. All meetings of shareholders for the election
of directors or for any other proper purpose shall be held in the City of
Dallas, State of Texas, or at such other place within or without the State of
Texas, as the Board of Directors may from time to time designate, as stated
in the notice of such meeting or a duly executed waiver of notice thereof.

2.02 ANNUAL MEETING. An annual meeting of shareholders, commencing in
the year 1996, shall be held at 11:00 a.m. on the second Tuesday of June in
each year, unless such day is a legal holiday, in which case such meeting
shall be held at the specified time on the next full business day thereafter
which is not a legal holiday. At such meeting the shareholders entitled to
vote thereat may transact such business as may properly be brought before the
meeting.

2.03 SPECIAL MEETING. Special meetings of shareholders may be called
by the Chairman of the Board of Directors, the President, the Board of
Directors, or the holders of not less than twenty-five percent (25%) of all
shares entitled to vote at the meeting.

2.04 NOTICE OF ANNUAL OR OF SPECIAL MEETING. Written or printed notice
stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) nor more than sixty (60) days before the
date of the meeting, either personally or by mail, by or at the direction of
the President, the Secretary, or the officer or person calling the meeting,
to each shareholder entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States

<PAGE>

mail, addressed to the shareholder at his address as it appears on the share
transfer records of the corporation, with postage thereon prepaid.

2.05 BUSINESS AT SPECIAL MEETING. The business transacted at any
special meeting of shareholders shall be limited to the purposes stated in
the notice thereof.

2.06 QUORUM OF SHAREHOLDERS. The holders of a majority of the shares
of stock entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. Once a quorum is present
at a meeting of shareholders, the shareholders represented in person or by
proxy at the meeting may conduct such business as may be properly brought
before the meeting until it is adjourned, and the subsequent withdrawal from
the meeting of any shareholder or the refusal of any shareholder represented
in person or by proxy to vote shall not affect the presence of a quorum at
the meeting. The shareholders represented in person or by proxy at a meeting
of shareholders at which a quorum is not present may adjourn the meeting
until such time and to such place as may be determined by a vote of the
holders of a majority of the shares represented in person or by proxy at that
meeting.

2.07 VOTING ON MATTERS OTHER THAN THE ELECTION OF DIRECTORS. With
respect to any matter, other than the election of directors or a matter for
which the affirmative vote of the holders of a specified portion of the
shares entitled to vote is required by law or Articles of Incorporation or
these bylaws, the affirmative vote of the holders of a majority of the shams
entitled to vote on that matter and represented in person or by proxy at a
meeting of shareholders at which a quorum is present shall be the act of the
shareholders.

2.08 VOTING IN THE ELECTION OF DIRECTORS. Directors shall be elected
by a plurality of the votes cast by the holders of shares entitled to vote in
the election of directors at a meeting of shareholders at which a quorum is
present.

2.09 VOTING OF SHARES. Each outstanding shares shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the shares are limited or
denied by the Articles of Incorporation or as otherwise provided by law.

2.10 PROXIES. At any meeting of the shareholders, each shareholder
having the right to vote shall be entitled to vote either in person or by
proxy executed in writing by the shareholder. A telegram, telex, cablegram,
or similar transmission by the shareholder, or a photographic, photostatic,
facsimile, or similar reproduction of a writing executed by the shareholder,
shall be treated as an execution in writing for purposes of this section. No
proxy shall be valid after eleven (11) months from the date of its execution
unless otherwise provided in the proxy. Each proxy shall be revocable unless
the proxy form states that the proxy is irrevocable and the proxy is coupled
with an interest and unless otherwise made irrevocable by law. An
irrevocable proxy representing the shares that are subject to the irrevocable
proxy shall be specifically enforceable against the holder of those shares or
any successor or transferee of the holder.

-2-

<PAGE>

2.11 VOTING LIST. The officer or agent having charge of the share
transfer records for shares of the corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and number of shares held by each
shareholder, which list, for a period of ten (10) days prior to such meeting,
shall be kept on file at the registered office or principal place of business
of the corporation and shall be subject to the inspection by any shareholder
at any time during usual business hours. Such list shall also be produced
and kept open at the time and place of the meeting and shall be subject to
the inspection of any shareholder during the whole time of the meeting. The
original share transfer records shall be prima facie evidence as to who are
the shareholders entitled to examine such list or share transfer records or
to vote at any such meeting of shareholders.

2.12 ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action required
by law to be taken at any annual or special meeting of shareholders, or any
action which may be taken at any annual or special meeting of shareholders,
may be taken without a meeting, without prior notice, and without a vote, if
a consent or consents in writing, setting forth the action so taken, shall
have been signed by the holder or holders of all the shares entitled to vote
with respect to the action that is the subject of the consent.

ARTICLE III

BOARD OF DIRECTORS

3.01 POWERS. The business and affairs of the corporation shall be
managed by its Board of Directors which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by law, the
Articles of Incorporation or these Bylaws directed or required to be
exercised and done by the shareholders.

3.02 ELECTION AND NUMBER OF DIRECTORS. The directors other than the
initial Board of Directors shall be elected at the annual meeting of the
shareholders, except as provided in Section 3.05 of this Article. Directors
need not be residents of the State of Nevada or shareholders of the
corporation. The Board of Directors shall consist of at least two (2) and no
more than six (6) directors.

3.03 TERM. Each director elected shall hold office until the next
succeeding annual meeting and until his successor is elected and qualified or
until his death, resignation or removal. Each member of the first Board of
Directors shall hold office until the first annual meeting of shareholders
and until his successor is elected and qualified or until his death,
resignation or removal.

-3-

<PAGE>

3.04 QUORUM OF DIRECTORS. Unless otherwise provided in the Articles of
Incorporation, a majority of the number of directors shall constitute a
quorum for the transaction of business unless a greater number is required by
law.

3.05 VACANCIES. Subject to any agreement between the shareholders, any
vacancy occurring in the Board of Directors shall be filled by the
affirmative vote of a majority of the remaining directors though less than a
quorum of the Board of Directors. A director elected to fill a vacancy shall
be elected for the unexpired term of his predecessor in office. Subject to
any agreement between the shareholders, any directorship to be filled by
reason of an increase in the number of directors shall be filled by the
affirmative vote of a majority of the other directors though less than a
quorum of the Board of Directors. A director elected to fill a newly created
directorship shall hold office until his successor is elected and qualified
or until his death, resignation or removal. If a majority cannot agree on a
director under this section, the directors shall be elected at a special
meeting of shareholders called for that purpose.

3.06 RESIGNATION AND REMOVAL. Any director may resign at any time upon
giving written notice to the corporation. At any meeting of shareholders
called expressly for the purpose of removing a director or directors, any
director or the entire Board of Directors may be removed, with or without
cause, by a vote of the holders of sixty-six and two-thirds percent (66 2/3%)
of the shares then entitled to vote at an election of directors.

3.07 COMPENSATION OF DIRECTORS. As specifically prescribed from time
to time by resolution of the Board of Directors, the directors of the
corporation may be paid their expenses of attendance at each meeting of the
Board. No amount shall be paid to directors for attendance at meetings or
for acting in their capacity as directors. This provision shall not preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.

3.08 INTERESTED DIRECTORS. No contract or transaction between the
corporation and one or more of its directors or officers or between the
corporation and any other corporation, limited liability company,
partnership, association or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, solely because the director
or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose if (i) the material
facts as to his relationship or interest and as to a contract or transaction
are disclosed or are known to the Board of Directors or the committee, and
the Board or committee in good faith authorizes the contract or transaction
by the affirmative vote of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good
faith by vote of the shareholders; or (iii) the contract or transaction is
fair as to the corporation as of the time it is authorized, approved, or
ratified by the Board of Directors, a committee thereof, or the shareholders.
Common or interested directors may

-4-

<PAGE>

be counted in determining the presence of a quorum at a meeting of the Board
of Directors or of a committee which authorizes the contract or transaction.

ARTICLE IV

MEETINGS OF TIRE BOARD

4.01 FIRST MEETING. The first meeting of each newly elected Board of
Directors shall be held at such time and place either within or without the
State of Nevada as shall be fixed by the vote of the shareholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a
quorum shall be present, or the meeting may be convened at such place and
time as shall be fixed by the consent in writing of all the directors.

4.02 REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held monthly or less often at such time and at such place as time to time
shall be prescribed by resolution of the Board of Directors.

4.03 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the Chairman of the Board of Directors or the President, and
shall be called by the Chairman of the Board of Directors, the President or
the Secretary on the written request of two directors. Written notice of
special meetings of the Board of Directors shall be given to each director at
least two (2) days before the date of the meeting.

4.04 BUSINESS AT REGULAR OR SPECIAL MEETING. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of
such meeting.

4.05 QUORUM OF DIRECTORS. A majority of the Board of Directors shall
constitute a quorum for the transaction of business, unless a greater number
is required by law or the Articles of Incorporation. If a quorum shall not
be present at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.

4.06 ACT OF DIRECTORS' MEETING. The act of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors unless the act of a greater number is required by law or
the Articles of Incorporation.

4.07 ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action required
or permitted by law, the Articles of Incorporation or these Bylaws to be
taken at a meeting of the Board of Directors or any committee thereof may be
taken without a meeting if a consent in writing, setting forth the

-5-

<PAGE>

action so taken, is signed by all members of the Board of Directors or
committee, as the case may be. Such consent shall have the same force and
effect as a unanimous vote at such meeting.

ARTICLE V

COMMITTEES

The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members one or more
committees, each of which, to the extent provided in such resolution or in
the Articles of Incorporation or in these Bylaws, shall have and may exercise
all of the authority of the Board of Directors, except that no such committee
have the authority of the Board of Directors in reference to amending the
Articles of Incorporation, proposing a reduction of the stated capital of the
corporation in the manner permitted by law, approving a plan of merger or
share exchange of the corporation, recommending to the shareholders the sale,
lease, or exchange of all or substantially all of the property and assets of
the corporation otherwise than in the usual and regular course of its
business, recommending to the shareholders a voluntary dissolution of the
corporation or a revocation thereof, amending, altering, or repealing the
Bylaws of the corporation or adopting new Bylaws of the corporation, filling
the vacancies in the Board of Directors or any such committee, electing or
removing officers of the corporation, members of the Board of Directors or
members of any such committee, fixing the compensation of any member of such
committee, or altering or repealing any resolution of the Board of Directors
which by its terms provides that it shall not be so amendable or repealable.
No such committee shall have the power or authority to declare a dividend or
to authorize the issuance of shares of the corporation. Vacancies in the
membership of the committee shall be filled by the Board of Directors at a
regular or special meeting of the Board. Each committee shall keep regular
minutes of its proceedings and report the same to the Board when required.
Designations of committees and delegation thereto of authority shall not
operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed, by law, upon it or any director.

ARTICLE VI

NOTICES

6.01 METHODS OF GIVING NOTICE. Whenever any notice is required to be
given to any shareholders or director under the provisions of any statute,
the Articles of Incorporation or these Bylaws, it shall be given in writing
and delivered personally or mailed to such shareholder or director at such
address as appears on the share transfer records of the corporation, and such
notice shall he deemed to be given at the time when the same shall be
deposited in the United States mail with sufficient postage thereon prepaid.

-6-

<PAGE>

6.02 WAIVER OF NOTICE. Whenever any notice is required to be given to
any shareholder or director under the provisions of any law, the Articles of
Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein shall be deemed equivalent to the giving of such notice.

6.03 ATTENDANCE AS WAIVER. Attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting is not lawfully called or
convened.

ARTICLE VII

AUTHORITY FOR TELEPHONE MEETING

Subject to the provisions required or permitted for notice of meetings,
unless otherwise restricted by the Articles of Incorporation or these Bylaws,
shareholders, members of the Board of Directors or members of any committee
designated by such Board may participate in and hold a meeting of such
shareholders, Board or committee using conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.

ARTICLE VIII

OFFICERS

8.01 EXECUTIVE OFFICERS. The officers of the corporation shall consist
of a Chairman of the Board, President and Chief Operating Officer, one or
more Vice Presidents, and a Secretary, each of whom shall be elected by the
Board of Directors as provided in Section 8.02 of this Article.

8.02 ELECTION AND QUALIFICATION. The Board of Directors, at its first
meeting after each annual meeting of shareholders, shall elect officers, none
of whom need be a member of the Board.

8.03 OTHER OFFICERS AND AGENTS. The Board of Directors may elect or
appoint such other officers, assistant officers and agents as may be
necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board.

8.04 TERM, REMOVAL AND VACANCIES. Each officer of the corporation
shall hold office until his successor is chosen and qualified or until his
death, resignation or removal. Any officer may

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resign at any time upon giving written notice to the corporation. Any
officer or agent or member of a committee elected or appointed by the Board
of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of
the person so removed. Election or appointment of an officer or agent or
member of a committee shall not of itself create contract rights. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors.

8.05 CHAIRMAN OF THE BOARD. The Chairman of the Board shall conduct
all meetings of the Board of Directors and shall have such other powers and
duties as usually pertain to such office or as may be delegated by the Board
of Directors.

8.06 CHIEF EXECUTIVE OFFICER. The Board shall designate the chief
executive officer of the corporation who shall have such powers and duties as
usually pertain to such office or as may be delegated by the Board of
Directors.

8.07 PRESIDENT. The President shall have such powers and duties as
usually pertain to such office. The President shall be ex-officio a member
of all standing committees, shall have general powers of oversight,
supervision and management of the business and affairs of the corporation,
and shall see that orders and resolutions of the Board of Directors are
carried into effect. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed.

8.08 EXECUTIVE VICE PRESIDENTS AND VICE PRESIDENTS. The Executive Vice
Presidents and Vice Presidents, in the order of their seniority, unless
otherwise determined by the Board of Directors, shall, in the absence or
disability of the President, perform the duties and exercise the powers of
the President. They shall perform such other duties and have such other
powers as the Board of Directors shall prescribe.

8.09 SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and of the shareholders, and record the proceedings of the
meetings in a book to be kept for that purpose. He shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or President.

8.10 ASSISTANT SECRETARIES. The Assistant Secretaries shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe.

8.11 TREASURER. The Treasurer shall have the custody of the corporate
funds and securities, and shall keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation, and shall deposit
all monies and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors. He shall

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disburse the funds of the corporation as may be ordered by authorized
officers or the Board of Directors, and shall render to the President and the
Board of Directors an account of transactions as Treasurer, and of the
financial condition of the corporation.

8.12 ASSISTANT TREASURERS. The Assistant Treasurers shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. They shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe.

8.13 OFFICER'S BOND. If directed by the Board of Directors, any
officer may be required to give the corporation a bond (which shall be
renewed as the Board may require) in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of any and all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation. Bond premiums shall be an obligation of the corporation.

ARTICLE IX

INDEMNIFICATION OF OFFICERS AND DIRECTORS

9.01 GENERAL PROVISION. The corporation shall indemnify the officers
and directors of the corporation to the extent stated in the Articles of
Incorporation and shall indemnify its other agents and employees as required
by law. Additionally, the corporation may indemnify, to the extent of the
provisions set forth herein in Section 9.02 through 9.10, any person, other
than an officer or director, who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, by reason of the fact that he is or was an employee or agent
of the corporation, or is or was serving at the request of the corporation as
an employee or agent of another corporation, limited liability company,
partnership, joint venture, trust or other enterprise. Any such employee or
agent desiring indemnification shall make written application for such
indemnification to the Board of Directors of the corporation. A special
meeting of the Directors shall be called within ten (10) days after receipt
of such application to determine if the person so applying shall be
indemnified, and if so, to what extent.

9.02 DETERMINATION. The indemnification contained in Section 9.01 is
conditioned upon a determination

(i) by a majority vote of a quorum consisting of directors who at
the time of the vote are not named defendants or respondents in the
proceeding;

(ii) if such a quorum cannot be obtained, by a majority vote of a
committee of the Board of Directors, designated to act in the matter by a
majority

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vote of all directors, consisting solely of two or more directors who at
the time of the vote are not named defendants or respondents in the
proceeding;

(iii) by special legal counsel selected by the Board of Directors or
a committee of the Board by vote as set forth in subsection (i) or (ii)
hereof, or, if such a quorum cannot be obtained and such a committee cannot
be established, by a majority vote of all directors; or

(iv) by the shareholders in a vote that excludes the shares held by
directors who are named defendants or respondents in the proceeding,

that such person (1) conducted himself in good faith; (2) reasonably
believed, in the case of conduct in his official capacity as a director or
officer of the corporation, that his conduct was in the corporation's best
interest, and in all other cases, that his conduct was at least not opposed
to the corporation's best interest; and (3) in the case of any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful.

9.03 PREVAILING OFFICER OR DIRECTOR. Notwithstanding Section 9.02, the
corporation shall indemnify each agent and employee against reasonable
expenses incurred by him in connection with a proceeding in which he is a
party because he is an agent or employee if he has been wholly successful, on
the merits or otherwise, in the defense of the proceeding.

9.04 LIMITATION. An agent or employee, found liable on the basis that
personal benefit was improperly received by him, or found liable to the
corporation may be indemnified at the discretion of the Board of Directors
but the indemnification shall be limited to reasonable expenses actually
incurred by the person in connection with the proceeding and shall not be
made in respect of any proceeding in which the person shall have been found
liable for willful or intentional misconduct in the performance of his duty
to the corporation.

9.05 LIABILITY. A person shall be deemed to have been found liable in
respect of any claim, issue or matter only after the person shall have been
so found by final decision of a court of competent jurisdiction after
exhaustion of all appeals therefrom.

9.06 EXPENSES. "Expenses" as used herein means court costs, attorneys'
fees, judgments, penalties (including excise and similar taxes), fines,
settlements and other reasonable expenditures actually incurred by the person
in connection with the proceeding.

9.07 REIMBURSEMENT IN ADVANCE. Reasonable expenses incurred by a
director or officer who was, is or is threatened to be named a defendant or
respondent in a proceeding may be paid or reimbursed by the corporation in
advance of the final disposition of the proceeding after (i) the corporation
receives a written undertaking by or on behalf of the director or officer to
repay the amount paid or reimbursed if it is ultimately determined that
indemnification of the director or officer against expenses incurred by him
in connection with that proceeding is prohibited by law and

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(ii) a determination is made under Section 9.02 that the facts then known to
those making the determination would not preclude indemnification under this
Article IX.

9.08 REIMBURSEMENT. The corporation shall pay or reimburse expenses
incurred by a director or officer in connection with his appearance as a
witness or other participant in any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, any appeal in such action, suit or proceeding, and any inquiry
or investigation that could lead to such an action, suit or proceeding, at a
time when such officer or director is not a named defendant or respondent in
the proceeding.

9.09 NOTICE TO SHAREHOLDERS. Any indemnification of or advance of
expenses to a director or officer in accordance with this Article IX shall be
reported in writing to the shareholders of the corporation with or before the
notice or waiver of notice of the next shareholders' meeting or with or
before the next submission to the shareholders of a consent to action without
a meeting, and, in any case, within the twelve (12) month period immediately
following the date of the indemnification or advance.

9.10 INSURANCE. The corporation may purchase and maintain insurance or
other arrangement on behalf of any person who is or was a director, officer,
employee or agent of the corporation or who is or was serving at the request
of the corporation as a director, officer, member, manager, partner,
venturer, proprietor, trustee, employee or similar functionary of another
foreign or domestic corporation, limited liability company, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, in accordance with Section 78.752 of the General Corporation Law
of the State of Nevada.

ARTICLE X

CERTIFICATES FOR SHARES

10.01 CERTIFICATES REPRESENTING SHARES. The corporation shall deliver
certificates representing all shares to which shareholders are entitled.
Such certificates shall be numbered and shall be entered in the books of the
corporation as they are issued, and shall be signed by the President or a
Vice President, and the Secretary or an Assistant Secretary of the
corporation. The signatures of the President or Vice President, and the
Secretary or Assistant Secretary, upon a certificate may be facsimiles, if
the certificate is countersigned by a transfer agent or registered by a
registrar, either of which is other than the corporation itself or an
employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased
to be such officer before such certificate is issued, it may he issued by the
corporation with the same effect as if he were such officer at the date of
its issuance. Each certificate representing shares issued by such
corporation (1) shall conspicuously set forth on the face or back of the
certificate a full statement of (a) all of the designations, preferences,
limitations and relative rights of the shares of each class authorized to be
issued and, (b) if the corporation is authorized to

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issue shares of any preferred or special class in series, the variations in
the relative rights and preferences of the shares of each such series to the
extent the same have been fixed and determined and the authority of the Board
of Directors to fix and determine the relative rights and preferences of
subsequent series; or (2) shall conspicuously state on the face or back of
the certificate that (a) such a statement is set forth in the Articles of
Incorporation on file in the office of the Secretary of State of Nevada and
(b) the corporation will furnish a copy of such statement to the record
holder of the certificate without charge on written request to the
corporation at its principal place of business or registered office. If the
corporation has by its Articles of Incorporation limited or denied the
pre-emptive rights of shareholders to acquire unissued or treasury shares of
the corporation, each certificate representing shares issued by such
corporation (1) shall conspicuously set forth on the face or back of the
certificate a full statement of the limitation or denial of pre-emptive
rights contained in the Articles of Incorporation, or (2) shall conspicuously
state on the face or back of the certificate that (a) such a statement is set
forth in the Articles of Incorporation on file in the office of the Secretary
of State of Nevada and (b) the corporation will furnish a copy of such
statement to the record holder of the certificate without charge on request
to the corporation at its principal place of business or registered office.
Each certificate representing shares shall state upon the face thereof that
the corporation is organized under the laws of the State of Nevada, the name
of the person to whom issued, the number and class of shares and the
designation of the series, if any, which such certificate represents and the
par value of each share represented by such certificate or a statement that
the shares are without par value. No certificate shall be issued for any
share until the consideration therefor, fixed as provided by law, has been
fully paid.

10.02 RESTRICTION ON TRANSFER OF SHARES. If any restriction on the
transfer, or registration of the transfer, of shares shall be imposed or
agreed to by the corporation, as permitted by law, the Articles of
Incorporation or these Bylaws, each certificate representing shares so
restricted (1) shall conspicuously set forth a full or summary statement of
the restriction on the face of the certificate, or (2) shall set forth such
statement on the back of the certificate and conspicuously refer to the same
on the face of the certificate, or (3) shall conspicuously state on the face
or back of the certificate that such a restriction exists pursuant to a
specified document and (a) that the corporation will furnish to the record
holder of the certificate without charge on written request to the
corporation at its principal place of business or registered office a copy of
the specified document, or (b) if such document is one required or permitted
to be and has been filed under applicable law, that such specified document
is on file in the Office of the Secretary of State of Nevada and contains a
full statement of such restriction. Unless such document was on file in the
Office of the Secretary of State of Nevada at the time of the request, if the
corporation fails within a reasonable time to furnish the record holder of a
certificate, upon such request and without charge, a copy of the specified
document, the corporation shall not be permitted thereafter to enforce its
rights under the restriction imposed on the shares represented by such
certificate. Any restriction on the transfer, or registration of transfer,
of shares of the corporation, if reasonable and noted conspicuously on the
certificates representing such shares, shall he specifically enforceable
against the holder of the restricted shares or any successor or transferee of
the holder. Unless noted conspicuously on the certificates representing such
shares, a restriction, even though otherwise enforceable, is ineffective
against a transferee for value without actual knowledge of the restriction at
the time of the transfer or against

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any subsequent transferee (whether or not for value), but such a restriction
shall be specifically enforceable against any other person who is not a
transferee for value from and after the time that the person acquires actual
knowledge of the existence of the restriction.

10.03 TRANSFER OF SHARES. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate, and record the
transaction upon its books.

10.04 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors
may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors, in its discretion and as a condition precedent to the
issuance thereof, may require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the
same in such manner as it shall require and/or to give the corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.

10.05 REGISTERED HOLDERS AS OWNERS. Unless otherwise provided by law,
the corporation may regard the person in whose name any shares issued by the
corporation are registered in the share transfer records of the corporation
at any particular time (including, without limitation, as of a record date
fixed pursuant to section 10.06) as the owner of those shares at that time
for purposes of voting those shares, receiving distributions thereon or
notices in respect thereof, transferring those shares, exercising rights of
dissent with respect to those shares, exercising or waiving any pre-emptive
right with respect to those shares, entering into agreements with respect to
those shares, or giving proxies with respect to those shares. Neither the
corporation nor any of its officers, directors, employees, or agents shall be
liable for regarding that person as the owner of those shares at that time
for those purposes, regardless of whether that person does not possess a
certificate for those shares.

10.06 CLOSING OF SHARE TRANSFER RECORDS AND FIXING RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors may provide that the
share transfer records shall be closed for a stated period but not to exceed,
in any case, sixty (60) days. If the share transfer records shall be closed
for the purpose of determining shareholders entitled to notice of or to vote
at a meeting of shareholders, such records shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the share
transfer records, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case
to be not more than sixty (60) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action requiring

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such determination of shareholders is to be taken. If the share transfer
records are not closed and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section 10.06, such determination shall
apply to any adjournment thereof, except where the determination has been
made through the closing of the share transfer records and the stated period
of closing has expired.

10.07 FIXING RECORD DATES FOR CONSENTS TO ACTION. Unless a record date
shall have previously been fixed or determined pursuant to this Section,
whenever action by shareholders is proposed to be taken by consent in writing
without a meeting of shareholders, the Board of Directors may fix a record
date for the purpose of determining shareholders entitled to consent to that
action, which record date shall not precede, and shall not be more than ten
(10) days after, the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the
Board of Directors and the prior action of the Board of Directors is not
required by law, the record date for determining shareholders entitled to
consent to action in writing without a meeting shall be the first date on
which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered
office, its principal place of business, or an officer or agent of the
corporation having custody of the books in which proceedings of meetings of
shareholders are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the corporation's
principal place of business shall be addressed to the President or the
Principal Executive Officer of the corporation. If no record date shall have
been fixed by the Board of Directors and prior action of the Board of
Directors is required by law, the record date for determining shareholders
entitled to consent to action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors adopts a
resolution taking such prior action.

ARTICLE XI

BOOKS AND RECORDS

11.01 MINUTES AND ORIGINAL ISSUANCE RECORDS. The corporation shall keep
books and records of account and shall keep minutes of the proceedings of its
shareholders, its Board of Directors, and each committee of its Board of
Directors. The corporation shall keep at its registered office, and may also
keep at its principal place of business or at the office of its transfer
agent or registrar, a record of the original issuance of shares issued by the
corporation and a record of each transfer of those shares that have been
presented to the corporation for registration of transfer. Such records
shall contain the names and addresses of all past and current shareholders of
the corporation and the number and class of shares issued by the corporation
held by each of them. Any books, records, minutes, and share transfer
records may be in written form or in any other form capable of

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being converted into written form within a reasonable time. The principal
place of business of the corporation, or the office of its transfer agent or
registrar, may be located outside the State of Nevada.

11.02 DEMAND FOR EXAMINATION. Any person who shall have been a
shareholder for at least six (6) months immediately preceding his demand, or
shall be the holder of at least five percent (5%) of all the outstanding
shares of the corporation, upon written demand stating the purpose thereof,
shall have the right to examine, in person or by agent, accountant, or
attorney, at any reasonable time or times not less than ten (10) days after
making such written request, for any proper purpose, its relevant books and
records of account, minutes, and share transfer records, and to make extracts
therefrom.

11.03 WRITTEN REQUEST FOR ANNUAL STATEMENTS. Upon the written request
of any shareholder of the corporation, the corporation shall mail to such
shareholder its annual statements for its last fiscal year showing in
reasonable detail its assets and liabilities and the results of its
operations and the most recent interim statements, if any, which have been
filed in a public record or otherwise published. The corporation shall be
allowed a reasonable time to prepare such annual statements.

ARTICLE XII

GENERAL PROVISIONS

12.01 DISTRIBUTIONS. The Board of Directors from time to time may
authorize, and the corporation make distributions in cash, in property, or in
its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent or when the authorization or
payment thereof would be contrary to any restrictions contained in the
Articles of Incorporation. Such distributions may be declared at any regular
or special meeting of the Board, and the authorization and payment shall be
subject to all applicable provisions of law, the Articles of Incorporation
and these Bylaws.

12.02 RESERVES. To the extent allowed by the Articles of Incorporation,
before payment of any dividend there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from
time to time, in their absolute discretion, deem proper as a reserve fund to
meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall deem conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it
was created.

12.03 REPORTS. The Board of Directors shall, when requested by the
holders of at least twenty-five percent (25%) of the outstanding shares
entitled to vote, prepare and send to the shareholders a report, not more
often than quarterly, of the amount of business and the financial condition
of the corporation.

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12.04 CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors from time to time may designate.

12.05 FISCAL YEAR. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.

ARTICLE XIII

AMENDMENTS

The initial Bylaws of the corporation shall be adopted by the Board of
Directors. The power to alter, amend, or repeal the Bylaws or adopt new
Bylaws, subject to repeal or changes by action of the shareholders, is vested
in the Board of Directors. Thus, these Bylaws may be altered, amended, or
repealed or new Bylaws may be adopted at any regular or special meting of the
shareholders at which a quorum is present or represented, by the affirmative
vote of a majority of the shares entitled to vote at such meeting and present
or represented thereat, provided notice of the proposed repeal or change is
contained in the notice of such meeting of shareholders. The Bylaws may
contain any provision for the regulation and management of the affairs of the
corporation not inconsistent with the law or the Articles of Incorporation.

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

POOLING AND SERVICING AGREEMENT
Dated as of _____________1, 199__

by and between

RESIDENTIAL INVESTORS CORPORATION
(Depositor)

and

REMODELERS NATIONAL FUNDING CORP.
(Transferor and Servicer)

and

___________________________________________
(Trustee)

REMODELERS HOME IMPROVEMENT LOAN ASSET-BACKED CERTIFICATES,
SERIES 199__-__

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

<PAGE>

TABLE OF CONTENTS
Page
----

ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Addition Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Aggregate FHA Insurance Premium Deposit Amount. . . . . . . . . . . . . 1
Aggregate FHA Insurance Proceeds. . . . . . . . . . . . . . . . . . . . 1
Aggregate FHA Premium Requirement . . . . . . . . . . . . . . . . . . . 2
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Amount Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Annual FHA Premium Rate . . . . . . . . . . . . . . . . . . . . . . . . 2
Assignment of Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . 2
Assumed Pool Principal Balance. . . . . . . . . . . . . . . . . . . . . 2
Authorized Denominations. . . . . . . . . . . . . . . . . . . . . . . . 2
Available Remittance Amount . . . . . . . . . . . . . . . . . . . . . . 2
Beneficial Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Book-Entry Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 3
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capitalized Interest Account. . . . . . . . . . . . . . . . . . . . . . 3
Capitalized Interest Account Deposit. . . . . . . . . . . . . . . . . . 3
Capitalized Interest Account Requirement. . . . . . . . . . . . . . . . 3
Capitalized Interest Amount . . . . . . . . . . . . . . . . . . . . . . 3
Capitalized Interest Excess . . . . . . . . . . . . . . . . . . . . . . 3
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Account . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Insurer Default . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Insurer Reimbursement Amount. . . . . . . . . . . . . . . . 4
Certificate Insurer Premium . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Interest Rate . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Register. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Registrar . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificate Transferor. . . . . . . . . . . . . . . . . . . . . . . . . 4
Certificateholder or Holder . . . . . . . . . . . . . . . . . . . . . . 4
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A Certificateholder . . . . . . . . . . . . . . . . . . . . . . . 5
Class A Overcollateralization . . . . . . . . . . . . . . . . . . . . . 5
Class A-1 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A-2 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A-3 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A-4 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class B Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class B Certificateholder . . . . . . . . . . . . . . . . . . . . . . . 5
Class B Loss Reimbursement Amount . . . . . . . . . . . . . . . . . . . 5
Class Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

- i -

<PAGE>

Class Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . 5
Class R Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class R Certificateholder . . . . . . . . . . . . . . . . . . . . . . . 6
Class R Distribution Trigger. . . . . . . . . . . . . . . . . . . . . . 6
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Collection Account. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Completion Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 6
Conventional Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . 6
Credit Support Reduction Date . . . . . . . . . . . . . . . . . . . . . 6
Custodial Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Custodian Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Cut-Off Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Defaulted Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . 6
Deficiency Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Deleted Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . . 7
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Due Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Due Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Duff & Phelps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Eligible Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Eligible Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Excess FHA Premium Amount . . . . . . . . . . . . . . . . . . . . . . . 8
Excess Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Expected Loan Losses. . . . . . . . . . . . . . . . . . . . . . . . . . 8
FDIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FHA Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FHA Claim Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FHA Claims Administration Agreement . . . . . . . . . . . . . . . . . . 8
FHA Claims Administrator. . . . . . . . . . . . . . . . . . . . . . . . 8
FHA Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FHA Insurance Amount. . . . . . . . . . . . . . . . . . . . . . . . . . 8
FHA Insurance Premium Account . . . . . . . . . . . . . . . . . . . . . 9
FHA Insurance Premium Deposit Amount. . . . . . . . . . . . . . . . . . 9
FHA Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 9
FHA Insurance Transfer Certificate. . . . . . . . . . . . . . . . . . . 9
FHA Premium Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FHA Premium Requirement . . . . . . . . . . . . . . . . . . . . . . . . 9
FHA Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FHA Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Fidelity Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FNMA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

- ii -

<PAGE>

Funding Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Guaranteed Payment. . . . . . . . . . . . . . . . . . . . . . . . . . .10
Guaranty Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Guaranty Policy Proceeds. . . . . . . . . . . . . . . . . . . . . . . .10
HUD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Initial Class A Overcollateralization . . . . . . . . . . . . . . . . .10
Initial FHA Insurance Amount. . . . . . . . . . . . . . . . . . . . . .10
Initial FHA Insurance Premium Account Deposit . . . . . . . . . . . . .10
Initial Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . .10
Initial Pool Principal Balance. . . . . . . . . . . . . . . . . . . . .11
Insurance Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .11
Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Insured Certificates. . . . . . . . . . . . . . . . . . . . . . . . . .11
Interest Carry-Forward Amount . . . . . . . . . . . . . . . . . . . . .11
Interest Remittance Amount. . . . . . . . . . . . . . . . . . . . . . .11
Interest Shortfall. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Interest Shortfall Rate . . . . . . . . . . . . . . . . . . . . . . . .12
Liquidated Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . .12
Liquidation Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . .12
Loan Sale Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .12
Majority Certificateholders . . . . . . . . . . . . . . . . . . . . . .12
Modified Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . . .12
Monthly Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Mortgage Loan Interest Rate . . . . . . . . . . . . . . . . . . . . . .13
Mortgage Loan Schedule. . . . . . . . . . . . . . . . . . . . . . . . .13
Mortgage Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Mortgaged Property. . . . . . . . . . . . . . . . . . . . . . . . . . .13
Mortgaged Property States . . . . . . . . . . . . . . . . . . . . . . .13
Net Liquidation Proceeds. . . . . . . . . . . . . . . . . . . . . . . .13
Net Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Non-United States Person. . . . . . . . . . . . . . . . . . . . . . . .14
Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Obligor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . .14
Original Class Principal Balance. . . . . . . . . . . . . . . . . . . .14
Ownership Interest. . . . . . . . . . . . . . . . . . . . . . . . . . .14
Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . .14
Permitted Instruments . . . . . . . . . . . . . . . . . . . . . . . . .15
Permitted Transferee. . . . . . . . . . . . . . . . . . . . . . . . . .16
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Pool Principal Balance. . . . . . . . . . . . . . . . . . . . . . . . .17
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . .17
Pre-Funding Account Deposit . . . . . . . . . . . . . . . . . . . . . .17
Pre-Funding Termination Remittance Date . . . . . . . . . . . . . . . .17

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Preference Amount . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . . . . . .17
Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Principal Carry-Forward Amount. . . . . . . . . . . . . . . . . . . . .17
Principal Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . .18
Principal Remittance Amount . . . . . . . . . . . . . . . . . . . . . .18
Projected Interest Shortfall. . . . . . . . . . . . . . . . . . . . . .18
Qualified Mortgage. . . . . . . . . . . . . . . . . . . . . . . . . . .18
Qualified Substitute Mortgage Loan. . . . . . . . . . . . . . . . . . .18
Rating Agency or Rating Agencies. . . . . . . . . . . . . . . . . . . .19
Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Released Mortgaged Property Proceeds. . . . . . . . . . . . . . . . . .19
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
REMIC Administrative Fee. . . . . . . . . . . . . . . . . . . . . . . .20
REMIC Administrator . . . . . . . . . . . . . . . . . . . . . . . . . .20
REMIC Change of Law . . . . . . . . . . . . . . . . . . . . . . . . . .20
REMIC Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
REMIC Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Remittance Amount . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Remittance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
REO Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
REO Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Required Class A Overcollateralization Level. . . . . . . . . . . . . .21
Required Conventional OC Level. . . . . . . . . . . . . . . . . . . . .21
Required Conventional Credit Support Multiple . . . . . . . . . . . . .21
Required Title I OC Level . . . . . . . . . . . . . . . . . . . . . . .22
Required Title I Credit Support Multiple. . . . . . . . . . . . . . . .22
Residual Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . .23
Series or Series 199__-__ . . . . . . . . . . . . . . . . . . . . . . .23
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Servicer's Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . .23
Servicer's Monthly Remittance Report. . . . . . . . . . . . . . . . . .23
Servicer's Monthly Statement. . . . . . . . . . . . . . . . . . . . . .23
Servicer's Mortgage Loan File . . . . . . . . . . . . . . . . . . . . .23
Servicing Advances. . . . . . . . . . . . . . . . . . . . . . . . . . .23
Servicing Compensation. . . . . . . . . . . . . . . . . . . . . . . . .24
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Servicing Officer . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Standard & Poor's . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Startup Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Subsequent Mortgage Loan. . . . . . . . . . . . . . . . . . . . . . . .24
Subsequent Purchase Price . . . . . . . . . . . . . . . . . . . . . . .24
Subsequent Transfer Agreement . . . . . . . . . . . . . . . . . . . . .24
Subsequent Transfer Date. . . . . . . . . . . . . . . . . . . . . . . .25
Subservicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Subservicing Account. . . . . . . . . . . . . . . . . . . . . . . . . .25

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Subservicing Agreement. . . . . . . . . . . . . . . . . . . . . . . . .25
Substitution Adjustment . . . . . . . . . . . . . . . . . . . . . . . .25
Superior Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Tax Matters Person. . . . . . . . . . . . . . . . . . . . . . . . . . .25
Tax Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Termination Price . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Title I Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . . .25
Title I Pool Principal Balance. . . . . . . . . . . . . . . . . . . . .26
Title I Program . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Transfer Affidavit and Agreement. . . . . . . . . . . . . . . . . . . .26
Transfer Certificate. . . . . . . . . . . . . . . . . . . . . . . . . .26
Transferor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Trust Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Trustee Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Trustee's Mortgage Loan File. . . . . . . . . . . . . . . . . . . . . .27
United States Person. . . . . . . . . . . . . . . . . . . . . . . . . .27
Weighted Average Balance. . . . . . . . . . . . . . . . . . . . . . . .27
Weighted Average Certificate Interest Rate. . . . . . . . . . . . . . .27

ARTICLE II - SALE AND CONVEYANCE OF THE TRUST FUND . . . . . . . . . . . . .28
Section 2.01 Creation of Trust Fund; Transfer of Trust Fund Assets;
Issuance of Certificates Evidencing Interests in Trust
Fund; Priority and Subordination of Ownership
Interests. . . . . . . . . . . . . . . . . . . . . . . .28
Section 2.02 Conveyance of the Subsequent Mortgage Loans; Fixed
Price Contract . . . . . . . . . . . . . . . . . . . . .30
Section 2.03 Ownership and Possession of Mortgage Loan Files. . . . .32
Section 2.04 Books and Records. . . . . . . . . . . . . . . . . . . .32
Section 2.05 Delivery of Mortgage Loan Documents. . . . . . . . . . .32
Section 2.06 Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee. . . . . . . . .34
Section 2.07 Designations under REMIC Provisions; Designation of
Startup Day; REMIC Certificate Maturity Date . . . . . .36

ARTICLE III - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .36
Section 3.01 Representations and Warranties of the Depositor. . . . .36
Section 3.02 Representations, Warranties and Covenants of the
Servicer and Transferor. . . . . . . . . . . . . . . . .39
Section 3.03 Individual Mortgage Loans. . . . . . . . . . . . . . . .40
Section 3.04 Subsequent Mortgage Loans. . . . . . . . . . . . . . . .45
Section 3.05 Purchase and Substitution. . . . . . . . . . . . . . . .46

ARTICLE IV - THE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . .48
Section 4.01 The Certificates . . . . . . . . . . . . . . . . . . . .48
Section 4.02 Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . . . .49
Section 4.03 Mutilated, Destroyed, Lost or Stolen Certificates. . . .53
Section 4.04 Book-Entry Certificates. . . . . . . . . . . . . . . . .53

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<PAGE>

Section 4.05 Persons Deemed Owners. . . . . . . . . . . . . . . . . .54
Section 4.06 The Guaranty Policy. . . . . . . . . . . . . . . . . . .54

ARTICLE V - ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS . . . . . . .55
Section 5.01 Duties of the Servicer . . . . . . . . . . . . . . . . .55
Section 5.02 Liquidation of Mortgage Loans. . . . . . . . . . . . . .57
Section 5.03 Establishment of Collection Accounts; Deposits in
Collection Accounts. . . . . . . . . . . . . . . . . . .58
Section 5.04 Permitted Withdrawals From the Collection Account. . . .59
Section 5.05 Initial Collection Account; Transfer of Collection
Account. . . . . . . . . . . . . . . . . . . . . . . . .60
Section 5.06 Fidelity Bond; Errors and Omission Insurance . . . . . .60
Section 5.07 Title, Management and Disposition of REO Property. . . .61
Section 5.08 [Reserved] . . . . . . . . . . . . . . . . . . . . . . .62
Section 5.09 Access to Certain Documentation and Information
Regarding the Mortgage Loans . . . . . . . . . . . . . .62
Section 5.10 Superior Liens . . . . . . . . . . . . . . . . . . . . .62
Section 5.11 FHA Matters. . . . . . . . . . . . . . . . . . . . . . .62
Section 5.12 Subservicing . . . . . . . . . . . . . . . . . . . . . .65
Section 5.13 Duties of the Servicer relating to the REMIC.. . . . . .66
Section 5.14 The Standby Servicer.. . . . . . . . . . . . . . . . . .68
Section 5.15 Pre-Funding Account. . . . . . . . . . . . . . . . . . .68
Section 5.16 Capitalized Interest Account . . . . . . . . . . . . . .69

ARTICLE VI - DISTRIBUTIONS TO THE CERTIFICATEHOLDERS . . . . . . . . . . . .70
Section 6.01 Establishment of Certificate Account; Deposits in
Certificate Account. . . . . . . . . . . . . . . . . . .70
Section 6.02 Permitted Withdrawals from Certificate Account . . . . .70
Section 6.03 [Reserved] . . . . . . . . . . . . . . . . . . . . . . .71
Section 6.04 Investment of Accounts . . . . . . . . . . . . . . . . .71
Section 6.05 Priority and Subordination of Distributions;
Distributions and Transfers. . . . . . . . . . . . . . .71
Section 6.06 Statements . . . . . . . . . . . . . . . . . . . . . . .74
Section 6.07 Reports of Foreclosure and Abandonment of Mortgaged
Property . . . . . . . . . . . . . . . . . . . . . . . .77
Section 6.08 Specification of Certain Tax Matters . . . . . . . . . .78
Section 6.09 Establishment of FHA Insurance Premium Account;
Deposits in FHA Insurance Premium Account; Permitted
Withdrawals from FHA Insurance Premium Account . . . . .78
Section 6.10 Allocation of Losses . . . . . . . . . . . . . . . . . .79

ARTICLE VII - GENERAL SERVICING PROCEDURE. . . . . . . . . . . . . . . . . .80
Section 7.01 Assumption Agreements. . . . . . . . . . . . . . . . . .80
Section 7.02 Satisfaction of Mortgages and Release of Mortgage Loan
Files. . . . . . . . . . . . . . . . . . . . . . . . . .81
Section 7.03 Servicing Compensation . . . . . . . . . . . . . . . . .82
Section 7.04 Quarterly Statements as to Compliance. . . . . . . . . .83
Section 7.05 Annual Independent Public Accountants' Servicing
Report . . . . . . . . . . . . . . . . . . . . . . . . .83
Section 7.06 Certificateholder's and Trustee's Right to Examine
Servicer Records . . . . . . . . . . . . . . . . . . . .83
Section 7.07 Reports to the Trustee; Collection Account
Statements . . . . . . . . . . . . . . . . . . . . . . .84

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<PAGE>

ARTICLE VIII - REPORTS TO BE PROVIDED BY SERVICER. . . . . . . . . . . . . .84
Section 8.01 Financial Statements . . . . . . . . . . . . . . . . . .84

ARTICLE IX - THE SERVICER. . . . . . . . . . . . . . . . . . . . . . . . . .84
Section 9.01 Indemnification; Third Party Claims. . . . . . . . . . .84
Section 9.02 Merger or Consolidation of the Servicer. . . . . . . . .86
Section 9.03 Limitation on Liability of the Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . . .86
Section 9.04 Servicer Not to Resign; Assignment . . . . . . . . . . .86
Section 9.05 Relationship of Servicer . . . . . . . . . . . . . . . .87

ARTICLE X - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
Section 10.01 Events of Default. . . . . . . . . . . . . . . . . . . .87
Section 10.02 Standby Servicer to Act; Appointment of Successor. . . .89
Section 10.03 Waiver of Defaults . . . . . . . . . . . . . . . . . . .90
Section 10.04 Accounting Upon Termination of Servicer. . . . . . . . .91

ARTICLE XI - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . .91
Section 11.01 Termination. . . . . . . . . . . . . . . . . . . . . . .91
Section 11.02 Optional Termination by Servicer . . . . . . . . . . . .92
Section 11.03 Notice of Termination; Surrender and Cancellation of
Certificates.. . . . . . . . . . . . . . . . . . . . . .92
Section 11.04 Additional Termination Requirements. . . . . . . . . . .93

ARTICLE XII - THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . .94
Section 12.01 Duties of Trustee. . . . . . . . . . . . . . . . . . . .94
Section 12.02 Certain Matters Affecting the Trustee. . . . . . . . . .95
Section 12.03 Trustee Not Liable for Certificates or Mortgage
Loans. . . . . . . . . . . . . . . . . . . . . . . . . .97
Section 12.04 Trustee May Own Certificates . . . . . . . . . . . . . .97
Section 12.05 Trustee's Fees and Expenses. . . . . . . . . . . . . . .97
Section 12.06 Eligibility Requirements for Trustee . . . . . . . . . .98
Section 12.07 Resignation and Removal of the Trustee . . . . . . . . .98
Section 12.08 Successor Trustee. . . . . . . . . . . . . . . . . . . .99
Section 12.09 Merger or Consolidation of Trustee. . . . . . . . . . .100
Section 12.10 Appointment of Co-Trustee or Separate Trustee. . . . . 100
Section 12.11 Appointment of Custodians . . . . . . . . . . . . . . .101
Section 12.12 Trustee May Enforce Claims Without Possession of
Certificates. . . . . . . . . . . . . . . . . . . . . .102
Section 12.13 Suits for Enforcement . . . . . . . . . . . . . . . . .102

ARTICLE XIII - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . .102
Section 13.01 Acts of Certificateholders. . . . . . . . . . . . . . .102
Section 13.02 Amendment . . . . . . . . . . . . . . . . . . . . . . .102
Section 13.03 Recordation of Agreement. . . . . . . . . . . . . . . .103
Section 13.04 Duration of Agreement . . . . . . . . . . . . . . . . .104
Section 13.05 Governing Law . . . . . . . . . . . . . . . . . . . . .104
Section 13.06 Notices . . . . . . . . . . . . . . . . . . . . . . . .104
Section 13.07 Severability of Provisions. . . . . . . . . . . . . . .104
Section 13.08 No Partnership. . . . . . . . . . . . . . . . . . . . .105
Section 13.09 Counterparts. . . . . . . . . . . . . . . . . . . . . .105
Section 13.10 Successors and Assigns. . . . . . . . . . . . . . . . .105

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Section 13.11 Headings. . . . . . . . . . . . . . . . . . . . . . . .105
Section 13.12 Paying Agent. . . . . . . . . . . . . . . . . . . . . .105
Section 13.13 Actions of Certificateholders . . . . . . . . . . . . .106
Section 13.14 Reports to Rating Agencies. . . . . . . . . . . . . . .106
Section 13.15 Certificate Insurer Deemed Owner. . . . . . . . . . . .107
Section 13.16 Third Party Beneficiary . . . . . . . . . . . . . . . .107
Section 13.17 Suspension of Certificate Insurer's Rights. . . . . . .107

- viii -

<PAGE>

EXHIBITS

EXHIBIT A Contents of Mortgage Loan File
EXHIBIT B-1 Form of Class A Certificate
EXHIBIT B-2 Form of Class B Certificate
EXHIBIT B-3 Form of Class R Certificate
EXHIBIT C Form of Collection Account Letter Agreement
EXHIBIT D Form of Investment Letter
EXHIBIT E Form of Assignment
EXHIBIT F-1 Form of Trustee Initial Acknowledgment
EXHIBIT F-2 Form of Custodian Initial Acknowledgment
EXHIBIT G-1 Form of Trustee Final Certification
EXHIBIT G-2 Form of Custodian Final Certification
EXHIBIT H Mortgage Loan Schedule
EXHIBIT I Form of Request for Release of Documents
EXHIBIT J-1 Form of Transfer Affidavit and Agreement
EXHIBIT J-2 Form of Transfer Certificate
EXHIBIT K Form of Custodial Agreement
EXHIBIT L Form of Liquidation Report
EXHIBIT M Form of FHA Claims Administration Agreement between Trustee and
Servicer
EXHIBIT N Form of Servicer's Monthly Remittance Report to Trustee
EXHIBIT O Form of Certification for Assignment of Mortgage Loan
EXHIBIT P Form of Agreement of Appointment and Acceptance of Separate
Trustee
EXHIBIT Q Form of Subsequent Transfer Agreement

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This Pooling and Servicing Agreement is entered into effective as of
___________1, 199__, by and between ___________________________, as trustee (the
"TRUSTEE"), Remodelers Investment Corporation, as Depositor (the "DEPOSITOR"),
Remodelers National Funding Corp. ("RNFC"), as Transferor (in such capacity, the
"TRANSFEROR") and Servicer (in such capacity, the "SERVICER") and
__________________________, as standby servicer (the "STANDBY SERVICER"):

PRELIMINARY STATEMENT

The Depositor intends to sell home improvement loan pass-through
certificates (collectively, the "CERTIFICATES"), to be issued hereunder in
multiple classes, which in the aggregate will evidence the entire beneficial
ownership interest in the Trust Fund. As provided herein, the Trustee, at the
direction of the Depositor, will make an election to treat the Trust Fund (other
than the Pre-Funding Account and the Capitalized Interest Account) as a real
estate mortgage investment conduit ("REMIC") for federal income tax purposes.
The Class A Certificates and the Class B Certificates will be the "regular
interests" in the REMIC and the Class R Certificates will be the "residual
interest" therein.

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

ARTICLE 1.

DEFINITIONS

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

ACCOUNT: The Certificate Account, the Collection Account, the FHA
Insurance Premium Account, the Pre-Funding Account or the Capitalized Interest
Account.

ADDITION NOTICE: With respect to the transfer of Subsequent Mortgage
Loans to the Trust pursuant to SECTION 2.02 of this Agreement, notice of the
Depositor's designation of Subsequent Mortgage Loans to be sold to the Trust
Fund and the aggregate Principal Balance of such Subsequent Mortgage Loans as of
the related Cut-Off Date, which shall be given to the Trustee and to the
Certificate Insurer not later than three Business Days prior to the related
Subsequent Transfer Date.

AGGREGATE FHA INSURANCE PREMIUM DEPOSIT AMOUNT: As to any Determination
Date, the aggregate of the FHA Insurance Premium Deposit Amounts for all Title I
Mortgage Loans outstanding as of such Determination Date.

AGGREGATE FHA INSURANCE PROCEEDS: As of any date of determination and
with respect to the Title I Mortgage Loans only, the aggregate amount of all FHA
Insurance Proceeds received by the Trustee (directly or through any FHA Claims
Administrator), up to the last day of the immediately preceding Due Period.

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AGGREGATE FHA PREMIUM REQUIREMENT: As of the Determination Date occurring
in _____________ of each year commencing in 199__, the aggregate of the FHA
Premium Requirements for all Title I Mortgage Loans outstanding as of such
Determination Date.

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

AMOUNT AVAILABLE: With respect to any Remittance Date, the sum of (i) the
Available Remittance Amount (as reduced by any portion thereof that has been
deposited in the Certificate Account but may not be withdrawn therefrom pursuant
to an order of a United States bankruptcy court of competent jurisdiction
imposing a stay pursuant to Section 362 of the United States Bankruptcy Code),
(ii) all interest and gain, if any, on funds held in the Certificate Account and
(iii) any amount deposited into the Certificate Account from the Capitalized
Interest Account pursuant to SECTION 5.16(a).

ANNUAL FHA PREMIUM RATE: With respect to:

(i) Each Title I Mortgage Loan made to finance or refinance property
improvements, .50%; and

(ii) Each Title I Mortgage Loan made to finance or refinance the purchase
of a manufactured home and/or a lot on which a manufactured home will
be placed, or a share of a cooperative association which owns and
operates a manufactured home park, (A) for each year during the first
four years of the term of any such Mortgage Loan, 1.00%; (B) for each
of years five through seven of the term of any such Mortgage Loan,
.75%; and (C) for each year during the term of any such Mortgage Loan
subsequent to year seven, until the FHA premium charge is paid in
full, .50%.

ASSIGNMENT OF MORTGAGE: With respect to each Mortgage Loan secured by a
Mortgage, an assignment, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect of record the sale of the related Mortgage to the Trustee for
the benefit of the Certificateholders.

ASSUMED POOL PRINCIPAL BALANCE: On the Closing Date, the amount equal to
the sum of the Initial Pool Principal Balance, plus the Pre-Funding Account
Deposit, which amount is $__________.

AUTHORIZED DENOMINATIONS: Each of the Class A Certificates and the Class
B Certificates are issuable only in the minimum denomination of $250,000 or
integral multiples of $5,000 in excess thereof; provided, however, that one or
more Certificates of each such Class of Certificates shall be issuable in a
denomination (which may be less than the foregoing minimum denomination) equal
to an amount such that the aggregate denomination of all Certificates of such
Class shall be equal to the Original Class Principal Balance of such Class.

AVAILABLE REMITTANCE AMOUNT: With respect to any Remittance Date, the sum
of (A) all amounts described in clauses (i) through (ix) of SECTION 5.03
received by the Servicer or any Subservicer (including any amounts paid by the
Transferor, the Servicer or the Depositor and excluding any amounts not required
to be deposited in the Collection Account pursuant to

POOLING AND SERVICING AGREEMENT - Page 2

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SECTION 5.03 and any amounts withdrawn by the Servicer pursuant to clauses (ii)
through (vii) of SECTION 5.04 as of the related Determination Date) during the
related Due Period and deposited into the Certificate Account on the Business
Day prior to the related Remittance Date; (B) with respect to the Pre-Funding
Termination Remittance Date, amounts, if any, deposited into the Certificate
Account by the Trustee from the Pre-Funding Account pursuant to SECTION 5.15(c)
at the end of the Funding Period (net of reinvestment income transferred to the
Capitalized Interest Account); (C) with respect to the final Remittance Date in
connection with the purchase of all the Mortgage Loans and REO Properties by the
Servicer, the Termination Price. No amount included in the computation of the
Available Remittance Amount with respect to any Remittance Date by virtue of
being described by any component of the definition thereof shall be included
more than once by virtue of also being described by any other component or
otherwise.

BENEFICIAL OWNER: With respect to a Book-Entry Certificate, the person who
is the beneficial owner thereof.

BOOK-ENTRY CERTIFICATE: A definitive certificate evidencing 100% of a
Class of Class A Certificates registered in the name of DTC or its nominee,
beneficial ownership of which is reflected on the books of DTC or on books of a
Person maintaining an account with DTC (directly or as an indirect participant
in accordance with the rules of DTC). As of the Closing Date, each Class of
Class A Certificates constitutes a Class of Book-Entry Certificates. None of
the Class B Certificates or Class R Certificates constitutes a Class of Book-
Entry Certificates.

BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a day
on which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee is located are authorized or obligated by
law or executive order to be closed.

CAPITALIZED INTEREST ACCOUNT: The account established and maintained by
the Trustee pursuant to SECTION 5.16 hereof, which account shall contain the
Capitalized Interest Amount. The Capitalized Interest Account is not part of
the REMIC.

CAPITALIZED INTEREST ACCOUNT DEPOSIT: An amount equal to $___________.

CAPITALIZED INTEREST ACCOUNT REQUIREMENT: On the Closing Date, the
Capitalized Interest Account Requirement will equal the Capitalized Interest
Account Deposit. Thereafter, as determined by the Trustee on any Determination
Date prior to ________________, 199__, the Capitalized Interest Account
Requirement will equal the Projected Interest Shortfall.

CAPITALIZED INTEREST AMOUNT: The amount in the Capitalized Interest
Account as of any date of determination, after giving effect to (i) the
Capitalized Interest Account Deposit, (ii) amounts to be transferred to the
Certificate Account on the next Distribution Date pursuant to SECTION 5.16(a),
(iii) amounts released to the Depositor pursuant to SECTION 5.16(d), and (iv)
any amounts available under any letter of credit or, subject to the prior
consent of the Certificate Insurer, from immediately available funds deposited
with the Trustee pursuant to SECTION 5.16(c).

CAPITALIZED INTEREST EXCESS: The amount of excess funds on deposit in the
Capitalized Interest Account as a result of the delivery of Subsequent Mortgage
Loans; on any Determination Date occurring prior to _________________, 199__,
the Capitalized Interest Excess shall equal the

POOLING AND SERVICING AGREEMENT - Page 3

<PAGE>

greater of (i) zero and (ii) the Capitalized Interest Amount less the
Capitalized Interest Account Requirement.

CERTIFICATE: Any Class A Certificate (including any Class A-1
Certificate, any Class A-2 Certificate, any Class A-3 Certificate and any
Class A-4 Certificate), Class B Certificate or Class R Certificate executed by
the Trustee on behalf of the Trust Fund and authenticated by the Trustee,
substantially in the applicable form annexed hereto as EXHIBITS B-1, B-2 AND
B-3, respectively.

CERTIFICATE ACCOUNT: The account established and maintained by the
Trustee pursuant to SECTION 6.01 hereof.

CERTIFICATE INSURER: MBIA Insurance Corporation, as issuer of the
Guaranty Policy, and its successors and assigns; provided that the rights of the
Certificate Insurer hereunder (including the rights to direct certain actions
and receive certain notices) shall terminate at such time as the Class Principal
Balances of the Class A Certificates have been reduced to zero and the
Certificate Insurer has been reimbursed for all Guaranteed Payments and any
other amounts owed under the Guaranty Policy and the Insurance Agreement.

CERTIFICATE INSURER DEFAULT: The failure of the Certificate Insurer to
make payments under the Guaranty Policy, or the entry of an order or decree with
respect to the Certificate Insurer in any insolvency or bankruptcy proceedings
which remain unstayed or undischarged for 90 days.

CERTIFICATE INSURER REIMBURSEMENT AMOUNT: At any time, an amount owed to
the Certificate Insurer as reimbursement for any Guaranteed Payments made under
the Guaranty Policy, together with interest thereon at the rate specified in the
Insurance Agreement, which have not previously been reimbursed.

CERTIFICATE INSURER PREMIUM: As specified in the Insurance Agreement.

CERTIFICATE INTEREST RATE: With respect to a Class of Certificates, the
annual rate of interest payable to the Certificateholders of such Class of
Certificates. The Certificate Interest Rate with respect to the Class A-1
Certificates is equal to ____%, the Certificate Interest Rate with respect to
the Class A-2 Certificates is equal to ____%, the Certificate Interest Rate with
respect to the Class A-3 Certificates is equal to ____%, the Certificate
Interest Rate with respect to the Class A-4 Certificates is equal to ____%, and
the Certificate Interest Rate with respect to the Class B Certificates is equal
to ____%.

CERTIFICATE REGISTER: As defined in SECTION 4.02 hereof.

CERTIFICATE REGISTRAR: Initially, the Trustee, and thereafter, any
successor appointed pursuant to SECTION 4.02 hereof.

CERTIFICATE TRANSFEROR: Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.

CERTIFICATEHOLDER or HOLDER: Each Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purposes of
giving any consent, waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Depositor, the

POOLING AND SERVICING AGREEMENT - Page 4

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Servicer, Standby Servicer or any Subservicer, or registered in the name of any
Person known to a Responsible Officer of the Trustee to be an affiliate of any
of them, shall be deemed not to be outstanding and the undivided Percentage
Interest evidenced thereby shall not be taken into account in determining
whether the requisite Percentage Interest of Certificates necessary to effect
any such consent, waiver, request or demand has been obtained.

CLASS: Collectively, Certificates bearing the same class designation,
including (i) in certain instances an alphabetical and/or numerical designation
(i.e., A, B or R), (ii) in other instances the complete alphabetical and
numerical designations (A-1, A-2, A-3, A-4, B and R), and (iii) in other
instances a class of Insured Certificates (i.e., A-1, A-2, A-3 or A-4), and, in
case of clause (ii), whose form is identical except for variation in the
Percentage Interest or the initial principal balance evidenced thereby.

CLASS A CERTIFICATE: A Certificate denominated as a Class A-1, Class A-2,
Class A-3 or Class A-4 Certificate.

CLASS A CERTIFICATEHOLDER: A Holder of a Class A Certificate.

CLASS A OVERCOLLATERALIZATION: As calculated on any Determination Date
based on the distributions of funds and the allocations of Net Loan Losses that
will be made on the related Remittance Date, the amount equal to the excess of
(A) the sum of (i) the Pool Principal Balance and (ii) the amount on deposit in
the Pre-Funding Account over (B) the aggregate Class Principal Balances of all
Classes of Class A Certificates.

CLASS A-1 CERTIFICATE: A Certificate denominated as a Class A-1
Certificate.

CLASS A-2 CERTIFICATE: A Certificate denominated as a Class A-2
Certificate.

CLASS A-3 CERTIFICATE: A Certificate denominated as a Class A-3
Certificate.

CLASS A-4 CERTIFICATE: A Certificate denominated as a Class A-4
Certificate.

CLASS B CERTIFICATE: A Certificate denominated as a Class B Certificate.

CLASS B CERTIFICATEHOLDER: A Holder of a Class B Certificate.

CLASS B LOSS REIMBURSEMENT AMOUNT: As defined in SECTION 6.10(c).

CLASS POOL FACTOR: As of any date of determination and with respect to
each Class of Certificates, exclusive of the Class R Certificates, the then
applicable Class Principal Balance of the respective Class of Certificates
divided by the Original Class Principal Balance of such Class.

CLASS PRINCIPAL BALANCE: As of any date of determination and with respect
to each Class of Certificates, exclusive of the Class R Certificates, the
Original Class Principal Balance of each such Class reduced by the sum of (i)
all amounts previously distributed to Certificateholders of such Class in
respect of principal on all previous Remittance Dates pursuant to SECTION 6.05,
and (ii) all amounts allocated to such Class on all previous Remittance Dates
for losses and write-offs pursuant to SECTION 6.10.

POOLING AND SERVICING AGREEMENT - Page 5

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CLASS R CERTIFICATE: A Certificate denominated as a Class R Certificate
evidencing the Residual Interest in the REMIC for purposes of the REMIC
Provisions.

CLASS R CERTIFICATEHOLDER: A Holder of a Class R Certificate.

CLASS R DISTRIBUTION TRIGGER: As defined in SECTION 6.05(b)(xiv).

CLOSING DATE: _______________, 199__.

CODE: The Internal Revenue Code of 1986, as amended.

COLLECTION ACCOUNT: The account established and maintained by the
Servicer in accordance with SECTION 5.03.

COMPLETION CERTIFICATE: With respect to a Mortgage Loan made to finance
property improvements, a certificate executed by the related Obligor wherein
such Obligor states the related contractor or seller of the property improvement
has completed to such Obligor's satisfaction the improvements for which the
related Mortgage Loan was obtained.

CONVENTIONAL MORTGAGE LOAN: An Initial Mortgage Loan or a Subsequent
Mortgage Loan which is not covered by FHA Insurance.

CREDIT SUPPORT REDUCTION DATE: The Remittance Date occurring on the later
of: (i) the thirty-sixth (36th) Remittance Date; or (ii) the Remittance Date on
which the Pool Principal Balance is equal to or less than fifty percent (____%)
of the aggregate Principal Balances as of the applicable Cut-Off Dates of all
the Mortgage Loans.

CUSTODIAL AGREEMENT: An agreement for the retention of the Trustee's
Mortgage Loan Files initially in the form attached as EXHIBIT K hereto.

CUSTODIAN: Any Custodian appointed pursuant to a Custodial Agreement and
SECTION 12.11, which shall not be affiliated with the Servicer, the Standby
Servicer, any Subservicer or the Depositor. Bank One, Texas, National
Association, shall be the initial Custodian pursuant to the terms of the
Custodial Agreement dated _________________, 199__ by and between the Depositor,
RNFC, as the Transferor and the Servicer, the Trustee, and Bank One, Texas,
National Association, as the Custodian.

CUSTODIAN FEE: If applicable, the annual fee payable to the Custodian
(including the Trustee, if acting in such capacity), calculated and payable
monthly on each Remittance Date equal to ____% (_____ basis points) per annum of
the Pool Principal Balance as of the immediately preceding Determination Date,
except with respect to the first Remittance Date, when such monthly fee shall be
pro rated based on two days for the first Due Period.

CUT-OFF DATE: With respect to the Initial Mortgage Loans, the close of
business on ___________________, 199__ and with respect to each Subsequent
Mortgage Loan, the close of business on the date specified as such in the
applicable Subsequent Transfer Agreement.

POOLING AND SERVICING AGREEMENT - Page 6

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DEFAULTED MORTGAGE LOAN: With respect to the calculation of the Required
Conventional Credit Support Multiple and the Required Title I Credit Support
Multiple, during a Due Period, any Mortgage Loan, including without limitation
any Liquidated Mortgage Loan, with respect to which any of the following occurs:
(a) with respect to a Title I Mortgage Loan, an FHA Claim has been submitted;
(b) foreclosure proceedings have been commenced; (c) any portion of a scheduled
monthly payment of principal and interest becomes 180 days past due; or (d) the
Servicer or any Subservicer has determined in accordance with customary
servicing practices that the Mortgage Loan is uncollectible.

DEFICIENCY AMOUNT: With respect to the Guaranty Policy and as of any
Remittance Date, the amount by which the sum of the Interest Remittance Amount
and the Principal Remittance Amount for the Class A Certificates exceeds the
Amount Available for distribution on such Class A Certificates for such
Remittance Date.

DELETED MORTGAGE LOAN: A Mortgage Loan replaced by or to be replaced by a
Qualified Substitute Mortgage Loan.

DEPOSITOR: Remodelers Investment Corporation, a Nevada corporation, and
any successor thereto.

DETERMINATION DATE: The day of each month which is five (5) Business Days
prior to the related Remittance Date.

DTC: The Depository Trust Company.

DUE DATE: The day of the month on which the Monthly Payment is due from
the Obligor on a Mortgage Loan.

DUE PERIOD: With respect to each Remittance Date, the calendar month
preceding the month in which such Remittance Date occurs, except with respect to
the first Remittance Date, the partial calendar month commencing on
__________________, 199__.

DUFF & PHELPS: Duff & Phelps Credit Rating Co., or any successor thereto.

ELIGIBLE ACCOUNT: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of
their two highest long-term rating categories, or (B) the short- term debt
obligations of which are then rated by each Rating Agency in their highest
short-term rating category; (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC; (iii) a trust account (which shall be a "segregated
trust account") maintained with the corporate trust department of a federal or
state chartered depository institution or trust company with trust powers and
acting in its fiduciary capacity for the benefit of the Trustee hereunder, which
depository institution or trust company shall have capital and surplus of not
less than $50,000,000; or (iv) an account that will not cause any Rating Agency
to downgrade or withdraw its then-current rating(s) assigned to the Class A
Certificates, as evidenced in writing by such Rating Agency. (Each reference in
this definition of "Eligible Account" to the Rating Agency shall be construed as
a reference to Standard & Poor's and Moody's.)

POOLING AND SERVICING AGREEMENT - Page 7

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ELIGIBLE SERVICER: A Person who is qualified to act as Servicer of the
Mortgage Loans under applicable federal and state laws and regulations and, with
respect to the servicing of any Title I Mortgage Loans, who is approved by HUD
to service loans insured under the Title I Program.

EVENT OF DEFAULT: As described in SECTION 10.01 hereof.

EXCESS FHA PREMIUM AMOUNT: As of the Determination Date occurring in
____________ of each year commencing in 199__, an amount equal to the greater of
(i) zero and (ii) the difference between (A) the amount on deposit in the FHA
Insurance Premium Account as of the last day of the immediately preceding Due
Period and (B) the Aggregate FHA Premium Requirement.

EXCESS SPREAD: As defined in SECTION 6.05(b)(xiv).

EXPECTED LOAN LOSSES: As defined in SECTION 10.01(a)(vii).

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

FHA: The Federal Housing Administration of HUD and any successor thereto.
Unless the context otherwise requires, the FHA and HUD are referred to herein
collectively as the "FHA".

FHA CLAIM: A claim for reimbursement of loss properly filed with the FHA
under the FHA Insurance applicable to a Title I Mortgage Loan.

FHA CLAIM AMOUNT: With respect to any Title I Mortgage Loan with respect
to which an FHA Claim is made, an amount equal to the amount the Trustee (or any
FHA Claims Administrator) is entitled to claim under the FHA Insurance pursuant
to the FHA Regulations.

FHA CLAIMS ADMINISTRATION AGREEMENT: An agreement between the Trustee and
each FHA Claims Administrator relating to the administration of the FHA Claims
as provided in SECTION 5.11(e), a form of which is attached hereto as EXHIBIT M.

FHA CLAIMS ADMINISTRATOR: Initially, the Servicer, who shall serve as
such and as agent and attorney-in-fact for the Trustee for purposes of handling
all aspects of administering, processing and submitting FHA Claims, pursuant to
an FHA Claims Administration Agreement in the form attached hereto as EXHIBIT M;
and thereafter, any other Person that holds a valid contract of insurance with
and is approved by the FHA to originate, purchase, service and/or sell loans
insured under the Title I Program, and is appointed as a successor FHA Claims
Administrator to the Servicer pursuant to SECTION 5.11(e) hereof.

FHA INSURANCE: With respect to the Title I Mortgage Loans, the mortgage
insurance provided by the FHA pursuant to Title I of the National Housing Act of
1934, as amended.

FHA INSURANCE AMOUNT: As of any date of determination, an amount equal to
(i) the sum of (A) the Initial FHA Insurance Amount, (B) the FHA Insurance
attributable to any Qualified Substitute Mortgage Loan that replaces a Deleted
Mortgage Loan pursuant to SECTION 2.06 or 3.05 and (C) the amount of any FHA
Insurance attributable to FHA Insurance Proceeds reclaimed by the FHA in
connection with the rejection of an FHA Claim, less (ii) the sum of (A) the
Aggregate FHA Insurance Proceeds with respect to the Title I Mortgage Loans, (B)
that portion of the FHA Insurance

POOLING AND SERVICING AGREEMENT - Page 8

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Amount attributable to any Title I Mortgage Loan that is purchased or replaced
by the Transferor or the Depositor pursuant to SECTION 2.06 or 3.05, and (C) any
other insurance amounts deducted by the FHA from the Trustee's FHA Title I
insurance coverage reserve account which deduction is attributable to any
Title I Mortgage Loans.

FHA INSURANCE PREMIUM ACCOUNT: The account established and maintained by
the Trustee in accordance with SECTION 6.09.

FHA INSURANCE PREMIUM DEPOSIT AMOUNT: As to any Determination Date and
with respect to each Title I Mortgage Loan outstanding as of such date, an
amount equal to the product of (i) 1/12 and (ii) the FHA Premium Amount with
respect to such Title I Mortgage Loan.

FHA INSURANCE PROCEEDS: With respect to any Title I Mortgage Loan,
proceeds, if any, received by the Trustee (or any FHA Claims Administrator) from
the FHA pursuant to the FHA Insurance, which upon final payment of such proceeds
such Title I Mortgage Loan shall become a Liquidated Mortgage Loan, if not
previously so determined.

FHA INSURANCE TRANSFER CERTIFICATE: The written certification delivered
by the Trustee (or any FHA Claims Administrator) to the Depositor, the
Certificate Insurer and each Rating Agency pursuant to SECTION 5.11(b) hereof.

FHA PREMIUM AMOUNT: With respect to each Title I Mortgage Loan, an amount
per annum equal to the product of (i) the Annual FHA Premium Rate then
applicable to such Title I Mortgage Loan and (ii) the original principal balance
of such Title I Mortgage Loan.

FHA PREMIUM REQUIREMENT: As of the Determination Date occurring in
December of each year commencing in 199__ and with respect to each Title I
Mortgage Loan outstanding as of the last day of the immediately preceding Due
Period, an amount equal to the product of (i) the FHA Premium Amount and (ii) a
fraction the numerator of which is the number of full calendar months which have
elapsed since the most recent anniversary of the calendar month in which the
Title I Mortgage Loan was originated and the denominator of which is 12.

FHA REGULATIONS: The rules, regulations and procedures promulgated by HUD
under the National Housing Act of 1934, as amended, relating to Title I property
improvement loans and loans pertaining to manufactured homes and related real
property, currently found at 24 C.F.R. Parts 201 and 202, together with the "TI
Letters" and HUD Handbook 4700.2, as the same may be amended or supplemented
from time to time; provided that with respect to the origination or servicing of
a Title I Mortgage Loan, such rules and regulations that were in effect at the
time the relevant origination or servicing actions occurred.

FHA TRANSFER DATE: Each date on which the FHA reports to the Trustee the
transfer of the FHA Insurance with respect to any Title I Mortgage Loans from
the Transferor's contract of insurance to the Trustee's contract of insurance;
provided that each such date shall not be more than 120 days after (i) the
Closing Date, in the case of Initial Mortgage Loans that are Title I Mortgage
Loans or (ii) the related Subsequent Transfer Date, in the case of Subsequent
Mortgage Loans that are Title I Mortgage Loans; provided that such 120 day
period may be extended by the Transferor with the consent of the Certificate
Insurer.

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

FIDELITY BOND: As described in SECTION 5.06 hereof.

FNMA: The Federal National Mortgage Association and any successor
thereto.

FUNDING PERIOD: The period beginning on the Closing Date and ending on the
earlier of (a) the date on which the amount on deposit in the Pre-Funding
Account is reduced below $_______ and the Transferor directs that the Funding
Period end, or (b) the close of business on _____________, 199__; provided,
however, that the Funding Period shall end on the close of business on any
Determination Date prior to ___________, 199__ if the Depositor fails to deposit
with the Trustee on or before such Determination Date a letter of credit issued
by a financial institution, and in a form, approved by the Certificate Insurer
and the Rating Agencies or immediately available funds, subject to the prior
consent of the Certificate Insurer, in either case in an amount equal to any
positive difference between the Capitalized Interest Account Requirement and the
Capitalized Interest Amount as of such Determination Date.

GUARANTEED PAYMENT: With respect to the Guaranty Policy and as of any
Remittance Date, the sum of (i) any Deficiency Amount and (ii) any unpaid
Preference Amount.

GUARANTY POLICY: That certain certificate guaranty insurance policy for
the Insured Certificates, number ___________, dated ________________, 199__ and
issued by the Certificate Insurer to the Trustee guaranteeing payment on each
Remittance Date of the Interest Remittance Amount, Principal Remittance Amount
and any unpaid Preference Amounts in connection with the Insured Certificates.

GUARANTY POLICY PROCEEDS: With respect to the Insured Certificates, the
proceeds, if any, received by the Trustee from the Certificate Insurer pursuant
to the Guaranty Policy. Such Guaranty Policy Proceeds shall be applied solely
to the Insured Certificates pursuant to SECTION 4.06(c) and SECTION 6.05(b) in
the event of a shortfall with respect to the payment of any Interest Remittance
Amount or Principal Remittance Amount, each in respect of the Insured
Certificates only, on any Remittance Date.

HUD: The United States Department of Housing and Urban Development and
any successor thereto.

INITIAL CLASS A OVERCOLLATERALIZATION: On the Closing Date, the amount
equal to the excess of the Assumed Pool Principal Balance over the Original
Class Principal Balance of all Classes of Class A Certificates, which excess
shall initially equal the Original Class Principal Balance of the Class B
Certificate.

INITIAL FHA INSURANCE AMOUNT: After the final FHA Transfer Date, an amount
equal to the actual amount (expressed in dollars) of FHA Insurance transferred
on the books and records of the FHA from the Transferor to the Trustee in
respect of the Title I Mortgage Loans, including Initial Mortgage Loans and
Subsequent Mortgage Loans that are Title I Mortgage Loans.

INITIAL FHA INSURANCE PREMIUM ACCOUNT DEPOSIT: An amount equal to
$__________.

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INITIAL MORTGAGE LOAN: An individual property improvement and/or home
equity loan of the type described in SUBSECTION 3.03(v), which is assigned and
transferred to the Trustee pursuant to this Agreement on the Closing Date,
together with the rights and obligations of a holder thereof and payments
thereon and proceeds therefrom, the Initial Mortgage Loans subject to this
Agreement being identified on the Mortgage Loan Schedule annexed hereto as
EXHIBIT H.

INITIAL POOL PRINCIPAL BALANCE: $_____________, the Pool Principal
Balance as of the Cut-Off Date.

INSURANCE AGREEMENT: The Insurance and Indemnification Agreement, dated
as of ________________, 199__, between the Depositor, the Standby Servicer, the
Trustee, the Transferor, the Servicer, the FHA Claims Administrator, RAC
Financial Group, Inc. and the Certificate Insurer.

INSURANCE PROCEEDS: With respect to any Mortgage Loan, the proceeds paid
to the Trustee or the Servicer by any insurer pursuant to any insurance policy
covering a Mortgage Loan, Mortgaged Property, or REO Property or any other
insurance policy that relates to a Mortgage Loan, net of any expenses which are
incurred by the Servicer or the Trustee in connection with the collection of
such proceeds and not otherwise reimbursed to the Servicer, other than FHA
Insurance Proceeds, Guaranty Policy Proceeds and proceeds of any insurance
policy that are to be applied to the restoration or repair of the Mortgaged
Property or released to the Obligor in accordance with customary mortgage loan
servicing procedures for property improvement and/or home equity loans or
manufactured housing loans, as applicable.

INSURED CERTIFICATES: Each Class of the Class A Certificates.

INTEREST CARRY-FORWARD AMOUNT: As of any Remittance Date, the amount, if
any, by which (A) the Remittance Amount (excluding the amounts described in
clause (i) and (v) and the principal portion of clause (iii) of the definition
thereof) with respect to any Class of Certificates, exclusive of the Class R
Certificates, as of the immediately preceding Remittance Date exceeded (B) the
amount of the actual distributions of interest to the Holders of such Class of
Certificates made pursuant to the applicable clause in SECTION 6.05(b) for such
Class on such immediately preceding Remittance Date.

INTEREST REMITTANCE AMOUNT: As to any Remittance Date, and with respect to
the Class A Certificates and the Class B Certificates then outstanding, 30 days'
interest at the respective Certificate Interest Rate on the Class Principal
Balance of the respective Certificates, provided, however, that with respect to
the first Remittance Date, _____________, 199__, the Interest Remittance Amount
shall consist of only two days of interest at the respective Certificate
Interest Rates on the Class Principal Balance of the respective Certificates.

INTEREST SHORTFALL: The amount of the shortfall in interest on the Class
A Certificates and the Class B Certificates arising as a result of the
utilization of the Pre-Funding Account for the purchase by the Trust Fund of
Subsequent Mortgage Loans after the Closing Date. With respect to the
______________ 199__ Remittance Date, the Interest Shortfall is equal to two
days' interest on the Pre-Funding Account Deposit computed at a per annum rate
equal to the Weighted Average Certificate Interest Rate, based on the respective
Class Principal Balances on the Closing Date. With respect to the ____________
199__ Remittance Date and the ____________ 199__ Remittance

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Date, the Interest Shortfall will be equal to 30 days' interest on the average
daily balance in the Pre-Funding Account (net of interest and investment
earnings) during the related Due Period, computed at a per annum rate equal to
the Weighted Average Certificate Interest Rate as of the immediately preceding
Remittance Date (after distributions).

INTEREST SHORTFALL RATE: The per annum rate equal to ____%, such rate
having been derived as follows: (a)(i) the sum of (A) the Weighted Average
Certificate Interest Rate as of the Closing Date and (B) the Class A-4
Certificate Interest Rate, divided by (ii) two; minus (b) ____%.

LIQUIDATED MORTGAGE LOAN: Any Mortgage Loan or REO Property in respect of
a Mortgage Loan on which a Monthly Payment is in excess of 30 days past due and
as to which the Servicer has determined that all amounts which it reasonably and
in good faith expects to collect have been recovered from or on account of such
defaulted Mortgage Loan or the related REO Property; provided that in any event
such defaulted Mortgage Loan or the related REO Property shall be deemed
uncollectible and therefore deemed a Liquidated Mortgage Loan upon the earlier
of: (a) with respect to a Title I Mortgage Loan, the receipt of FHA Insurance
Proceeds after the submission of an FHA Claim, (b) the liquidation of the
related REO Property acquired through foreclosure or similar proceedings, (c)
the determination by the Servicer in accordance with customary servicing
practices that no further amounts are collectible from the Mortgage Loan and any
related security, or (d) the date on which any portion of a Monthly Payment on
any Mortgage Loan is in excess of 300 days past due.

LIQUIDATION PROCEEDS: With respect to a Liquidated Mortgage Loan, any cash
amounts received in connection with the liquidation of such Liquidated Mortgage
Loan, whether through trustee's sale, foreclosure sale, REO Disposition or
otherwise, and any other amounts required to be deposited in the Collection
Account pursuant to SECTION 5.07 hereof (in each case other than FHA Insurance
Proceeds, Insurance Proceeds and Released Mortgaged Property Proceeds).

LOAN SALE AGREEMENT: Each loan sale agreement entered into by the
Transferor, as purchaser, pursuant to which the Transferor has acquired any of
the Mortgage Loans and which shall include all of the rights and benefits of the
Transferor thereunder, subject to any limitations thereunder regarding
assignment by the Transferor.

MAJORITY CERTIFICATEHOLDERS: (i) Until such time as the sum of the Class
Principal Balances of all Classes of Class A Certificates have been reduced to
zero, the Holder or Holders of in excess of 50% of the Class Principal Balance
of all Classes of Class A Certificates (accordingly, the Holders of the Class B
Certificates shall be excluded from any rights or actions of the Majority
Certificateholders during such period); and (ii) thereafter, the Holder or
Holders of in excess of 50% of the Class Principal Balance of the Class B
Certificates.

MODIFIED MORTGAGE LOAN: A Mortgage Loan with respect to which the
Servicer has deferred delinquent interest and has modified the terms thereof to
increase the principal amount of such Mortgage Loan, both pursuant to SECTION
5.01(b).

MONTHLY PAYMENT: The scheduled monthly payment of principal and/or
interest required to be made by an Obligor on the related Mortgage Loan, as set
forth in the related Note.

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

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MORTGAGE: The mortgage, deed of trust or other instrument creating a lien
in accordance with applicable law on a Mortgaged Property to secure the Note
which evidences a secured Mortgage Loan.

MORTGAGE LOAN INTEREST RATE: The fixed annual rate of interest borne by a
Note, as shown on the related Mortgage Loan Schedule.

MORTGAGE LOAN SCHEDULE: The schedule of Initial Mortgage Loans attached
hereto as EXHIBIT H, as amended or supplemented from time to time, including any
schedules of Subsequent Mortgage Loans attached as exhibits to any Subsequent
Transfer Agreement, such schedules identifying each Mortgage Loan by address of
the Mortgaged Property and the name(s) of each Obligor and setting forth as to
each Mortgage Loan the following information: (i) the Principal Balance as of
the applicable Cut-Off Date, (ii) the account number, (iii) the original
principal amount, (iv) the Due Date, (v) the Mortgage Loan Interest Rate, (vi)
the first date on which a Monthly Payment is due under the related Note, (vii)
the Monthly Payment, (viii) the maturity date of the related Note, (ix) the
remaining number of months to maturity as of the applicable Cut-Off Date, (x)
the applicable Mortgaged Property State and (xi) whether the Mortgage Loan is a
Title I Mortgage Loan or a Conventional Mortgage Loan, except for approximately
80 Initial Mortgage Loans for which the Mortgaged Property address and state has
not been set forth thereon, but with respect to which the Depositor and the
Transferor shall provide such information within 30 days after the Closing Date.

MORTGAGE LOANS: The Initial Mortgage Loans and the Subsequent Mortgage
Loans. As applicable, Mortgage Loan shall be deemed to refer to the related
Note, Mortgage, and any related REO Property acquired through foreclosure of a
related Mortgage. The term "Mortgage Loan" shall include and encompass, as to
any Title I Mortgage Loan, the FHA Insurance applicable thereto, the right to
file an FHA Claim thereunder and the right to receive any FHA Insurance Proceeds
in respect thereof.

MORTGAGED PROPERTY: The property (real, personal or mixed) encumbered by
the Mortgage which secures the Note evidencing a secured Mortgage Loan.

MORTGAGED PROPERTY STATES: Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Iowa, Kansas,
Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi,
Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Carolina,
Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee,
Texas, Utah, Virginia, Washington, Wisconsin, Wyoming and any other state
wherein a Mortgaged Property securing any Subsequent Mortgage Loan may be
located.

NET LIQUIDATION PROCEEDS: Liquidation Proceeds net of any reimbursements
to the Servicer made therefrom for any unreimbursed Servicing Advances made and
any other fees and expenses paid in connection with the foreclosure,
conservation and liquidation of the related Mortgage Loan or REO Property
pursuant to SECTIONS 5.02 AND 5.07 hereof.

NET LOAN LOSSES: On each Remittance Date, with respect to the Liquidated
Mortgage Loans occurring or becoming such during the immediately preceding Due
Period, an amount (but not less than zero) determined as of the related
Determination Date equal to:

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(i) the aggregate uncollected Principal Balances of and accrued and unpaid
interest on such Liquidated Mortgage Loans as of the last day of such
Due Period, with interest computed at the sum of the Weighted Average
Certificate Interest Rate, and the rates at which the Trustee Fee, the
Custodian Fee, the REMIC Administrator Fee, the Servicing Fee and the
Certificate Insurer Premium, if any, are calculated, for such
Liquidated Mortgage Loans determined as of the date of determination,
and without the application of any amounts included in clause (ii)
below, less

(ii) the aggregate amount of any recoveries with respect to such Liquidated
Mortgage Loans from whatever source received during such Due Period,
including any Net Liquidation Proceeds, any FHA Insurance Proceeds,
any Insurance Proceeds, any Released Mortgaged Property Proceeds, any
payments from the related Obligor and any payments made pursuant to
SECTION 3.05.

NON-UNITED STATES PERSON: Any Person other than a United States Person.

NOTE: The note or other evidence of indebtedness evidencing the
indebtedness of an Obligor under a Mortgage Loan.

OBLIGOR: Each obligor on a Note.

OFFICER'S CERTIFICATE: A certificate delivered to the Trustee signed by
the President or a Vice President or an Assistant Vice President of the
Depositor, the Servicer, the Standby Servicer, or any FHA Claims Administrator
then serving as agent and attorney-in-fact for the Trustee, in each case, as
required by this Agreement.

ORIGINAL CLASS PRINCIPAL BALANCE: In the case of the Class A-1
Certificates, $__________; in the case of the Class A-2 Certificates, $________;
in the case of the Class A-3 Certificates, $__________; in the case of the
Class A-4 Certificates, $__________; and in the case of the Class B
Certificates, $__________.

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.

PAYING AGENT: Initially, the Trustee, and thereafter, the Trustee or any
other Person that meets the eligibility standards for the Paying Agent specified
in SECTION 13.12 and is authorized by the Trustee to make payments on the
Certificates on behalf of the Trustee.

PERCENTAGE INTEREST: With respect to any Certificate, except the Class R
Certificates, the portion of the Class evidenced by such Certificate, expressed
as a percentage rounded to five decimal places, equivalent to a fraction the
numerator of which is the denomination represented by such Certificate and the
denominator of which is the Original Class Principal Balance of such Class.
With respect to any Class R Certificate, the portion of the Class evidenced
thereby as stated on the face of such Certificate.

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PERMITTED INSTRUMENTS: Each of the following:

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

(ii) a repurchase agreement that satisfies the following criteria and
is acceptable to the Certificate Insurer: (1) must be between the Trustee
and either (a) primary dealers on the Federal Reserve reporting dealer list
which are rated in one of the two highest categories for long-term
unsecured debt obligations by each Rating Agency, or (b) banks rated in one
of the two highest categories for long-term unsecured debt obligations by
each Rating Agency; and (2) the written repurchase agreement must include
the following: (a) securities which are acceptable for the transfer and
are either (I) direct U.S. governments obligations, or (II) obligations of
a Federal agency that are backed by the full faith and credit of the U.S.
government, or FNMA or FHLMC; (b) a term no greater than 60 days for any
repurchase transaction; (c) the collateral must be delivered to the Trustee
or a third party custodian acting as agent for the Trustee by appropriate
book entries and confirmation statements, with a copy to the Certificate
Insurer, and must have been delivered before or simultaneous with payment
(i.e., perfection by possession of certificated securities); and (d) the
securities sold thereunder must be valued weekly, marked-to-market at
current market price plus accrued interest and the value of the collateral
must be equal to at least 104% of the amount of cash transferred by the
Trustee under the repurchase agreement and if the value of the securities
held as collateral declines to an amount below 104% of the cash transferred
by the Trustee plus accrued interest (i.e. a margin call), then additional
cash and/or acceptable securities must be transferred to the Trustee to
satisfy such margin call; provided, however, that if the securities used as
collateral are obligations of FNMA or FHLMC, then the value of the
securities held as collateral must equal at least 105% of the cash
transferred by the Trustee under such repurchase agreement;

(iii) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust company
incorporated under the laws of the United States or any state, including
the Trustee; provided that the debt obligations of such depository
institution or trust company at the date of the acquisition thereof have
been rated by each Rating Agency in one of its two highest long-term rating
categories;

(iv) deposits, including deposits with the Trustee, which are fully
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund of the FDIC, as the case may be;

(v) commercial paper of any corporation incorporated under the laws
of the United States or any state thereof, including corporate affiliates
of the Trustee, which at the date of acquisition is rated by each Rating
Agency in its highest short-term rating category and which has an original
maturity of not more than 365 days;

(vi) debt obligations rated by each Rating Agency at the time at which
the investment is made in its highest long-term rating category (or those
investments specified in (iii) above with depository institutions which
have debt obligations rated by each Rating Agency in one of its two highest
long-term rating categories);

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(vii) money market funds which are rated by each Rating Agency at
the time at which the investment is made in its highest long-term rating
category, any such money market funds which provide for demand withdrawals
being conclusively deemed to satisfy any maturity requirements for
Permitted Instruments set forth in the Certificates or this Agreement; or

(viii) any other demand, money market or time deposit obligation,
security or investment as may be acceptable to each Rating Agency and the
Certificate Insurer at the time at which the investment is made;

provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where the interest
and principal payments with respect to such instrument provide a yield to
maturity at par greater than 120% of the yield to maturity at par of the
underlying obligations; and provided, further, that no instrument described in
the foregoing subparagraphs may be purchased at a price greater than par if such
instrument may be prepaid or called at a price less than its purchase price
prior to stated maturity.

Each reference in this definition of "Permitted Instruments" to the Rating
Agency shall be construed, in the case of each subparagraph above referring to
each Rating Agency, as a reference to Standard & Poor's and Moody's.

PERMITTED TRANSFEREE: Any Person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization (as
defined below) or any agency or instrumentality of either of the foregoing,
(iii) an organization (except certain farmers' cooperatives described in Section
521 of the Code) which is exempt from tax imposed by Chapter 1 of the Code
(including the tax imposed by Section 511 of the Code on unrelated business
taxable income) on any excess inclusions (as defined in Section 860E(c)(1) of
the Code) with respect to any Class R Certificate, (iv) rural electric and
telephone cooperatives described in Section 1381(a)(2)(C) of the Code, (v) any
other Person so designated by the Trustee or the Depositor if the transfer of an
Ownership Interest in a Class R Certificate to such Person may cause the REMIC
to fail to qualify as a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code at any time that any Certificates are
outstanding, or (vi) any other Person so designated by the Trustee based upon an
opinion of counsel, which opinion shall be at the expense of the Transferor,
that the holding of an Ownership Interest in a Class R Certificate by such
Person may cause the Trust Fund or any Person having an Ownership Interest in
any Class of Certificates, other than such Person, to incur a liability for any
federal tax imposed under the Code that would not otherwise be imposed but for
the Transfer of an Ownership Interest in a 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 or successor provisions. A
corporation will not be treated as an instrumentality of the United States or of
any State or political subdivision thereof for these purposes if all of its
activities are subject to tax and, with the exception of FHLMC, a majority of
its board of directors is not selected by any such governmental unit.

POOLING AND SERVICING AGREEMENT - Page 16

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

PLAN: As defined in Section 4.02(e).

POOL PRINCIPAL BALANCE: The aggregate Principal Balances as of any
Determination Date.

POST LIQUIDATION PROCEEDS: As defined in SECTION 5.02.

PRE-FUNDING ACCOUNT: The account established and maintained by the
Trustee pursuant to SECTION 5.15, which account is NOT part of the REMIC.

PRE-FUNDING ACCOUNT DEPOSIT: An amount equal to $__________.

PRE-FUNDING TERMINATION REMITTANCE DATE: The first Remittance Date
following the Due Period in which the Funding Period ends.

PREFERENCE AMOUNT: Any amount previously distributed to the Holder of an
Insured Certificate 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, non-appealable order of a court having
competent jurisdiction.

PREPAYMENT ASSUMPTION: For REMIC purposes, an assumed constant rate of
prepayment equal to ____% per annum.

PRINCIPAL BALANCE: With respect to any Mortgage Loan or related REO
Property, (i) at the applicable Cut-Off Date, the outstanding principal balance
of the Mortgage Loan as of such Cut-Off Date and (ii) with respect to any Due
Period after such Cut-Off Date, the outstanding principal balance of the
Mortgage Loan as of the first day of such Due Period (after considering all
payments received thereon and any writedowns effected with respect to
reclassifying this Mortgage Loan as a Liquidated Mortgage Loan during the
immediately preceding Due Period), without giving effect to amounts received in
respect of such Mortgage Loan or related REO Property after such day; PROVIDED,
HOWEVER, with respect to a Modified Mortgage Loan, the Principal Balance of such
Modified Mortgage Loan shall be the product of (i) the outstanding principal
balance thereof as of the first day of such Due Period and (ii) the REMIC Factor
for such Modified Mortgage Loan.

PRINCIPAL CARRY-FORWARD AMOUNT: As of any Remittance Date, the amount, if
any, by which (i) the Remittance Amount (excluding the amounts described in
clauses (ii) and (iv) and the interest portion of clause (iii) of the definition
thereof) with respect to any Class of Certificates, exclusive of the Class R
Certificates, as of the immediately preceding Remittance Date exceeded (ii) the
amount of the actual distribution of principal to the Holders of such Class of
Certificates made pursuant to the applicable clause in SECTION 6.05(b) for such
Class on such immediately preceding Remittance Date.

PRINCIPAL PREPAYMENT: With respect to any Mortgage Loan and with respect
to any Due Period, any principal amount received on a Mortgage Loan in excess of
the scheduled principal amount included in the Monthly Payment due on the Due
Date in such Due Period.

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PRINCIPAL REMITTANCE AMOUNT: As to any Remittance Date (other than the
Remittance Date described in the next succeeding sentence) and with respect to
the Class A Certificates and the Class B Certificates, the amount of principal
required to be distributed on such Remittance Date from the Amount Available,
such amount of principal, subject to the following two sentences, being equal to
the lesser of (A) the sum of the Class Principal Balance of each such Class of
Certificates immediately prior to such Remittance Date and (B) the sum of (i)
each payment of scheduled principal received by the Servicer (exclusive of
Principal Prepayments and amounts described in clause (B)(iii) hereof) in the
related Due Period, excluding any partial or advance payments (other than any
Principal Prepayments) held by the Servicer in accordance with customary
mortgage loan servicing practices and the FHA Regulations, if applicable; (ii)
all Principal Prepayments received by the Servicer during the related Due
Period; (iii) the principal portion (as determined in accordance with SECTION
2.08) of all Net Liquidation Proceeds, FHA Insurance Proceeds, Insurance
Proceeds and Released Mortgaged Property Proceeds received during the related
Due Period; (iv) (a) that portion of the purchase price (as provided in SECTION
3.05(a)) of any repurchased Mortgage Loans which represents principal and (b)
the principal portion of any Substitution Adjustments required to be deposited
in the Collection Account as of the related Determination Date; and (v) upon the
reduction of the Class A Overcollateralization to zero, the principal portion of
any Net Loan Losses in excess of such Class A Overcollateralization. As to the
final Remittance Date, subject to the following sentence, the amount of
principal required to be distributed on such Remittance Date from the Amount
Available in respect of the Class A Certificates and the Class B Certificates
shall be equal to the amount described in clause (A) of the immediately
preceding sentence. The purpose and intent of clause (v) of the first sentence
of this definition is that, for purpose of calculating the Deficiency Amount in
respect of a Class of Insured Certificates and the Principal Remittance Amount
distributable to such Class pursuant to SECTION 6.05(b), the amount of Net Loan
Losses allocated to such Class of Insured Certificates pursuant to SECTION 6.10
on such Remittance Date shall be added to, as applicable, the amount of
principal calculated pursuant to each of the two preceding sentences in
determining the Principal Remittance Amount for such Class.

PROJECTED INTEREST SHORTFALL: As determined by the Trustee on any
Determination Date prior to _____________, 199__, the Projected Interest
Shortfall shall be the amount equal to the Interest Shortfall Rate multiplied by
the Weighted Average Balance in the Pre-Funding Account as of such Determination
Date, multiplied by the number of days in the Due Period in which such
Determination Date occurs and any Due Period thereafter ending on or before
______________, 199__ (assuming a 360-day year consisting of twelve 30-day
months) and divided by 360 days.

PROSPECTUS: The Prospectus of the Depositor regarding Mortgage
Certificates, dated ________________, 19__, together with the Prospecuts
Supplement of the Depositor regarding Home Improvement Loan Asset-Backed
Certificates, dated _____________, 19__.

QUALIFIED MORTGAGE: The meaning set forth for such term 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 2.06 or 3.05, which
(i) has or have an interest rate or rates of not less than (and not more than
two percentage points more than) the Mortgage Loan Interest Rate for the Deleted
Mortgage Loan, (ii) matures or mature not more than one year later than and not
more than one year earlier than the Deleted Mortgage Loan, (iii) has or have a
principal balance or principal balances (after application of all payments
received on or prior to the date of

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substitution) equal to or less than the Principal Balance of the Deleted
Mortgage Loan as of such date, (iv) has or have a lien priority no lower than
the Deleted Mortgage Loan, (v) 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), (vi) complies or
comply as of the date of substitution with each representation and warranty set
forth in SECTION 3.03, (vii) in the case of a Deleted Mortgage Loan which is a
Title I Mortgage Loan, is the same type of loan as the Deleted Mortgage Loan,
either a property improvement loan or a manufactured home loan (as those terms
are defined in the FHA Regulations) and is covered by FHA Insurance under the
Title I Program, and (viii) is secured by a Mortgage on Mortgaged Property.
Notwithstanding clause (ii) above, a mortgage loan or mortgage loans proposed to
be substituted for one or more Deleted Mortgage Loans shall not be "Qualified
Substitute Mortgage Loans" if the substitution thereof would result in any
deferral of the "latest possible maturity date" (as such term is used in
Section 2.07(c)) of any Class of the Class A Certificates. For purposes of
determining whether multiple mortgage loans proposed to be substituted for one
or more Deleted Mortgage Loans pursuant to Section 2.06 or 3.05 are in fact
"Qualified Substitute Mortgage Loans" as provided above, the criteria specified
in clauses (i), (ii) and (iii) above may be considered on an aggregate or
weighted average basis, rather than on a loan-by-loan basis (e.g., so long as
the weighted average Mortgage Loan Interest Rate of any mortgage loans proposed
to be substituted is not less than (and not more than two percentage points more
than) the Mortgage Loan Interest Rate for the designated Deleted Mortgage Loan
or Mortgage Loans, the requirements of clause (i) above would be deemed
satisfied).

RATING AGENCY OR RATING AGENCIES: One or all of (i) Standard & Poor's,
(ii) Duff & Phelps, or (iii) Moody's, provided that when the terms Rating Agency
or Rating Agencies are used in reference to the Insured Certificates, such terms
shall mean one or both of Standard & Poor's or Moody's.

RATINGS: The ratings initially assigned to each of the Class A
Certificates by the Rating Agencies.

RECORD DATE: The close of business on the last Business Day of the month
immediately preceding the month in which a Remittance Date occurs.

RELEASED MORTGAGED PROPERTY PROCEEDS: With respect to any Mortgage Loan,
proceeds received by the Servicer in connection with (i) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(ii) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise; which in either
case are not released to the Obligor in accordance with applicable law,
customary second mortgage servicing procedures and this Agreement.

REMIC: The "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code consisting of the assets in the Trust Fund except
the Pre-Funding Account and the Capitalized Interest Account.

REMIC ADMINISTRATIVE FEE: The annual fee payable to the REMIC
Administrator, calculated and payable monthly on each Remittance Date, equal to
____% (__ basis points) per annum of the Pool Principal Balance as of the
immediately preceding Determination Date, except with respect to the first
Remittance Date, such monthly amount shall be prorated based on two days for the
first Due Period.

POOLING AND SERVICING AGREEMENT - Page 19

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REMIC ADMINISTRATOR: The Person with whom the Servicer has contracted to
perform certain of its duties hereunder relating to (i) the generation of
reports, including the Servicer's Monthly Remittance Report and the Servicer's
Monthly Statement, (ii) the calculation of distributions pursuant to SECTION
6.05(b) (which is commonly referred to as "bond administration") and (iii) the
REMIC Administration of the Trust Fund, including the required federal and state
tax filings, which Person on the Closing Date will be Residential Funding
Corporation.

REMIC CHANGE OF LAW: Any proposed, temporary or final regulation, revenue
ruling, revenue procedure or other official announcement or interpretation
relating to the REMIC and the REMIC Provisions issued after the Closing Date.

REMIC FACTOR: With respect to any Modified Mortgage Loan, an amount equal
to (i) the outstanding principal balance thereof immediately prior to such
Modified Mortgage Loan being modified divided by (ii) the outstanding principal
balance thereof immediately after such Modified Mortgage Loan was modified.

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

REMITTANCE AMOUNT: As to any Remittance Date and with respect to each
Class of Certificates, exclusive of the Class R Certificates, the sum of (i) the
Principal Remittance Amount, if any, applicable to such Class of Certificates
pursuant to the priority scheme set forth in SECTION 6.05(b), (ii) the Interest
Remittance Amount applicable to such Class of Certificates, (iii) an amount
equal to any amount that constitutes any Obligor payment that is recovered from
the Certificateholders of such Class during the related Due Period 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, (iv) the Interest Carry-Forward Amount, if any, applicable to such
Class of Certificates, and (v) the Principal Carry-Forward Amount, if any,
applicable to such Class of Certificates.

REMITTANCE DATE: The 20th day of any month or if such 20th day is not a
Business Day, the first Business Day immediately following such day, commencing
on _______________, 199__.

REO DISPOSITION: The final sale by the Servicer of a Mortgaged Property
acquired by the Servicer in foreclosure or by deed in lieu of foreclosure. The
proceeds of any REO Disposition constitute part of the definition of Liquidation
Proceeds.

REO PROPERTY: As defined in SECTION 5.07.

REQUIRED CLASS A OVERCOLLATERALIZATION LEVEL: On each Remittance Date, as
of the related Determination Date the amount equal to the sum of the Required
Title I OC Level and the Required Conventional OC Level.

REQUIRED CONVENTIONAL OC LEVEL: On each Remittance Date, as of the
related Determination Date the amount equal to the greater of (i) ____% of the
sum of the aggregate Principal Balances as of the applicable Cut-Off Dates of
the Conventional Mortgage Loans and the amount on deposit in

POOLING AND SERVICING AGREEMENT - Page 20

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the Pre-Funding Account that is intended to fund the purchase of Conventional
Mortgage Loans based on the characteristics of the then existing Pool Principal
Balance (the "REQUIRED CONVENTIONAL OC FLOOR"), and (ii) the product of (x) the
Required Conventional Credit Support Multiple and (y) ____% of the aggregate
Principal Balances as of the applicable Cut-Off Dates of the Conventional
Mortgage Loans and the amount on deposit in the Pre-Funding Account that is
intended to fund the purchase of Conventional Mortgage Loans based on the
characteristics of the then existing Pool Principal Balance; PROVIDED, HOWEVER,
that on each Remittance Date on or after the Credit Support Reduction Date on
which the Required Conventional Credit Support Multiple is equal to 1.0, as of
the related Determination Date, the amount equal to the greater of (i) the
Required Conventional OC Floor and (ii) the product of (x) the Required
Conventional Credit Support Multiple and (y) the lesser of (A) ____% of the
aggregate Principal Balances as of the applicable Cut-Off Dates of the
Conventional Mortgage Loans and the amount on deposit in the Pre-Funding Account
that is intended to fund the purchase of Conventional Mortgage Loans based on
the characteristics of the then existing Pool Principal Balance and (B) ____% of
the aggregate outstanding Principal Balances of the Conventional Mortgage Loans
and the amount on deposit in the Pre-Funding Account that is intended to fund
the purchase of Conventional Mortgage Loans based on the characteristics of the
then existing Pool Principal Balance.

REQUIRED CONVENTIONAL CREDIT SUPPORT MULTIPLE: On each Remittance Date, as
of the related Determination Date the amount calculated as follows: (i) if less
than ____% (by Principal Balance) of the Conventional Mortgage Loans are more
than 30 days delinquent, and if less than ____% (by Principal Balance) of the
Conventional Mortgage Loans are more than 60 days delinquent, and if less than
____% (by Principal Balance) of the Conventional Mortgage Loans have become
Defaulted Mortgage Loans, then such amount will be 1.0; (ii) if less than ____%
(by Principal Balance) of the Conventional Mortgage Loans are more than 30 days
delinquent, and if less than ____% (by Principal Balance) of the Conventional
Mortgage Loans are more than 60 days delinquent, and if less than ____% (by
Principal Balance) of the Conventional Mortgage Loans have become Defaulted
Mortgage Loans, then such amount will be 1.25; (iii) if less than ____% (by
Principal Balance) of the Conventional Mortgage Loans are more than 30 days
delinquent, and if less than ____% (by Principal Balance) of the Conventional
Mortgage Loans are more than 60 days delinquent, and if less than ____% (by
Principal Balance) of the Conventional Mortgage Loans have become Defaulted
Mortgage Loans, then such amount will be 1.50; (iv) if ____% or more (by
Principal Balance) of the Conventional Mortgage Loans are more than 30 days
delinquent, or if ____% or more (by Principal Balance) of the Conventional
Mortgage Loans are more than 60 days delinquent, or if ____% or more (by
Principal Balance) of the Conventional Mortgage Loans have become Defaulted
Mortgage Loans, then such amount will be 2.50; or (v) if ____% or more (by
Principal Balance) of the Conventional Mortgage Loans have become Defaulted
Mortgage Loans on a cumulative basis on or prior to the first anniversary of the
________________, 19__ Cut-Off Date, or if ____% or more (by Principal Balance)
of the Conventional Mortgage Loans have become Defaulted Mortgage Loans on a
cumulative basis on or prior to the second anniversary of the _____________,
199__ Cut-Off Date, or if ____% or more (by Principal Balance) of the
Conventional Mortgage Loans have become Defaulted Mortgage Loans on a cumulative
basis after the second anniversary of the ____________, 199__ Cut-Off Date, then
such amount will be 2.50; provided that except with respect to the calculation
on a cumulative basis through the immediately preceding Due Period for the above
clause (v), the above delinquency and default percentages will be calculated as
the average of the ratios for the immediately preceding three Due Periods based
on the outstanding aggregate Principal Balances for such Conventional Mortgage
Loans, which default percentages will be calculated on an annualized basis as
the average of the ratios for the immediately preceding three Due Periods

POOLING AND SERVICING AGREEMENT - Page 21

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where such ratio equals the quotient of (A) 12 times the aggregate outstanding
Principal Balance for such Conventional Mortgage Loans that became Defaulted
Mortgage Loans, over (B) the aggregate outstanding Principal Balance of such
Conventional Mortgage Loans as of the end of the related Due Period.

REQUIRED TITLE I OC LEVEL: On each Remittance Date, as of the related
Determination Date the amount equal to the greater of (i) the sum of (a) ____%
of the sum of the aggregate Principal Balances as of the applicable Cut-Off
Dates of the Title I Mortgage Loans and the amount on deposit in the Pre-Funding
Account that is intended to fund the purchase of Title I Mortgage Loans based
on the characteristics of the then existing Pool Principal Balance, (b) plus the
difference (but not less than zero) between (I) ____% of the aggregate Principal
Balances as of the applicable Cut-Off Dates of the Title I Mortgage Loans, minus
(II) the Initial FHA Insurance Amount (the "REQUIRED TITLE I OC FLOOR"), and
(ii) the product of (x) the Required Title I Credit Support Multiple, and (y)
____% of the aggregate Principal Balances as of the applicable Cut-Off Dates of
the Title I Mortgage Loans and the amount on deposit in the Pre-Funding Account
that is intended to fund the purchase of Title I Mortgage Loans based on the
characteristics of the then existing Pool Principal Balance; PROVIDED, HOWEVER,
that on each Remittance Date on or after the Credit Support Reduction Date on
which the Required Title I Credit Support Multiple is equal to 1.0, as of the
related Determination Date, the amount equal to the greater of (i) the Required
Title I OC Floor, and (ii) the product of (x) the Required Title I Credit
Support Multiple, and (y) the lesser of (A) ____% of the aggregate Principal
Balances as of the applicable Cut-Off Dates of the Title I Mortgage Loans and
the amount on deposit in the Pre-Funding Account that is intended to fund the
purchase of Title I Mortgage Loans based on the characteristics of the then
existing Pool Principal Balance or (B) ____% of the aggregate outstanding
Principal Balances of the Title I Mortgage Loans and the amount on deposit in
the Pre-Funding Account that is intended to fund the purchase of Title I
Mortgage Loans based on the characteristics of the then existing Pool Principal
Balance.

REQUIRED TITLE I CREDIT SUPPORT MULTIPLE: On each Remittance Date, as of
the related Determination Date the amount calculated as follows: (i) if less
than ____% (by Principal Balance) of the Title I Mortgage Loans are more than 30
days delinquent, and if less than ____% (by Principal Balance) of the Title I
Mortgage Loans are more than 60 days delinquent, and if less than ____% (by
Principal Balance) of the Title I Mortgage Loans have become Defaulted Mortgage
Loans, then such amount will be 1.0; (ii) if less than ____% (by Principal
Balance) of the Title I Mortgage Loans are more than 30 days delinquent, and if
less than ____% (by Principal Balance) of the Title I Mortgage Loans are more
than 60 days delinquent, and if less than ____% (by Principal Balance) of the
Title I Mortgage Loans have become Defaulted Mortgage Loans, then such amount
will be 1.25; (iii) if less than ____% (by Principal Balance) of the Title I
Mortgage Loans are more than 30 days delinquent, and if less than ____% (by
Principal Balance) of the Title I Mortgage Loans are more than 60 days
delinquent, and if less than ____% (by Principal Balance) of the Title I
Mortgage Loans have become Defaulted Mortgage Loans, then such amount will be
1.50; (iv) if ____% or more (by Principal Balance) of the Title I Mortgage Loans
are more than 30 days delinquent, or if ____% or more (by Principal Balance) of
the Title I Mortgage Loans are more than 60 days delinquent, or if ____% or more
(by Principal Balance) of the Title I Mortgage Loans have become Defaulted
Mortgage Loans, then such amount will be 2.5; or (v) if ____% or more (by
Principal Balance) of the Title I Mortgage Loans have become Defaulted Mortgage
Loans on a cumulative basis on or prior to the first anniversary of the
_______________, 199__ Cut-Off Date, or if ____% or more (by Principal Balance)
of the Title I Mortgage Loans have become Defaulted Mortgage Loans on a
cumulative basis on or prior to the second anniversary of the _______________,
199__

POOLING AND SERVICING AGREEMENT - Page 22

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Cut-Off Date, or if ____% or more (by Principal Balance) of the Title I
Mortgage Loans have become Defaulted Mortgage Loans on a cumulative basis after
the second anniversary of the _______________, 199__Cut-Off Date, then such
amount will be 2.50; provided that except with respect to the calculation on a
cumulative basis through the immediately preceding Due Period for the above
clause (v), the above delinquency and default percentages will be calculated
as the average of the ratios for the immediately preceding three Due Periods
based on the outstanding aggregate Principal Balances for such Title I Mortgage
Loans, which default percentages will be calculated on an annualized basis as
the average of the ratios for the immediately preceding three Due Periods,
where such ratio equals the quotient of (A) 12 times the aggregate outstanding
Principal Balance for such Title I Mortgage Loans that became Defaulted
Mortgage Loans, over (B) the aggregate outstanding Principal Balance of such
Title I Mortgage Loans as of the end of the related Due Period.

RESIDUAL INTEREST: A "residual interest" in a "real estate mortgage
investment conduit" within the meaning of Section 860G(a)(2) of the Code.

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, Assistant Vice President, 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 having direct responsibility for the administration of this
Agreement. When used with respect to the Depositor, the Transferor, the
Servicer, the Custodian, the Standby Servicer or any FHA Claims Administrator,
the President or any Vice President, Assistant Vice President, or any Secretary
or Assistant Secretary.

SERIES or SERIES 199 - : Remodelers Home Improvement Loan Asset-Backed
Certificates, Series 199__-__.

SERVICER: RNFC, in its capacity as the servicer hereunder, or any
successor appointed as herein provided.

SERVICER'S FISCAL YEAR: October 1st through September 30th of each year.

SERVICER'S MONTHLY REMITTANCE REPORT: A report prepared by the Servicer
substantially in the form of EXHIBIT N attached hereto.

SERVICER'S MONTHLY STATEMENT: As defined in SECTION 6.06.

SERVICER'S MORTGAGE LOAN FILE: As described in EXHIBIT A.

SERVICING ADVANCES: Subject to SECTION 5.01(b), all reasonable and
customary "out of pocket" costs and expenses advanced or paid by the Servicer
with respect to the Mortgage Loans in accordance with the performance by the
Servicer of its servicing obligations hereunder, including, but not limited to,
the costs and expenses for (i) the preservation, restoration and protection of
the Mortgaged Property, including without limitation advances in respect of real
estate taxes and assessments, (ii) any collection, enforcement or judicial
proceedings, including without limitation foreclosures, collections and
liquidations pursuant to SECTION 5.02, (iii) the conservation, management and
sale or other disposition of an REO Property pursuant to SECTION 5.07, (iv) the

POOLING AND SERVICING AGREEMENT - Page 23

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preservation of the security for a Mortgage Loan if a Superior Lien has
accelerated or intends to accelerate its obligations pursuant to SECTION 5.10;
provided that such Servicing Advances are reimbursable to the Servicer to the
extent provided in the applicable clause of SECTION 6.05(b) or deducted or
retained in calculating Net Liquidation Proceeds hereunder.

SERVICING COMPENSATION: The Servicing Fee and other amounts to which the
Servicer is entitled pursuant to SECTIONS 7.01 and 7.03.

SERVICING FEE: As to each Mortgage Loan (including any Mortgage Loan as to
which the related Mortgaged Property has become an REO Property, but excluding
any Liquidated Mortgage Loan), the fee payable monthly to the Servicer on each
Remittance Date, which shall be the product of ____% times the Principal Balance
of such Mortgage Loan as of the beginning of the immediately preceding Due
Period, divided by 12; provided that with respect to the first Remittance Date,
such monthly fee attributable to the performance of its servicing functions
commencing on the Closing Date shall be pro rated based on two days for the
first Due Period. The Servicing Fee includes any servicing fees owed or payable
to any Subservicer which fees shall be paid from the Servicing Fee.

SERVICING OFFICER: Any officer of the Servicer or Subservicer involved
in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appears on a list of servicing officers
annexed to an Officer's Certificate furnished by the Servicer or the
Subservicer, respectively, to the Trustee, on behalf of the Certificateholders,
as such list may from time to time be amended.

STANDARD & POOR'S: Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., or any successor thereto.

STARTUP DAY: The day designated as such pursuant to SECTION 2.07.

SUBSEQUENT MORTGAGE LOAN: An individual property improvement and/or home
equity loan of the type described in SUBSECTION 3.03(v), which is assigned and
transferred to the Trustee on a Subsequent Transfer Date, pursuant to a
Subsequent Transfer Agreement, together with the rights and obligations of a
holder thereof and payments thereon and proceeds therefrom, the Subsequent
Mortgage Loans subject to this Agreement will be identified on a Mortgage Loan
Schedule attached as an exhibit to the related Subsequent Transfer Agreement.

SUBSEQUENT PURCHASE PRICE: The Principal Balance of any Subsequent
Mortgage Loans as of the applicable Cut-Off Date.

SUBSEQUENT TRANSFER AGREEMENT: With respect to any Subsequent Mortgage
Loan, the agreement pursuant to which Subsequent Mortgage Loans are transferred
to the Trust Fund by the Depositor, in substantially the form attached hereto as
EXHIBIT Q.

SUBSEQUENT TRANSFER DATE: The date specified in each Subsequent Transfer
Agreement, but no later than _______________, 199__ .

SUBSERVICER: Any Person with whom the Servicer has entered into a
Subservicing Agreement and who is an Eligible Servicer and who satisfies any
requirements set forth in SECTION 5.12(a) in respect of the qualifications of a
Subservicer.

POOLING AND SERVICING AGREEMENT - Page 24

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SUBSERVICING ACCOUNT: An account established by a Subservicer pursuant to
a Subservicing Agreement, which account must be an Eligible Account.

SUBSERVICING AGREEMENT: Any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Mortgage
Loans as provided in SECTION 5.12(a), copies of which shall be made available,
along with any modifications thereto, to the Trustee and to the Certificate
Insurer.

SUBSTITUTION ADJUSTMENT: As to any date on which a substitution occurs
pursuant to SECTIONS 2.06 or 3.05, the amount, if any, by which (a) the sum of
the aggregate principal balance (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 plus any accrued interest thereon
that is scheduled to be paid during the Due Period in which such substitution
occurs, is less than (b) the sum of the aggregate of the Principal Balances,
together with accrued and unpaid interest thereon to the date of substitution,
of the related Deleted Mortgage Loans.

SUPERIOR LIEN: With respect to any Mortgage Loan which is secured by
other than a first priority lien, the mortgage loan(s) relating to the
corresponding Mortgaged Property having a superior priority lien.

TAX MATTERS PERSON: The Class R Certificateholder holding the largest
Percentage Interest, from time to time.

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 the REMIC due to its classification as a "real estate mortgage
investment conduit" within the meaning of Section 860D of the Code 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 provision of federal, state or local tax laws.

TERMINATION PRICE: As of any date of determination, an amount equal to
the sum of (i) the aggregate Class Principal Balance of the Class A and Class B
Certificates as of such date, and (ii) the sum of any outstanding Interest
Carry-Forward Amount with respect to the Class A and Class B Certificates and 30
days' interest on the aggregate Class Principal Balance of the Class A and
Class B Certificates as of such date, computed at the weighted average Mortgage
Loan Interest Rate of the Mortgage Loans (including REO Properties) then
outstanding.

TITLE I MORTGAGE LOAN: A Mortgage Loan that has been or will be
registered by FHA for FHA Insurance under the Title I Program.

TITLE I POOL PRINCIPAL BALANCE: The aggregate Principal Balances of the
Title I Mortgage Loans as of any date of determination.

TITLE I PROGRAM: The mortgage insurance program authorized pursuant to
the National Housing Act of 1934, as amended.

POOLING AND SERVICING AGREEMENT - Page 25

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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(d)(i).

TRANSFER CERTIFICATE: As defined in SECTION 4.02(d)(i).

TRANSFEROR: RNFC, in its capacity as the transferor hereunder.

TRUST FUND: The segregated pool of assets subject hereto, constituting
the trust created hereby and to be administered hereunder, designated as the
"Remodelers Series 199__-__ Trust Fund" and consisting of: (i) such Mortgage
Loans as from time to time are subject to this Agreement, including both the
Initial Mortgage Loans and any Subsequent Mortgage Loans conveyed to the Trust
Fund during the Funding Period, together with the Servicer's Mortgage Loan
Files and the Trustee's Mortgage Loan Files relating thereto and all proceeds
thereof, (ii) such assets as from time to time are identified as REO Property,
(iii) such assets and funds as are from time to time deposited in the Collection
Account, the FHA Insurance Premium Account, the Certificate Account, the Pre-
Funding Account and the Capitalized Interest Account, including amounts on
deposit in such accounts which are invested in Permitted Instruments, (iv) the
Trustee's rights under all insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any Insurance Proceeds,
(v) the Trustee's rights under the FHA Insurance applicable to the Title I
Mortgage Loans, including the right to make FHA Claims and the right to direct
any FHA Claims Administrator to make FHA Claims, subject to the terms of this
Agreement, (vi) the Guaranty Policy applicable to the Class A Certificates,
(vii) Net Liquidation Proceeds, FHA Insurance Proceeds, Guaranty Policy Proceeds
and Released Mortgaged Property Proceeds, (viii) all right, title and interest
of the Transferor in and to the obligations of any seller pursuant to a Loan
Sale Agreement, (ix) all right, title and interest of the Depositor in and to
the obligations of the Transferor under that certain Loan Sale Agreement dated
as of _______________, 199__ , between the Transferor, as seller, and the
Depositor, as purchaser, (x) all right, title and interest of the Trustee, as
purchaser, on behalf of the Trust Fund, under each Subsequent Transfer
Agreement, and (xi) all right, title and interest of the Servicer and the
Transferor in and to the rights and obligations of any Subservicer, pursuant to
any Subservicing Agreement.

TRUSTEE: First Trust of California, National Association, or its
successor in interest, or any successor trustee appointed as herein provided.

TRUSTEE FEE: The annual fee payable to the Trustee, calculated and
payable monthly on each Remittance Date, equal to ____% (___ basis points) per
annum of the Pool Principal Balance as of the immediately preceding
Determination Date, except with respect to the first Remittance Date such
monthly amount shall be pro rated based on two days for the first Due Period.

TRUSTEE'S MORTGAGE LOAN FILE: The documents delivered to the Trustee or
its designated agent pursuant to SECTION 2.05.

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, or an estate or
trust whose income from sources without the United States is

POOLING AND SERVICING AGREEMENT - Page 26

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includible in gross income for United States federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States.

WEIGHTED AVERAGE BALANCE: On any Determination Date, with respect to the
calculation of the weighted average balance on a daily basis of the amount on
deposit in the Pre-Funding Account for the Due Period in which such
Determination Date occurs, the division of (x) the total of (A) the sum of the
actual amount on deposit on each day prior to such Determination Date plus (B)
the sum of the amount on deposit on such Determination Date for the days
remaining in such Due Period including the Determination Date (but assuming a 30
day month) divided by (y) thirty days; and with respect to such calculation for
any Due Period thereafter that ends on or before _______________, 199__ , the
amount on deposit on such Determination Date (assuming no further reductions of
such amount during the remaining term of the Funding Period).

WEIGHTED AVERAGE CERTIFICATE INTEREST RATE: As of any particular date of
determination, the sum of:

(i) the product of (1) the Class Principal Balance of the Class A-1
Certificates divided by the Class Principal Balance of the Class A
Certificates and the Class B Certificates, and (2) the Certificate Interest
Rate for such Class A-1 Certificates; and

(ii) the product of (1) the Class Principal Balance of the Class A-2
Certificates divided by the Class Principal Balance of the Class A
Certificates and the Class B Certificates, and (2) the Certificate Interest
Rate for such Class A-2 Certificates; and

(iii) the product of (1) the Class Principal Balance of the Class
A-3 Certificates divided by the Class Principal Balance of the Class A
Certificates and the Class B Certificates, and (2) the Certificate Interest
Rate for such Class A-3 Certificates; and

(iv) the product of (1) the Class Principal Balance of the Class A-4
Certificates divided by the Class Principal Balance of the Class A
Certificates and the Class B Certificates, and (2) the Certificate Interest
Rate for such Class A-4 Certificates; and

(v) the product of (1) the Class Principal Balance of the Class B
Certificates divided by the Class Principal Balance of the Class A
Certificates and the Class B Certificates, and (2) the Certificate Interest
Rate for such Class B Certificates.

ARTICLE II

SALE AND CONVEYANCE OF THE TRUST FUND

Section 2.01 CREATION OF TRUST FUND; TRANSFER OF TRUST FUND ASSETS;
ISSUANCE OF CERTIFICATES EVIDENCING INTERESTS IN TRUST FUND;
PRIORITY AND SUBORDINATION OF OWNERSHIP INTERESTS.

(a) The Trust Fund is hereby created. The Depositor hereby appoints the
Trustee as trustee hereunder of the Trust Fund effective as of the Closing Date
and the Trustee hereby acknowledges and accepts such appointment. The Trust
Fund shall be administered pursuant to and in accordance with the provisions of
this Agreement for the benefit of the Certificateholders.

POOLING AND SERVICING AGREEMENT - Page 27

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(b) The Depositor, as of the Closing Date and concurrently with the
execution and delivery hereof, does hereby sell, transfer, assign, set over,
convey and grant to the Trustee, without recourse, but subject to the other
terms and provisions of this Agreement, and does hereby grant to the Trustee, in
trust for the exclusive use and benefit of the Certificateholders, all of the
right, title and interest of the Depositor in and to the Mortgage Loans and all
other assets included or to be included in the Trust Fund, whether now owned or
hereafter acquired and including, without limitation, the Initial Mortgage Loans
(including all interest thereon accrued after the Closing Date), any Subsequent
Mortgage Loans (including all interest thereon accrued after the related
Subsequent Transfer Date), the Pre-Funding Account Deposit, the Capitalized
Interest Account Deposit, the Initial FHA Insurance Premium Account Deposit, all
right, title and interest of the Depositor in and to the FHA Insurance of the
Transferor applicable to the Title I Mortgage Loans and all right, title and
interest of the Servicer and the Transferor in and to the rights and obligations
of any Subservicer. Notwithstanding any provision to the contrary herein, the
preceding sale, transfer, assignment, set over, conveyance and grant by the
Depositor shall not include the accrued interest at the respective Mortgage Loan
Interest Rates on the principal amount of the Initial Mortgage Loans up to the
Closing Date, which pre-transfer accrued interest on the Initial Mortgage Loans
and all right, title and interest in and to such pre-transfer accrued interest
will be retained by the Transferor from which the Depositor will have acquired
its interest in the Initial Mortgage Loans subject to such right, title and
interest retained by the Transferor. The foregoing sale, transfer, assignment,
set over, conveyance and grant does not and is not intended to result in a
creation or an assumption by the Trustee of any obligation of the Depositor, the
Transferor or any other person in connection with the Mortgage Loans or under
any agreement or instrument relating thereto except as specifically set forth
herein.

It is expressly intended that the conveyance of the Mortgage Loans, and all
other assets included or to be included in the Trust Fund, by the Depositor to
the Trustee as provided in this SECTION 2.01 or the following SECTION 2.02 be,
and be construed for all purposes as, an absolute conveyance of the Mortgage
Loans and such other assets by the Depositor to the Trustee for the benefit of
the Certificateholders. It is not intended that such conveyance be deemed a
grant of a security interest or a pledge or collateral assignment of the
Mortgage Loans and such other assets by the Depositor to the Trustee to secure a
debt or other obligation of the Depositor. However, in the event that the
Mortgage Loans or such other assets are held to be property of the Depositor, or
if for any reason this Agreement is held or deemed to create a security interest
in the Mortgage Loans or such other assets, 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 Uniform Commercial Code in effect in the State of Texas
or any other applicable state; (b) the conveyance provided for in this SECTION
2.01 and the following SECTION 2.02 shall be deemed to be a grant by the
Depositor to the Trustee, for the benefit

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of the Certificateholders, of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans, all amounts payable to
the holders of the Mortgage Loans in accordance with the terms thereof, all
other assets included or to be included in the Trust Fund and all income and
proceeds of the conversion, voluntary or involuntary, of the foregoing, whether
in the form of cash, instruments, securities or other property, including
without limitation, all amounts from time to time held or invested in the
Accounts; (c) the possession by the Trustee or its agent of Notes and such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9.305 of the
Uniform Commercial Code in effect in the State of Texas or any other applicable
state; (d) Uniform Commercial Code financing statements shall be filed in
appropriate jurisdictions reflecting the Depositor as debtor and the Trustee,
for the benefit of the Certificateholders, as secured party; and (e)
notifications to persons holding such property, and acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Trustee shall be made, all for the purpose of perfecting such security
interest under applicable law. The Depositor and the Servicer shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
Mortgage Loans or any other assets included or to be included in the Trust Fund,
such security interest would be deemed to be a perfected security interest of
first priority under applicable law and will be maintained as such throughout
the term of this Agreement.

As used in this SECTION 2.01, the term "security interest" shall mean a
security interest as contemplated under the Uniform Commercial Code in effect in
the State of Texas or any other applicable state, as well as a common law pledge
or collateral assignment of property to secure a debt or other obligation.

(c) The Trustee acknowledges the conveyance to it of the Initial Mortgage
Loans, the Pre-Funding Account Deposit and the Capitalized Interest Account
Deposit, together with the conveyance to it of all other assets initially
included in the Trust Fund, receipt of which is hereby acknowledged. The
Trustee, as of the Closing Date and concurrently with the execution and delivery
hereof, does hereby agree that upon the acknowledgment by the FHA of the Initial
FHA Insurance Amount the Trustee shall be deemed to have sold, transferred,
assigned, set over, conveyed and granted its entire beneficial ownership
interest in such Initial FHA Insurance Amount to the Trust Fund and shall
maintain the FHA Insurance Amount for the benefit of the Certificateholders in
accordance with the provisions of this Agreement. Concurrently with such
delivery and in exchange therefor, the Trustee, pursuant to the written request
of the Depositor, has executed (not in its individual capacity, but solely as
Trustee) and caused to be authenticated and delivered to or upon the order of
the Depositor, the Class A Certificates, the Class B Certificates and the Class
R Certificates. The Class R Certificates evidence the ownership of the Residual
Interests in the REMIC. The rights of the Class R Certificateholders to receive
distributions from the proceeds of the Trust Fund in respect of the Class R
Certificates and all ownership interests of the Class R Certificateholders in
such distributions shall be as set forth in this Agreement.

(d) For purposes of Texas law, the parties to this Agreement intend to
create an "express trust" under the Texas Trust Act.

Section 2.02 CONVEYANCE OF THE SUBSEQUENT MORTGAGE LOANS; FIXED PRICE
CONTRACT.

(a) On or before the last day of the Funding Period, the Depositor shall
convey to the Trustee, and the Trustee shall purchase on behalf of the Trust
Fund, pursuant to this SECTION 2.02 the lesser of: (i) all Mortgage Loans then
in its possession that satisfy the requirements of this SECTION 2.02 or (ii) the
maximum principal balance of Mortgage Loans that satisfies the requirements of
this SECTION 2.02 whose aggregate Subsequent Purchase Price does not exceed the
Pre-Funding Account Deposit. Subject to the conditions set forth in this
SECTION 2.02, in consideration of the Trustee's delivery on the related
Subsequent Transfer Dates to or upon the order of the Depositor of the
Subsequent Purchase Price of the related Subsequent Mortgage Loans from amounts
on deposit in the Pre-Funding Account, the Depositor shall, from time to time,
on any Subsequent Transfer Date sell, transfer, assign, set over, convey and
grant to the Trustee, without recourse, but subject to the other terms and
provisions of this Agreement, and shall thereby grant to the Trustee, in trust
for the exclusive use and benefit of the Certificateholders, all of the right,
title and interest of the Depositor

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in and to each Subsequent Mortgage Loan (including all interest thereon accrued
after the related Subsequent Transfer Date) identified on the Mortgage Loan
Schedule attached to the related Subsequent Transfer Agreement and delivered by
the Depositor on such Subsequent Transfer Date and all items with respect to
such Subsequent Mortgage Loan included or to be included in the Trust Fund
pursuant to SECTION 2.01 and other items in the related Trustee's Mortgage Loan
File. Notwithstanding any provision to the contrary herein, the preceding sale,
transfer, assignment, set over, conveyance and grant by the Depositor shall not
include the accrued interest at the respective Mortgage Loan Interest Rates on
the principal amount of the Subsequent Mortgage Loans up to the related
Subsequent Transfer Date, which pre-transfer accrued interest on the Subsequent
Mortgage Loans and all right, title and interest in and to such pre-transfer
accrued interest will be retained by the Transferor from which the Depositor
will have acquired its interest in the Subsequent Mortgage Loans subject to such
right, title and interest retained by the Transferor. The sale, transfer,
assignment, set over, conveyance and grant by the Depositor of the Subsequent
Mortgage Loans to the Trustee does not and is not intended to result in a
creation or an assumption by the Trustee of any obligation of the Depositor, the
Transferor or any other person in connection with the Subsequent Mortgage Loans
or under any agreement or instrument relating thereto except as specifically set
forth herein.

(b) The amount released from the Pre-Funding Account on any Subsequent
Transfer Date in connection with any conveyance of Subsequent Mortgage Loans
shall be equal to the aggregate of the Subsequent Purchase Prices for such
Subsequent Mortgage Loans, which amount shall not exceed the amount then on
deposit in the Pre-Funding Account. If the Subsequent Purchase Price for such
Subsequent Mortgage Loans is less than the amount required to obtain the release
of the interest of any third party (including any lienholder therein), then the
Transferor or the Depositor shall cause the delivery of immediately available
funds equal to such insufficiency to the Trustee in escrow (which funds shall
not be part of the Trust Fund or the REMIC) and the Trustee, in turn, shall
remit such immediately available funds, together with funds from the Pre-Funding
Account equal to Subsequent Purchase Price, to the third party designated by the
Transferor or the Depositor that is releasing its interest in such Subsequent
Mortgage Loans. The amount released from the Pre-Funding Account in connection
with any conveyance of Subsequent Mortgage Loans shall, for federal income tax
purposes, be considered cash contributed to the REMIC by the Depositor and used
by the Trustee to acquire the related Subsequent Mortgage Loans pursuant to the
fixed price contract established pursuant to this Section 2.02.

With respect to any Subsequent Mortgage Loans that are Title I Mortgage
Loans, the Transferor or Depositor shall remit an amount to the Trustee for
deposit in the FHA Insurance Premium Account which amount shall be reasonably
determined by the Transferor as necessary to provide sufficient funds for the
payment of the FHA Premium Amount for such Title I Mortgage Loans on the next
annual due date therefor.

On the related Subsequent Transfer Date, the Depositor shall transfer to
the Trustee the Subsequent Mortgage Loans and the other property and rights
related thereto described in (a) above only upon the satisfaction of each of the
following conditions on or prior to the related Subsequent Transfer Date:

(i) the Subsequent Mortgage Loans to be conveyed on a given
Subsequent Transfer Date must have an aggregate Principal Balance as of the
related Cut-Off Date of not

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less than $__________, except in the case of the final Subsequent Transfer
Date when no minimum Principal Balance requirement shall be applicable;

(ii) the Transferor and/or Depositor shall provide the Trustee and the
Certificate Insurer with an Addition Notice and shall provide any
information reasonably requested by the Trustee or the Certificate Insurer
with respect to the Subsequent Mortgage Loans;

(iii) the Depositor shall deliver to the Trustee and the
Certificate Insurer a duly executed Subsequent Transfer Agreement,
including all exhibits listed therein;

(iv) the Transferor shall deposit in the Collection Account all
collections in respect of the Subsequent Mortgage Loans received on or
after the related Cut-Off Date subject to the Transferor's retention of the
accrued interest thereon up to the Subsequent Transfer Date;

(v) the Transferor and the Depositor shall certify that, as of the
Subsequent Transfer Date, the Transferor and the Depositor, respectively,
was not insolvent nor was made insolvent by such transfer nor is aware of
any pending insolvency;

(vi) the Transferor and the Depositor shall certify that, such
addition of Subsequent Mortgage Loans will not result in a material adverse
tax consequence to the Trust Fund or the Holders of Class A Certificates;

(vii) the Funding Period shall not have terminated;

(viii) the Transferor shall make the representations and warranties
set forth in SECTION 3.02 and SECTION 3.04(A) hereof and shall reconfirm
the accuracy of the representations and warranties set forth in Section
3.03 hereof.

(c) In addition, the Transferor and/or Depositor will provide the
Certificate Insurer and the Trustee with data regarding all Subsequent Mortgage
Loans transferred to the Trust Fund on the related Subsequent Transfer Date,
which shall be delivered at least three Business Days prior to such Subsequent
Transfer Date. No later than the end of the Funding Period, the following
conditions shall have been satisfied with respect to all Subsequent Mortgage
Loans transferred to the Trust Fund on any Subsequent Transfer Date:

(i) the Transferor and Depositor shall have delivered to the Trustee
and the Certificate Insurer an Officer's Certificate confirming the
satisfaction of each condition precedent specified in this SECTION 2.02 and
in the related Subsequent Transfer Agreements;

(ii) on the date of the final delivery of Subsequent Mortgage Loans,
the Transferor and/or Depositor shall have delivered to the Certificate
Insurer and the Trustee opinions of counsel with respect to the transfer of
all of the Subsequent Mortgage Loans to the Trust Fund on any Subsequent
Transfer Date substantially in the form of the opinions of counsel
delivered to the Trustee and the Certificate Insurer on the Closing Date
(regarding certain bankruptcy, corporate, securities and tax matters);

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(iii) on the date of the final delivery of Subsequent Mortgage
Loans, the Trustee shall deliver to the Certificate Insurer and the
Depositor an opinion of counsel with respect to each of the Subsequent
Transfer Agreements substantially in the form of the opinion of counsel
delivered to the Depositor and the Certificate Insurer on the Closing Date;

(iv) the Transferor and Depositor shall make the representations and
warranties set forth in SECTION 3.04(B) hereof; and

(v) the Certificate Insurer shall deliver to the Depositor and the
Trustee a written notice confirming the Certificate Insurer's consent and
approval to the addition of all Subsequent Mortgage Loans purchased by the
Trust Fund on any Subsequent Transfer Date.

Section 2.03 OWNERSHIP AND POSSESSION OF MORTGAGE LOAN FILES. Upon the
issuance of the Certificates, with respect to the Initial Mortgage Loans, and
upon payment of the related Subsequent Purchase Price, with respect to the
Subsequent Mortgage Loans, the ownership of each Note, the related Mortgage and
the contents of the related Servicer's Mortgage Loan File and the Trustee's
Mortgage Loan File shall be vested in the Trustee for the benefit of the
Certificateholders, although possession of the Servicer's Mortgage Loan Files
(other than items required to be maintained in the Trustee's Mortgage Loan
Files) shall remain with the Servicer, as contemplated in SECTION 3.02.

Section 2.04 BOOKS AND RECORDS.

The sale of each Mortgage Loan shall be reflected on the Depositor's
balance sheets and other financial statements as a sale of assets by the
Depositor. The Depositor shall be responsible for maintaining, and shall
maintain, a complete set of books and records for each Mortgage Loan which shall
be clearly marked to reflect the ownership of each Mortgage Loan by the Trustee
for the benefit of the Certificateholders.

Section 2.05 DELIVERY OF MORTGAGE LOAN DOCUMENTS.

(a) With respect to each Initial Mortgage Loan, on the Closing Date the
Depositor has delivered or caused to be delivered, and with respect to each
Subsequent Mortgage Loan, on the related Subsequent Transfer Dates, the
Depositor will deliver or will cause to be delivered, to the Trustee or, if a
Custodian has been appointed pursuant to Section 12.11, to the Custodian each of
the following documents:

(i) The original Note, with any intervening endorsements evidencing a
complete chain of title from the originator thereof to the Depositor,
endorsed "Pay to the order of First Trust of California, National
Association, as Trustee, without recourse" and signed, by facsimile or
manual signature, in the name of the Depositor by a Responsible Officer
thereof;

(ii) With respect to each Note, either: (A) the original Mortgage,
with evidence of recording thereon, (B) a copy of the Mortgage certified as
a true copy by a Responsible Officer of the Transferor or by the closing
attorney, if the original has been transmitted for recording but has not,
at the time of delivery of this Agreement, been returned or (C) a copy of
the Mortgage certified by the public recording office in those instances
where the original recorded Mortgage has been lost or has been retained by
the public recording office;

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(iii) With respect to each Note, either: (A) the original
Assignment of Mortgage to "First Trust of California, National Association,
as Trustee under the Pooling and Servicing Agreement dated as of
_______________, 199__ , regarding Remodelers Home Improvement Loan Asset-
Backed Certificates, Series 199__-__" with evidence of recording thereon,
(B) a copy of the Assignment of Mortgage, certified as a true copy by a
Responsible Officer of the Transferor where the original has been
transmitted for recording but has not, at the time of delivery of this
Agreement, been returned or (C) a copy of the Assignment of Mortgage
certified by the public recording office in those instances where the
original recorded Assignment of Mortgage has been lost or has been retained
by the public recording office (provided, however, that where the original
Assignment of Mortgage is not being delivered to the Trustee, such
Responsible Officer may complete one or more blanket certificates attaching
copies of one or more Assignments of Mortgage relating thereto); PROVIDED
that any such Assignments of Mortgage may be made by blanket assignments
for Mortgage Loans secured by Mortgaged Properties located in the same
county, if permitted by applicable law; PROVIDED further that on the
Closing Date, any Assignment of Mortgage may be assigned in blank and that
promptly thereafter the Depositor and Transferor shall satisfy the
foregoing requirements of either clause (A), (B) or (C).

(iv) With respect to each Note, either: (A) originals of all
intervening assignments, if any, showing a complete chain of title from the
originator of such Note to the assignor of the Assignment of Mortgage to
the Trustee contemplated in Section 2.05(a)(iii) above, including any
recorded warehousing assignments, with evidence of recording thereon, (B)
if the original intervening assignments have not yet been returned from the
recording office, a copy of the originals of such intervening assignments
together with a certificate of a Responsible Officer of the Transferor or
the closing attorney certifying that the copy is a true copy of the
original of such intervening assignments or (C) a copy of the intervening
assignment certified by the public recording office in those instances
where the original recorded intervening assignment has been lost or has
been retained by the public recording office; and

(v) Originals of all assumption and modification agreements, if any,
or a copy certified as a true copy by a Responsible Officer of the
Transferor if the original has been transmitted for recording until such
time as the original is returned by the public recording office.

(b) The Depositor agrees to deliver or cause to be delivered on or before
the applicable Subsequent Transfer Date to the Trustee, or if a Custodian has
been appointed pursuant to SECTION 12.11, to the Custodian each of the documents
identified in paragraphs (i) through (v) of subsection (a) above with respect to
any Subsequent Mortgage Loans.

(c) The Transferor shall, within five Business Days after the receipt
thereof, and in any event, within nine (9) months of the Closing Date (in the
case of the Initial Mortgage Loans) or the related Subsequent Transfer Date (in
the case of the Subsequent Mortgage Loans), deliver or cause to be delivered to
the Trustee or, if a Custodian has been appointed pursuant to SECTION 12.11, to
the Custodian: (i) the original recorded Mortgage in those instances where a
copy thereof certified by the Transferor was delivered to the Trustee or the
Custodian; (ii) the original recorded Assignment of Mortgage to the Trustee,
which, together with any intervening assignments of Mortgage, evidences a
complete chain of title from the originator to the Trustee, in those instances
where copies

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thereof certified by the Transferor were delivered to the Trustee or the
Custodian; and (iii) the original recorded assumption and modification agreement
in those instances in which a copy was delivered. Notwithstanding anything to
the contrary contained in this SECTION 2.05, in those instances where the public
recording office retains the original Mortgage, Assignment of Mortgage, the
intervening assignments of the Mortgage or the original recorded assumption and
modification agreement after it has been recorded, or where any such original
has been lost or destroyed, the Depositor and Transferor shall be deemed to have
satisfied their or its respective obligations hereunder upon delivery to the
Trustee or the Custodian of a copy of such Mortgage, Assignment of Mortgage,
intervening assignments of Mortgage or assumption and modification agreement
certified by the public recording office to be a true copy of the recorded
original thereof.

All Mortgage Loan documents held by the Trustee or the Custodian as to each
Mortgage Loan are referred to herein as the "TRUSTEE'S MORTGAGE LOAN FILE." All
recordings required pursuant to this SECTION 2.05 shall be accomplished by and
at the expense of the Transferor.

Section 2.06 ACCEPTANCE BY TRUSTEE OF THE TRUST FUND; CERTAIN
SUBSTITUTIONS; CERTIFICATION BY TRUSTEE.

(a) The Trustee agrees to execute and deliver or cause the Custodian, if
any, to execute and deliver on the Closing Date an acknowledgment of receipt of
the Trustee's Mortgage Loan File for each Initial Mortgage Loan, and the Trustee
agrees to execute and deliver or cause the Custodian, if any, to execute and
deliver on any Subsequent Transfer Date an acknowledgment of receipt of the
Trustee's Mortgage Loan File for each Subsequent Mortgage Loan, in the form
attached hereto as EXHIBIT F-1, if the Trustee delivers such acknowledgments and
in the form attached hereto as EXHIBIT F-2, if the Custodian delivers such
acknowledgment. The Trustee declares that it will hold or cause the Custodian
to 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
conditions set forth herein for the benefit of the Certificateholders. The
Trustee agrees, for the benefit of the Certificateholders, to review (or cause
to be reviewed) each Trustee's Mortgage Loan File within 45 days after the
Closing Date (or, with respect to any Qualified Substitute Mortgage Loan or
Subsequent Mortgage Loan, within 45 days after the receipt by the Trustee
thereof) and to deliver or cause the Custodian to deliver to the Transferor, the
Depositor, the Certificate Insurer, the Servicer and the Standby Servicer a
certification in the form attached hereto as EXHIBIT G-1, if prepared by the
Trustee, or EXHIBIT G-2, if prepared by the Custodian, 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 the Trustee pursuant to this Agreement are in its possession
or in the possession of the Custodian on its behalf (other than as expressly
permitted by SECTION 2.05(A)(II) OR 2.05(C), (ii) all documents delivered by the
Depositor and the Transferor pursuant to SECTION 2.05 have been reviewed by the
Trustee or the Custodian on its behalf and have not been mutilated or damaged
and appear regular on their face (handwritten additions, changes or corrections
shall not constitute irregularities if initialed by the Obligor) and relate to
such Mortgage Loan, (iii) based on the Trustee's examination, or the examination
of the Custodian on its behalf, and only as to the foregoing documents, the
information set forth on the Mortgage Loan Schedule accurately reflects the
information set forth in the Trustee's Mortgage Loan File and (iv) each Note has
been endorsed as provided in SECTION 2.05. The Trustee shall be under no duty
or obligation (i) to inspect, review or examine any such documents, instruments,
certificates or other papers to determine that they are

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genuine, enforceable, or appropriate for the represented purpose or that they
are other than what they purport to be on their face or (ii) to determine
whether any Trustee's Mortgage Loan File should include any of the documents
specified in SECTION 2.05(A)(V).

(b) If the Trustee during the process of reviewing the Trustee's Mortgage
Loan Files finds any document constituting a part of a Trustee's Mortgage Loan
File which is not executed, has not been received, is unrelated to any Mortgage
Loan identified in the Mortgage Loan Schedule, does not conform to the
requirements of SECTION 2.05 or does not conform, in all material respects, to
the description thereof as set forth in the Mortgage Loan Schedule, then the
Trustee shall promptly so notify the Transferor, the Servicer, the Certificate
Insurer, the Standby Servicer and the Depositor. In performing any such review,
the Trustee may conclusively rely on the Depositor and the Transferor 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 Trustee's Mortgage Loan
Files is limited solely to confirming that the documents listed in SECTION 2.05
have been received and further confirming that any and all documents delivered
pursuant to SECTION 2.05 have been executed and relate to the Mortgage Loans
identified in the Mortgage Loan Schedule. The Trustee shall have no
responsibility for determining whether any document is valid and binding,
whether the text of any assignment or endorsement is in proper or recordable
form, whether any document has been recorded in accordance with the requirements
of any applicable jurisdiction, or whether a blanket assignment is permitted in
any applicable jurisdiction. If a material defect in a document constituting
part of a Trustee's Mortgage Loan File is discovered, then the Depositor and
Transferor shall comply with the cure, substitution and repurchase provisions of
SECTION 3.05 hereof.

(c) Within the three month period beginning on the Closing Date, each of
the Depositor and the Transferor shall have the option, exercisable in its sole
discretion, to remove a Mortgage Loan from the Trust Fund and substitute
therefor a Qualified Substitute Mortgage Loan in the manner and subject to the
conditions set forth in SECTION 3.05 applicable to substitutions made by the
Transferor and subject to the further conditions that (i) the Depositor and/or
the Transferor may only effect substitutions under this Section 2.06(c) which,
in the aggregate, amount to (A) not more than ____% of the aggregate Cut-Off
Date Principal Balances of the Mortgage Loans (as measured by the aggregate
Principal Balance of the Deleted Mortgage Loans) on the Determination Date
immediately preceding the substitution date, without Certificate Insurer
approval and (B) not more than ____% of the aggregate Cut-Off Date Principal
Balances of the Mortgage Loans (as measured by the aggregate Principal Balance
of the Deleted Mortgage Loans) on the Determination Date immediately preceding
the substitution date, with Certificate Insurer approval, and (ii) no such
substitution shall be undertaken unless and until (A) the Trustee shall have
received written assurances from each Rating Agency that such substitution once
effected would not result in the ratings assigned to any Class A Certificates
being downgraded and (B) the Trustee and Certificate Insurer shall have received
an opinion of counsel, which opinion of counsel shall be acceptable to the
Trustee, that such substitution once effected would not cause the Trust Fund to
be an "investment company" as defined under the Investment Company Act of 1940.

(d) Upon receipt by the Trustee of a certification of a Servicing Officer
of the Servicer of such substitution and the deposit of the Substitution
Adjustment pursuant to SECTION 3.05 in the Collection Account (which
certification shall be in the form of EXHIBIT I hereto), the Trustee shall
release (or cause to be released) to the Servicer for release to the Depositor
or the Transferor, as the case may be, the related Trustee's Mortgage Loan File
for each Deleted Mortgage Loan and shall execute, without recourse,
representation or warranty, and deliver such instruments of transfer

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presented to it by the Servicer as shall be necessary to transfer such Deleted
Mortgage Loan to the Depositor or the Transferor, as the case may be.

(e) On the Remittance Date in ___________ of each year commencing in
199__, the Trustee shall deliver to the Depositor, the Certificate Insurer, the
Standby Servicer and the Servicer a certification listing all Trustee's Mortgage
Loan Files held by the Trustee (or by the Custodian on behalf of the Trustee) on
such Remittance Date.

Section 2.07 DESIGNATIONS UNDER REMIC PROVISIONS; DESIGNATION OF STARTUP
DAY; REMIC CERTIFICATE MATURITY DATE.

(a) The Class A Certificates and the Class B Certificates are hereby
designated as the "regular interests" and the Class R Certificates are hereby
designated as the single class of "residual interest" in the REMIC for purposes
of the REMIC Provisions. The Pre-Funding Account and the Capitalized Interest
Account are not part of the REMIC.

(b) The Closing Date will be the "Startup Day" of the REMIC within the
meaning of Section 860G(a)(9) of the Code.

(c) For purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations under the Code the "latest possible maturity date" of the
Certificates is March 20, 2018.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.01 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

The Depositor hereby represents and warrants to the Trustee, the Servicer,
the Standby Servicer, the Certificate Insurer and the Certificateholders as of
the Closing Date:

(a) The Depositor is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware and either directly
or through its Owner Trustee, First Trust of California, National Association,
or its Delaware Trustee, Wilmington Trust Company, has all licenses necessary to
carry on its business as now being conducted and either directly or through its
Owner Trustee, First Trust of California, National Association, or its Delaware
Trustee, Wilmington Trust Company, is licensed, qualified and in good standing
in each Mortgaged Property State if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by the
Depositor and perform its obligations as Depositor hereunder; the Depositor's
Owner Trustee, First Trust of California, National Association, holds a valid
Title I contract of insurance, is approved by the FHA to originate, purchase,
service and/or sell loans insured under the Title I Program and is not subject
to any administrative action, probation, suspension, withdrawal or termination
of its contract of insurance under the Title I Program; the Depositor has the
power and authority to execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Depositor and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action of the Depositor;

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this Agreement evidences the valid, binding and enforceable obligation of the
Depositor; and all requisite action has been taken by the Depositor to make this
Agreement valid, binding and enforceable upon the Depositor in accordance with
its terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium and other, similar laws relating to or affecting creditors' rights
generally or the application of equitable principles in any proceeding, whether
at law or in equity;

(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Depositor makes no such representation or warranty),
that are necessary in connection with the purchase and sale of the Certificates
and the execution and delivery by the Depositor of this Agreement and the other
related documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect, are not subject to
any pending proceedings or appeals (administrative, judicial or otherwise) and
either the time within which any appeal therefrom may be taken or review thereof
may be obtained has expired or no review thereof may be obtained or appeal
therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and such other documents on the part
of the Depositor and the performance by the Depositor of its obligations as
Depositor under this Agreement and such other documents to which it is a party;

(c) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the trust
agreement creating and governing the Depositor, (ii) the breach of any term or
provision of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any material agreement, indenture or loan
or credit agreement or other material instrument to which the Depositor, its
Owner Trustee, First Trust of California, National Association, or their
respective property is subject (including, without limitation, such Owner
Trustee's Title I contract of insurance from the FHA), (iii) the violation of
any law, rule, regulation, order, judgment or decree to which the Depositor, its
Owner Trustee, First Trust of California, National Association, or their
respective property is subject, (iv) the cancellation, termination or suspension
of, or other administrative action by the FHA against, such Owner Trustee's
Title I contract of insurance or (v) the rejection by the FHA of any claims for
reimbursement of losses on any loans insured under the Title I Program;

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

(e) There is no action, suit, proceeding or investigation pending or, to
the best of the Depositor's knowledge, threatened against the Depositor 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 Depositor or in any material impairment of the right or ability of
the Depositor to carry on its business substantially as now conducted, or in any
material liability on the part of the Depositor or which would draw into
question the validity of this Agreement or the Mortgage Loans or of any action
taken or to be taken in connection with the obligations of the

POOLING AND SERVICING AGREEMENT - Page 37

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Depositor contemplated herein, or which would be likely to impair materially the
ability of the Depositor to perform under the terms of this Agreement;

(f) The Depositor is not in default with respect to any order or decree of
any court or any order, regulation or demand of any federal, state, municipal or
other governmental agency, which default might have consequences that would
materially and adversely affect the condition (financial or other) or operations
of the Depositor or its properties or might have consequences that would
materially and adversely affect its performance hereunder;

(g) As of the Closing Date, the Trustee will have good and marketable
title on behalf of the Trust Fund to each Initial Mortgage Loan and such other
items comprising the corpus of the Trust Fund free and clear of any lien,
mortgage, pledge, charge, security interest or other encumbrance;

(h) As of any Subsequent Transfer Date, the Trustee will have good and
marketable title on behalf of the Trust Fund to each Subsequent Mortgage Loan
transferred on such date and such other items comprising the corpus of the Trust
Fund free and clear of any lien, mortgage, pledge, charge, security interest or
other encumbrance; and

(i) The transfer, assignment and conveyance of the Mortgage Loans, the
Notes and the Mortgages by the Depositor pursuant to this Agreement or any
Subsequent Transfer Agreement are not subject to the bulk transfer laws or any
similar statutory provisions in effect in any applicable jurisdiction.

Notwithstanding anything to the contrary in this Agreement, there shall be
no recourse to the Depositor's Owner Trustee, in its individual, corporate
capacity, as a result of any error or inaccuracy in any of the representations
or warranties of the Depositor set forth in this Agreement, and such recourse
shall exist only with respect to the Depositor and its assets. The
representations and warranties of the Depositor have been made without the
Depositor's Owner Trustee having conducted any independent investigation of such
matters.

Section 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER
AND TRANSFEROR.

The Servicer as such and in its capacity as the Transferor hereby
represents, warrants and covenants with and to the Depositor, the Trustee, the
Standby Servicer, the Certificate Insurer and the Certificateholders as of the
Closing Date:

(a) The Servicer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Texas and has all licenses
necessary to carry on its business as now being conducted and is licensed,
qualified and in good standing in each Mortgaged Property State if the laws of
such state require licensing or qualification in order to conduct business of
the type conducted by the Servicer and perform its obligations as Servicer
hereunder; the Servicer holds a valid Title I contract of insurance, is approved
by the FHA to originate, purchase, service and/or sell loans insured under the
Title I Program as a servicer and lender and is not subject to any
administrative action, probation, suspension, withdrawal or termination of its
contract of insurance under the Title I Program; the Servicer has the power and
authority to execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant to this Agreement) by the

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Servicer and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action of the Servicer; this
Agreement evidences the valid, binding and enforceable obligation of the
Servicer; and all requisite action has been taken by the Servicer to make this
Agreement valid, binding and enforceable upon the Servicer in accordance with
its terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium and other, similar laws relating to or affecting creditors' rights
generally or the application of equitable principles in any proceeding, whether
at law or in equity;

(b) All actions, approvals, consents, waivers, exemptions, variances,
franchises, orders, permits, authorizations, rights and licenses required to be
taken, given or obtained, as the case may be, by or from any federal, state or
other governmental authority or agency (other than any such actions, approvals,
etc. under any state securities laws, real estate syndication or "Blue Sky"
statutes, as to which the Servicer makes no such representation or warranty),
that are necessary in connection with the execution and delivery by the Servicer
of this Agreement and the other related documents to which it is a party, have
been duly taken, given or obtained, as the case may be, are in full force and
effect, are not subject to any pending proceedings or appeals (administrative,
judicial or otherwise) and either the time within which any appeal therefrom may
be taken or review thereof may be obtained has expired or no review thereof may
be obtained or appeal therefrom taken, and are adequate to authorize the
consummation of the transactions contemplated by this Agreement and such other
documents on the part of the Servicer and the performance by the Servicer of its
obligations as Servicer under this Agreement and such other documents to which
it is a party;

(c) The consummation of the transactions contemplated by this Agreement
will not result in (i) the breach of any terms or provisions of the charter or
by-laws of the Servicer, (ii) the breach of any term or provision of, or
conflict with or constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit agreement
or other material instrument to which the Servicer or its property is subject
(including without limitation the Servicer's Title I contract of insurance from
the FHA), (iii) the violation of any law, rule, regulation, order, judgment or
decree to which the Servicer or its property is subject, (iv) the cancellation
of the Servicer's Title I contract of insurance, or (v) the rejection by the FHA
of any claims for reimbursement of losses on any loans insured under the Title I
Program;

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

(e) There is no action, suit, proceeding or investigation pending or, to
the best of the Servicer's knowledge, threatened against the 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 Servicer or in any material impairment of the right or ability of
the Servicer to carry on its business substantially as now conducted, or in any
material liability on the part of the Servicer or which would draw into question
the validity of this Agreement or the Mortgage Loans or of any action taken or
to be taken in connection with the obligations of the Servicer contemplated
herein, or which would be likely to impair materially the ability of the
Servicer to perform under the terms of this Agreement;

POOLING AND SERVICING AGREEMENT - Page 39

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

(g) So long as Remodelers National Funding Corp. is the Servicer of the
Mortgage Loans hereunder, the Servicer's Mortgage Loan Files (other than the
Trustee's Mortgage Loan Files) for each Mortgage Loan will be maintained at 3101
Bee Caves Road, Suite 200, Austin, Texas 78746, or, if Remodelers National
Funding Corp. is no longer the Servicer hereunder or if Remodelers National
Funding Corp. changes the location of the Servicer's Mortgage Loan Files (other
than items required to be maintained in the Trustee's Mortgage Loan Files), the
Servicer's Mortgage Loan Files (other than items required to be maintained in
the Trustee's Mortgage Loan Files) for each Mortgage Loan shall be maintained at
such address as may be indicated on an Officer's Certificate executed by a
Responsible Officer of the Servicer and delivered to the Trustee, the Standby
Servicer and the Depositor;

(h) The Servicer shall not solicit any refinancing of any of the Mortgage
Loans; provided, that this covenant shall not prevent or restrict the Servicer
from making general solicitations, by mail, advertisement or otherwise of the
general public or persons on a targeted list, so long as the list was not
generated from lists of the Obligors of the Mortgage Loans; and

(i) The Servicer shall not sell, transfer, assign or otherwise dispose of
a customer or similar list comprised of the names of the Obligors under the
Mortgage Loans to any third party.

Section 3.03 INDIVIDUAL MORTGAGE LOANS.

The Transferor hereby represents and warrants to the Depositor, the
Trustee, the Certificate Insurer, the Standby Servicer and the
Certificateholders, with respect to each Initial Mortgage Loan, as of the
Closing Date and, with respect to each Subsequent Mortgage Loan, as of the
related Subsequent Transfer Date:

(a) MORTGAGE LOAN INFORMATION. The information with respect to each
Mortgage Loan set forth in the Mortgage Loan Schedule is true and correct in all
material respects as of the applicable Cut-Off Date.

(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. All of the original or certified
documentation required to be delivered to the Trustee or to the Custodian on or
prior to the Closing Date or the Subsequent Transfer Date, as applicable, or as
otherwise provided in this Agreement has or will be so delivered.

(c) PAYMENTS CURRENT. No scheduled payments on the Mortgage Loans are
delinquent 90 days or more as of the applicable Cut-Off Date, based on the terms
under which the related Mortgages and Notes have been made. The Transferor has
not advanced funds, or induced, solicited or knowingly received any advance of
funds from a party other than the related Obligor, directly or indirectly, for
the payment of any amount required by any Mortgage Loan.

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(d) NO WAIVER OR MODIFICATION. The terms of each Note and Mortgage have
not been impaired, waived, altered or modified in any respect, except by written
instruments reflected in the Trustee's Mortgage Loan File and no provision of
any Mortgage or Note has been "whited out" or erased unless such modification
has been initialed by each of the parties to the related Mortgage Loan. No
instrument of waiver, alteration, modification or assumption has been executed
except for the instruments that are part of the Trustee's Mortgage Loan File and
the terms of which are reflected in the Trustee's Mortgage Loan File.

(e) NO DEFENSES. No Note or Mortgage is subject to any set-off,
counterclaim or defense, including the defense of usury, nor will the operation
of any of the terms of any Note or Mortgage, or the exercise of any right
thereunder, render such Note or Mortgage unenforceable, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense, including
the defense of usury, and to the best of the Transferor's knowledge, no such
right of rescission, set-off, counterclaim or defense has been asserted in any
proceeding or was asserted in any state or federal bankruptcy or insolvency
proceeding at the time the related Mortgage Loan was originated.

(f) COMPLIANCE WITH LAWS. Any and all requirements of any federal, state
or local law applicable to each Mortgage Loan have been complied with including,
without limitation, all consumer, usury, truth-in-lending, consumer credit
protection, equal credit opportunity or disclosure laws applicable to each
Mortgage Loan, and with respect to the Title I Mortgage Loans, the FHA
Regulations; each Mortgage Loan was originated in compliance with all applicable
laws and no fraud or misrepresentation was committed by any Person in connection
therewith; any Mortgage Loan originated in the State of Texas, was originated
pursuant to Chapter 6 of the Texas Consumer Credit Code.

(g) NO SATISFACTION OR RELEASE OF LIEN. No Mortgage has been satisfied,
canceled, subordinated or rescinded, in whole or in part. No Mortgaged Property
has been released from the lien of the related Mortgage, in whole or in part,
nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission, other than the subordination of the
lien of a Mortgage securing a Mortgage Loan (in the case of a Title I Mortgage
Loan, as permitted by FHA Regulations), with respect to which a related Superior
Lien was released in connection with the refinancing of the mortgage loan
relating to such Superior Lien.

(h) VALID LIEN. Each Note is secured by a Mortgage and each Mortgage is
or creates a valid, subsisting and enforceable lien on the related Mortgaged
Property, including, in the case of a Mortgage securing a property improvement
loan, the land and all buildings on the Mortgaged Property.

(i) VALIDITY OF MORTGAGE LOAN DOCUMENTS. Each Note and each Mortgage is
genuine and each is the legal, valid and binding obligation of the Obligor
thereof, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights in general and by general principles of equity. All
parties to each Note and each Mortgage had legal capacity at the time to enter
into the related Mortgage Loan and to execute and deliver such Note and
Mortgage, and such Note and Mortgage have been duly and properly executed by
such parties.

(j) FULL DISBURSEMENT OF PROCEEDS. As of the applicable Cut-Off Date the
proceeds of each Mortgage Loan have been fully disbursed and there is no
requirement for future advances

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thereunder, all costs, fees and expenses incurred in making or closing each
Mortgage Loan and the recording of the Mortgage were disbursed, the Obligor is
not entitled to any refund of any amounts paid or due under the Note or any
related Mortgage and any and all requirements set forth in the related Mortgage
Loan documents have been complied with.

(k) OWNERSHIP. Immediately prior to the conveyance thereof to the
Depositor, the Transferor had good and marketable title to each Mortgage Loan,
Note and Mortgage, was the sole owner thereof and had full right to sell each
Mortgage Loan, Note and Mortgage to the Depositor and upon the conveyance
thereof by the Transferor to the Depositor, the Depositor became the sole owner
of each Mortgage Loan, Note and Mortgage free and clear of any encumbrance,
equity, lien, pledge, charge, claim or security interest.

(l) OWNERSHIP OF MORTGAGED PROPERTY. The related Servicer's Mortgage Loan
File contains a title document with respect to each Mortgage Loan reflecting
that title to the related Mortgaged Property is held at least 50% by the Obligor
under such Mortgage Loan.

(m) NO DEFAULTS. Except with respect to any delinquent scheduled payment
which is not more than 90 days delinquent as of the applicable Cut-Off Date,
there is no default, breach, violation or event of acceleration existing under
any Mortgage or any Note and, to the best of the Transferor's knowledge, there
is no event which, with the passage of time or with notice and/or the expiration
of any grace or cure period, would constitute such a default, breach, violation
or event of acceleration and neither the Transferor nor its predecessors have
waived any such default, breach, violation or event of acceleration, except as
set forth in an instrument of waiver, alteration, modification or assumption
that is included in the Trustee's Mortgage Loan File.

(n) NO CONDEMNATION OR DAMAGE. To the best of the Transferor's knowledge,
the physical condition of each Mortgaged Property has not deteriorated since the
date of origination of the related Mortgage Loan (normal wear and tear excepted)
and there is no proceeding pending for the total or partial condemnation of any
Mortgaged Property.

(o) MORTGAGE REMEDIES ADEQUATE. Each Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the related Mortgaged Property of
the benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise,
by judicial foreclosure.

(p) FHA INSURANCE COVERAGE. Each Title I Mortgage Loan is an FHA Title I
property improvement loan (as such term is defined in 24 C.F.R. Part 201.2)
underwritten by the originator thereof in accordance with such originator's then
current underwriting guidelines and all FHA requirements for the Title I Program
as set forth in the FHA Regulations, and has been or will be reported to and
acknowledged by the FHA for FHA Insurance under the Transferor's Title I
contract of insurance. The Transferor has no knowledge of any event which would
invalidate or cancel the FHA Insurance for such Title I Mortgage Loan.

(q) UNDERWRITING OF CONVENTIONAL MORTGAGE LOANS. Each Conventional
Mortgage Loan is either a property improvement and/or home equity loan or a
first or junior lien purchase money loan, and has been underwritten by the
originator thereof in accordance with such originator's then current
underwriting guidelines.

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(r) TERMS OF MORTGAGE LOANS. Each Mortgage Loan is a fixed rate loan;
each Note has an original term to maturity of not less than 24 months nor more
than 20 years and 32 days from the date of origination; each Note is payable in
monthly installments of principal and interest, with interest payable in
arrears, and requires a monthly payment which is sufficient to amortize the
original principal balance over the original term and to pay interest at the
related Mortgage Loan Interest Rate; and no Note provides for any extension of
the original term.

(s) SECURITY. No Note is, or has been, secured by any collateral except
the lien of the related Mortgage.

(t) DEED OF TRUST. If a Mortgage constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and currently so serves as such and is named in the Mortgage, or a
valid substitution of trustee has been recorded or may be recorded and no
extraordinary fees or expenses are, or will become, payable by the Transferor to
the trustee under the deed of trust, except in connection with default
proceedings and a trustee's sale after default by the related Obligor.

(u) VALUE AND TITLE I INSURABILITY. Except with respect to conditions and
circumstances expressly permitted pursuant to the applicable underwriting
guidelines, the Transferor has no knowledge of any conditions or circumstances
(that are not reflected in the Trustee's Mortgage Loan File or in the Servicer's
Mortgage Loan File) that could reasonably be expected to materially and
adversely affect the value of the related Mortgaged Property with respect to any
Conventional Mortgage Loan. Further, the Transferor has no knowledge of any
conditions or circumstances that could reasonably be expected to affect the FHA
insurability with respect to any Title I Mortgage Loan under the Title I
Program.

(v) TYPES OF MORTGAGE LOANS. Each Mortgage Loan is (i) in respect of (1)
a property improvement and/or home equity loan, or (2) a first or junior lien
purchase money loan, and (ii) not a loan in respect of the purchase of a
manufactured home; provided that each Title I Mortgage Loan is only in respect
of a property improvement loan.

(w) COMPLETION OF IMPROVEMENTS. With respect to all Mortgage Loans
(except for such Mortgage Loans that are first lien or junior lien purchase
money loans, the proceeds of which have been used in part to improve the related
Mortgaged Property), all improvements to be made to each Mortgaged Property with
the proceeds of the related Mortgage Loan have been completed and, except as to
Mortgage Loans that are such purchase money loans or that were made by the
originator thereof directly to the owner of the property being improved, the
Servicer's Mortgage Loan File with respect to such Mortgage Loan contains a
Completion Certificate.

(x) ORIGINATION PRACTICES. The origination practices used by each
originator of the Mortgage Loans and the servicing and collection practices used
by the Transferor with respect to each Mortgage Loan, and with respect to each
Title I Mortgage Loan the refinancing practices, if applicable, have been in all
material respects legal, proper, prudent and customary in the property
improvement and/or home equity loan origination and servicing business and, in
the case of Title I Mortgage Loans, in compliance with all FHA Regulations.

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(y) SERVICING PRACTICES. Each Mortgage Loan has been serviced in
accordance with all applicable laws and, to the best of the Transferor's
knowledge, no fraud or misrepresentation was committed by any Person in
connection therewith.

(z) NO BULK TRANSFER. The sale, transfer, assignment, conveyance and
grant of the Notes and the Mortgages by the Transferor to the Depositor were not
subject to the bulk transfer laws or any similar statutory provisions in effect
in any applicable jurisdiction.

(aa) DELINQUENCIES. As of the _______________, 199__ Cut-Off Date, none
of the Initial Mortgage Loans were 31 days or more delinquent.

(bb) RELIEF ACT MATTERS. No Obligor has notified the Transferor, and the
Transferor has no knowledge of any relief requested or allowed to an Obligor
under the Soldiers' and Sailors' Civil Relief Act of 1940.

(cc) SELECTION CRITERIA. The Mortgage Loans were not selected by the
Transferor for sale to the Depositor or for inclusion in the Trust Fund on any
basis intended to adversely affect the Depositor or the Trust Fund.

(dd) REMIC QUALIFICATION. With respect to each Mortgage Loan, either: (i)
the original principal balance of the Mortgage Loan as of the date of
origination thereof was less than 125% of the value of the Mortgaged Property
attributable to only the real property securing such Mortgage Loan less the
amount of all indebtedness secured by such Mortgaged Property which is senior or
pari passu with the lien of such Mortgage Loan; or (ii) substantially all of the
proceeds of such Mortgage Loan were used to acquire or to improve or protect an
interest in real property that, at the date of origination of such Mortgage
Loan, was the only security therefor.

(ee) APPRAISED MORTGAGE LOAN-TO-VALUE. At origination, each Title I
Mortgage Loan in excess of $15,000, that was not owner-occupied, had an
appraised loan-to-value ratio not in excess of 100%; provided that the FHA
Regulations in effect at the time of such origination required an appraisal of
the Mortgaged Property.

(ff) TYPE OF MORTGAGED PROPERTIES. At the time of origination, each Title
I Mortgage Loan with a principal balance of $7,500 or greater was secured by a
lien on an owner-occupied one-to-four family dwelling.

(gg) SENIOR LIEN DELINQUENCIES. No lien senior to the lien created by a
Mortgage at the time of origination of the related Mortgage Loan was more than
30 days past due.

(hh) AGGREGATE PRINCIPAL BALANCES OF THE CONVENTIONAL MORTGAGE LOANS. The
aggregate outstanding principal balances of the Conventional Mortgage Loans as
of each Cut-Off Date will not represent more than ____% of the Pool Principal
Balance.

The Transferor has reviewed all of the documents constituting each
Servicer's Mortgage Loan File and each Trustee's Mortgage Loan File and has made
such inquiries as it deems necessary to make and confirm the accuracy of the
representations set forth herein.

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With respect to the 80 individual Initial Mortgage Loans for which the
Mortgaged Property address and state has not been set forth on the Mortgage Loan
Schedule on the Closing Date, the Depositor or Transferor shall provide to the
Trustee and the Custodian, if applicable, the Mortgaged Property address and
state for each such Initial Mortgage Loan within 30 days after the Closing Date.

Section 3.04 SUBSEQUENT MORTGAGE LOANS.

(a) The Transferor shall represent and warrant to the Depositor, the
Trustee, the Certificate Insurer, the Standby Servicer and the
Certificateholders that as of each Subsequent Transfer Date:

(i) No Subsequent Mortgage Loan provides for negative amortization;
and

(ii) No Subsequent Mortgage Loan has a Cut-Off Date or a Subsequent
Transfer Date later than _______________, 199__ ; and

(iii) No Subsequent Mortgage Loan has a maturity date later than
__________, 20__.

(b) The Transferor shall represent and warrant to the Depositor, the
Trustee, the Certificate Insurer and the Certificateholders that as of the end
of the Funding Period:

(i) The Mortgage Loans have a Mortgage Loan Interest Rate of at least
____%;

(ii) The Mortgage Loans have a weighted average original term to
stated maturity of not more than 20 years;

(iii) No Title I Mortgage Loans have a Principal Balance as of the
related Cut-Off Date of greater than $__________ and no Conventional
Mortgage Loans have a Principal Balance as of the related Cut-Off Date of
greater than $__________;

(iv) There is not a concentration of Mortgage Loans in a single zip
code in excess of ____% by Pool Principal Balance;

(v) The other quantitative criteria set forth in paragraphs 32 and 33
of that certain Commitment to Issue a Financial Guaranty Insurance Policy
(Application No. ___________) dated as of _______________, 199__ issued by
the Certificate Insurer, have been satisfied; and

(vi) No more than ten percent (____%) of the Subsequent Mortgage Loans
by Principal Balance as of the respective Cut-Off Dates shall be property
improvement and home equity loans in which less than fifty percent (50%) of
the proceeds from each such loan have been used for the improvement of the
related Mortgaged Property.

Section 3.05 PURCHASE AND SUBSTITUTION.

(a) It is understood and agreed that the representations and warranties
set forth in SECTIONS 3.03 and 3.04, shall survive the transfer and assignment
of the Mortgage Loans to the Trust

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Fund and delivery of the Certificates to the Certificateholders. Upon discovery
by the Depositor, the Servicer, the Transferor, the Custodian, the Trustee, the
Certificate Insurer or any Certificateholder 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 which
materially and adversely affects the interests of 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 Transferor's best knowledge), the party discovering such breach
shall give prompt written notice to the others. The Transferor shall within 60
days of the earlier of its discovery or its receipt of notice of any breach of a
representation or warranty, promptly cure such breach in all material respects.
If, however, within 60 days after the notice to the Transferor respecting such
breach the Transferor has not remedied the breach and the breach materially and
adversely affects the interest of the Certificateholders generally or in the
related Mortgage Loan, the Depositor shall cause the Transferor on the
Determination Date next succeeding the end of such 60 day period either (i) to
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 in the manner and subject to the conditions set forth in this SECTION 3.05
or (ii) to purchase such Mortgage Loan at a purchase price equal to the Purchase
Price (as defined below) by depositing such Purchase Price in the Collection
Account; provided any such substitution may be effected not later than the date
which is two years after the Startup Day; provided further, however, that if it
is discovered that any Mortgage Loan does not constitute a Qualified Mortgage,
the Transferor shall and the Trustee shall cause the Transferor to repurchase
the affected Mortgage Loan or to substitute in lieu of such Mortgage Loan a
Qualified Substitute Mortgage Loan, no later than 90 days after the earliest of
such discovery by the Servicer, the Transferor, the Certificate Insurer, the
Depositor or the Trustee. The Transferor shall provide the Servicer and the
Trustee with a certification of a Responsible Officer on the Determination Date
next succeeding the end of such 60 day period indicating whether the Transferor
is purchasing the defective Mortgage Loan or substituting in lieu of such
Mortgage Loan a Qualified Substitute Mortgage Loan. With respect to the
purchase of a defective Mortgage Loan pursuant to this Section, the "PURCHASE
PRICE" shall be equal to the Principal Balance of such Mortgage Loan as of the
date of purchase, plus all accrued and unpaid interest on such Mortgage Loan to
but not including the Due Date in the Due Period most recently ended prior to
such Determination Date computed at the Mortgage Loan Interest Rate, plus the
amount of any unreimbursed Servicing Advances made by the Servicer with respect
to such Mortgage Loan, which Purchase Price shall be deposited in the Collection
Account (after deducting therefrom any amounts received in respect of such
repurchased Mortgage Loan and being held in the Collection Account for future
distribution to the extent such amounts represent recoveries of principal not
yet applied to reduce the related Principal Balance or interest (net of the
Servicing Fee) for the period from and after the Due Date in the Due Period most
recently ended prior to such Determination Date). As to any Title I Mortgage
Loan for which the related FHA Insurance has not been transferred on the books
of the FHA from the Transferor's contract of insurance to the Trustee's contract
of insurance within 120 days after the Closing Date (in the case of Title I
Mortgage Loans that are Initial Mortgage Loans) or the related Subsequent
Transfer Date (in the case of Title I Mortgage Loans that are Subsequent
Mortgage Loans), the Transferor shall purchase such Mortgage Loan from the Trust
Fund in the manner and at the price set forth in this SECTION 3.05(a) for the
purchase of a defective Mortgage Loan; provided that such 120 day period may be
extended by the Transferor with the consent of the Certificate Insurer.

Any substitution of Mortgage Loans pursuant to this SECTION and SECTION
2.06(c) shall be accompanied by payment by the Transferor of the Substitution
Adjustment, if any, to be deposited

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in the Collection Account. For purposes of calculating the Available Remittance
Amount for any Remittance Date, amounts paid by the Transferor pursuant to this
SECTION 3.04 in connection with the repurchase or substitution of any Mortgage
Loan that are on deposit in the Collection Account as of the Determination Date
for such Remittance Date shall be deemed to have been paid during the related
Due Period and shall be transferred to the Certificate Account pursuant to
SECTION 5.04(i) on the Determination Date for such Remittance Date.

As to any Deleted Loan for which the Transferor substitutes a Qualified
Substitute Loan or Loans, the Transferor shall effect such substitution by
delivering to the Trustee a certification in the form attached hereto as
EXHIBIT I, executed by a Responsible Officer, and the documents constituting the
Trustee's Loan File for such Qualified Substitute Loan or Loans.

In addition to the preceding repurchase obligations, each of the Depositor
and the Transferor shall have the option, exercisable in its sole discretion at
any time, to repurchase any Mortgage Loan from the Trust Fund in the event that
such Mortgage Loan is in foreclosure, default or imminent default; provided that
any repurchase pursuant to this paragraph is conducted in the same manner as the
repurchase of a defective Mortgage Loan pursuant to this SECTION 3.05.

(b) The Transferor 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 Transferor. The Trust Fund will own all payments received on
the Deleted Mortgage Loan on or before the date of substitution, and the
Transferor shall thereafter be entitled to retain all amounts subsequently
received in respect of such Deleted Mortgage Loan. The Transferor shall give
written notice to the Trustee, the Servicer, the Standby Servicer 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. The Transferor shall promptly deliver to the Trustee, the
Servicer and the Certificate Insurer a copy of the amended Mortgage Loan
Schedule. Upon such substitution, such Qualified Substitute Mortgage Loan or
Mortgage Loans shall be subject to the terms of this Agreement in all respects,
and the Transferor shall be deemed to have made with respect to such Qualified
Substitute Mortgage Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in SECTION 3.03. On the date
of such substitution, the Transferor will deposit into the Collection Account,
an amount equal to the Substitution Adjustment, if any.

(c) It is understood and agreed that the obligations of the Transferor set
forth in this SECTION 3.05 to cure, purchase or substitute for a defective
Mortgage Loan constitute the sole remedies of the Trustee, the
Certificateholders and the Certificate Insurer hereunder respecting a breach of
the representations and warranties contained in SECTIONS 3.03 and 3.04. Any
cause of action against the Depositor relating to or arising out of a defect in
a Trustee's Mortgage Loan File as contemplated by SECTION 2.06 or against the
Transferor relating to or arising out of a breach of any representations and
warranties made in SECTIONS 3.03 or 3.04 shall accrue as to any Mortgage Loan
upon (i) discovery of such defect or breach by any party and notice thereof to
the Depositor or the Transferor, as applicable, or notice thereof by the
Transferor or the Depositor, as applicable, to the Trustee, (ii) failure by the
Transferor or the Depositor, as applicable, to cure such defect or breach or
purchase or substitute such Mortgage Loan as specified above, and (iii) demand
upon the

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Transferor or the Depositor, as applicable, by the Trustee or the Majority
Certificateholders for all amounts payable in respect of such Mortgage Loan.

(d) Notwithstanding any contrary provision of this Agreement, no purchase
or substitution pursuant to SECTIONS 2.06(c) or 3.05 shall be made unless such
purchase or substitution would not (i) result in the imposition of taxes on
"prohibited transactions" of the Trust Fund, as defined in Section 860F of the
Code, or a tax on contributions to the REMIC under the REMIC Provisions, or
(ii) cause the REMIC to fail to qualify as a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code at any time that any
Certificates are outstanding. Any Mortgage Loan as to which purchase or
substitution was delayed pursuant to this paragraph shall be purchased or
substituted (subject to compliance with Sections 2.06(c) and 3.05) upon the
occurrence of a default or when a default becomes reasonably foreseeable with
respect to such loan.

(e) The Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any
Mortgage Loan pursuant to this Section or the eligibility of any Mortgage Loan
for purposes of this Agreement.

ARTICLE IV

THE CERTIFICATES

Section 4.01 THE CERTIFICATES.

The Class A, Class B and Class R Certificates shall be substantially in the
forms annexed hereto as Exhibits B-1, B-2 and B-3, respectively, and shall, upon
original issue, be executed (not in its individual capacity, but solely as
Trustee) and delivered by the Trustee to the Certificate Registrar for
authentication and delivery to or upon the order of the Depositor, concurrently
with the transfer and assignment to the Trustee of the Initial Mortgage Loans,
the Pre-Funding Account Deposit, the Capitalized Interest Account Deposit and
the other items of the Trust Fund pursuant to SECTION 2.01. All Certificates
shall be executed and authenticated by manual or facsimile signature by an
authorized officer of the Trustee and on behalf of the Certificate Registrar by
an authorized officer of the Certificate Registrar. Certificates bearing the
signatures of individuals who were at the time of the execution of the
Certificates the proper officers of the Trustee shall bind the Trust Fund,
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 Class A Certificates shall initially be issued only in book-entry
form. The Beneficial Owners of interests in any Class A Certificates will hold
their Certificates through the book entry facilities of DTC. So long as the
Class A Certificates are in book-entry form, each such Class A Certificate will
be evidenced by one or more Book-Entry Certificates registered in the name of
the nominee of DTC. The interests of such Beneficial Owners will be represented
by book-entries on the records of DTC and participating members thereof. No
Beneficial Owners will be entitled to receive a definitive certificate
representing such person's interest, except in the event that

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<PAGE>

definitive certificates evidencing the Class A Certificates are issued due to
the termination of the book-entry registration of the Class A Certificates. All
references in this Agreement to any Class A Certificates reflect the rights of
Beneficial Owners only as such rights may be exercised through DTC and its
participating members for so long as such Class A Certificates are held by DTC.
Beneficial ownership interests in each Class of Class A or Class B Certificates
will be issued only in minimum denominations of $250,000 and integral multiples
of $1,000 in excess thereof; provided, however, that one or more beneficial
ownership interests in each Class of Class A or Class B Certificates may be
issued in a different denomination such that the aggregate initial principal
balance of such Class of Class A or Class B Certificates will equal the Original
Class Principal Balance of such Class.

(b) The Trustee shall cause to be kept at its office in St. Paul,
Minnesota, or at its designated agent, a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, it shall provide for the
registration of the Certificates (including the Book-Entry Certificates) and of
transfers and exchanges of Certificates as herein provided. The Certificate
Register shall contain the name, remittance instructions, Class and Percentage
Interest of each Certificateholder, as well as the Series and the number in the
Series. The Trustee hereby accepts appointment as Certificate Registrar for the
purpose of registering the Certificates and transfers and exchanges of such
Certificates as herein provided. If requested, the Trustee shall furnish the
Depositor with a copy of the Certificate Register promptly after the transfer or
exchange of any Certificates as provided herein.

(c) 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 authorized the Trustee or its designee under clause (iii)(A) below
to deliver payments to a Person other than such Person and to negotiate the
terms of any mandatory sale under clause (iii)(B) below and to execute all
instruments of transfer and to do all other things necessary in connection with
any such sale.

(i) The rights of each Person acquiring any Ownership Interest in a
Class R Certificate are expressly subject to the following provisions:

(A) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall be a United States Person and a Permitted
Transferee and shall not be a Plan and shall promptly notify the
Trustee of any change or impending change in its status as a United
States Person, a Permitted Transferee or a Plan.

(B) 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, (I) an affidavit and agreement (a "TRANSFER
AFFIDAVIT AND AGREEMENT"), in the form attached hereto as EXHIBIT J-1,
from the proposed Transferee, in substance satisfactory to the
Trustee, representing and warranting, among other things, that it is a
United States Person and a Permitted Transferee, that it is not
acquiring its Ownership Interest in the Class R Certificate that is
the subject of the proposed Transfer as a nominee, trustee or agent
for any Person who 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(d) and agrees

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to be bound by them, and (II) a certificate (a "TRANSFER
CERTIFICATE"), in the form attached hereto as EXHIBIT J-2, from the
Holder wishing to transfer the Class R Certificate, in substance
satisfactory to the Trustee, representing and warranting, among other
things, that no purpose of the proposed Transfer is to impede the
assessment or collection of tax.

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

(D) 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 Transfer
Certificate to the Trustee.

(E) 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 regulations 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".

(ii) The Trustee will register the Transfer of any Class R Certificate
only if it shall have received the Transfer Affidavit and Agreement, a
Transfer Certificate of the Holder requesting such transfer and all of such
other documents as shall have been reasonably required by the Trustee as a
condition to such registration. Transfers of the Class R Certificates to
Non-United States Persons and "Disqualified Organizations" (as defined in
Section 860E(e)(5) of the Code) are prohibited.

(iii) (A) If any Disqualified Organization shall become a holder
of a Class R Certificate, then the last preceding Permitted Transferee
shall be restored, to the extent permitted by law, to all rights and
obligations as Holder thereof retroactive to the date of registration
of such Transfer of such Class R Certificate. If a Non-United States
Person shall become a holder of a Class R Certificate, then the last
preceding United States Person shall be restored, to the extent
permitted by law, to all rights and obligations as Holder thereof
retroactive to the date of registration of such Transfer of such Class
R Certificate. If a Transfer of a Class R Certificate is disregarded
pursuant to the provisions of Treasury regulations Section 1.860E-1 or
Section 1.860G-3, then the last preceding Permitted Transferee shall
be restored, to the extent permitted by law, to all rights and
obligations as Holder thereof retroactive to the date of registration
of such Transfer of such Class R Certificate. 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(d) or for making any

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payments due on such Certificate to the Holder thereof or for taking
any other action with respect to such Holder under the provisions of
this Agreement.

(B) If any purported Transferee shall become a Holder of a Class
R Certificate in violation of the restrictions in this Section 4.02(d)
and to the extent that the retroactive restoration of the rights of
the Holder of such Class R Certificate as described in clause (iii)(A)
above shall be invalid, illegal or unenforceable, then the Trustee
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 Trustee on such terms as the Trustee may
choose. Such purported Transferee shall promptly endorse and deliver
each Class R Certificate in accordance with the instructions of the
Trustee. Such purchaser may be the Trustee itself or any Affiliate of
the Trustee. The proceeds of such sale, net of the commissions (which
may include commissions payable to the Trustee or its Affiliates),
expenses and taxes due, if any, will be remitted by the Trustee to
such purported Transferee. The terms and conditions of any sale under
this clause (iii)(B) shall be determined in the sole discretion of the
Trustee, and the Trustee 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.

(d) Each prospective initial purchaser of a beneficial interest in a Class
B Certificate and any subsequent transferee of a beneficial interest in a Class
B Certificate (each, a "PROSPECTIVE OWNER"), shall either (i) represent and
warrant, in writing, to the Depositor, the Servicer, the Standby Servicer, the
Trustee, the Certificate Insurer, the Placement Agent and any of their
successors that (1) the Prospective Owner is not an "employee benefit plan"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or a "plan" within the meaning of Section
4975(e)(1) of the Code (any such plan or employee benefit plan, a "PLAN") and is
not directly or indirectly purchasing the Class B Certificate on behalf of, as
investment manager of, as named fiduciary of, as trustee of, or with assets of a
Plan or (2) either (I) the Prospective Owner is acquiring the Class B
Certificate for its own account and no part of the assets used to acquire the
Class B Certificate constitute assets of a Plan, or (II) the source of funds to
be used to acquire the Class B Certificate is an "insurance company general
account," within the meaning of Prohibited Transaction Class Exemption 95-60, 60
Fed. Reg. 35925 (July 12, 1995) (the "EXEMPTION"), and there is no Plan with
respect to which the amount of such general account's reserves for the
contract(s) held by or on behalf of such Plan (determined under Section 807(d)
of the Code), together with the amount of the reserves of the contract(s) held
by or on behalf of any other Plans (determined under Section 807(d) of the Code)
maintained by the same employer (or an affiliate thereof as defined in Section
V(a)(1) of the Exemption) or by the same employee organization, exceed 10% of
the total of all liabilities of such general account; or (ii) furnish to the
Depositor, the Transferor, the Servicer, the Standby Servicer, the Trustee, the
Certificate Insurer, the Placement Agent and any of their successors an opinion
of counsel acceptable to such persons that (A) the proposed issuance or transfer
will not cause any assets of the Trust Fund to be deemed assets of a Plan, or
(B) the proposed issuance or transfer will not cause the Depositor, the
Transferor, the Servicer, the Standby Servicer, the Trustee, the Certificate
Insurer, the Placement Agent or any of their successors to be a fiduciary of a
Plan within the meaning of Section 3(21) of ERISA and will not give rise to a
transaction described in Section 406 of ERISA or Section 4975(c)(1) of the Code
for which a statutory or administrative exemption is unavailable. In the case
of clause (i) in the

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preceding sentence, such representation and warranty shall be in the form of
paragraph 9 of the form of investment letter attached hereto as Exhibit D or
such other form as is acceptable to the Trustee.

(e) Subject to the preceding paragraphs, upon surrender for registration
of transfer of any Certificate at the corporate trust office of the Trustee (or
at the office of the designated Certificate Registrar), 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.

(f) At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of Authorized Denominations of a like Class and 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. Every Certificate
presented or surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer substantially in the form of
EXHIBIT E hereto, or such other endorsement or written instrument of transfer as
is satisfactory to the Trustee, duly executed by the Holder thereof or his
attorney duly authorized in writing, together with wiring instructions, if
applicable, in the form set forth in EXHIBIT E.

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

(h) All Certificates surrendered for registration of transfer and exchange
shall be marked "cancelled" by the Trustee, and after proper notation in the
Certificate Register reflecting such transfer and exchange has been made, such
Certificates may be destroyed by the Trustee pursuant to its customary
practices.

Section 4.03 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (ii) there is delivered to
the Depositor, the Trustee, the Certificate Insurer (only where Insured
Certificates are involved) and the Certificate Registrar such security or
indemnity as may be required by each of them to save each of them harmless in a
form acceptable to the Certificate Registrar and the Trustee, then, in the
absence of notice to the Depositor, the Trustee, the Certificate Insurer (only
where Insured Certificates are involved) and the Certificate Registrar that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, deliver and authenticate, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor, Class and Percentage Interest, but bearing a number not contemporaneously
outstanding. Upon the issuance of any new Certificate under this Section 4.03,
the Depositor and the Trustee may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses 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.

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Section 4.04 BOOK-ENTRY CERTIFICATES. The Book-Entry Certificates shall
initially be registered in the name of Cede & Co., as nominee for DTC. Until
such date as the Class A Certificates are no longer registered in the name of
Cede & Co., as nominee of DTC:

(a) All notices, transmittals of payment and other communications and
transactions between the Transferor, the Servicer, the Trustee or the Standby
Servicer and the Beneficial Owners of the Book-Entry Certificates shall occur
between the Transferor, the Servicer, the Trustee or the Standby Servicer, as
the case may be, and DTC. DTC shall be responsible for transmitting information
and payments to its participants who shall be responsible for transmitting such
information and payments to indirect participants and the Beneficial Owners;

(b) Any requirements of surrender of Book-Entry Certificates under this
Agreement, if agreed by DTC and the Trustee, may be waived and an appropriate
notation may be made on the Book-Entry Certificate then in the possession of
DTC;

(c) Nothing in this Agreement shall be construed to require or permit
Book-Entry Certificates to be registered otherwise than in the name of DTC or
its nominee or delivered otherwise than to DTC or at the direction of DTC;

(d) The Transferor and the Depositor hereby authorize the Trustee to
execute and deliver a letter of representations in the form required by DTC (the
"LETTER TO REPRESENTATIONS"); and

(e) Delivery of Book-Entry Certificates shall be effected by appropriate
delivery under the rules and procedures of DTC and the Letter of
Representations, dated the date of the issuance of the Book-Entry Certificates,
by and between the Trustee, the Depositor and DTC.

Section 4.05 PERSONS DEEMED OWNERS.

Prior to due presentation of a Certificate for registration of transfer,
the Servicer, the Depositor, the Trustee, the Certificate Insurer and the
Certificate Registrar 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 Depositor, the Servicer, the Trustee, the Certificate Insurer and the
Certificate Registrar shall not be affected by notice to the contrary.

Section 4.06 THE GUARANTY POLICY.

(a) On the Determination Date preceding each Remittance Date, the Trustee
shall determine if a Deficiency Amount exists with respect to any of the Class A
Certificates. If a Deficiency Amount does exist with respect to any of the
Class A Certificates, the Trustee shall promptly, but in no event later than
12:00 noon New York City time on the second Business Day preceding the related
Remittance Date, make a claim under the Guaranty Policy in accordance with the
terms of such policy.

(b) On any date on which the Trustee receives written notice from the
Holder of a Class A Certificate that a Preference Amount is payable pursuant to
the terms of the Guaranty Policy, the Trustee shall make a claim for the payment
of such Preference Amount and shall deliver

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the documents required to be delivered under the Guaranty Policy to the
Certificate Insurer with respect thereto in the manner set forth in the Guaranty
Policy.

(c) The Trustee shall (i) receive as attorney-in-fact of each Holder of
the Class A Certificates with respect to which a Deficiency Amount has been
determined to exist, any Guaranteed Payment from the Certificate Insurer under
the Guaranty Policy and (ii) disburse such Guaranteed Payment to such Holders of
such Class A Certificates as set forth in SECTION 6.05(b). Guaranteed Payments
for the Class A Certificates disbursed by the Trustee from the Guaranty Policy
Proceeds shall not be considered payment by the Trust Fund with respect to such
Class A Certificates, nor shall such payments discharge the obligation of the
Trust Fund, with respect to such Class A Certificates, and the Certificate
Insurer shall become the owner of such unpaid amounts due from the Trust Fund in
respect of Guaranteed Payments for such Class and the deemed assignee of such
Holders of such Class A Certificates. The Trustee hereby agrees on behalf of
each Beneficial Owner of a Class A Certificate for the benefit of the
Certificate Insurer that it recognizes that to the extent the Certificate
Insurer makes Guaranteed Payments for such Class A Certificates, either directly
or indirectly (as by paying through the Trustee), to the Beneficial Owners of
such Class A Certificates, the Certificate Insurer will be entitled to receive
the related Insurer Reimbursement Obligation pursuant to SECTION 6.05(b).

(d) To the extent of any Guaranteed Payment for the Class A Certificates
under the Guaranty Policy, the Certificate Insurer shall be fully subrogated to
the rights of the Beneficial Owners of such Class A Certificates and the Trustee
in respect of such Class A Certificates, the Deficiency Amount or Preference
Amount giving rise to such Guaranteed Payment or in any proceedings relating
thereto.

ARTICLE V

ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

Section 5.01 DUTIES OF THE SERVICER.

(a) SERVICING STANDARD. The Servicer, as independent contract servicer,
shall service and administer the Mortgage Loans and shall have full power and
authority, acting alone, to do any and all things in connection with such
servicing and administration which the Servicer may deem necessary or desirable
and consistent with the terms of this Agreement. Notwithstanding anything to
the contrary contained herein, the Servicer, in servicing and administering the
Mortgage Loans, shall employ or cause to be employed procedures (including
collection, foreclosure, liquidation and REO Property management and liquidation
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering loans of the same type as the Mortgage Loans for
its own account, all in accordance with accepted servicing practices of prudent
lending institutions and servicers of loans of the same type as the Mortgage
Loans and giving due consideration to the Certificateholders' reliance on the
Servicer. With respect to any Title I Mortgage Loan, the foregoing servicing
standard also shall include the requirement that the Servicer shall, and shall
cause any Subservicer to, comply with FHA Regulations in servicing the Title I
Mortgage Loans so that the FHA Insurance remains in full force and effect with
respect to the Title I Mortgage Loans, except for good faith disputes relating
to FHA Regulations or such FHA Insurance, unless such disputes would result in
the termination or suspension of such FHA

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Insurance. The Servicer has and shall maintain the facilities, procedures and
experienced personnel necessary to comply with the servicing standard set forth
in this subsection (a) and the duties of the Servicer set forth in this
Agreement relating to the servicing of the Mortgage Loans. Consistent with the
terms of this Agreement, the Servicer may, with the prior written consent of the
Trustee, with respect to any material obligations hereunder which consent shall
not be unreasonably withheld, employ or retain agents or contract with third
parties to aid in the performance of the Servicer's obligations hereunder;
provided that the Servicer may employ or retain agents or contract with third
parties to perform the REMIC reporting duties set forth in Section 5.13,
including the retention of the Standby Servicer therefor, without the consent of
the Trustee. The REMIC reporting duties will initially be performed by the
Standby Servicer pursuant to a REMIC Administration Master Agreement between the
Servicer and the Standby Servicer.

(b) SERVICING ADVANCES. In accordance with the preceding general
servicing standard, the Servicer, or any Subservicer on behalf of the Servicer,
shall make all reasonable and necessary Servicing Advances in connection with
the servicing of each Mortgage Loan hereunder. Notwithstanding any provision to
the contrary herein, neither the Servicer, nor any Subservicer on behalf of the
Servicer, shall have any obligation to advance its own funds for any delinquent
scheduled payments of principal and interest on any Mortgage Loan or to satisfy
or keep current the indebtedness secured by any Superior Liens on the related
Mortgaged Property. No costs incurred by the Servicer or any Subservicer in
respect of Servicing Advances shall for the purposes of distributions to
Certificateholders be added to the amount owing under the related Mortgage Loan.
Notwithstanding any obligation by the Servicer to make a Servicing Advance
hereunder with respect to a Mortgage Loan, before making any Servicing Advance
that is material in relation to the outstanding principal balance thereof, the
Servicer shall assess the reasonable likelihood of (i) recovering such Servicing
Advance and any prior Servicing Advances for such Mortgage Loan, and (ii)
recovering any amounts attributable to outstanding interest and principal owing
on such Mortgage Loan for the benefit of the Certificateholders in excess of the
costs, expenses and other deductions to obtain such recovery, including without
limitation any Servicing Advances therefor and, if applicable, the outstanding
indebtedness of all Superior Liens. The Servicer shall only make a Servicing
Advance with respect to a Mortgage Loan to the extent that the Servicer
determines in its reasonable, good faith judgment that such Servicing Advance
would likely be recovered as aforesaid.

(c) WAIVERS, MODIFICATIONS AND EXTENSIONS. Consistent with the terms of
this Agreement and the FHA Regulations, the Servicer may waive, modify or vary
any provision of any Mortgage Loan or consent to the postponement of strict
compliance with any such provision or in any manner grant indulgence to any
Obligor if in the Servicer's reasonable determination such waiver, modification,
postponement or indulgence is not materially adverse to the interests of the
Certificateholders or the Certificate Insurer; provided, however, that such
waiver, modification, postponement or indulgence would not affect the status of
the REMIC or cause a tax to be imposed upon the REMIC for federal income tax
purposes; provided, further, however, unless the Obligor is in default with
respect to the Mortgage Loan, or such default is, in the judgment of the
Servicer, reasonably foreseeable, the Servicer may not permit any modification
with respect to any Mortgage Loan that would change the Mortgage Loan Interest
Rate, defer (subject to the following paragraph) or forgive the payment of any
principal or interest (unless in connection with the liquidation of the related
Mortgage Loan) or extend the final maturity date on the Mortgage Loan. The
Servicer may grant a waiver or enter into a subordination agreement with respect
to the refinancing of a superior lien on the Mortgaged Property, provided that
the Obligor is in a better financial or cash flow

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position as a result of such refinancing, which may include a reduction in the
Obligor's scheduled monthly payment on the indebtedness secured by such superior
lien. The Servicer shall notify the Trustee of any modification, waiver or
amendment of any provision of any Mortgage Loan and the date thereof, and shall
deliver to the Trustee for deposit in the related Trustee's Mortgage Loan File,
an original counterpart of the agreement relating to such modification, waiver
or amendment promptly following the execution thereof.

The Servicer shall make reasonable efforts to collect all payments called
for under the terms and provisions of each Mortgage Loan and the related Note
and Mortgage, if applicable. Consistent with the foregoing, the Servicer may in
its discretion waive or permit to be waived any late payment charge, prepayment
charge or assumption fee or any other fee or charge which the Servicer would be
entitled to retain hereunder as Servicing Compensation and extend the due date
for payments due on a Note for a period (with respect to each payment as to
which the due date is extended) not greater than 90 days after the initially
scheduled due date for such payment, provided that such extension (i) would not
result in an extension of the final maturity date of such Note, (ii) would not
affect the status of the REMIC or cause a tax to be imposed upon the REMIC, and
(iii) would not result in a violation of FHA Regulations.

(d) INSTRUMENTS OF SATISFACTION OR RELEASE. Without limiting the
generality of the foregoing, the 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 Servicer, the Trustee shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties under this Agreement.

Section 5.02 LIQUIDATION OF MORTGAGE LOANS.

(a) In the event that any payment due under any Mortgage Loan and not
postponed pursuant to SECTION 5.01(c) is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the Mortgage Loan and such failure continues beyond any
applicable grace period, the Servicer shall take such action as it shall deem to
be in the best interest of the Certificateholders. Without limiting the
generality of the preceding sentence, the Servicer shall, in accordance with the
standard of care specified in SECTION 5.01(a), (i) in the case of Title I
Mortgage Loans only, after the FHA Transfer Date for such Title I Mortgage Loan,
direct the Trustee or any FHA Claims Administrator, as the case may be, to
submit an FHA Claim in lieu of commencing foreclosure proceedings, or (ii) take
such other action as the Servicer shall deem to be in the best interests of the
Certificateholders (including the resale or substitution of such Mortgage Loan
pursuant to SECTION 3.05, or, if no Superior Liens exist on the related
Mortgaged Property, foreclose or otherwise comparably effect ownership in such
Mortgaged Property in the name of the Trustee for the benefit of
Certificateholders), provided such action would not affect the status of the
REMIC or cause a tax to be imposed upon the REMIC for federal income tax
purposes. The Servicer shall give the Trustee (and any FHA Claims
Administrator) notice of the election of remedies made pursuant to this SECTION
5.02. The Servicer shall not be required to satisfy the indebtedness secured by
any Superior Liens on the related Mortgaged Property or to advance funds to keep
the indebtedness secured by such Superior Liens current. In connection with any
collection or foreclosure activities, the Servicer shall exercise collection or
foreclosure procedures

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with the same degree of care and skill as it would exercise or use under the
circumstances in the conduct of its own affairs.

(b) During any Due Period occurring after a Mortgage Loan becomes a
Liquidated Mortgage Loan, the Servicer shall deposit into the Collection Account
any proceeds received by it with respect to such Liquidated Mortgage Loan or the
related REO Property ("POST LIQUIDATION PROCEEDS"), including without limitation
any FHA Insurance Proceeds that are received by the Servicer in any Due Period
occurring after the expiration of 300 days from the receipt by the Servicer of
any portion of a Monthly Payment.

(c) After a Mortgage Loan has become a Liquidated Mortgage Loan, the
Servicer shall promptly prepare and forward to the Trustee (and any FHA Claims
Administrator), the Certificate Insurer and, upon request of any
Certificateholder, to such Certificateholder a Liquidation Report, in the form
attached hereto as EXHIBIT L, detailing following: (i) the Net Liquidation
Proceeds, FHA Insurance Proceeds, Insurance Proceeds or Released Mortgaged
Property Proceeds received from the Liquidated Mortgage Loan; (ii) expenses
incurred with respect thereto; (iii) any Net Loan Losses incurred in connection
therewith; and (iv) any Post Liquidation Proceeds.

Section 5.03 ESTABLISHMENT OF COLLECTION ACCOUNTS; DEPOSITS IN COLLECTION
ACCOUNTS.

The Servicer shall cause to be established and maintained one or more
Collection Accounts, which shall be Eligible Accounts, which may be interest-
bearing, entitled "First Trust of California, National Association, in trust for
the Beneficial Owners of Remodelers Home Improvement Loan Asset-Backed
Certificates, Series 199__-__, Collection Account." The Collection Account may
be maintained with the Trustee or any other depository institution which
satisfies the requirements set forth in the definition of Eligible Account. The
creation of any Collection Account other than one maintained with the Trustee
shall be evidenced by a letter agreement in the form of EXHIBIT C hereto. A copy
of such letter agreement shall be furnished to the Trustee, the Certificate
Insurer and, upon request of any Certificateholder, to such Certificateholder.
The Servicer shall use its best efforts to deposit or cause to be deposited
(without duplication) within one (1) Business Day, and shall in any event
deposit within two (2) Business Days, of receipt thereof in the Collection
Account and retain therein:

(i) all payments on account of scheduled principal on the Mortgage
Loans collected after the applicable Cut-Off Date;

(ii) all payments on account of interest accruing on the Initial
Mortgage Loans and collected on and after the Closing Date and all payments
on account of interest accruing on the Subsequent Mortgage Loans and
collected on and after the applicable Subsequent Transfer Date;

(iii) all Net Liquidation Proceeds and Post Liquidation Proceeds
pursuant to SECTIONS 5.02 or 5.07;

(iv) all Insurance Proceeds;

(v) all FHA Insurance Proceeds, other than those received in respect
of a Deleted Mortgage Loan which shall be delivered to the Transferor;

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(vi) all Released Mortgaged Property Proceeds;

(vii) any amounts payable in connection with the repurchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant to
SECTIONS 2.06 and 3.05;

(viii)any amount required to be deposited in the Collection
Account pursuant to the receipt of proceeds from any fidelity bond or
errors and omission insurance under Section 5.06 or the deposit of the
Termination Price under SECTION 11.02; and

(ix) interest and gains on funds held in the Collection Account.

With respect to any Modified Mortgage Loan, the Servicer shall (a) include
as payments on account of scheduled principal, an amount equal to the product of
(i) the principal portion of the Monthly Payment for such Modified Mortgage Loan
and (ii) the REMIC Factor for such Modified Mortgage Loan and (b) include as
payments on account of interest, an amount equal to (i) the Monthly Payment
received with respect to such Modified Mortgage Loan less (ii) the amount
calculated in (a) above in this paragraph.

The foregoing requirements for deposit in the Collection Account shall be
exclusive.

Section 5.04 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT.

The Servicer shall withdraw or cause to be withdrawn funds from the
Collection Account for the following purposes:

(i) to effect the remittance to the Trustee on the Business Day
immediately preceding each Remittance Date of the Available Remittance
Amount, plus any amount which would exceed the 12 month time limit in the
second paragraph following this paragraph;

(ii) to pay itself any accrued and unpaid Servicing Fees;

(iii) to withdraw any amount received from an Obligor 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;

(iv) to withdraw funds attributable to accrued interest on the
Initial Mortgage Loans up to the Closing Date and accrued interest on the
Subsequent Mortgage Loans up to the applicable Subsequent Transfer Date,
but deposited in the Collection Account on and after the Closing Date and
such Subsequent Transfer Date, respectively, and to withdraw any funds
deposited in the Collection Account that were not required to be deposited
therein (such as Servicing Compensation) or were deposited therein in error
or that constituted FHA Insurance Proceeds the FHA seeks to reclaim on the
grounds that a Title I Mortgage Loan which was the subject of an FHA Claim
is found not to conform to FHA Regulations;

(v) to pay itself Servicing Compensation pursuant to SECTION 7.03
hereof to the extent not paid pursuant to SECTION 5.04(ii);

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(vi) to withdraw funds necessary for the conservation and disposition
of REO Property pursuant to the third paragraph of SECTION 5.07; and

(vii) to clear and terminate the Collection Account upon the
termination of this Agreement with any amounts on deposit therein being
paid to the Certificate Account.

Notwithstanding the preceding clause (iv), with respect to any Remittance
Date following the Closing Date, the Servicer shall only withdraw the funds
attributable to such accrued interest on the Initial Mortgage Loans or the
Subsequent Mortgage Loans up to the Closing Date or the applicable Subsequent
Transfer Date to the extent that the Servicer determines and certifies to the
Trustee that a sufficient amount of funds will be deposited into the Certificate
Account to equal the sum of the interest and principal amounts distributable to
all Classes of Certificates, exclusive of the Class R Certificates, plus the
fees distributable to the Trustee, the Custodian, the REMIC Administrator and
the Certificate Insurer and the FHA Premium Deposit Amount, on each such
Remittance Date.

The Servicer shall not retain any cash or investment in the Collection
Account for a period in excess of 12 months and cash therein shall be considered
transferred to the Certificate Account on a first-in, first-out basis.

The funds held in the Collection Account may be invested (to the extent
practicable and consistent with any requirements of the Code) in Permitted
Instruments, as directed in writing to the Servicer by the Depositor. In any
case, funds in the Collection Account must be available for withdrawal without
penalty, and any Permitted Instruments must mature or otherwise be available for
withdrawal, not later than one Business Day immediately preceding the Remittance
Date next following the date of such investment and shall not be sold or
disposed of prior to its maturity. All Permitted Instruments in which funds in
the Collection Account are invested must be held by or registered in the name of
"First Trust of California, National Association, in trust for the Beneficial
Owners of Remodelers Home Improvement Loan Asset-Backed Certificates, Series
199__-__."

Section 5.05 INITIAL COLLECTION ACCOUNT; TRANSFER OF COLLECTION ACCOUNT.

Pursuant to Section 5.03, the Collection Account shall be established, as
of the Closing Date, with Bank One, Texas, N.A., as an Eligible Account pursuant
to the definition thereof. The Collection Account may, upon written notice to
the Trustee, be transferred to a different depository institution so long as
such transfer is to an Eligible Account.

Section 5.06 FIDELITY BOND; ERRORS AND OMISSION INSURANCE.

The Servicer shall maintain with a responsible company, and at its own
expense, a blanket fidelity bond and an errors and omissions insurance policy in
such amounts as required by, and satisfying any other requirements of, FHA and
FHLMC, with broad coverage on all officers, employees or other persons acting in
any capacity requiring such persons to handle funds, money, documents or papers
relating to the Mortgage Loans ("SERVICER EMPLOYEES"). Any such fidelity bond
and errors and omissions insurance shall protect and insure

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the Servicer against losses, including losses resulting from forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts (including acts
relating to the origination and servicing of loans of the same type as the
Mortgage Loans) of such Servicer Employees. Such fidelity bond shall also
protect and insure the Servicer against losses in connection with the release or
satisfaction of a Mortgage Loan without having obtained payment in full of the
indebtedness secured thereby. In the event of any loss of principal or interest
on a Mortgage Loan for which reimbursement is received from Servicer's fidelity
bond or errors and omissions insurance, the proceeds from any such insurance
will be deposited in the Collection Account. No provision of this Section 5.06
requiring such fidelity bond and errors and omissions insurance shall diminish
or relieve the Servicer from its duties and obligations as set forth in this
Agreement. Upon the request of the Trustee, the Servicer shall cause to be
delivered to the Trustee a certified true copy of such fidelity bond and
insurance policy. On the Closing Date, such bond and insurance is maintained by
the Servicer with Reliance Insurance Company of Illinois.

Section 5.07 TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY.

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 taken in the name of the Trustee for the benefit of
the Certificateholders.

The Servicer shall manage, conserve, protect and operate each REO Property
for the Certificateholders solely for the purpose of its prudent and prompt
disposition and sale. The Servicer shall, either itself or through an agent
selected by the Servicer, manage, conserve, protect and operate the REO Property
in the same manner that it manages, conserves, protects and operates other
foreclosed property for its own account, and in the same manner that similar
property in the same locality as the REO Property is managed. The Servicer
shall attempt to sell the same (and may temporarily rent the same) on such terms
and conditions as the Servicer deems to be in the best interest of the
Certificateholders.

The disposition of REO Property shall be carried out by the Servicer at
such price, and upon such terms and conditions, as the Servicer deems to be in
the best interest of the Certificateholders and, as soon as practicable
thereafter, the expenses of such sale shall be paid. The Net Liquidation
Proceeds or Post Liquidation Proceeds, as applicable, from the conservation,
disposition and sale of the REO Property shall be promptly deposited by the
Servicer in the Collection Account for distribution to the Certificateholders in
accordance with SECTION 6.05, which Net Liquidation Proceeds or Post Liquidation
Proceeds, as applicable, shall equal all cash amounts received with respect
thereto less the amounts retained and withdrawn by the Servicer for any related
unreimbursed Servicing Advances and any other fees and expenses incurred in
connection with such REO Property.

In the event any Mortgaged Property is acquired as aforesaid or otherwise
in connection with a default or default reasonably foreseeable on a Mortgage
Loan, the Servicer shall dispose of such Mortgaged Property within two years
after its acquisition unless the holding of such Mortgaged Property subsequent
to two years after its acquisition will not result in the imposition of taxes on
"prohibited transactions" as defined in Section 860F of the Code or cause the
REMIC to fail to qualify as a "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code at any time that any Certificates are
outstanding. Notwithstanding any other provision of this Agreement, (i) no
Mortgaged Property acquired by the Servicer pursuant to this SECTION 5.07 shall
be rented (or allowed to continue to be rented) or otherwise used for the
production of income by or on behalf of the REMIC, and (ii) no construction
shall take place on such Mortgaged Property in such a manner or pursuant to any
terms, such that in the case of either clause (i) or (ii) such action

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would cause such Mortgaged Property to fail to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code or result in the receipt by
the REMIC of any "net income from foreclosure property" which is subject to
taxation within the meaning of Sections 860G(c) and 857(b)(4)(B) of the Code.
If a period greater than two years is permitted under this Agreement and is
necessary to sell any REO Property, the Servicer shall give appropriate notice
thereof to the Trustee (or any FHA Claims Administrator), request an extension
from the Internal Revenue Service, and report monthly to the Trustee as to the
progress being made in selling such REO Property. Any out-of-pocket expenses,
including the cost of opinions of counsel, incurred by the Servicer pursuant to
this paragraph shall be deemed to be "Servicing Advances".

Section 5.08 [Reserved]

Section 5.09 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE MORTGAGE LOANS.

The Servicer shall provide to the Trustee (and any FHA Claims
Administrator), the Certificateholders, the Certificate Insurer and the
supervisory agents and examiners of each of the foregoing access to the
documentation regarding the Mortgage Loans required by applicable state and
federal regulations, such access being afforded without charge but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it.

Section 5.10 SUPERIOR LIENS.

(a) The Servicer shall file (or cause to be filed) of record a request for
notice of any action by a superior lienholder under a Superior Lien for the
protection of the Trustee's interest, where permitted by local law and whenever
applicable state law does not require that a junior lienholder be named as a
party defendant in foreclosure proceedings in order to foreclose such junior
lienholder's equity of redemption.

(b) If the Servicer is notified that any superior lienholder has
accelerated or intends to accelerate the obligations secured by a Superior Lien,
or has declared or intends to declare a default under the mortgage or the
promissory note secured thereby, or has filed or intends to file an election to
have any Mortgaged Property sold or foreclosed, the Servicer shall take, on
behalf of the Trust Fund, all reasonable actions that are necessary to protect
the interests of the Certificateholders, and/or to preserve the security of the
related Mortgage Loan, including making any Servicing Advances that are
necessary to cure the default or reinstate the Superior Lien, subject to the
application of the REMIC Provisions. The Servicer shall immediately notify the
Trustee (and any FHA Claims Administrator) of any such action or circumstances.
Any Servicing Advances by the Servicer pursuant to its obligations in this
Section 5.10 shall comply with requirements set forth in Section 5.01(b) hereof.

Section 5.11 FHA MATTERS.

(a) As soon as practicable after the Closing Date and as soon as
practicable after each Subsequent Transfer Date, the Transferor shall submit an
appropriate transfer of note report to the FHA regarding the conveyance of the
Title I Mortgage Loans to the Trustee. The Transferor shall use its best
efforts to cause the FHA to transfer the FHA Insurance relating to the Title I
Mortgage Loans to the Trustee as promptly as possible after the Closing Date or
the related Subsequent

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Transfer Date, as applicable. With respect to each Title I Mortgage Loan, the
Transferor shall perform any actions, which are necessary or appropriate under
the Title I Program, to report such Title I Mortgage Loan for FHA Insurance
under the Transferor's Title I contract of insurance and to effectuate the
transfer of such portion of the FHA insurance coverage reserve account as may be
allocable to such Title I Mortgage Loan from the Transferor's Title I contract
of insurance to the Trustee's Title I contract of insurance; provided that such
transfer of the FHA Insurance to the Trustee's Title I contract of insurance
shall be completed within 120 days of the Closing Date or the related Subsequent
Transfer Date, as applicable, unless such 120 day period is extended by the
Transferor with the consent of the Certificate Insurer.

(b) On each FHA Transfer Date, the Trustee shall allocate on its books and
records as beneficially held on behalf of the Trust Fund that portion of its FHA
Insurance equal to the FHA Insurance transferred from the Transferor's FHA
insurance coverage reserve account to the Trustee's FHA insurance coverage
reserve account, which amount shall be available for FHA Claims relating to the
Title I Mortgage Loans, and promptly after the final FHA Transfer Date the
Trustee (or any FHA Claims Administrator) shall deliver a written certification
(an "FHA INSURANCE TRANSFER CERTIFICATE") to the Rating Agencies, the
Certificate Insurer and the Depositor with respect to (i) the exact amount of
the Initial FHA Insurance Amount actually transferred from the Transferor to the
Trustee on the books and records of the FHA in respect of the Title I Mortgage
Loans; (ii) whether such Initial FHA Insurance amount is less than ____% of the
Cut-Off Date Principal Balances of the Title I Mortgage Loans thereby causing
the amount of the initial Required Class A Overcollateralization Level to be
increased by 100% of the amount of such shortfall; and (iii) the actual
allocation by the Trustee on its books and records of the Initial FHA Insurance
Amount as available for FHA Claims relating to the Title I Mortgage Loans. From
time to time, during normal business hours, as requested by the Servicer, the
Depositor, the Certificate Insurer or any Certificateholder and upon reasonable
advance notice, the Trustee (and any FHA Claims Administrator) shall permit the
Servicer, the Depositor, the Certificate Insurer or such Certificateholder to
examine its books and records to determine that the Trustee has properly
allocated its FHA Insurance. If, pursuant to SECTION 5.02, the Servicer elects
to direct the Trustee (or any FHA Claims Administrator) to submit an FHA Claim
to the FHA, the Trustee (or any FHA Claims Administrator) shall submit such FHA
Claim to the FHA. In no event shall the Trustee (or any FHA Claims
Administrator) submit any FHA Claim if the amount of such FHA Claim would exceed
the FHA Insurance Amount. In addition, the Trustee (and any FHA Claims
Administrator) shall not submit any insurance claim to the FHA under the Title I
Program relating to a loan not part of the Trust Fund if the effect thereof
would be to reduce the FHA Insurance Amount. On each Determination Date, the
Trustee (or any FHA Claims Administrator) shall deliver to the Depositor and the
Certificate Insurer a certificate executed by a Responsible Officer of the
Trustee or the FHA Claims Administrator, as the case may be, setting forth the
FHA Insurance Amount as of the end of the preceding month and the amount of FHA
Claims submitted during the preceding month.

The Certificateholders shall not have any liability or obligation to repay
any FHA Insurance Proceeds for any FHA Claim that is rejected by the FHA within
the two-year period following the date the FHA Claim was certified for payment
by the FHA, including any such rejection by the FHA after the termination of
this Agreement pursuant to Article XI.

(c) If, pursuant to SECTION 5.02, the Servicer elects to direct any FHA
Claims Administrator to submit an FHA Claim to the FHA, the Servicer shall
notify the Trustee by certification of a Servicing Officer and shall request
delivery of the related Title I Mortgage Loan

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and Trustee's Mortgage Loan File to the FHA Claims Administrator. Upon receipt
of such notice and request, the Trustee shall promptly release or cause to be
released such Title I Mortgage Loan and Trustee's Mortgage Loan File to the FHA
Claims Administrator and shall execute such documents as the FHA Claims
Administrator shall deem necessary to the prosecution of any FHA Claim. Such
receipt shall obligate the FHA Claims Administrator to return the original Note
and the related Trustee's Mortgage Loan File to the Trustee when its need by the
FHA Claims Administrator has ceased unless the Title I Mortgage Loan shall be
liquidated or assigned to the FHA. In the event a Title I Mortgage Loan is to
be assigned to the FHA, the FHA Claims Administrator shall prepare, the Trustee
shall execute and the FHA Claims Administrator shall deliver an Assignment of
Mortgage from the Trustee to the FHA. In the event the FHA rejects an FHA
Claim, the FHA Claims Administrator shall (i) immediately notify the Transferor,
the Servicer, the Standby Servicer, the Certificate Insurer, the Depositor and
the Trustee and (ii) specify in such notice the reason given by the FHA, if any,
for such rejection. The Transferor, the Depositor and the Servicer shall
cooperate with the FHA Claims Administrator and furnish to the FHA Claims
Administrator any and all documents, if any, necessary to cure such rejection.
If the FHA Claims Administrator gets notice from the FHA that the FHA Claim has
been rejected and the cause for such rejection is not subject to cure, the FHA
Claims Administrator shall (i) immediately notify the Transferor, the Trustee,
the Certificate Insurer, the Standby Servicer and the Servicer, and (ii) specify
in such notice the reason given by the FHA, if any, for such rejection. If the
cause for such rejection is related to a breach of the Transferor's
representations and warranties set forth in SECTION 3.03, the Depositor, the
Transferor and the Trustee shall comply with the provisions of SECTION 3.05
regarding the purchase or substitution of the related Mortgage Loan. If the
cause for such rejection is not related to a breach of the Transferor's
representations and warranties set forth in SECTION 3.03, the Servicer shall
employ collection and foreclosure procedures with respect to such Mortgage Loan
pursuant to SECTION 5.02.

(d) The Trustee (and any FHA Claims Administrator) shall deposit or cause
to be deposited all FHA Insurance Proceeds in the Collection Account pursuant to
SECTION 5.03.

(e) The Trustee on the Closing Date will enter into an FHA Claims
Administration Agreement with the Servicer pursuant to which the Servicer, as
FHA Claims Administrator, will assume full and complete responsibility for all
aspects of administering, processing and submitting FHA Claims, as agent and
attorney-in-fact for the Trustee, and will thereby become obligated and
primarily liable to the Trustee and the Certificateholders for the
administration of FHA Claims in accordance with the provisions of this
Agreement. The Trustee may enter into similar FHA Claims Administration
Agreements with successor FHA Claims Administrators to the Servicer. The
Trustee shall give written notice to the Depositor, the Servicer, the
Certificateholders, the Certificate Insurer, the Standby Servicer and the Rating
Agencies of the appointment of any FHA Claims Administrator, other than the
initial appointment of the Servicer as FHA Claims Administrator as contemplated
in this Agreement. In the event it is determined that any FHA Claims
Administrator is no longer able to perform its duties hereunder, the Trustee or
its designee shall perform the obligations and duties of such FHA Claims
Administrator until a successor has assumed such FHA Claims Administrator's
responsibilities and obligations hereunder; provided, however, (x) the Trustee
or its designee shall not be liable for the actions of any FHA Claims
Administrator prior to it and (y) the Trustee or its designee shall be entitled
to rely on the information contained in the most recent certificate delivered by
the FHA Claims Administrator to the Trustee pursuant to Section 5.11(b);
provided further, 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 so request in writing to the Trustee, appoint, or petition

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a court of competent jurisdiction to appoint, any investing lender approved by
the FHA to purchase, hold and sell loans originated under the Title I Program,
or a lender approved to originate, purchase, service and/or sell loans
originated under the Title I Program, as the successor to the FHA Claims
Administrator.

(f) In the event the Trustee shall for any reason no longer be the record
owner of the FHA Insurance applicable to the Title I Mortgage Loans, the
successor to the Trustee's ownership of record of such FHA Insurance shall
thereupon assume all of the rights and obligations of the Trustee under any FHA
Claims Administration Agreement that the Trustee may have entered into, unless
the Trustee or such successor elects to terminate any FHA Claims Administration
Agreement in accordance with its terms. Such successor shall be deemed to have
assumed all of the Trustee's interest therein and to have replaced the Trustee
as a party to each FHA Claims Administration Agreement to the same extent as if
the FHA Claims Administration Agreement had been assigned to the assuming party,
except that the Trustee shall not thereby be relieved of any liability or
obligations under the FHA Claims Administration Agreements.

(g) The Trustee (and each FHA Claims Administrator) shall comply with FHA
Regulations and take all other actions so that the FHA Insurance remains in full
force and effect with respect to the Title I Mortgage Loans, except for good
faith disputes relating to the FHA Regulations or such FHA Insurance, unless
such disputes would result in the termination or suspension of such FHA
Insurance.

(h) The Trustee (or any FHA Claims Administrator) shall provide the
Servicer with the information described in Section 6.06(b)(viii) hereof.

(i) The Servicer shall not be entitled to any fees or compensation (other
than the Servicing Fee) for serving as the initial FHA Claims Administrator.
The Trustee shall not be responsible for the payment of any fees of any FHA
Claims Administrator. The Servicer shall be responsible for the payment of any
fees or compensation of (a) any Person who succeeds the Servicer as FHA Claims
Administrator and (b) any Person who succeeds the Trustee as record owner of the
FHA Insurance applicable to the Title I Mortgage Loans.

Section 5.12 SUBSERVICING.

(a) The Servicer, with the prior written consent of the Trustee (and any
FHA Claims Administrator) may enter into Subservicing Agreements for any
servicing and administration of Mortgage Loans with any institution which is in
compliance with the laws of each state necessary to enable it to perform its
obligations under such Subservicing Agreement and is an Eligible Servicer. The
Servicer shall give prior written notice to the Trustee, the Standby Servicer
and the Certificate Insurer (and any FHA Claims Administrator ) of the
appointment of any Subservicer. Any such Subservicing Agreement shall be
consistent with and not violate the provisions of this Agreement and with
respect to any Title I Mortgage Loans serviced thereunder shall comply with FHA
Regulations. The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either itself directly service the related Mortgage Loans or
enter into a Subservicing Agreement with a successor subservicer which qualifies
hereunder. The Trustee, the Standby Servicer and Certificate Insurer hereby
acknowledge and consent to each Person identified as a Subservicer in the
definition of such term as of the Closing Date.

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(b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Trustee, the
Certificate Insurer and Certificateholders 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 Servicer alone were servicing and administering the Mortgage Loans. For
purposes of this Agreement, the Servicer shall be deemed to have received
payments on Mortgage Loans when the Subservicer has received such payments and,
unless the context otherwise requires, references in this Agreement to actions
taken or to be taken by the Servicer in servicing the Mortgage Loans include
actions taken or to be taken by a Subservicer on behalf of the Servicer. The
Servicer shall be entitled to enter into any agreement with a Subservicer for
indemnification of the Servicer by such Subservicer, and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.

(c) In the event the Servicer shall for any reason no longer be the
Servicer (including by reason of an Event of Default), the Standby Servicer, on
behalf of the Trustee and the Certificateholders pursuant to SECTION 5.14, shall
thereupon assume all of the rights and obligations of the Servicer under each
Subservicing Agreement that the Servicer may have entered into, unless the
Standby Servicer elects to terminate any Subservicing Agreement in accordance
with its terms. The Standby Servicer shall be deemed to have assumed all of the
Servicer's interest therein and to have replaced the Servicer as a party to each
Subservicing Agreement to the same extent as if the Subservicing Agreements had
been assigned to the assuming party, except that the Servicer shall not thereby
be relieved of any liability or obligations under the Subservicing Agreements.
The Servicer at its expense and without right of reimbursement therefor, shall,
upon request of the Standby Servicer, deliver to the assuming party all
documents and records relating to each Subservicing Agreement and the Mortgage
Loans then being serviced and an accounting of amounts collected and held by it
and otherwise use its best efforts to effect the orderly and efficient transfer
of the Subservicing Agreements to the assuming party.

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

(e) Any Subservicing Agreement that may be entered into and any other
transactions or services relating to the Mortgage Loans involving a Subservicer
in its capacity as such and not as an originator shall be deemed to be between
the Subservicer and the Servicer alone and the Trustee, any FHA Claims
Administrator and the Certificateholders shall not be deemed parties thereto and
shall have no claims, rights, obligations, duties or liabilities with respect to
the Subservicer in its capacity as such except as set forth in SECTION 5.12(c)
above.

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Section 5.13 DUTIES OF THE SERVICER RELATING TO THE REMIC.

(a) It is intended that the REMIC formed hereunder shall constitute, and
that the affairs of the REMIC shall be conducted so as to qualify it as a "real
estate mortgage investment conduit" as defined in and in accordance with the
REMIC Provisions. In furtherance of such intention, the Servicer covenants and
agrees that it shall: (i) prepare, execute and file, or cause to be prepared,
executed and filed, in a timely manner, a United States Real Estate Mortgage
Investment Conduit Income Tax Return (Form 1066) and any other Tax Return
required to be filed by the REMIC, using a calendar year as the taxable year for
the REMIC; (ii) make, or cause to be made, an election, on behalf of the REMIC,
to be treated as a "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code on the federal income tax return of the REMIC for
its first taxable year; (iii) prepare and forward, or cause to be prepared and
forwarded, to the Certificateholders and to the Internal Revenue Service and any
other relevant governmental taxing authority all information returns or reports
as and when required to be provided to them in accordance with the REMIC
Provisions including, without limitation, information reports relating to
"market discount" and "original issue discount," as defined in the Code, based
upon the Prepayment Assumption and calculated by using the issue price of the
Certificates; (iv) not take any action or omit to take any action that would
cause the termination of the status of the REMIC under the REMIC Provisions and
any other applicable federal, state and local laws; (v) direct the Trustee to
pay the amount of any and all federal, state, and local taxes, including,
without limitation, prohibited transaction taxes as defined in Section 860F of
the Code, other than any amount due as a result of a Transfer or attempted or
purported Transfer in violation of Section 4.02, imposed on the REMIC when and
as the same shall be due and payable (subject to the Trustee's right to be
reimbursed or indemnified for such tax payments as provided elsewhere herein and
provided that such obligation shall not prevent the Trustee, the Servicer or any
other appropriate Person from contesting any such tax in appropriate proceedings
and shall not prevent the Trustee from withholding payment of such tax, if
permitted by law, pending the outcome of such proceedings); (vi) ensure that any
such returns or reports filed on behalf of the REMIC are properly executed by
the appropriate Person; (vii) as agent for the Tax Matters Person of the REMIC
(and the Tax Matters Person by its acceptance of its Class R Certificate hereby
appoints the Standby Servicer to act as its agent), represent the REMIC in any
administrative or judicial proceedings relating to an examination or audit by
any governmental taxing authority, request an administrative adjustment as to
any taxable year of the REMIC, enter into settlement agreements with any
governmental taxing agency, extend any statute of limitations relating to any
item of the REMIC and otherwise act on behalf of the REMIC in relation to any
tax matter involving the REMIC; and (viii) make available information required
under the Code or REMIC Provisions with respect to any Transfer of a Class R
Certificate, including any information necessary for the computation of any tax
imposed (A) as a result of the Transfer of an Ownership Interest in a Class R
Certificate to any Person other than a Permitted Transferee, 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 regulation 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 not a Permitted
Transferee. The cost of the preparation of any tax returns of the REMIC shall
be borne by the Servicer.

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In the event that any tax is imposed on the REMIC, such tax shall be borne
by the Holders of the Class R Certificates. The Trustee is hereby authorized to
retain from amounts otherwise distributable to the Holders of the Class R
Certificates on any Remittance Date sufficient funds to reimburse the Trustee
for the payment of such tax (to the extent that the Trustee has not been
previously reimbursed or indemnified therefor) and, if such amounts are
insufficient, to demand payment thereof from the Holders of the Class R
Certificates. The Trustee agrees first to seek indemnification for any such tax
payment from any indemnifying parties before reimbursing itself from amounts
otherwise distributable to the Holders of the Class R Certificates.
Notwithstanding anything to the contrary contained herein, if such taxes arise
out of a breach by the Trustee or the Standby Servicer of their respective
obligations hereunder, such tax shall be paid by the Trustee or the Standby
Servicer, as applicable, out of its own funds.

(b) The Servicer shall furnish any information which may be required under
the Code or the REMIC Provisions with respect to any Transfer of a Class R
Certificate, including the computation of the present value of the "excess
inclusions" (as defined in Section 860E of the Code), and, upon request, shall
provide such information to any Holder of a Class R Certificate for a reasonable
fee.

Section 5.14 THE STANDBY SERVICER. In the event that the Servicer is
terminated pursuant to Section 10.01 hereof, or resigns pursuant to Section 9.04
hereof or otherwise becomes unable to perform its obligations under this
Agreement, the Standby Servicer will become the successor servicer or will
appoint a successor servicer in accordance with the provisions of Section 10.02
hereof; provided that any successor servicer, including the Standby Servicer,
satisfies the requirements of an Eligible Servicer and is approved by Standard &
Poor's as a servicer for loans insured by the FHA under the Title I Program;
provided that if the Standby Servicer, becomes the successor servicer hereunder,
then such Standby Servicer shall have seventy-five (75) days to satisfy the
requirements of an Eligible Servicer.

Section 5.15 PRE-FUNDING ACCOUNT.

(a) No later than the Closing Date, the Trustee shall establish and
maintain with itself one or more Eligible Accounts entitled "Pre-Funding
Account, First Trust of California, National Association, as Trustee for
Remodelers Home Improvement Loan Asset-Backed Certificates, Series 199__-__".
On the Closing Date, the Depositor shall cause the Pre-Funding Account Deposit
to be deposited with the Trustee from the proceeds of the sale of the Class A
Certificates. The Trustee shall, promptly upon receipt, deposit in the Pre-
Funding Account on the Closing Date the Pre- Funding Account Deposit. On any
Subsequent Transfer Date, the Depositor shall instruct the Trustee to: (i)
withdraw from the Pre-Funding Account an amount equal to the Subsequent Purchase
Price for the Subsequent Mortgage Loans sold to the Trust Fund on such
Subsequent Transfer Date pursuant to a Subsequent Transfer Agreement; and
(ii) pay such amount to or upon the order of the Depositor upon satisfaction of
the conditions set forth in Section 2.02 of this Agreement with respect to such
transfer.

(b) The Pre-Funding Account will be part of the Trust Fund but not part of
the REMIC. Amounts held in the Pre-Funding Account shall be invested in
Permitted Investments of the type specified in clause (vii) of the definition of
Permitted Investments, which Permitted Investments shall mature on the Business
Day following the purchase date of such investments or upon demand. The Trustee
shall not be liable for any losses on amounts invested in accordance with the
provisions

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hereof (except to the extent that the Trustee is the obligor and has defaulted
on such investments). Any losses realized in connection with any such investment
shall be for the account of the Depositor, and the Depositor shall deposit the
amount of such loss (to the extent not offset by income from other investments)
in the Pre-Funding Account immediately upon the realization of such loss. All
interest and any other investment earnings on amounts held in the Pre-Funding
Account shall be taxed to the Depositor and for federal and state income tax
purposes the Depositor shall be deemed to be the owner of the Pre-Funding
Account. All interest and any other investment earnings on amounts held in the
Pre-Funding Account shall be deposited into the Capitalized Interest Account on
each Remittance Date.

(c) If the Pre-Funding Account has not been reduced to zero by the close
of business on the date on which the Funding Period ends, any amounts remaining
in the Pre-Funding Account (net of reinvestment earnings which shall be
transferred to the Capitalized Interest Account) shall be deposited into the
Certificate Account on the Business Day immediately preceding the Pre-Funding
Termination Remittance Date for distribution to the Class A Certificateholders
on a pro rata basis to all Classes of Class A Certificates on the Pre-Funding
Termination Remittance Date. Amounts that are transferred to the Certificate
Account from the Pre-Funding Account pursuant to this Section 5.15(c) may not be
invested in Permitted Investments or other investments after being transferred
into the Certificate Account.

Section 5.16 CAPITALIZED INTEREST ACCOUNT.

(a) No later than the Closing Date, the Trustee shall establish and
maintain with itself one or more Eligible Accounts entitled "Capitalized
Interest Account, First Trust of California, National Association, as Trustee
for Remodelers Home Improvement Loan Asset-Backed Certificates, Series 199__-
__". The Trustee shall, promptly upon receipt, deposit in the Capitalized
Interest Account the Capitalized Interest Account Deposit. The Trustee shall
hold the Capitalized Interest Account Deposit for the benefit of the
Certificateholders, exclusive of the Class R Certificateholders. On the Business
Day preceding each Remittance Date, the Trustee shall withdraw from the
Capitalized Interest Account and deposit into the Certificate Account the
Interest Shortfall, if any, with respect to such Remittance Date.

(b) The Capitalized Interest Account will be part of the Trust Fund but
not part of the REMIC. Amounts held in the Capitalized Interest Account shall
be invested in Permitted Investments of the type specified in clause (vii) of
the definition of Permitted Investments, which Permitted Investments shall
mature no later than the third Business Day prior to the Remittance Date. The
Trustee shall not be liable for any losses on amounts invested in accordance
with the provisions hereof (except to the extent that the Trustee is the obligor
and has defaulted on such investments). All interest and other investment
earnings on amounts held in the Capitalized Interest Account shall be paid by
the Trustee to the Depositor on each Remittance Date and for federal and state
income tax purposes the Depositor shall be deemed to be the owner of the
Capitalized Interest Account. Any losses realized in connection with any such
investment shall be for the account of the Depositor and the Depositor and the
Transferor shall deposit the amount of such loss (to the extent not offset by
income from other investments) in the Capitalized Interest Account immediately
upon the realization of such loss. All amounts earned on deposit in the
Capitalized Interest Account shall be taxed to the Depositor.

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(c) On the Closing Date, the Depositor shall cause the Capitalized
Interest Account Deposit to be deposited with the Trustee from the proceeds of
the sale of the Class A Certificates. On or before each Determination Date
occurring prior to _______________, 199__ , the Transferor and the Depositor may
deposit with the Trustee a letter of credit issued by a financial institution,
and in a form, approved by the Certificate Insurer and the Rating Agencies or
immediately available funds, subject to the prior consent of the Certificate
Insurer, in either case in an amount equal to any positive difference between
the Capitalized Interest Account Requirement and the Capitalized Interest Amount
as of such Determination Date, and the Trustee shall notify the Certificate
Insurer of the receipt of such a letter of credit or such funds. The failure to
deposit such a letter of credit or such funds in respect of any such difference
before the close of business on such Determination Date will cause the Funding
Period to end on such Determination Date. Any amounts remaining in the
Capitalized Interest Account at the end of the Funding Period and not used as
described above will be distributed to the Depositor including any net
reinvestment income thereon.

(d) If the Capitalized Interest Excess is greater than zero on any
Determination Date occurring prior to _______________, 199__ , such Capitalized
Interest Excess will be released to the Depositor on the following Remittance
Date.

ARTICLE VI

DISTRIBUTIONS TO THE CERTIFICATEHOLDERS

Section 6.01 ESTABLISHMENT OF CERTIFICATE ACCOUNT; DEPOSITS IN
CERTIFICATE ACCOUNT.

No later than the Closing Date, the Trustee will establish and maintain
with itself one or more Eligible Accounts entitled "Certificate Account, First
Trust of California, National Association, as Trustee for Remodelers Home
Improvement Loan Asset-Backed Certificates, Series 199__-__." The Trustee shall,
promptly upon receipt, deposit in the Certificate Account and retain therein:

(i) the Available Remittance Amount remitted by the Servicer pursuant
to Section 5.04(i) hereof;

(ii) the Guaranty Policy Proceeds which shall be used only to make
distributions to the Holders of the Insured Certificates for which such
proceeds were paid by the Certificate Insurer;

(iii) amounts transferred from the Pre-Funding Account pursuant to
Section 5.15(c) hereof;

(iv) amounts transferred from the Capitalized Interest Account
pursuant to Section 5.16(a) hereof;

(v) amounts transferred from the FHA Insurance Premium Account
pursuant to Section 6.09(f) hereof; and

(vi) interest and gain on funds held in the Certificate Account.

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Section 6.02 PERMITTED WITHDRAWALS FROM CERTIFICATE ACCOUNT.

The Trustee shall, based upon information set forth in the Servicer's
Monthly Remittance Report for such Remittance Date, withdraw amounts on deposit
in the Certificate Account on each Remittance Date to effect the distributions
described in Section 6.05(b) hereof; and also, in no particular order of
priority:

(i) to withdraw the amount necessary to cover any shortfall in the
FHA Insurance Premium Account pursuant to Section 6.09(e) hereof;

(ii) to invest amounts on deposit in the Certificate Account in
Permitted Instruments pursuant to Section 6.04 hereof;

(iii) to withdraw any amount not required to be deposited in the
Certificate Account or deposited therein in error;

(iv) from amounts otherwise distributable to the Class R
Certificateholders, to pay any taxes imposed on the REMIC pursuant to
Section 5.13(a) hereof; and

(v) to clear and terminate the Certificate Account in connection with
the termination of this Agreement.

Section 6.03 [RESERVED].

Section 6.04 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 the
Certificate Account, the Collection Account and the FHA Insurance Premium
Account held by the Trustee shall be invested by the Trustee, as directed in
writing, or by telephone or facsimile transmission confirmed in writing, by the
Depositor in one or more Permitted Instruments bearing interest or sold at a
discount. No such investment in any such Account shall mature later than the
Business Day immediately preceding the next Remittance Date. The Trustee shall
invest funds in such Accounts held by the Trustee, to the fullest extent
practicable, in such manner as the Depositor shall from time to time direct as
set forth in this Section 6.04(a), but only in one or more Permitted
Instruments. All income or other gain from investments in any such Account held
by the Trustee shall be deposited in such Account immediately on receipt.

(b) If any amounts are needed for disbursement from any Account held by or
on behalf of 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 6.04 is the cause of such loss or charge.

(c) Subject to Section 12.01 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

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on any Permitted Instrument included therein (except to the extent that the
Trustee is the obligor and has defaulted thereon).

Section 6.05 PRIORITY AND SUBORDINATION OF DISTRIBUTIONS; DISTRIBUTIONS
AND TRANSFERS.

(a) The rights of the Certificateholders to receive distributions from the
proceeds of the Trust Fund, and all ownership interests of the
Certificateholders in such distributions, shall be as set forth in this
Agreement. In this regard, Section 6.05(b) sets forth the priority of
distributions to the Certificateholders in which the Class R Certificates and
the Class B Certificates are subordinate in right of distributions to the Class
A Certificates as set forth in such Section 6.05(b). Notwithstanding anything
contained in this Agreement to the contrary, no Certificateholder shall be
required to refund any amount properly distributed to it pursuant to the terms
of this Agreement.

(b) On each Remittance Date, the Trustee shall withdraw from the
Certificate Account (1) the Amount Available, (2) any Guaranteed Payment
deposited in the Certificate Account by or on behalf of the Certificate Insurer
(which payments may only be used to pay the Holders of the Class A Certificates
the respective Interest Remittance Amount, the Interest Carry-Forward Amount,
the Principal Remittance Amount or the Principal Carry-Forward Amount, as
applicable), and (3) any amounts deposited into the Certificate Account from the
Pre-Funding Account. The Trustee shall, in accordance with the report prepared
and computed by the Servicer, make distributions and transfers thereof to each
Class sequentially in the following order of priority to the extent of the
Amount Available and any Guaranteed Payment (with respect to the Class A
Certificates only):

(i) first to the FHA Insurance Premium Account, an amount equal to
the aggregate FHA Insurance Premium Deposit Amount;

(ii) then to the Certificate Insurer, an amount equal to the
Certificate Insurer Premium;

(iii) then to the Trustee, an amount equal to the Trustee Fee and
then, if applicable, to the Custodian, an amount equal to the Custodian Fee
and then, if applicable, to the Servicer or its designee, an amount equal
to the REMIC Administrative Fee.

(iv) then pro rata to the Class A-1, Class A-2, Class A-3 and Class A-
4 Certificateholders, as a distribution of principal, any amounts deposited
into the Certificate Account from the amounts remaining in the Pre-Funding
Account;

(v) then, pro rata, to the Class A-1, Class A-2, Class A-3 and
Class A-4 Certificateholders, (A) the Interest Remittance Amount applicable
to the respective Class A Certificates and (B) the Interest Carry-Forward
Amount, if any, applicable to the respective Class A Certificates;

(vi) then to the Class A-1 Certificateholders, (A) to be applied to
reduce the Class Principal Balance of the Class A-1 Certificates until such
Class Principal Balance is reduced to zero, an amount equal to the
Principal Remittance Amount and (B) the Principal Carry- Forward Amount, if
any, applicable to the Class A-1 Certificates;

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(vii) then to the Class A-2 Certificateholders, (A) to be applied
to reduce the Class Principal Balance of the Class A-2 Certificates until
such Class Principal Balance is reduced to zero, an amount equal to that
portion of the Principal Remittance Amount, if any, remaining after any
distributions pursuant to clause (vi) above and (B) the Principal Carry-
Forward Amount, if any, applicable to the Class A-2 Certificates;

(viii) then to the Class A-3 Certificateholders, (A) to be applied
to reduce the Class Principal Balance of the Class A-3 Certificates until
such Class Principal Balance is reduced to zero, an amount equal to that
portion of the Principal Remittance Amount, if any, remaining after any
distributions pursuant to clauses (vi) and (vii) above and (B) the
Principal Carry-Forward Amount, if any, applicable to the Class A-3
Certificates;

(ix) then to the Class A-4 Certificateholders, (A) to be applied to
reduce the Class Principal Balance of the Class A-4 Certificates until such
Class Principal Balance is reduced to zero, an amount equal to that portion
of the Principal Remittance Amount, if any, remaining after any
distributions pursuant to clauses (vi) through (viii) above and (B) the
Principal Carry-Forward Amount, if any, applicable to the Class A-4
Certificates;

(x) then to the Certificate Insurer, the Certificate Insurer
Reimbursement Amount;

(xii) then to the Class B Certificateholders, (A) to be applied to
reduce the Class Principal Balance of the Class B Certificates until such
Class Principal Balance is reduced to zero, an amount equal to an amount
equal to that portion of the Principal Remittance Amount, if any, remaining
after any distributions pursuant to clauses (vi), (vii), (viii), (ix) and
(x) above and (B) the Principal Carry-Forward Amount, if any, applicable to
the Class B Certificates;

(xiii) then after making all of the foregoing distributions, to the
extent of any remaining Amount Available, to the Servicer an amount equal
to Servicing Advances previously made by the Servicer and not previously
reimbursed;

(xiv) then after making all of the foregoing distributions, (A) to
the Class A Certificateholders, as an additional sequential distribution of
principal to that class of Class A Certificates entitled to principal
distributions in accordance with clauses (vi) through (ix) above, the
remaining balance, if any, of the Amount Available after all of the
foregoing distributions pursuant to clauses (i) through (xiii) above (the
"EXCESS SPREAD") up to the amount at which the Class A
Overcollateralization equals the Required Class A Overcollateralization
Level (each such occurrence being herein called a "CLASS R DISTRIBUTION
TRIGGER"); and, if a Class R Distribution Trigger occurs, then (B) to the
Class B Certificateholders an amount equal to the portion of the Excess
Spread, if any, remaining after any distributions to the Class A
Certificateholders pursuant to the preceding subclause (A), until the Class
B Loss Reimbursement Amount is reduced to zero, and then (C) to the Class R
Certificateholders an amount equal to the portion of the Excess Spread, if
any,

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remaining after any distributions to the Class A Certificateholders and
Class B Certificateholders pursuant to the preceding subclauses (A) and
(B).

No amounts will be distributed on the Class R Certificates until such time
as the Trustee (or the Servicer, as FHA Claims Administrator) has delivered to
the Depositor, the Certificate Insurer and the Rating Agencies the FHA Insurance
Transfer Certificate with respect to the Initial FHA Insurance Amount.

If the Amount Available is insufficient to distribute in full the amounts
described in items (v) through (ix) above to the Holders of the Class A
Certificates, the Trustee shall make a claim under the Guaranty Policy for the
amount of such insufficiency in accordance with the terms thereof. The Guaranty
Policy Proceeds, if any, for any Class A Certificates under the Guaranty Policy
shall be available only for distribution to Holders of the Class A Certificates
to compensate for any shortfalls in respect of the Interest Remittance Amounts
and the Principal Remittance Amounts with respect to Class A Certificates.

(c) All distributions made on the Class A-1, Class A-2, Class A-3, Class
A-4, Class B or Class R Certificates as a Class on each Remittance Date will be
made on a pro rata basis among the Certificateholders of the respective Class of
record on the next preceding Record Date based on the Percentage Interest
represented by their respective Certificates, and except as otherwise provided
in the next succeeding sentence, shall be made by wire transfer of immediately
available funds to the account of such Certificateholder, if such
Certificateholder shall own of record Certificates of the same Class which have
original denominations aggregating at least $250,000 and shall have so notified
the Trustee, and otherwise by check mailed to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the location specified in the notice to
Certificateholders of such final distribution.

(d) If, on a particular Remittance Date, the Amount Available applied in
the order of priority described in SECTION 6.05(b) above is not sufficient to
make a full distribution of the Interest Remittance Amount on such Class A
Certificate, interest will be distributed pro rata to the Class A Certificates
based on the Interest Remittance Amount each such Class would otherwise have
been entitled to receive in the absence of such a shortfall.

(e) Notwithstanding the priority of distribution set forth in Section
6.05(b) above, for any Remittance Date occurring on or after the date on which
the sum of the Class Principal Balance of the Class B Certificates has been
reduced to zero as a result of any losses allocated to the Class B Certificates
pursuant to SECTION 6.10, all Principal Remittance Amounts (including any
Principal Carry Forward Amounts) will be distributed pro rata to the Class A
Certificateholders in accordance with their respective Class Principal Balances
immediately prior to such Remittance Date.

Section 6.06 STATEMENTS.

(a) No later than each Determination Date, the Servicer shall deliver to
the Trustee (and any FHA Claims Administrator), by facsimile, the receipt and
legibility of which shall be confirmed telephonically, and with hard copy
thereof to be delivered no later than one (1) Business Day after such
Determination Date, the Servicer's Monthly Remittance Report, setting forth the
date of such Report (day, month and year), the Series designation of the
Certificates (i.e. "Series 199__-__"), and

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the date of this Agreement. Furthermore, no later than each Determination Date,
the Servicer shall deliver to the Trustee a magnetic tape or computer disk
providing such information regarding the Servicer's activities in servicing the
Mortgage Loans during the related Due Period as the Trustee may reasonably
require.

(b) On each Remittance Date, the Servicer shall prepare and the Trustee
shall distribute a monthly statement (the "SERVICER'S MONTHLY STATEMENT") to the
Depositor, the Certificateholders, the Beneficial Owners (who have notified the
Trustee by delivery of an Investment Letter to the Trustee), the Certificate
Insurer, the Rating Agencies and any FHA Claims Administrator, stating the date
of original issuance of the Certificates (day, month and year), the series
designation of the Certificates (i.e. "Series 199__-__"), the date of this
Agreement and the following information:

(i) the Available Remittance Amount for the related Remittance Date;

(ii) the Class Principal Balance of each Class of Certificates,
exclusive of the Class R Certificates, and the Pool Principal Balance
(including, until the Funding Period ends, the amount remaining in the Pre-
Funding Account and the Capitalized Interest Account as of such Remittance
Date) as of the first day of the related Due Period and after giving effect
to distributions made to the Holders of such Certificates on such
Remittance Date;

(iii) the Class Pool Factor with respect to each Class of
Certificates, exclusive of the Class R Certificates, then outstanding;

(iv) the amount of principal and interest received on the Conventional
Mortgage Loans and the Title I Mortgage Loans during the related Due
Period;

(v) the Principal Remittance Amount, the Interest Remittance Amount,
the Interest Carry-Forward Amount, the Principal Carry-Forward Amount and
the amount of any losses allocated to Certificateholders pursuant to
Section 6.10, if any, with respect to each Class of Certificates, exclusive
of the Class R Certificates, then outstanding;

(vi) whether a Class R Distribution Trigger has occurred on such
Remittance Date, and if so, the amount of any Excess Spread or any other
amount to be distributed to the Class R Certificateholders on such
Remittance Date;

(vii) the Servicing Fees, the Trustee Fees, the Custodian Fees,
the REMIC Administrative Fee, if any, the Certificate Insurer Premium and
the amounts deposited to the FHA Insurance Premium Deposit Amount;

(viii) the FHA Insurance Amount before and after such Remittance
Date, and the aggregate number of FHA Claims submitted, the aggregate
principal balance of all the Mortgage Loans relating to FHA Claims finally
rejected by the FHA and the amount of FHA Insurance Proceeds received, in
each case, during the related Due Period, and the cumulative amount of FHA
Insurance Proceeds received since the Closing Date;

(ix) the Class A Overcollateralization on such Remittance Date, the
Required Class A Overcollateralization Level as of such Remittance Date,
the Net Loan Losses

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incurred during the related Due Period and the cumulative Net Loan Losses
as of such Remittance Date;

(x) the weighted average maturity of the Conventional Mortgage Loans
and the Title I Mortgage Loans and the weighted average Mortgage Loan
Interest Rate of the Conventional Mortgage Loans and the Title I Mortgage
Loans;

(xi) certain performance information, including delinquency and
foreclosure information with respect to the Conventional Mortgage Loans and
the Title I Mortgage Loans, as set forth in the Servicer's Monthly
Remittance Report;

(xii) the amount of any Guaranteed Payment included in the amounts
distributed on such Remittance Date;

(xiii) as identified with respect to the applicable Class of
Insured Certificates, the amount of any Certificate Insurer Reimbursement
Amount to be distributed to the Certificate Insurer on such Remittance Date
and the amount of any Certificate Insurer Reimbursement Amount remaining
unsatisfied following such distribution;

(xiv) the number of and aggregate Principal Balance of all
Mortgage Loans in foreclosure proceedings (other than any Mortgage Loans
described in clause (xv)) and the percent of the aggregate Principal
Balances of such Mortgage Loans to the aggregate Principal Balances of all
Mortgage Loans, all as of the close of business on the first day of the
related Due Period;

(xv) the number of and the aggregate Principal Balance of the Mortgage
Loans in bankruptcy proceedings (other than any Mortgage Loans described in
clause (xiv)) and the percent of the aggregate Principal Balances of such
Mortgage Loans to the aggregate Principal Balances of all Mortgage Loans,
all as of the close of business on the first day of the related Due Period;

(xvi) the number of REO Properties, the aggregate Principal
Balance of the related Mortgage Loans, the book value of such REO
Properties and the percent of the aggregate Principal Balances of such
Mortgage Loans to the aggregate Principal Balances of all Mortgage Loans,
all as of the close of business on the first day of the related Due Period;

(xvii) the aggregate Principal Balance of Mortgage Loans that
became Defaulted Mortgage Loans and the aggregate Principal Balance of
Mortgage Loans that became Liquidated Mortgage Loans during the related Due
Period; and

(xviii) the cumulative aggregate Principal Balance of Mortgage Loans
that became Defaulted Mortgage Loans and the cumulative aggregate Principal
Balance of Mortgage Loans that became Liquidated Mortgage Loans from the
Closing Date through the most current Due Period.

All reports prepared by the Servicer of the withdrawals from and deposits
in the Collection Account will be based in whole or in part upon the information
provided to the Trustee by the

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Servicer, and the Trustee may fully rely upon and shall have no liability with
respect to such information provided by the Servicer.

(c) Within a reasonable period of time after the end of each calendar
year, the Servicer shall prepare and the Trustee shall distribute to each Person
who at any time during the calendar year was a Certificateholder, exclusive of
the Class R Certificateholders, such information as is reasonably necessary to
provide to such Person a statement containing the information set forth in
subclauses (b)(iv) and (v) above, aggregated for such calendar year or
applicable portion thereof during which such Person was a Certificateholder.
Such obligation of the Trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
Servicer to the Trustee or the Certificateholders pursuant to any requirements
of the Code as are in force from time to time.

(d) On each Remittance Date, the Trustee shall forward to the Class R
Certificateholders a copy of the reports forwarded to the Holders of the Class A
Certificates and the Class B Certificates in respect of such Remittance Date and
a statement setting forth the amounts actually distributed to such Class R
Certificateholders on such Remittance Date, together with such other information
as the Trustee deems necessary or appropriate.

(e) Within a reasonable period of time after the end of each calendar
year, the Servicer shall prepare and the Trustee shall distribute to each Person
who at any time during the calendar year was a Class R Certificateholder, if
requested in writing by such Person, such information as is reasonably necessary
to provide to such Person a statement containing the information provided
pursuant to the previous paragraph aggregated for such calendar year or
applicable portion thereof during which such Person was a Class R
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Servicer to the Trustee and then to the Certificateholders
pursuant to any requirements of the Code as are in force from time to time.

(f) Upon reasonable advance notice in writing, the Servicer will provide
to each holder of a Class A Certificate or a Class B Certificate which is a
savings and loan association, bank or insurance company access to information
and documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the FDIC or other
regulatory authorities with respect to investment in such Certificates.

(g) The Servicer or its agent shall furnish to the Trustee, who in turn
shall forward to each Certificateholder, during the term of this Agreement, such
periodic, special, or other reports, including information tax returns or
reports required with respect to the Certificates, including Internal Revenue
Service Forms 1099 and (if instructed in writing by the Depositor on the basis
of the advice of legal counsel) Form 1066, Schedule Q and other similar reports
that are required to be filed by the Servicer or its agent and the Class R
Certificateholders, whether or not provided for herein, as shall be necessary,
reasonable, or appropriate with respect to the Certificateholder, or otherwise
with respect to the purposes of this Agreement, all such reports or information
to be provided by and in accordance with such applicable instructions and
directions as the Certificateholder may reasonably require.

(h) Reports and computer tapes furnished by the Servicer and the Trustee
pursuant to this Agreement shall be deemed confidential and of proprietary
nature, and shall not be copied or

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distributed except in connection with the purposes and requirements of this
Agreement. No Person entitled to receive copies of such reports or tapes shall
use the information therein for the purpose of soliciting the customers of the
Depositor or the Servicer or for any other purpose except as set forth in this
Agreement.

Section 6.07 REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
PROPERTY.

Each year beginning in 199__ the Servicer, at its expense, shall make the
reports of foreclosures and abandonments of any Mortgaged Property required by
Section 6050J of the Code. The reports from the Servicer shall be in form and
substance sufficient to meet the reporting requirements imposed by such Section
6050J of the Code.

Section 6.08 SPECIFICATION OF CERTAIN TAX MATTERS.

Each Certificateholder shall provide the Trustee with a completed and
executed Form W-9 prior to purchasing a Certificate. The Trustee shall comply
with all requirements of the Code, and applicable state and local law, with
respect to the withholding from any distributions made to any Certificateholder
of any applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.

Section 6.09 ESTABLISHMENT OF FHA INSURANCE PREMIUM ACCOUNT; DEPOSITS IN
FHA INSURANCE PREMIUM ACCOUNT; PERMITTED WITHDRAWALS FROM
FHA INSURANCE PREMIUM ACCOUNT.

(a) No later than the Closing Date, the Trustee will establish and
maintain with itself one or more Eligible Accounts, which may be interest
bearing, entitled "FHA Insurance Premium Account; [Trustee], in trust for
Remodelers Home Improvement Loan Asset-Backed Certificates, Series 199__-__."
On the Closing Date, the Transferor shall deposit the Initial FHA Insurance
Premium Account Deposit into the FHA Insurance Premium Account. The Transferor
shall be entitled to reimbursement in accordance with SECTION 6.09(g).

(b) On or prior to each Remittance Date, the Servicer shall calculate the
FHA Insurance Premium Deposit Amount for each Title I Mortgage Loan outstanding
as of the related Determination Date and shall include the amount of the
Aggregate FHA Insurance Premium Deposit Amount in the Servicer's Monthly
Remittance Report delivered pursuant to SECTION 6.06(a). In addition, the
Servicer shall forward to the Trustee a copy of the invoice submitted by the FHA
in respect of the FHA Premium Amount payable with respect to each Title I
Mortgage Loan during such calendar month, together with the Servicer's
preliminary adjustments, if any, to such FHA invoice.

(c) On or prior to the 20th day of each month, the Servicer shall deliver
an Officer's Certificate stating (i) attached thereto is the Servicer's final
adjustments to the FHA invoice forwarded to the Trustee pursuant to SECTION
6.09(b) and (ii) the aggregate FHA Premium Amount for each Title I Mortgage Loan
as to which an FHA Premium Amount is payable.

(d) On or before the 28th day of each calendar month and in accordance
with the FHA Regulations, the Trustee shall withdraw from the FHA Insurance
Premium Account and pay to the FHA an amount equal to the FHA Premium Amount for
each Title I Mortgage Loan as to which

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such FHA Premium Amount is payable to the FHA during such calendar month as
indicated on the Servicer's Officer's Certificate delivered pursuant to SECTION
6.09(c).

(e) If at any time the amount then on deposit in the FHA Insurance Premium
Account shall be insufficient to pay in full any FHA Premium Amount then due and
payable, the Trustee shall withdraw the amount of such shortfall from the
Certificate Account.

(f) On the Determination Date occurring in November of each year
commencing in ______, the FHA Claims Administrator shall deliver to the Trustee
an Officer's Certificate indicating the Aggregate FHA Premium Requirement. On
the Remittance Date occurring in November of each year commencing in ______, the
Trustee shall withdraw the Excess FHA Premium Amount from the FHA Insurance
Premium Account and deposit such amount in the Certificate Account to be
distributed in accordance with SECTION 6.05(b) hereof.

(g) On each Remittance Date, the Trustee shall withdraw from the FHA
Insurance Premium Account and distribute to the Transferor, any FHA Claims
Administrator or any Person acting on behalf of any of the foregoing, amounts
advanced to the FHA by the Transferor, any such FHA Claims Administrator or such
Person, as the case may be, and not previously reimbursed, in respect of the FHA
Premium Amount relating to any Title I Mortgage Loan which was not paid from
amounts on deposit in the FHA Insurance Premium Account.

Section 6.10 ALLOCATION OF LOSSES.

(a) In the event that Net Liquidation Proceeds, FHA Insurance Proceeds,
Insurance Proceeds or Released Mortgaged Property Proceeds on a Liquidated
Mortgage Loan are less than the related Principal Balance plus accrued interest
thereon, or any Obligor makes a partial payment of any Monthly Payment due on a
Mortgage Loan, such Net Liquidation Proceeds, Insurance Proceeds, FHA Insurance
Proceeds, Released Mortgaged Property Proceeds or partial payment (excluding
partial payments held in escrow pursuant to FHA Regulations) shall be applied to
payment of the related Note, first to interest accrued at the Mortgage Loan
Interest Rate and then to principal.

(b) On any Remittance Date, any Net Loan Losses attributable to any
Mortgage Loans which became Liquidated Mortgage Loans during the immediately
preceding Due Period shall be allocated as follows: (i) first to reduce the
portion of the Pool Principal Balance attributable to the Class R Certificates
(which is the excess of the Pool Principal Balance over the aggregate Class
Principal Balance of the Class A Certificates and the Class B Certificates),
until such excess has been reduced to zero; and (ii) second, to reduce the Class
Principal Balance of the Class B Certificates, until such Class Principal
Balance has been reduced to zero. After the reduction of the Class A
Overcollateralization to zero, any Net Loan Losses will not be allocated to
reduce the Class Principal Balance of the Class A Certificates, but rather any
such Net Loan Losses will be included in the Principal Remittance Amount
attributable to the Class A Certificates pursuant to the definition of Principal
Remittance Amount.

(c) If Net Loan Losses are allocated to reduce the Class Principal Balance
of the Class B Certificates pursuant to this SECTION 6.10, then to the extent
that any portion of Excess Spread is available for distribution on any
Remittance Date upon the occurrence of a Class R Distribution Trigger, the
holders of the Class B Certificates pursuant to SECTION 6.05 (b) (xiv) shall be
distributed

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such portion of the Excess Spread up to the Class B Loss Reimbursement Amount,
which distribution shall be prior to any distribution to the holders of the
Class R Certificates. With respect to any Remittance Date, the "CLASS B LOSS
REIMBURSEMENT AMOUNT" shall be the amount (but not less than zero) equal to (A)
the aggregate amount of the Net Loan Losses allocated to reduce the Class
Principal Balance of the Class B Certificates on such Remittance Date and any
prior Remittance Date and the corresponding amount of accrued and unpaid
interest on such reduced amount of the Class Principal Balance of the Class B
Certificates at the Certificate Interest Rate applicable thereto, minus (B) the
aggregate amount of any Excess Spread previously distributed to the Class B
Certificates pursuant to SECTION 6.05 (b) (xiv).

(d) Notwithstanding clause (v) of the definition of "Principal Remittance
Amount", if on the final Remittance Date the funds available from any source,
including Excess Spread and any Guaranteed Payment received by the Trustee are
not sufficient to provide for the distribution of the portion of the Principal
Remittance Amount attributable to such clause (v) for such Remittance Date and
any Principal Carry-Forward Amount applicable to such Remittance Date, then the
holders of the Class A Certificates will not be distributed such portion of the
Principal Remittance Amount and such Principal Carry-Forward Amount, in which
event such portion of the Principal Remittance Amount and such Principal Carry-
Forward Amount will be written-off and the Class Principal Balances of all Class
A Certificates will be reduced on a pro rata basis by the aggregate amount
thereof, without the distribution of funds to the Class A Certificateholders.
In addition, on the Remittance Date on which the final payment in respect of the
last Mortgage Loan has been received in the immediately preceding Due Period,
then after the final distribution of any Amount Available from the Certificate
Account on such Remittance Date, to the extent that any Class of Certificates
has a Class Principal Balance (including Principal Carry-Forward Amount
outstanding after such final distribution) and any accrued and unpaid interest
thereon (including any Interest Carry-Forward Amount), such Class of
Certificates shall be allocated losses to reduce its Class Principal Balance and
accrued and unpaid interest to zero.

ARTICLE VII

GENERAL SERVICING PROCEDURE

Section 7.01 ASSUMPTION AGREEMENTS.

When a Mortgaged Property has been or is about to be conveyed by the
Obligor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, however, that the Servicer shall not exercise any
such right if the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law. In such event or in the
event the related Mortgage and Note do not contain a "due-on-sale" clause, the
Servicer shall enter into an assumption and modification agreement with the
person to whom such property has been or is about to be conveyed, pursuant to
which such person becomes liable under the Note and, unless prohibited by
applicable law or the Mortgage Documents, the Obligor remains liable thereon.
The Servicer is also authorized to enter into a substitution of liability
agreement with such person, pursuant to which the original Obligor is released
from liability and such person is substituted as Obligor and becomes liable
under the Note. The Servicer shall notify the Trustee that any such substitution
or assumption agreement has been

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completed by forwarding to the Trustee the original of such substitution or
assumption agreement, which original shall be added by the Trustee to the
related Trustee's Mortgage Loan File and shall, for all purposes, be considered
a part of such Trustee's Mortgage Loan File to the same extent as all other
documents and instruments constituting a part thereof. In connection with any
assumption or substitution agreement entered into pursuant to this Section 7.01,
the Servicer shall not change the Mortgage Loan Interest Rate or the Monthly
Payment, defer or forgive the payment of principal or interest, reduce the
outstanding principal amount or extend the final maturity date on such Mortgage
Loan. Any fee collected by the Servicer for consenting to any such conveyance
or entering into an assumption or substitution agreement shall be retained by or
paid to the Servicer as additional Servicing Compensation.

Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.

Section 7.02 SATISFACTION OF MORTGAGES AND RELEASE OF MORTGAGE LOAN
FILES.

Subject to the provisions of Sections 5.01 and 5.02, the Servicer shall not
grant a satisfaction or release of a Mortgage without having obtained payment in
full of the indebtedness secured by the Mortgage or otherwise prejudice any
right the Certificateholders may have under the mortgage instruments. The
Servicer shall maintain the Fidelity Bond and errors and omissions insurance as
provided for in Section 5.06 insuring the Servicer against any loss it may
sustain with respect to any Mortgage Loan not satisfied in accordance with the
procedures set forth herein.

Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer will immediately notify (and forward a
copy of such notice to any FHA Claims Administrator) the Trustee (if it holds
the related Trustee's Mortgage Loan File) or the Custodian, as the case may be,
by an Officers' Certificate in the form of EXHIBIT I attached hereto (which
certification shall include a statement to the effect that all amounts received
or to be received in connection with such payment which are required to be
deposited in the Collection Account pursuant to Section 5.03 have been or will
be so deposited) of a Servicing Officer and shall request delivery to it of the
Trustee's Mortgage Loan File. Upon receipt of such certification and request,
the Trustee or such Custodian, as the case may be, shall promptly release the
related Trustee's Mortgage Loan File to the Servicer. Expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall be
payable only from and to the extent of Servicing Compensation and shall not be
chargeable to the Collection Account or the Certificate Account. Upon receipt
by the Trustee or the Custodian, on behalf of the Trustee, of the certification
of a Servicing Officer, substantially in the form of the Request for Release of
Documents attached hereto as EXHIBIT I, with respect to the release of the
Trustee's Mortgage Loan File for any Mortgage Loan or any documents included
therein, the Trustee or the Custodian, as appropriate, shall release to the
Servicer the related Trustee's Mortgage Loan File for such Mortgage Loan and
shall deliver such instruments of transfer presented to it by the Servicer as
shall be necessary or appropriate for the release of such Trustee's Mortgage
Loan File in accordance with such certification of the Servicing Officer;
provided that in the case of a release of the related Trustee's Mortgage Loan
File in connection with a substitution or repurchase of any Mortgage Loan
pursuant to Section 2.06(c) and (d), Section 3.05 or Section 11.02 or a release
for other servicing reasons (as identified as box number 4, 5 or 7,
respectively, in the

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form of the Request for Release of Documents), such release of the Trustee's
Mortgage Loan File by the Custodian shall be subject to the prior approval of
the Trustee.

The Trustee shall execute and deliver to the Servicer any court pleadings,
requests for trustee's sale or other documents necessary to the foreclosure or
trustee's sale in respect of a Mortgaged Property or to any legal action brought
to obtain judgment against any Obligor on the Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Note or Mortgage or otherwise available at law or in equity. Together with such
documents or pleadings, the Servicer shall deliver to the Trustee a certificate
of a Servicing Officer requesting that such pleadings or documents be executed
by the Trustee and certifying as to the reason such documents or pleadings are
required and that the execution and delivery thereof by the Trustee will not
invalidate or otherwise affect the lien of the Mortgage, except for the
termination of such a lien upon completion of the foreclosure or trustee's sale.
The Trustee shall, upon receipt of a written request from a Servicing Officer,
execute any document provided to the Trustee by the Servicer or take any other
action requested in such request that is, in the opinion of the Servicer as
evidenced by such request, required by any state or other jurisdiction to
discharge the lien of a Mortgage upon the satisfaction thereof and the Trustee
will sign and post, but will not guarantee receipt of, any such documents to the
Servicer, or such other party as the Servicer may direct, within five Business
Days, or more promptly if needed, of the Trustee's receipt of such certificate
or documents. Such certificate or documents shall establish to the Trustee's
satisfaction that the related Mortgage Loan has been paid in full by or on
behalf of the Obligor and that such payment has been deposited in the Collection
Account.

Subject to any other applicable terms and conditions of this Agreement, the
Trustee and Servicer shall be entitled to approve an assignment in lieu of
satisfaction with respect to any Mortgage Loan, provided the obligee with
respect to such Mortgage Loan following such proposed assignment provides the
Trustee and Servicer with a "Certification for Assignment of Mortgage Loan" in
the form attached hereto as EXHIBIT O, in form and substance satisfactory to the
Trustee and Servicer, providing the following: (i) that the Mortgage Loan is
secured by Mortgaged Property located in a jurisdiction in which an assignment
in lieu of satisfaction is required to preserve lien priority, minimize or avoid
mortgage recording taxes or otherwise comply with, or facilitate a refinancing
under, the laws of such jurisdiction; (ii) that the substance of the assignment
is, and is intended to be, a refinancing of such Mortgage Loan and that the form
of the transaction is solely to comply with, or facilitate the transaction
under, such local laws; (iii) that the Mortgage Loan following the proposed
assignment will have a rate of interest at least 0.25 percent below or above the
rate of interest on such Mortgage Loan prior to such proposed assignment; and
(iv) that such assignment is at the request of the borrower under the related
Mortgage Loan. Upon approval of an assignment in lieu of satisfaction with
respect to any Mortgage Loan, the Servicer shall receive cash in an amount equal
to the unpaid principal balance of and accrued interest on such Mortgage Loan
and the Servicer shall treat such amount as a Principal Prepayment with respect
to such Mortgage Loan for all purposes hereof.

Section 7.03 SERVICING COMPENSATION.

As compensation for its services hereunder, the Servicer shall be entitled
to withdraw from the Collection Account, the Servicing Fee out of which the
Servicer shall pay any servicing fees owed or payable to any Subservicer.
Additional servicing compensation in the form of assumption and other
administrative fees, amounts remitted pursuant to Section 7.01 and late payment
charges

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shall be retained by or remitted to the Servicer to the extent not required to
be remitted to the Trustee for deposit in the Certificate Account.

The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder and shall not be entitled to
reimbursement therefor except as specifically provided for herein. The Servicer
also agrees to pay (i) all reasonable costs and expenses incurred by the Trustee
or the Depositor in investigating the Servicer's activities hereunder when, in
the reasonable opinion of the Trustee or the Depositor, such investigation is
warranted on the basis of adverse information about the Servicer obtained from a
reasonably reliable source, (ii) all reasonable costs and expenses incurred by
the Standby Servicer or the Trustee in replacing the Servicer in the event of a
default by the Servicer in the performance of its duties under the terms and
conditions of this Agreement, and (iii) the annual Rating Agency monitoring
fees.

Section 7.04 QUARTERLY STATEMENTS AS TO COMPLIANCE.

Not later than the last day of the second month following the end of each
quarter of the Servicer's Fiscal Year, beginning in ____________, 19__ the
Servicer will deliver to the Trustee, the Certificate Insurer, the Standby
Servicer and to each Certificateholder, an Officer's Certificate stating that
(i) the Servicer has fully complied with the provisions of Articles V and VII,
(ii) a review of the activities of the Servicer during the preceding quarter and
of performance under this Agreement has been made under such officer's
supervision, and (iii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such quarter, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officers and the
nature and status thereof and the action being taken by the Servicer to cure
such default.

Section 7.05 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.

On or before 120 days after the end of each of the Servicer's fiscal years
elapsing during the term of its appointment under this Agreement, beginning with
the first fiscal year ending after the Closing Date, the Servicer, at its
expense, shall furnish to the Depositor, the Trustee, the Certificateholders,
the Certificate Insurer, the Standby Servicer and the Rating Agencies (i) an
opinion by a firm of independent certified public accountants on the financial
position of the Servicer at the end of the relevant fiscal year and the results
of operations and changes in financial position of the Servicer for such year
then ended on the basis of an examination conducted in accordance with generally
accepted auditing standards, and (ii) if the Servicer is then servicing any
Mortgage Loans, a statement from such independent certified public accountants
to the effect that based on an examination of certain specified documents and
records relating to the servicing of the Servicer's mortgage loan portfolio
conducted substantially in compliance with the audit program for mortgages
serviced for the United States Department of Housing and Urban Development
Mortgage Audit Standards, or the Uniform Single Audit Program for Mortgage
Bankers (the "Applicable Accounting Standards"), such firm is of the opinion
that such servicing has been conducted in compliance with the Applicable
Accounting Standards except for (a) such exceptions as such firm shall believe
to be immaterial and (b) such other exceptions as shall be set forth in such
statement.

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Section 7.06 CERTIFICATEHOLDER'S AND TRUSTEE'S RIGHT TO EXAMINE SERVICER
RECORDS.

Each Certificateholder, the Trustee (and any FHA Claims Administrator), the
Certificate Insurer, the Standby Servicer and each of their respective agents
shall have the right upon reasonable prior notice, during normal business hours
and as often as reasonably required, to examine, audit and copy, at the expense
of the Person making such examination, any and all of the books, records or
other information of the Servicer (including without limitation any Subservicer
to the extent provided in the related Subservicing Agreement) whether held by
the Servicer or by another on behalf of the Servicer, which may be relevant to
the performance or observance by the Servicer of the terms, covenants or
conditions of this Agreement. Each Certificateholder, the Trustee (and any FHA
Claims Administrator), the Certificate Insurer and the Standby Servicer agree
that any information obtained pursuant to the terms of this Agreement shall be
held confidential.

Section 7.07 REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT STATEMENTS.

If the Collection Account is not maintained with the Trustee, then not
later than 25 days after each Record Date, the Servicer shall forward to the
Trustee (and any FHA Claims Administrator), the Certificate Insurer, the Standby
Servicer and to each Majority Certificateholder a statement, certified by a
Servicing Officer, setting forth the status of the Collection Account as of the
close of business on the preceding Record Date and showing, for the period
covered by such statement, the aggregate of deposits into the Collection Account
for each category of deposit specified in Section 5.03, the aggregate of
withdrawals from the Collection Account for each category of withdrawal
specified in Section 5.04 and the aggregate amount of permitted withdrawals not
made in the related Due Period in each case, for the related Due Period.

ARTICLE VIII

REPORTS TO BE PROVIDED BY SERVICER

Section 8.01 FINANCIAL STATEMENTS.

The Servicer understands that, in connection with the transfer of the
Certificates, Certificateholders may request that the Servicer make available to
the Beneficial Owners and/or Certificateholders and to prospective Beneficial
Owners and/or Certificateholders annual audited financial statements of the
Servicer for one or more of the most recently completed five fiscal years for
which such statements are available, which request shall not be unreasonably
denied.

The Servicer also agrees to make available on a reasonable basis to the
Beneficial Owners and/or Certificateholders, and any prospective Beneficial
Owners and/or Certificateholder a knowledgeable financial or accounting officer
for the purpose of answering reasonable questions respecting recent developments
affecting the Servicer or the financial statements of the Servicer and to permit
the Beneficial Owners and/or Certificateholders and any prospective Beneficial
Owners and/or Certificateholder to inspect the Servicer's servicing facilities
during normal business hours for the purpose of satisfying the Beneficial Owners
and/or Certificateholders and such prospective Beneficial Owners and/or
Certificateholder that the Servicer has the ability to service the Mortgage
Loans in accordance with this Agreement.

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ARTICLE IX

THE SERVICER

Section 9.01 INDEMNIFICATION; THIRD PARTY CLAIMS.

(a) The Servicer agrees to indemnify and hold the Trustee, the Depositor,
the Certificate Insurer and each Certificateholder harmless from and against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Trustee, the
Depositor, the Certificate Insurer or any Certificateholder may sustain directly
resulting from the negligence or willful misconduct of the Servicer in the
performance of its duties hereunder or in the servicing of the Mortgage Loans in
compliance with the terms of this Agreement. IT IS THE EXPRESS INTENTION OF THE
PARTIES TO THIS AGREEMENT THAT THE INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS
OF THE SERVICER SET FORTH IN THE PRECEDING SENTENCE SHALL APPLY FULLY TO CLAIMS,
LOSSES, ETC. RESULTING FROM ACTS OR OMISSIONS THAT MAY CONSTITUTE ORDINARY
NEGLIGENCE ON THE PART OF THE SERVICER. The Servicer shall not be liable or
responsible for any of the representations, covenants, warranties,
responsibilities, duties or liabilities of any prior Servicer. The Servicer
shall immediately notify the Trustee, the Depositor, the Certificate Insurer and
each Certificateholder if a claim is made by a third party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and advance all expenses in connection therewith,
including reasonable counsel fees, and promptly advance funds to pay, discharge
and satisfy any judgment or decree which may be entered against the Servicer,
the Trustee, the Depositor, the Certificate Insurer and/or any Certificateholder
in respect of such claim.

(b) The Depositor agrees to indemnify and hold the Trustee, the Servicer,
the Certificate Insurer and each Certificateholder harmless from and against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Trustee, the
Servicer, the Certificate Insurer or any Certificateholder may sustain directly
resulting from the negligence or willful misconduct of the Depositor in the
performance of its duties hereunder or in compliance with the terms of this
Agreement. IT IS THE EXPRESS INTENTION OF THE PARTIES TO THIS AGREEMENT THAT
THE INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS OF THE DEPOSITOR SET FORTH IN
THE PRECEDING SENTENCE SHALL APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM
ACTS OR OMISSIONS THAT MAY CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE
DEPOSITOR. The Depositor shall immediately notify the Trustee, the Servicer,
the Certificate Insurer and each Certificateholder if a claim is made by a third
party with respect to this Agreement, and the Depositor shall assume (with the
consent of the Trustee) the defense of any such claim and advance all expenses
in connection therewith, including reasonable counsel fees, and promptly advance
funds to pay, discharge and satisfy any judgment or decree which may be entered
against the Depositor, the Servicer, the Trustee, the Certificate Insurer and/or
any Certificateholder in respect of such claim.

(c) The Transferor agrees to indemnify and hold the Trustee, the Servicer,
the Certificate Insurer and each Certificateholder harmless from and against any
and all claims, losses, penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and expenses that the Trustee, the
Servicer, the Certificate Insurer or any Certificateholder may sustain directly

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resulting from the negligence or willful misconduct of the Transferor in the
performance of its duties hereunder or in compliance with the terms of this
Agreement. IT IS THE EXPRESS INTENTION OF THE PARTIES TO THIS AGREEMENT THAT
THE INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS OF THE TRANSFEROR SET FORTH IN
THE PRECEDING SENTENCE SHALL APPLY FULLY TO CLAIMS, LOSSES, ETC. RESULTING FROM
ACTS OR OMISSIONS THAT MAY CONSTITUTE ORDINARY NEGLIGENCE ON THE PART OF THE
TRANSFEROR. The Transferor shall immediately notify the Trustee, the Servicer,
the Certificate Insurer and each Certificateholder if a claim is made by a third
party with respect to this Agreement, and the Transferor shall assume (with the
consent of the Trustee) the defense of any such claim and advance all expenses
in connection therewith, including reasonable counsel fees, and promptly advance
funds to pay, discharge and satisfy any judgment or decree which may be entered
against the Transferor, the Servicer, the Trustee, the Certificate Insurer
and/or any Certificateholder in respect of such claim.

(d) The obligations of the Servicer, the Depositor and the Transferor
under this Section 9.01 shall survive the termination of this Agreement.

Section 9.02 MERGER OR CONSOLIDATION OF THE SERVICER.

The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and will obtain and preserve its qualification to do business
as a foreign corporation and maintain such other licenses and permits, 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.

Any Person into which the Servicer may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer, shall be an Eligible Servicer and shall be the successor of the
Servicer, as applicable hereunder, without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Servicer shall send notice of any such
merger, conversion, consolidation or succession to the Trustee, the Certificate
Insurer and the Standby Servicer.

Section 9.03 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.

The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities
respecting any matters arising hereunder. Subject to the terms of Section 9.01
herein, the Servicer shall have no obligation to appear with respect to,
prosecute or defend any legal action which is not incidental to the Servicer's
duty to service the Mortgage Loans in accordance with this Agreement.

Section 9.04 SERVICER NOT TO RESIGN; ASSIGNMENT.

(a) The Servicer shall not resign from the obligations and duties hereby
imposed on it except by mutual consent of the Servicer, the Depositor, the
Trustee, the Certificate Insurer and the Majority Certificateholders, or upon
the determination that the Servicer's duties hereunder are no longer permissible
under applicable law and such incapacity cannot be cured by the Servicer. Any
such determination permitting the resignation of the Servicer shall be evidenced
by a written opinion

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of counsel (who may be an employee of the Servicer) to such effect delivered to
the Trustee, the Certificate Insurer and the Depositor, which opinion of counsel
shall be in form and substance acceptable to the Trustee and the Certificate
Insurer. No such resignation shall become effective until the Standby Servicer
or a successor servicer has assumed the Servicer's responsibilities and
obligations hereunder in accordance with SECTION 10.02.

(b) The Servicer shall not assign this Agreement or any of its
obligations, rights and duties hereunder without the prior written consent the
Depositor, the Trustee, the Certificate Insurer and the Majority
Certificateholders; provided, however, the Servicer may assign this Agreement
without the prior written consent of the Depositor, the Trustee, the
Certificate Insurer and the Majority Certificateholders to (i) the Standby
Servicer or (ii) any Person that (A) is satisfactory to the Trustee, the
Certificate Insurer and the Majority Certificateholders, (B) services not less
than $25,000,000 in aggregate outstanding principal amount of FHA Title I
property improvement or manufactured home loans, (C) has a net worth of not less
than $2,500,000, (D) has a blanket fidelity bond and errors and omissions
insurance coverage satisfying the requirements set forth in Section 5.06 and (E)
will not cause any rating of the Class A Certificates in effect immediately
prior to such assignment to be qualified, downgraded or withdrawn, as evidenced
by a letter from each Rating Agency to such effect. Any such assignment to a
successor servicer (other than the Standby Servicer) shall be effective only
upon delivery to the Trustee and the Certificate Insurer of an Agreement, duly
executed by the Servicer and such successor servicer in a form reasonably
satisfactory to the Trustee, in which such successor servicer shall assume the
due and punctual performance of each covenant and condition to be performed or
observed by the Servicer hereunder.

Section 9.05 RELATIONSHIP OF SERVICER.

The relationship of the Servicer (and of the Standby Servicer and any
successor to the Servicer as servicer under this Agreement) to the Trustee under
this Agreement is intended by the parties hereto to be that of an independent
contractor and not of a joint venturer, agent or partner of the Trustee, except
to the extent that the Servicer (or the Standby Servicer or any successor to the
Servicer as servicer under this Agreement) serves as FHA Claims Administrator
and in that capacity acts on behalf of the Trustee as its agent and attorney-in-
fact.

ARTICLE X

DEFAULT

Section 10.01 EVENTS OF DEFAULT.

(a) In case one or more of the following Events of Default by the Servicer
shall occur and be continuing, that is to say:

(i) any failure by the Servicer to (1) deposit in the Collection
Account in accordance with SECTION 5.03 any payments in respect of the
Mortgage Loans received by the Servicer no later than the fourth Business
Day following the day on which such payments were received or (2) remit to
the Trustee the amounts required to be remitted to the Certificate Account
on any Remittance Date hereunder no later than the first Business Day after
receipt from the Trustee of notice of such failure; or

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(ii) failure by the Servicer duly to observe or perform, in any
material respect, any other covenants, obligations or agreements of the
Servicer as set forth in this Agreement, which failure continues unremedied
for a period of 60 days after the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice is
a "Notice of Default" hereunder, shall have been given to the Servicer by
the Trustee or to the Servicer or the Trustee by any Certificateholder or
the Certificate Insurer; or

(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or

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

(v) the 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; or

(vi) the Majority Certificateholders or the Certificate Insurer (A)
shall receive notice from the Servicer that the Servicer is no longer able
to discharge its duties under this Agreement or (B) shall determine, in
their reasonable judgment and based upon published reports (including wire
services), which they reasonably believe in good faith to be reliable, that
the Servicer

(1) has experienced a material adverse change in its business,
assets, liabilities, operations, condition (financial or
otherwise) or prospects,

(2) has defaulted on any of its material obligations, or

(3) has ceased to conduct its business in the ordinary course;
or

(vii) as of any Determination Date, the total Expected Loan Losses
(as defined below) exceed (1) commencing in _______________ 199__ up to
the fifth (5th) anniversary of the _______________, 199__ Cut-Off Date,
____% of the sum of the Initial Pool Principal Balance and the aggregate
Principal Balance as of the applicable Cut-Off Dates of all Subsequent
Mortgage Loans conveyed to the Trust Fund, or (2) thereafter up to the
tenth (10th) anniversary of the _______________, 199__ Cut-Off Date, ____%
of the sum of the Initial Pool Principal Balance and the aggregate
Principal Balance as of the applicable Cut- Off Dates of all Subsequent
Mortgage Loans conveyed to the Trust Fund (where the "EXPECTED LOAN LOSSES"
shall be the sum of (A) the cumulative Net Losses, plus (B) ____% of the
aggregate Principal Balance of the Mortgage Loans which are then more than
30 but less than 60 days delinquent, plus (C) ____% of the aggregate
Principal Balance of the

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Mortgage Loans which are then more than 60 but less than 90 days
delinquent, plus (B) ____% of the aggregate Principal Balance of the
Mortgage Loans which are then more than 90 days delinquent).

(b) then, and in each and every such case, so long as an Event of Default
shall not have been remedied, the Majority Certificateholders, the Certificate
Insurer or the Trustee by notice in writing to the Servicer may, in addition to
whatever rights such Person may have at law or equity to damages, including
injunctive relief and specific performance, and with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld),
terminate all the rights and obligations of the Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof, as servicer under
this Agreement. Upon receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with respect
to the Mortgage Loans or otherwise, shall, subject to SECTION 10.02, pass to and
be vested in the Standby Servicer and the Standby Servicer is hereby authorized
and empowered to execute and deliver, on behalf of the Servicer, as attorney-in-
fact or otherwise, any and all documents and other instruments and do or cause
to be done all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, including, but not limited to, the
transfer and endorsement or assignment of the Mortgage Loans and related
documents. If at the time of any such termination the Servicer is also serving
as FHA Claims Administrator pursuant to this Agreement and a FHA Claims
Administration Agreement, the Servicer's status as FHA Claims Administrator
shall be simultaneously terminated by the Trustee and the Servicer's
responsibilities as such shall be transferred to the Standby Servicer, as
successor FHA Claims Administrator (if the Standby Servicer is then qualified to
so act), or to another successor FHA Claims Administrator retained by the
Trustee, or to the Trustee itself if a successor FHA Claims Administrator cannot
be retained in a timely manner. The Servicer agrees to cooperate with the
Standby Servicer in effecting the termination of the Servicer's responsibilities
and rights hereunder, including, without limitation, the transfer to the Standby
Servicer for administration by it of all amounts which shall at the time be
credited by the Servicer to each Collection Account or thereafter received with
respect to the Mortgage Loans.

Section 10.02 STANDBY SERVICER TO ACT; APPOINTMENT OF SUCCESSOR.

On and after the date the Servicer receives a notice of termination
pursuant to SECTION 10.01, or the Trustee receives the resignation of the
Servicer evidenced by an opinion of counsel or accompanied by the consents
required by SECTION 9.04, or the Servicer is removed as servicer pursuant to
this ARTICLE X, then, subject to SECTION 5.14, the Standby Servicer shall be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof; provided, however,
that the Standby Servicer shall not be liable for any actions of any servicer
prior to it. In the event the Standby Servicer assumes the responsibilities of
the Servicer pursuant to this SECTION 10.02, the Standby Servicer will make
reasonable efforts consistent with applicable law to become licensed, qualified
and in good standing in each Mortgaged Property State the laws of which require
licensing or qualification, in order to perform its obligations as Servicer
hereunder or, alternatively, shall retain an agent who is so licensed, qualified
and in good standing in any such Mortgaged Property State. The Standby Servicer
shall be obligated to make Servicing Advances hereunder. As compensation
therefor, the Standby Servicer or any successor servicer appointed pursuant to
the following paragraph, shall be entitled to all funds relating to the Mortgage
Loans which the Servicer would have been entitled to receive from the Collection
Account pursuant to SECTION 5.04 and from the

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Certificate Account pursuant to the applicable provisions of SECTION 6.05(b) if
the Servicer had continued to act as servicer hereunder, together with other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in SECTIONS 7.01 and 7.03. The Servicer shall not be
entitled to any termination fee if it is terminated pursuant to SECTION 10.01,
but shall be entitled to any accrued and unpaid Servicing Fee to the date of
termination.

Any collections received by the Servicer after removal or resignation shall
be endorsed by it to the Standby Servicer and remitted directly to the Standby
Servicer or, at the direction of the Standby Servicer, to the successor
servicer. The compensation of any successor servicer (including, without
limitation, the Standby Servicer) so appointed shall be the Servicing Fees,
together with other Servicing Compensation provided for herein. In the event
the Standby Servicer is required to solicit bids to appoint a successor
servicer, the Standby Servicer shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
meeting the qualifications set forth in SECTION 9.04(b)(ii) above. Such public
announcement shall specify that the successor servicer shall be entitled to the
full amount of the Servicing Fees and Servicing Compensation provided for
herein. Within thirty days after any such public announcement, the Standby
Servicer 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 Standby Servicer shall deduct from
any sum received by the Standby Servicer from the successor to the 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 made by the Standby Servicer. After such deductions, the
remainder of such sum shall be paid by the Standby Servicer to the Servicer at
the time of such sale, transfer and assignment to the Servicer's successor. The
Trustee (and any FHA Claims Administrator), any Custodian, the Servicer, the
Standby Servicer and any such successor servicer shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. The Servicer agrees to cooperate with the Standby Servicer and any
successor servicer in effecting the termination of the Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Standby
Servicer or such successor servicer, as applicable, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Standby Servicer or such
successor servicer, as applicable, all amounts which then have been or should
have been deposited in the Collection Account by the Servicer or which are
thereafter received with respect to the Mortgage Loans. Neither the Standby
Servicer nor any other successor 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 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 Servicer
hereunder. No appointment of a successor to the Servicer hereunder shall be
effective until written notice of such proposed appointment shall have been
provided by the Standby Servicer to each Certificateholder, the Depositor, the
Trustee and the Certificate Insurer and, except in the case of the appointment
of the Standby Servicer as successor to the Servicer (when no consent shall be
required), the Depositor, the Majority Certificateholders, the Trustee and the
Certificate Insurer shall have consented thereto.

Pending appointment of a successor to the Servicer hereunder, the Standby
Servicer shall act as servicer hereunder as hereinabove provided. In connection
with such appointment and assumption, the Standby Servicer may make such
arrangements for the compensation of such successor servicer out of payments on
the Mortgage Loans as it and such successor servicer shall

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agree; provided, however, that no such compensation shall be in excess of that
permitted the Servicer pursuant to Section 7.03, together with other Servicing
Compensation in the form of assumption fees, late payment charges or otherwise
as provided in this Agreement. In the event the Standby Servicer is unable to
fulfill its duties as successor to the Servicer pursuant to this Section 10.02,
the Trustee shall fulfill such duties of the Standby Servicer and the Servicer
unless and until a successor Servicer is appointed.

Section 10.03 WAIVER OF DEFAULTS.

The Majority Certificateholders may with the prior consent of the
Certificate Insurer, on behalf of all Certificateholders, waive any events
permitting removal of the Servicer as servicer pursuant to this Article X,
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.

Section 10.04 ACCOUNTING UPON TERMINATION OF SERVICER.

Upon termination of the Servicer under this Article X, the Servicer shall:

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

(b) deliver to its successor or, if none shall yet have been appointed, to
the Standby Servicer all Mortgage Loan 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 Standby Servicer, the Certificate Insurer and 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 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 Servicer under this Agreement.

ARTICLE XI

TERMINATION

Section 11.01 TERMINATION.

Subject to SECTION 11.03, this Agreement shall terminate upon notice to the
Trustee of either: (a) the later of the distribution to Certificateholders of
the final payment or collection with respect

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to the last Mortgage Loan, or 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 Trustee, the Custodian and the Certificate
Insurer or (b) mutual consent of the Servicer, the Depositor, the Transferor,
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, alive as of the date hereof.

Section 11.02 OPTIONAL TERMINATION BY SERVICER

Subject to SECTION 11.03, on any date on which the Pool Principal Balance
is less than 10% of the sum of the Initial Pool Principal Balance and the
aggregate Principal Balances as of the applicable Cut-Off Dates of the
Subsequent Mortgage Loans conveyed to the Trust Fund, the Servicer may, at its
option, terminate this Agreement by purchasing, on the next succeeding
Remittance Date, all of the outstanding Mortgage Loans and REO Properties at a
price equal to the sum of the Termination Price and the outstanding and unpaid
fees and expenses of the Trustee, the Servicer, the Certificate Insurer and any
Custodian, including without limitation any unreimbursed Servicing Advances or
Certificate Insurer Reimbursement Amount.

Any such purchase by the Servicer shall be accomplished by depositing into
the Collection Account on the Determination Date immediately preceding the
Remittance Date on which the purchase is to occur the amount of the Termination
Price together with an amount equal to the fees and expenses of the Trustee, the
Servicer, the Certificate Insurer and any Custodian to be paid pursuant to the
preceding paragraph. On the same day that the Termination Price is deposited
into the Collection Account, the Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts not required to have
been deposited therein pursuant to SECTION 5.03 and any amounts withdrawable
therefrom by the Servicer pursuant to SECTION 5.04(ii), (iv) and (v)) shall be
transferred to the Certificate Account for distribution to Certificateholders on
the final Remittance Date; and any amounts received with respect to the Mortgage
Loans and REO Properties subsequent to such transfer shall belong to the
Servicer. For purposes of calculating the Available Remittance Amount for the
final Remittance Date, amounts transferred to the Certificate Account pursuant
to the immediately preceding sentence on the Determination Date immediately
preceding such final Remittance Date shall in all cases be deemed to have been
received during the related Due Period, and such transfer shall be made pursuant
to SECTION 5.04(i). On the same day that the Termination Price is deposited
into the Collection Account and transferred to the Certificate Account, the
Trustee (or any FHA Claims Administrator) shall file appropriate transfer
documentation with the FHA in order to cause FHA Insurance in an amount not
greater than the remaining FHA Insurance Amount to be transferred to the
Servicer.

Section 11.03 NOTICE OF TERMINATION; SURRENDER AND CANCELLATION OF
CERTIFICATES.

Notice of any termination of this Agreement pursuant to the foregoing
provisions of this Article XI, specifying the Remittance Date upon which the
Trust Fund will terminate and notifying the Certificateholders to surrender
their Certificates to the Trustee for payment of the final distribution thereon
and cancellation thereof by the Trustee, shall be given promptly by the Trustee
by letter to Certificateholders mailed during the month of such final
distribution, but before the Determination Date in such month, also specifying
(i) the Remittance Date upon which final payment of the Certificates will be
made upon presentation and surrender of the Certificates at the

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office of the Trustee therein designated, (ii) the amount of any such final
payment and (iii) that the Record Date otherwise applicable to such Remittance
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office of the Trustee therein specified. On the final
Remittance Date, the Trustee shall transfer or credit, or cause to be
transferred or credited, the Amount Available for such Remittance Date in
accordance with Section 6.05(b) and shall distribute any amounts on deposit in
any of the Accounts in accordance with this Agreement.

In the event that all of the Certificateholders shall 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 Class R Certificateholders
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 solely to
the Class R Certificateholders for payment.

Section 11.04 ADDITIONAL TERMINATION REQUIREMENTS.

(a) In connection with the termination of this Agreement pursuant to
SECTION 11.01 and SECTION 11.02, the REMIC shall be terminated in accordance
with the following additional requirements, unless the Trustee and the Depositor
have received an opinion of counsel to the effect that the failure of the REMIC
to comply with the requirements of this Section will not (i) result in the
imposition on the REMIC of taxes on "prohibited transactions", as described in
Section 860F of the Code, or (ii) cause the REMIC to fail to qualify as a "real
estate mortgage investment conduit" at any time that any Certificate is
outstanding:

(i) The Standby Servicer and the Trustee shall establish a 90-day
liquidation period for the REMIC and the Trustee shall specify the first
day of such period in a statement attached to the REMIC's final Tax Return
pursuant to Treasury regulations Section 1.860F-1. The Standby Servicer and
the Trustee also shall satisfy all of the requirements of a qualified
liquidation for the REMIC under Section 860F of the Code and the
regulations thereunder;

(ii) The Standby Servicer shall notify the Trustee at the commencement
of 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 or otherwise
dispose of all of the remaining assets of the REMIC in accordance with the
terms hereof; and

(iii) If the Servicer is exercising its right to purchase the
assets of the REMIC, the Servicer shall, during the 90-day liquidation
period and at or prior to the end of the 90-day liquidation period,
purchase all of the assets of the REMIC for cash; provided, however, that
in the event that a calendar quarter ends after the commencement of the 90-
day liquidation period but prior to the end of the 90-day liquidation
period, the Servicer shall not purchase any of the assets of the REMIC
prior to the close of that calendar quarter.

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(b) Each Holder of a Certificate and the Trustee hereby irrevocably
approves and appoints the Standby Servicer as its attorney-in-fact to adopt a
plan of complete liquidation for the REMIC in accordance with the terms and
conditions of this Agreement.

ARTICLE XII

THE TRUSTEE

Section 12.01 DUTIES OF TRUSTEE.

The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge and after the
curing of all such Events of Defaults which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Default of which a Responsible Officer of the Trustee
shall have actual knowledge has occurred and has not been cured or waived, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement; provided, however, that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Transferor, the Servicer, the Standby Servicer, any FHA Claims
Administrator or the Depositor hereunder. If any such instrument is found not
to conform in any material respect to the requirements of this Agreement, the
Trustee shall notify the Certificateholders of such instrument in the event that
the Trustee, after so requesting, does not receive a satisfactorily corrected
instrument.

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

(i) Prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee shall have actual knowledge, and after
the curing of all such Events of Default which may have occurred, the
duties and obligations of the Trustee shall be determined solely by the
express provisions of this Agreement, the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;

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(ii) The Trustee shall not be liable in its individual capacity for an
error of judgment made in good faith by a Responsible Officer or other
officers of the Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;

(iii) The Trustee shall not be liable in its individual capacity
with respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with this Agreement or at the direction of the
Majority Certificateholders, the Certificate Insurer or the Class R
Certificateholders, relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising or
omitting to exercise any trust or power conferred upon the Trustee, under
this Agreement;

(iv) The Trustee shall not be required to take notice or be deemed to
have notice or knowledge of any default or Event of Default unless a
Responsible Officer of the Trustee shall have received written notice
thereof. In the absence of receipt of such notice, the Trustee may
conclusively assume that there is no default or Event of Default;

(v) Other than those obligations assumed by the Trustee as the
successor to the Servicer and the Standby Servicer pursuant to SECTION
10.02, the Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability for the performance of any of its
duties hereunder or the exercise of any of its rights or powers if there is
reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it, and none of the provisions contained in this Agreement shall in any
event require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement
except during such time, if any, as the Trustee shall be the successor to,
and be vested with the rights, duties, powers and privileges of, the
Servicer and the Standby Servicer in accordance with the terms of this
Agreement; and

(vi) Subject to the other provisions of this Agreement and without
limiting the generality of this Section 12.01, the Trustee shall have no
duty (A) to see to any recording, filing, or depositing of this Agreement
or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the
maintenance of any such recording or refiling or depositing or to any
rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance, (C) to see to the payment or discharge of any tax, assessment,
or other governmental charge or any lien or encumbrance of any kind owing
with respect to, assessed or levied against, any part of the Trust Fund
from funds available in the Certificate Account, (D) to confirm or verify
the contents of any reports or certificates of the Servicer delivered to
the Trustee pursuant to this Agreement believed by the Trustee to be
genuine and to have been signed or presented by the proper party or
parties.

Section 12.02 CERTAIN MATTERS AFFECTING THE TRUSTEE.

(a) Except as otherwise provided in SECTION 12.01:

(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate, opinion
of counsel, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order,

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appraisal, bond or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;

(ii) The Trustee may consult with counsel and any advice or opinion of
counsel shall be full and complete authorization and protection in respect
of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion of counsel;

(iii) The Trustee shall be under no obligation to exercise any of
the trusts or powers vested in it by this Agreement or to institute,
conduct or defend any litigation hereunder or in relation hereto at the
request, order or direction of any of the Certificateholders or the
Certificate Insurer, pursuant to the provisions of this Agreement, unless
such Certificateholders or the Certificate Insurer shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby (which in the case
of the Majority Certificateholders will be deemed to be satisfied by a
letter agreement with respect to such costs from such Majority
Certificateholders); nothing contained herein shall, however, relieve the
Trustee of the obligation, upon the occurrence of an Event of Default of
which a Responsible Officer of the Trustee shall have actual knowledge
(which has not been cured), to exercise such of the rights and powers
vested in it by this Agreement, and to use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs;

(iv) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion or rights or powers conferred upon it by this
Agreement;

(v) Prior to the occurrence of an Event of Default hereunder and
after the curing of all Events of Default which may have occurred, the
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing to do so by the Majority
Certificateholders or the Certificate Insurer; provided, however, that if
the payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Agreement,
the Trustee may require reasonable indemnity against such cost, expense or
liability as a condition to taking any such action. The reasonable expense
of every such examination shall be paid by the Servicer or, if paid by the
Trustee, shall be repaid by the Servicer upon demand from the Servicer's
own funds;

(vi) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or willful
misconduct in the performance of such act;

(vii) The Trustee shall not be required to give any bond or surety
in respect of the execution of the Trust Fund created hereby or the powers
granted hereunder; and

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(viii) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys or custodians, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent, attorney or
custodian appointed by the Trustee with due care.

(b) Following the Startup Day, the Trustee shall not knowingly accept any
contribution of assets to the REMIC except (i) with respect to Subsequent
Mortgage Loans pursuant to Section 2.02, (ii) Qualified Substitute Mortgage
Loans pursuant to Section 3.05, and (iii) deemed contributions from the Pre-
Funding Account and the Capitalized Interest Account, unless the Trustee shall
have received an opinion of counsel to effect that the inclusion of such assets
in the REMIC will not cause the REMIC to fail to qualify as a "real estate
mortgage investment conduit" within the meaning of 860D of the Code at any time
that any Certificates are outstanding or subject the REMIC to any tax under the
REMIC Provisions or other applicable provisions of federal, state and local law
or ordinances.

Section 12.03 TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.

The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Depositor, the Transferor, the Servicer or the Standby
Servicer, as the case may be, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document. The Trustee shall not be accountable for the use or
application by the Depositor of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the
Collection Account by the Servicer. The Trustee shall not be responsible for the
legality or validity of this Agreement or the validity, priority, perfection or
sufficiency of the security for the Certificates issued or intended to be issued
hereunder. The Trustee shall have no responsibility for filing any financing or
continuation statement in any public office at any time or to otherwise perfect
or maintain the perfection of any security interest or lien granted to it
hereunder or to record this Agreement.

Section 12.04 TRUSTEE MAY OWN CERTIFICATES.

The Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates with the same rights it would have if it were not
Trustee, and may otherwise deal with the parties hereto.

Section 12.05 TRUSTEE'S FEES AND EXPENSES.

The Trustee shall be entitled to the Trustee's Fee (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by the Trustee in the execution of the
trusts hereby created and in the exercise and performance of any of the powers
and duties hereunder of the Trustee. The Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Depositor, the
Servicer and the Transferor and held harmless against any loss, liability or
reasonable expense incurred in connection with this Agreement or the
Certificates, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance by the Trustee
of its duties hereunder, including, without limitation, any such loss, liability
or expense incurred in connection with any legal action or

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resulting from any error in any tax or information return prepared by any Person
other than the Trustee. IT IS THE EXPRESS INTENTION OF THE PARTIES TO THIS
AGREEMENT THAT THE INDEMNIFICATION OBLIGATIONS OF THE DEPOSITOR, THE SERVICER
AND THE TRANSFEROR SET FORTH IN THE PRECEDING SENTENCE SHALL APPLY FULLY TO
CLAIMS, LOSSES, ETC. RESULTING FROM ACTS OR OMISSIONS THAT MAY CONSTITUTE
ORDINARY NEGLIGENCE ON THE PART OF THE DEPOSITOR, THE SERVICER OR THE
TRANSFEROR. Any payment pursuant to the foregoing indemnity shall be from the
Depositor's, the Servicer's or the Transferor's own funds, without reimbursement
hereunder. The obligations of the Depositor, Servicer and the Transferor under
this SECTION 12.05 shall survive termination of the initial Servicer and payment
of the Certificates, and shall extend to any co-trustee or separate trustee
appointed pursuant to this Article XII.

Section 12.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.

The Trustee hereunder shall at all times (i) be a banking association
organized and doing business under the laws of any state or the United States of
America, authorized under such laws to exercise corporate trust powers,
including taking title to the Trust Fund assets on behalf of the
Certificateholders, (ii) be a wholly-owned subsidiary of a bank holding company
and have a combined capital and surplus of at least $50,000,000, (iii) (A) have
a long-term debt rating of at least "BBB+" by Standard & Poor's and at least
"Baa1" by Moody's (except as provided in SECTION 12.08) or (B) be a wholly-owned
subsidiary of a bank holding company having a long-term debt rating of at least
"BBB+" by Standard & Poor's and at least "Baa1" by Moody's (except as provided
in SECTION 12.08), (iv) be subject to supervision or examination by federal or
state authority, (v) hold a valid Title I contract of insurance, be approved by
the FHA as a lender to originate, purchase, service and/or sell, or as an
investing lender to purchase, hold and sell, loans insured under the Title I
Program and meet the applicable approval requirements for participation in the
Title I Program, and (vi) use its FHA Title I contract of insurance only to
report for FHA Insurance thereunder loans that qualify for insurance under the
Title I Program and are transferred and assigned to the Trustee pursuant to this
Agreement or agreements similar to this Agreement which relate to the issuance
of securities rated by a nationally recognized statistical credit rating agency
and which have comparable provisions to this Section and SECTIONS 5.11 and 12.07
with respect to Trustee eligibility and the allocation of the FHA Insurance on
the books and records of the Trustee and the submission of claims to the FHA for
such loans subject to such agreements. If such banking association publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this SECTION 12.06 the combined capital and surplus of such association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this SECTION 12.06, the
Trustee shall resign immediately in the manner and with the effect specified in
SECTION 12.07.

Section 12.07 RESIGNATION AND REMOVAL OF THE TRUSTEE.

The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Servicer, the Standby Servicer,
the Depositor, the Certificate Insurer and the FHA Claims Administrator. Upon
receiving such notice of resignation, the Depositor shall, with the consent of
the Certificate Insurer, promptly appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the resigning
Trustee and to

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the successor trustee. A copy of such instrument shall be delivered to the
Certificateholders and the Certificate Insurer by the Depositor. Unless a
successor trustee shall have been so appointed and have accepted appointment
within 60 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor trustee.

No resignation by the Trustee shall become effective unless (i) a successor
has assumed the Trustee's responsibilities and obligations hereunder, (ii) title
to the Title I Mortgage Loans shall be assigned to such successor on the records
of the FHA and (iii) the FHA Insurance applicable to the Title I Mortgage Loans
shall have been assigned to such successor by the FHA and evidence thereof shall
have been delivered to the Depositor, the Servicer, the Standby Servicer, the
Certificate Insurer and the Certificateholders. The Trustee agrees to cooperate
with the Servicer, any FHA Administrator then serving as such, and any successor
in effecting the termination of the Trustee's responsibilities and rights
hereunder and shall promptly provide such successor all documents and records
reasonably requested by it to enable it to assume the Trustee's functions
hereunder.

If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 12.06 and shall fail to resign after written request
therefor by the Depositor, or if at any time the Trustee shall become incapable
of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Depositor, with the
consent of the Certificate Insurer, or the Certificate Insurer may remove the
Trustee and shall, within 30 days after such removal, appoint a successor
trustee by written instrument, in duplicate, which instrument shall be delivered
to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Servicer, the Standby Servicer, the
Certificateholders and the Certificate Insurer by the Depositor.

If the Trustee fails to perform in accordance with the terms of this
Agreement, the Majority Certificateholders, with the consent of the Certificate
Insurer, or the Certificate Insurer may remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
such Holders or their attorneys-in-fact duly authorized or by the Certificate
Insurer, as applicable, one complete set of which instruments shall be delivered
to the Depositor, one complete set to the Trustee so removed and one complete
set to the successor Trustee so appointed. A copy of such instrument shall be
delivered to the Servicer, the Standby Servicer and the Certificateholders by
the Depositor.

Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this SECTION 12.07 shall become
effective upon acceptance of appointment by the successor trustee as provided in
SECTION 12.08.

If the Trustee resigns or is removed pursuant to this Section 12.07, then
such Trustee shall pay, without any reimbursement hereunder, all expenses and
costs incurred in connection with the appointment and acceptance of the
successor trustee pursuant to the applicable provisions of Section 12.08, and
such Trustee shall notify each Rating Agency thereof as provided in Section
13.14.

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Section 12.08 SUCCESSOR TRUSTEE.

Any successor trustee appointed as provided in Section 12.07 shall execute,
acknowledge and deliver to the Depositor, the Servicer, the Standby Servicer,
the Certificate Insurer and to its predecessor trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as trustee herein. The predecessor trustee
shall transfer and deliver to the successor trustee the Trust Fund, including,
without limitation, all Trustee's Mortgage Loan Files, the related documents and
statements and the FHA Insurance applicable to the Title I Mortgage Loans held
by it hereunder, and the Depositor, the Servicer, the Standby Servicer and the
predecessor trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in the successor trustee all such rights, powers, duties and
obligations.

No successor trustee shall accept appointment as provided in this Section
12.08 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 12.06; provided, however, such
successor trustee or its bank holding company parent shall have a long-term debt
rating of at least "A-" by Standard & Poor's and at least "A3" by Moody's.

Upon acceptance of appointment by a successor trustee as provided in this
Section 12.08, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register and to the Rating Agencies and the Certificate Insurer. If
the Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.

Section 12.09 MERGER OR CONSOLIDATION OF TRUSTEE.

Any Person into which the Trustee may be merged or converted or with which
it may be consolidated or any corporation or banking association resulting from
any merger, conversion or consolidation to which the Trustee shall be a party,
or any corporation or banking association succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation or banking association shall be
eligible under the provisions of Section 12.06, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.

Section 12.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.

Notwithstanding any other provisions hereof, at any time, for the purpose
of meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may at the time be located, the
Depositor and the Trustee acting jointly, with the prior consent of the
Certificate Insurer, shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee to act as co-
trustee or co-trustees, jointly with the Trustee, or separate trustee or
separate trustees, of all or any part of the Trust Fund, and to vest in such
Person or Persons, in such capacity, such title to the Trust Fund, or any part
thereof, and, subject to the other provisions of this Section 12.10, such
powers, duties, obligations, rights and

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trusts as the Depositor and the Trustee may consider necessary or desirable. If
the Depositor shall not have joined in such appointment or if the Certificate
Insurer shall not have responded to a request for consent, in either case within
15 days after the receipt by it of a request so to do, or in case an Event of
Default shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 12.06 hereunder and no notice to Holders of Certificates of the
appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 12.08.

In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section 12.10, all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly, except
to the extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee hereunder or as successor to the
Servicer hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust Fund or any portion thereof in any
such jurisdiction) shall be exercised and performed by such separate trustee or
co-trustee at the direction of the Trustee.

Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.

A separate trustee or co-trustee may, at any time, constitute the Trustee
its attorney-in-fact, with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on
its behalf and in its name. The Trustee shall not be responsible for any action
or inaction of any such separate trustee or co-trustee. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

The Depositor and the Trustee are hereby directed to execute and deliver
the Agreement of Appointment and Acceptance of Separate Trustee in substantially
the form of EXHIBIT P hereto to appoint First Bank (N.A.) (the "Initial New
Jersey Separate Trustee") as separate-trustee with respect to the Mortgage Loans
secured by Mortgaged Properties situated in the State of New Jersey and any
other part of the Trust Fund or property securing the same that at any time may
be situated in the State of New Jersey (the "New Jersey Corpus"). The Initial
New Jersey Separate Trustee shall hold the New Jersey Corpus in trust for the
benefit of the Trustee and the Trust Fund.

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Section 12.11 APPOINTMENT OF CUSTODIANS.

The Trustee may, with the consent of the Servicer, appoint one or more
Custodians to hold all or a portion of the Trustee's Mortgage Loan Files as
agent for the Trustee, by entering into a Custodial Agreement; provided that
such appointment shall not cause the transfer or loss of the FHA Insurance
applicable to the Title I Mortgage Loans. Subject to this Article XII, the
Trustee agrees to comply with the terms of each Custodial Agreement and to
enforce the terms and provisions thereof against the Custodian for the benefit
of the Certificateholders. Each Custodian shall be a depository institution
subject to supervision by federal or state authority or shall meet the standards
of an eligible Trustee as set forth in Section 12.06 and shall be qualified to
do business in the jurisdiction in which it holds any Trustee's Mortgage Loan
File. Each Custodial Agreement may be amended only as provided in Section
13.02.

Section 12.12 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES.

All rights of action and claims under this Agreement or the Certificates
may be prosecuted and enforced by the Trustee without the possession of any of
the Certificates or the production thereof in any proceeding relating thereto.
Any such proceeding instituted by the Trustee shall be brought in its own name
or in its capacity as Trustee. Any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Certificateholders in respect of which such judgment has been recovered.

Section 12.13 SUITS FOR ENFORCEMENT.

In case an Event of Default or other default by the Servicer hereunder
shall occur and be continuing, the Trustee, in its discretion, but subject to
Section 10.01, may proceed to protect and enforce its rights and the rights of
the Certificateholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy, as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

Section 13.01 ACTS OF CERTIFICATEHOLDERS.

Except as otherwise specifically provided herein, whenever
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Certificateholders if the Majority
Certificateholders agree to take such action or give such consent or approval.

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Section 13.02 AMENDMENT.

(a) This Agreement may be amended from time to time by the Depositor, the
Servicer, the Standby Servicer, the Transferor and the Trustee by written
agreement with notice thereof to the Certificateholders, without the consent of
any of the Certificateholders, but with the consent of the Certificate Insurer,
to cure any error or ambiguity, to correct or supplement any provisions hereof
which may be defective or inconsistent with any other provisions hereof or to
add any other provisions with respect to matters or questions arising under this
Agreement; provided, however, that such action will not adversely affect in any
material respect the interests of the Certificateholders. An amendment described
above shall be deemed not to adversely affect in any material respect the
interests of the Certificateholders if either (i) an opinion of counsel is
obtained to such effect, or (ii) the party requesting the amendment obtains a
letter from each of the Rating Agencies confirming that the amendment, if made,
would not result in the downgrading or withdrawal of the rating then assigned by
the respective Rating Agency to any Class of Certificates then outstanding.
Notwithstanding the foregoing, the Depositor, the Servicer, the Standby
Servicer, the Transferor and the Trustee may at any time and from time to time
amend this Agreement, without the consent of the Certificateholders, to modify,
eliminate or add to any of its provisions to such extent as shall be necessary
or appropriate to maintain the qualification of the REMIC as a REMIC under the
Code or to avoid or minimize the risk of the imposition of any tax on the Trust
Fund pursuant to the Code that would be a claim against the Trustee at any time
prior to the final redemption of the Certificates, provided that the Trustee has
obtained an opinion of independent counsel (which opinion also shall be
addressed to the Depositor, the Servicer and the Standby Servicer) to the effect
that such action is necessary or appropriate to maintain such qualification or
to avoid or minimize the risk of the imposition of such a tax.

(b) This Agreement may also be amended from time to time by the Depositor,
the Servicer, the Standby Servicer, the Transferor and the Trustee by written
agreement, with the prior written consent of the Majority Certificateholders and
the Certificate Insurer, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement, or of
modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, collections of payments on Mortgage Loans or distributions
which are required to be made on any Certificate, without the consent of the
Holders of 100% of each Class of Certificates affected thereby and the
Certificate Insurer, (ii) adversely affect in any material respect the interests
of the Holders of any Class of Certificates in any manner other than as
described in (i), without the consent of the Holders of 100% of such Class of
Certificates, or (iii) reduce the percentage of any Class, the Holders of which
are required to consent to any such amendment, without the consent of the
Holders of 100% of such Class of Certificates and the Certificate Insurer.

(c) It shall not be necessary for the consent of Holders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof.

Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an opinion of counsel stating that
the execution of such amendment is authorized or permitted by this Agreement.
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement. Notwithstanding any contrary provision of this Agreement, the
Trustee shall not

POOLING AND SERVICING AGREEMENT - Page 102

<PAGE>

consent to any amendment to this Agreement unless it shall have first received
an opinion of counsel to the effect that such amendment will not adversely
affect the status of the REMIC as a "real estate mortgage investment conduit"
within the meaning of Section 860D of the Code or cause a tax to be imposed on
the REMIC.

Section 13.03 RECORDATION OF AGREEMENT.

To the extent permitted by applicable law, this Agreement, or a memorandum
thereof if permitted under applicable law, is subject to recordation in all
appropriate public offices for real property records in all of the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at the Certificateholders'
expense on direction of the Majority Certificateholders or the Certificate
Insurer, but only when accompanied by an opinion of counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Mortgage Loans.

Section 13.04 DURATION OF AGREEMENT.

This Agreement shall continue in existence and effect until terminated as
herein provided.

Section 13.05 GOVERNING LAW.

THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, WITHOUT GIVING EFFECT TO PRINCIPLES
OF CONFLICTS OF LAW.

Section 13.06 NOTICES.

All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to (i) the
Depositor, Remodelers Investment Corporation, 16901 Dallas Parkway, Suite 200,
Dallas Texas 75248, Attention: Mr. Daniel T. Phillips, or such other addresses
as may hereafter be furnished to the Certificateholders and the other parties
hereto in writing by the Depositor, (ii) in the case of the Trustee, ________
______________________________________________________________________________
________________________________________________, or such other address as may
hereafter be furnished to the Certificateholders and the other parties hereto,
(iii) in the case of the Transferor and the Servicer, Remodelers National
Funding Corp., 3101 Bee Caves Road, Suite 200, Austin, Texas 78746, Attention:
Mr. Jim Poythess and Mr. Greg Montgomery, or such other address as may hereafter
be furnished to the Certificateholders and the other parties hereto in writing
by the Servicer or the Transferor, (iv) in the case of the Standby Servicer,
______________________________________________________________________________
______________________________________________, or such other address as may be

POOLING AND SERVICING AGREEMENT - Page 103

<PAGE>

furnished to the Certificateholders and the other parties hereto in writing by
the Standby Servicer, (v) in the case of a claim under the Guaranty Policy,
______________________________________________________________________________
________________________________________________, or such other address as may
be furnished to the Certificateholders and the other parties hereto in writing
by such Fiscal Agent or the Certificate Insurer, (vi) in the case of the
Certificate
Insurer,___________________________________________________________________
______________________________________________________________________________
________, and (vii) in the case of the Certificateholders, as set forth in the
Certificate Register. Any such notices shall be deemed to be effective with
respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Certificateholders shall be effective upon mailing or
personal delivery.

Section 13.07 SEVERABILITY OF PROVISIONS.

If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be held invalid for any reason whatsoever, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Agreement.

Section 13.08 NO PARTNERSHIP.

Nothing herein contained shall be deemed or construed to create any
partnership or joint venture between the parties hereto and the services of each
of the FHA Claims Administrator and the Servicer shall be rendered as an
independent contractor.

Section 13.09 COUNTERPARTS.

This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same Agreement.

Section 13.10 SUCCESSORS AND ASSIGNS.

This Agreement shall inure to the benefit of and be binding upon the
Servicer, the Standby Servicer, the Transferor, the Depositor, the Trustee and
the Certificateholders and their respective successors and permitted assigns.

Section 13.11 HEADINGS.

The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.

Section 13.12 PAYING AGENT.

The Trustee hereby accepts appointment as Paying Agent. The Trustee may,
subject to the eligibility requirements for the Trustee set forth in SECTION
12.06, other than SECTION 12.06(v), appoint one or more other Paying Agents or
successor Paying Agents.

POOLING AND SERVICING AGREEMENT - Page 104

<PAGE>

Each Paying Agent, immediately upon such appointment, shall signify its
acceptance of the duties and obligations imposed upon it by this Agreement by
written instrument of acceptance deposited with the Trustee.

Each such Paying Agent other than the Trustee shall execute and deliver to
the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of Section 6.05, that such Paying Agent will:

(i) allocate all sums received for distribution to the Holders of
Certificates of each Class for which it is acting as Paying Agent on
each Payment Date among such Holders in the proportion specified by
the Trustee; and

(ii) hold all sums held by it for the distribution of amounts due with
respect to the Certificates in trust for the benefit of the Holders
entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided.

Any Paying Agent other than the Trustee may at any time resign and be
discharged of the duties and obligations created by this Agreement by giving at
least sixty (60) days written notice to the Trustee. Any such Paying Agent may
be removed at any time by an instrument filed with such Paying Agent signed by
the Trustee.

In the event of the resignation or removal of any Paying Agent other than
the Trustee, such Paying Agent shall pay over, assign and deliver any moneys
held by it as Paying Agent to its successor, or if there be no successor, to the
Trustee.

Upon the appointment, removal or notice of resignation of any Paying Agent,
the Trustee shall notify the Certificateholders by mailing notice thereof to
their addresses appearing on the Certificate Register.

Section 13.13 ACTIONS OF CERTIFICATEHOLDERS.

(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Depositor or the
Servicer. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Agreement and
conclusive in favor of the Trustee, the Depositor and the Servicer if made in
the manner provided in this Section.

(b) The fact and date of the execution by any Certificateholder of any
such instrument or writing may be proved in any reasonable manner which the
Trustee deems sufficient.

POOLING AND SERVICING AGREEMENT - Page 105

<PAGE>

(c) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every Holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done, by the
Trustee, the Depositor, the Certificate Insurer, the Servicer or the Standby
Servicer in reliance thereon, whether or not notation of such action is made
upon such Certificate.

(d) The Trustee may require additional proof of any matter referred to in
this Section 13.13 as it shall deem necessary.

Section 13.14 REPORTS TO RATING AGENCIES.

(a) The Trustee shall provide to each Rating Agency copies of statements,
reports and notices, to the extent received or prepared by the Trustee
hereunder, as follows:

(i) copies of amendments to this Agreement;

(ii) notice of any substitution or repurchase of any Mortgage Loans;

(iii) notice of any termination, replacement, succession, merger
or consolidation of either the Servicer, any Custodian or the Trustee, or
the appointment of any separate trustee or co-trustee or the appointment of
any successor FHA Administrator;

(iv) notice of final payment on each Class A Certificate;

(v) notice of any Event of Default;

(vi) copies of the annual independent auditor's report delivered
pursuant to Section 7.05, and copies of any compliance reports delivered by
the Servicer hereunder including Section 7.04; and

(vii) copies of any Servicer's Monthly Statement pursuant to
Section 6.06; and

(b) With respect to the requirement of the Trustee to provide statements,
reports and notices to the Rating Agencies such statements, reports and notices
shall be delivered to the Rating Agencies at the following addresses: (i) if to
Standard & Poor's, 26 Broadway, 15th Floor, New York, New York 10004-1064,
Attention: Asset-Backed Monitoring Department, (ii) if to Moody's, 99 Church
Street, Corporate Department - 4th Floor, New York, New York 10007, Attention:
Residential Mortgage Monitoring Department, or (iii) if to Duff & Phelps, 55
East Monroe Street, Chicago, Illinois, 60603, Attention: Asset-Backed
Monitoring Department.

Section 13.15 CERTIFICATE INSURER DEEMED OWNER. Unless a Certificate
Insurer Default shall be continuing, the Certificate Insurer shall be deemed to
be the Holder of 100% of the outstanding Insured Certificates for purpose of
exercising the rights, including voting rights, of the Holders of the Insured
Certificates under this Agreement. The rights of the Certificate Insurer to
direct certain actions and consent to certain actions of the Majority
Certificateholders hereunder will terminate at such time as the Class Principal
Balances of all Classes of Class A Certificates have been reduced to zero and
the Certificate Insurer has been reimbursed for all Guaranteed Payments and any
other amounts owed under the Guaranty Policy.

POOLING AND SERVICING AGREEMENT - Page 106

<PAGE>

Section 13.16 THIRD PARTY BENEFICIARY. The parties hereto acknowledge
that the Certificate Insurer is an express third party beneficiary hereof
entitled to enforce any rights reserved to it hereunder as if it were actually a
party hereto.

Section 13.17 SUSPENSION OF CERTIFICATE INSURER'S RIGHTS. During the
continuation of a Certificate Insurer Default, rights reserved to the
Certificate Insurer hereunder shall vest instead in the Holders of 50% or more
of the outstanding principal balance of the Insured Certificates.

[Remainder of page intentionally left blank.]

POOLING AND SERVICING AGREEMENT - Page 107

<PAGE>

IN WITNESS WHEREOF, the Servicer, the Transferor, the Trustee, the
Depositor and the Standby Servicer have caused their names to be signed to this
POOLING AND SERVICING AGREEMENT by their respective officers thereunto duly
authorized, as of the day and year first above written.

REMODELERS INVESTMENT CORPORATION,
as Depositor

By:
________________________________________
Name:
________________________________________
Title:
________________________________________

______________________________________________,
as Trustee

By:
________________________________________
Name:
________________________________________
Title:
________________________________________

REMODELERS NATIONAL FUNDING CORP., as
Transferor and Servicer

By:
________________________________________
Name:
________________________________________
Title:
________________________________________

_____________________________________________,
as Standby Servicer

By:
________________________________________
Name:
________________________________________
Title:
________________________________________

POOLING AND SERVICING AGREEMENT

<PAGE>

THE STATE OF _________ )
)
COUNTY OF ___________ )

BEFORE ME, the undersigned authority, a Notary Public, on this day
personally appeared ______________________, known to me to be a person and
officer whose name is subscribed to the foregoing instrument and acknowledged to
me that the same was the act of the said ________________________________, as
_______________ of _______________________, and that he/she executed the same as
the act of such association for the purpose and consideration therein expressed,
and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________,
199__.

_______________________________________________
Notary Public, State of __________
Commission Expires:

__________________________

THE STATE OF _________ )
)
COUNTY OF ___________ )

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________,
199__.

________________________________________________
Notary Public, State of __________
Commission Expires:

________________________

POOLING AND SERVICING AGREEMENT

<PAGE>

THE STATE OF _________ )
)
COUNTY OF ___________ )

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________,
199__.

________________________________________________
Notary Public, State of __________
Commission Expires:

_______________________

THE STATE OF _________ )
)
COUNTY OF ___________ )

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ___________,
199__.

_______________________________________________
Notary Public, State of __________
Commission Expires:

___________________________

POOLING AND SERVICING AGREEMENT

<PAGE>

EXHIBIT 5.1

<PAGE>

EXHIBIT 5.1

December __, 1995

Remodelers Investment Corporation
16901 Dallas Parkway, Suite 200
Dallas, Texas 75248

Re: Remodelers Investment Corporation
Registration Statement on Form S-3

Ladies and Gentlemen:

We have acted as counsel for Remodelers Investment Corporation, a
corporation organized under the laws of the State of Nevada (the "COMPANY"),
and certain trusts, all of the beneficial ownership of which will be owned by
the Company (together with the Company, each an "ISSUER"), in connection with
the proposed issuance by each Issuer of its asset-backed certificates (the
"CERTIFICATES"). The Certificates are to be issued pursuant to a Pooling and
Servicing Agreement (the "POOLING AND SERVICING AGREEMENT"), between the
applicable Issuer, the servicer (the "SERVICER") and the trustee (the
"TRUSTEE") in the form filed as an exhibit to the Company's Registration
Statement on Form S-3 (the "REGISTRATION STATEMENT"), which Registration
Statement is being filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "SECURITIES ACT") on December __,
1995. This opinion is also to be filed as an exhibit to the Registration
Statement.

We have examined originals or copies, certified or otherwise identified
to our satisfaction, of the Issuers' organizational documents, the Pooling
and Servicing Agreement and form of Certificates included therein and such
other documents, records, certificates of the Company and public officials
and other instruments as we have deemed necessary for the purposes of
rendering this opinion. In addition, we have assumed that the Pooling and
Servicing Agreement as completed for each series will be duly executed and
delivered; that the Certificates as completed for each series will be duly
executed and delivered substantially in the forms contemplated by the Pooling
and Servicing Agreement; and that the Certificates for each series will be
sold as described in the Registration Statement.

Based upon the foregoing, we are of the opinion that the Certificates
are in due and proper form, and assuming the due authorization, execution and
delivery of the Pooling and Servicing Agreement for each series by the
Issuer, the Servicer and the Trustee and the due authorization of

<PAGE>

Remodelers Investment Corporation
December __, 1995
Page -2-

the Certificates for each series by all necessary action on the part of the
applicable Issuer, when validly executed, authenticated and issued in
accordance with the applicable Pooling and Servicing Agreement and delivered
against payment therefor, the Certificates for each series will be validly
issued and outstanding, fully paid and non-assessable, and entitled to the
benefits of the Pooling and Servicing Agreement in accordance with their
terms, except that the enforceability thereof may be subject to (a)
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
or preferential conveyance or other similar laws now or hereinafter in effect
relating to creditors' rights generally, and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

The opinion expressed above is subject to the qualification that we do
not purport to be experts as to the laws of any jurisdiction other than the
United States and the State of Texas, and we express no opinion herein as to
the effect that the laws and decisions of courts of any such other
jurisdiction may have upon such opinions.

This opinion is solely for the benefit of the addressee hereof, and,
without our prior written consent, may not be quoted in whole or in part or
otherwise referred to in any legal opinion, document, or other report, and
may not be furnished to any person or entity. We consent to the use and
filing of this opinion as Exhibit 5.1 to the Registration Statement and to
the reference to our firm under the caption "Legal Matters" in the Prospectus
Supplement and Prospectus contained therein. In giving such consent we do
not imply or admit that we are within the category of persons whose consent
is required under Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder.

Sincerely,

ANDREWS & KURTH L.L.P.

By:
------------------------------
Michael B. Thimmig, Partner

<PAGE>

EXHIBIT 8.1

<PAGE>

EXHIBIT 8.1

December __, 1995

Remodelers Investment Corporation
16901 Dallas Parkway, Suite 200
Dallas, Texas 75248

Re: Remodelers Investment Corporation
Registration Statement on Form S-3

Ladies and Gentlemen:

We have acted as counsel for Remodelers Investment Corporation, a
corporation organized under the laws of the State of Nevada (the "COMPANY"), and
certain trusts, all of the beneficial ownership of which will be owned by the
Company (together with the Company, each an "ISSUER"), in connection with the
proposed issuance by each Issuer of its asset-backed certificates (the
"CERTIFICATES"). The Certificates are to be issued pursuant to a Pooling and
Servicing Agreement (the "POOLING AND SERVICING AGREEMENT"), between the
applicable Issuer, the servicer (the "SERVICER") and the trustee (the "TRUSTEE")
in the form filed as an exhibit to the Company's Registration Statement on Form
S-3 (the "REGISTRATION STATEMENT"), which Registration Statement is being filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "SECURITIES ACT") on December __, 1995. This opinion is also to be
filed as an exhibit to the Registration Statement.

We have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Issuers' organizational documents, the
Pooling and Servicing Agreement and form of Certificates included therein and
such other documents, records, certificates of the Company and public
officials and other instruments as we have deemed necessary for the purposes
of rendering this opinion. In addition, we have assumed that the Pooling and
Servicing Agreement as completed for each series will be duly executed and
delivered; that the Certificates as completed for each series will be duly
executed and delivered substantially in the forms contemplated by the Pooling
and Servicing Agreement; and that the Certificates for each series will be
sold as described in the Registration Statement.

On the basis of the foregoing, we are of the opinion that the
information in the Prospectus under the caption "Certain Federal Income Tax
Consequences," to the extent that it constitutes matters of law or legal
conclusions, is correct in all material respects.

<PAGE>

Remodelers Investment Corporation
December __, 1995
Page -2-

The opinion herein is based upon our interpretations of current law,
including court authority and existing Final and Temporary Regulations, which
are subject to change both prospectively and retroactively, and upon the facts
and assumptions discussed herein. This opinion letter is limited to the matters
set forth herein, and no opinions are intended to be implied or may be inferred
beyond those expressly stated herein. Our opinion is rendered as of the date
hereof and we assume no obligation to update or supplement this opinion or any
matter related to this opinion to reflect any change of fact, circumstances, or
law after the date hereof. In addition, our opinion is based on the assumption
that the matter will be properly presented to the applicable court.
Furthermore, our opinion is not binding on the IRS or a court. In addition, we
must note that our opinion represents merely our best legal judgment on the
matters presented and that others may disagree with our conclusion. There can
be no assurance that the IRS will not take a contrary position or that a court
would agree with our opinion if litigated.

We hereby consent to the reference to us under the caption "Certain
Federal Income Tax Consequences" in the Prospectus, and to the filing of this
opinion as an Exhibit to the Registration Statement, without implying or
admitting that we are experts within the meaning of the 1933 Act with respect
to any part of the Registration Statement.

Sincerely,

<PAGE>

EXHIBIT 10.5

<PAGE>

CERTIFICATE GUARANTY INSURANCE POLICY

OBLIGATIONS: $_______ POLICY NUMBER _____
Remodelers Home Improvement Loan
Asset-Backed Certificates
Series 199__-__
Class A-1, Class A-2, Class A-3 and Class A-4

___________ (the "Insurer"), in consideration of the payment of the
premium and subject to the terms of this Certificate Guaranty Insurance
Policy (this "Policy"), hereby unconditionally and irrevocably guarantees to
any Owner that an amount equal to each full and complete Guaranteed Payment
will be received by _____________ or its successor, as trustee for the Owners
(the "Trustee"), on behalf of the Owners from the Insurer, for distribution
by the Trustee to each Owner of each Owner's proportionate share of the
Guaranteed Payment. The Insurer's obligations hereunder with respect to a
particular Guaranteed Payment shall be discharged to the extent funds equal
to the applicable Guaranteed Payment are received by the Trustee, whether or
not such funds are properly applied by the Trustee. Guaranteed Payments
shall be made only at the time set forth in this Policy and no accelerated
Guaranteed Payments shall be made regardless of any acceleration of the
Obligations, unless such acceleration is at the sole option of the Insurer.

Notwithstanding the foregoing paragraph, this Policy does not cover
shortfalls, if any, attributable to the liability of the Trust Fund, the
REMIC or the Trustee for withholding taxes, if any (including interest and
penalties in respect of any such liability).

The Insurer will pay any Guaranteed Payment that is a Preference Amount
on the Business Day following receipt on a Business Day by the Fiscal Agent
of (i) a certified copy of the order requiring the return of such Preference
Amount, (ii) an opinion of counsel satisfactory to the Insurer that such
order is final and not subject to appeal, (iii) an assignment in such form as
is reasonably required by the Insurer, irrevocably assigning to the Insurer
all rights and claims of the Owner relating to or arising under the
Obligations against the debtor which made such preference payment or
otherwise with respect to such preference payment and (iv) appropriate
instruments to effect the appointment of the Insurer as agent for such Owner
in any legal proceeding related to such preference payment, such instruments
being in a form satisfactory to the Insurer, provided that if such documents
are received after 12:00 noon New York City time on such Business Day, they
will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the
final order of the court exercising jurisdiction on behalf of the Owner and
not to any Owner directly unless such Owner has returned principal or
interest paid on the Obligations to such receiver or trustee in bankruptcy,
in which case such payment shall be disbursed to such Owner.

The Insurer will pay any other amount payable hereunder no later than
12:00 noon New

<PAGE>

York City time on the later of the Remittance Date on which the related
Remittance Amount is due or the Business Day following receipt in New York,
New York on a Business Day by__________________, as Fiscal Agent for the
Insurer or any successor fiscal agent appointed by the Insurer (the "Fiscal
Agent"), of a Notice (as described below); provided that if such Notice is
received after 12:00 noon New York City time on such Business Day, it will be
deemed to be received on the following Business Day. If any such Notice
received by the Fiscal Agent is not in proper form or is otherwise
insufficient for the purpose of making a claim hereunder, it shall be deemed
not to have been received by the Fiscal Agent for purposes of this paragraph,
and the Insurer or the Fiscal Agent, as the case may be, shall promptly so
advise the Trustee and the Trustee may submit an amended Notice.

Guaranteed Payments due hereunder unless otherwise stated herein will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Guaranteed
Payment less, in respect of Guaranteed Payments related to Preference
Amounts, any amount held by the Trustee for the payment of such Guaranteed
Payment and legally available therefor.

The Fiscal Agent is the agent of the Insurer only and the Fiscal Agent
shall in no event be liable to Owners for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds
to make payments due under this Policy.

As used herein, the following terms shall have the following meanings:

"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee under the Pooling and Servicing
Agreement is located are authorized or obligated by law or executive order to
close.

"Deficiency Amount" means, as of any Remittance Date, the amount by
which the sum of the Interest Remittance Amount and the Principal Remittance
Amount for the Class A Certificates exceeds the Amount Available for
distribution on such Class A Certificates for such Remittance Date.

"Guaranteed Payment" means (i) as of any Remittance Date, any Deficiency
Amount and (ii) any unpaid Preference Amount.

"Notice" means the telephonic or telegraphic notice, promptly confirmed
in writing by telecopy substantially in the form of Exhibit A attached
hereto, the original of which is subsequently delivered by registered or
certified mail, from the Trustee or the Standby Servicer on behalf of the
Trustee specifying the Guaranteed Payment which shall be due and owing on the
applicable Remittance Date.

"Owner" means each registered holder of a Class A Certificate (other
than the Trust Fund,

<PAGE>

the Depositor, the Servicer, the Standby Servicer or any Subservicer) who, on
the applicable Remittance Date, is entitled under the terms of the Class A
Certificate to payment thereunder.

"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of ________, 199__ among Remodelers National Funding
Corp., a Texas corporation, as transferor and servicer (the "Transferor" or
"Servicer"), __________, a _______ corporation, as standby servicer (the
"Standby Servicer"), Remodelers Investment Corporation, a Nevada corporation,
as depositor (the "Depositor"), and _______________, a national banking
association, as trustee (the "Trustee"), without regard to any amendment or
supplement thereto.

"Preference Amount" means any amount previously distributed to an Owner
on the Class A Certificates that is recoverable and sought to be recovered as
a voidable preference by a trustee in bankruptcy pursuant to the United
States Bankruptcy Code (11 U.S.C.), as amended from time to time, in
accordance with a final nonappealable order of a court having competent
jurisdiction.

Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Pooling and Servicing Agreement
as of the date of execution of this Policy, without giving effect to any
subsequent amendment or modification to the Pooling and Servicing Agreement
unless such amendment or modification has been approved in writing by the
Insurer.

Any notice hereunder or service of process on the Fiscal Agent may be
made at the address listed below for the Fiscal Agent or such other address
as the Insurer shall specify in writing to the Trustee.

The notice address of the Fiscal Agent is ______________________________,
or such other address as the Fiscal Agent shall specify to the Trustee in
writing.

This Policy is being issued under and pursuant to, and shall be
construed under, the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.

The insurance provided by this Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law.

This Policy is not cancelable for any reason. The premium on this
Policy is not refundable for any reason including payment, or provision being
made for payment, prior to maturity of the Obligations.

<PAGE>

IN WITNESS WHEREOF, the Insurer has caused this Policy to be executed
and attested this ____ day of __________, 199__.

____________________________________

By _________________________________
Name: ___________________________
Title:___________________________

<PAGE>

EXHIBIT A
TO CERTIFICATE GUARANTY INSURANCE POLICY
NUMBER: _____

NOTICE UNDER CERTIFICATE GUARANTY
INSURANCE POLICY NUMBER: _____

__________, as Fiscal Agent for
___________________
_____________________
_____________________
_____________________
Attention:________________

_____________________
_____________________
_____________________

The undersigned, a duly authorized officer of [Trustee], as trustee (the
"Trustee"), hereby certifies to ________________________ (the "Fiscal Agent")
and __________________ (the "Insurer"), with reference to Certificate
Guaranty Insurance Policy Number: _____ (the "Policy") issued by the Insurer
in respect of the $________ Remodelers Home Improvement Loan Asset-Backed
Certificates, Series 199__-__, Class A-1, Class A-2, Class A-3 and Class A-4
(the "Obligations"), that:

(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of _____________, 199__ among Remodelers National
Funding Corp. as Transferor and Servicer, Remodelers Investment
Corporation, as Depositor, _________________, as Standby Servicer, and
the Trustee, as trustee for the Owners;

(ii) the Interest Remittance Amount with respect to the Class A
Certificates for the Remittance Date occurring on [ ] (the
"Applicable Remittance Date") is $[ ];

(iii) the Principal Remittance Amount with respect to the
Class A Certificates for the Applicable Remittance Date is $[ ];

(iv) the Amount Available respecting the Applicable Remittance
Date is $[ ];

(v) the amount of any previously distributed Amount Available
that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the Bankruptcy Code
in accordance with a final nonappealable order of a court

<PAGE>

having competent jurisdiction (the "Preference Amount") is $[ ];

(vi) the amount by which the sum of the Interest Remittance
Amount with respect to the Class A Certificates and the Principal
Remittance Amount with respect to the Class A Certificates exceeds the
Amount Available (the "Deficiency Amount") is $[ ];

(vii) the sum of the Deficiency Amount and the Preference
Amount (the "Guaranteed Payment", is $[ ];

(viii) the Trustee is making a claim under and pursuant to the
terms of the Policy for the dollar amount of the Guaranteed Payment
set forth in (vii) above to be applied to the payment of the
Remittance Amount for the Applicable Remittance Date in accordance
with the Pooling and Servicing Agreement;

(viii) the Trustee directs that payment of the Guaranteed
Payment be made to the following account by bank wire transfer of
federal or other immediately available funds in accordance with the
terms of the Policy: [TRUSTEE'S ACCOUNT].

Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Policy.

ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING
ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING,
INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE
ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY NOT TO
EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH SUCH
VIOLATION.

IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
under the Policy as of the _____ day of ____________, 19__.

[TRUSTEE]

By _________________________________
Title ______________________________

<PAGE>

EXHIBIT 10.6

<PAGE>

MORTGAGE LOAN SUBSERVICING AGREEMENT

This MORTGAGE LOAN SUBSERVICING AGREEMENT (the same, as amended or
supplemented from time to time, being this "AGREEMENT"), made and entered
into by and between REMODELERS NATIONAL FUNDING CORP., as servicer (together
with its successors and assigns, being referred to herein as "SERVICER"), and
[NAME OF SUBSERVICER], as subservicer (together with its successors and
assigns, being referred to herein as "SUBSERVICER").

WITNESSETH:

WHEREAS, Subservicer is engaged in the business of servicing mortgage loans
for investors, and Subservicer desires to service certain Loans owned by Owner
and serviced by Servicer; and

WHEREAS, Servicer and Subservicer desire to execute this Agreement to
define each party's rights, duties and obligations relating to the servicing of
Loans.

NOW, THEREFORE, in consideration of these premises and of the mutual
agreements herein set forth, Servicer and Subservicer each agree as follows:

ARTICLE I
DEFINITIONS

Except as otherwise expressly provided herein or unless the context
otherwise requires, the following terms shall have the respective meanings
specified in this Article I for all purposes of this Agreement, and the
definitions of such terms are equally applicable to the singular and plural
forms of such terms and to the masculine, feminine and neuter genders of such
terms.

AGREEMENT: This Subservicing Agreement, including all amendments or
supplements hereto; provided that the foregoing may be deemed to be divided into
separate Agreements with respect to specific Loans.

BUSINESS DAY: Any day other than a Saturday, Sunday or other day on which
banking or thrift institutions located in each of the cities specified in
Servicer's and Subservicer's notice addresses set forth on the execution page
hereof are authorized or obligated by Law to be closed.

COLLECTION ACCOUNT: A deposit account or accounts established and
maintained by Subservicer pursuant to this Agreement, into which all Revenues
shall be deposited. Each Collection Account shall be an Eligible Account and
shall be captioned in a manner to reflect the interest of Owner therein or in
accordance with the instructions of the Servicer pursuant to Section 3.01(b).

CONVENTIONAL MORTGAGE LOAN: Any fixed rate, fully amortizing property
improvement and/or home equity loan, which is not insured or guaranteed by the
FHA or VA, and which is secured by a Mortgage.

DEBTOR RELIEF LAWS: Any applicable liquidation, bankruptcy,
conservatorship, insolvency, rearrangement, moratorium, reorganization, or
similar Laws affecting the rights of creditors generally from time to time in
effect.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 1

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ELIGIBLE ACCOUNT: At any time, an account which is any of the following:
(i) an account maintained with a depository institution (A) the long-term debt
obligations of which are at such time rated by each Rating Agency in one of its
two highest long-term rating categories, or (B) the short-term debt obligations
of which are then rated by each Rating Agency in its highest short-term rating
category; (ii) an account or accounts the deposits in which are fully insured by
either the Bank Insurance Fund or the Savings Association Insurance Fund of the
FDIC; (iii) a trust account (which shall be a "segregated trust account")
maintained with the corporate trust department of a federal or state chartered
depository institution or trust company with trust powers and acting in its
fiduciary capacity for the benefit of the Owner or its designee hereunder, which
depository institution or trust company shall have capital and surplus of not
less than $50,000,000; or (iv) another account that is approved by the Servicer
and, with respect to any Pooled Loans, consented to by each Rating Agency in
writing.

EXPENSE ADVANCES: Subject to SECTION 4.01(b), all reasonable and customary
"out of pocket" costs and expenses advanced or paid by the Subservicer with
respect to the Loans in accordance with the performance by the Subservicer of
its servicing obligations hereunder, including, but not limited to, the costs
and expenses for (i) the preservation, restoration and protection of the
Mortgage Property, including without limitation advances in respect of real
estate taxes and assessments, (ii) any collection, enforcement or judicial
proceedings, including without limitation foreclosures, collections and
liquidations pursuant to SECTION 4.02, (iii) the conservation, management and
sale or other disposition of an REO Property pursuant to SECTION 4.07, and (iv)
the preservation of the security for a Loan if a Superior Lien has accelerated
or intends to accelerate its obligations pursuant to SECTION 4.09; provided that
such Expense Advances are reimbursable to the Subservicer to the extent provided
in SUBSECTION 4.01(b).

FHLMC: Federal Home Loan Mortgage Corporation, or any successor thereto.

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

FHA: The Federal Housing Administration.

FHA CLAIM: With respect to a Title I Mortgage Loan, a claim for
reimbursement of loss properly filed with the FHA under the FHA Insurance
applicable to such Title I Mortgage Loan.

FHA CLAIMS ADMINISTRATION AGREEMENT: With respect to the Title I Mortgage
Loans, an agreement between the Owner and each FHA Claims Administrator relating
to the administration of FHA Claims.

FHA CLAIMS ADMINISTRATOR: With respect to the Title I Mortgage Loans,
initially, the Servicer, who shall serve as such and as agent and attorney-in-
fact for the Owner for purposes of handling all aspects of administering,
processing and submitting FHA Claims, pursuant to an FHA Claims Administration
Agreement; and thereafter, any Person that (i) holds a valid FHA Title I
contract of insurance with and is approved by the FHA to originate, purchase,
service and sell loans insured under the FHA Regulations and (ii) is appointed
as a successor FHA Claims Administrator to the Servicer by the Owner or the
Master Servicer. Notwithstanding the above, the Subservicer shall act as
Servicer's agent in preparing all HUD claim files, analyses, submission reports
and submission forms.

FHA INSURANCE: The mortgage insurance provided by the Federal Housing
Administration pursuant to Title I of the National Housing Act of 1934, as
amended.

FHA REGULATIONS: Section 2 of Title I of the National Housing Act and the
rules, regulations and procedures promulgated thereunder relating to Title I
property improvement loans and loans pertaining to

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 2

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manufactured homes and related real property, as the same may be amended and
supplemented from time to time, including without limitation the regulations
at 24 C.F.R. Parts 201 and 202, the HUD Title I Handbook and the HUD "TI
Letters"; provided that with respect to the origination or servicing of a
Title I Mortgage Loan, such rules, regulations and procedures that were in
effect at the time the relevant origination or servicing actions occurred.

FLOOD INSURANCE POLICY: With respect to a Loan, a policy of insurance that
conforms to the Servicing Guidelines in providing coverage against loss
sustained by flood.

HUD. The United States Department of Housing and Urban Development.

INSURANCE PROCEEDS: Payments received with respect to a Loan under any
insurance policy or bond maintained in connection with such Loan, including but
not limited to the FHA Insurance, the Flood Insurance Policy and any other
insurance policies or bonds related to such Loan.

INTERNAL REVENUE SERVICE: The Internal Revenue Service of the United
States.

LAW: Any applicable statute, law, ordinance, regulation, order, writ,
injunction or decree of the United States of America or any agency thereof or
any state or political subdivision or agency thereof or any court of competent
jurisdiction.

LIQUIDATED LOAN: Any defaulted Loan or REO Property as to which the
Subservicer has determined pursuant to SECTIONS 4.01(a), 4.02 AND 4.07, as
applicable, that all amounts which it reasonably and in good faith expects to
recover have been recovered from or on account of such Loan or REO Property,
including a determination that the FHA has paid all FHA Insurance proceeds that
can reasonably and in good faith be expected to be paid in respect of the
related FHA Claim.

LIQUIDATION DATE: With respect to a defaulted Loan or a Loan that has been
foreclosed and as reasonably determined by Subservicer in good faith, the date
of the final receipt of Insurance Proceeds, Liquidation Proceeds or other
payments with respect to such Loan. If the determination of the Liquidation
Date with respect to a Loan is dependent upon the receipt of proceeds from the
related FHA Insurance, then Owner or FHA Claims Administrator will notify
Subservicer of the occurrence of such Liquidation Date following the receipt of
such FHA Insurance proceeds, including proper allocation of principal and
interest.

LIQUIDATION PROCEEDS: Amounts, other than Insurance Proceeds, received in
connection with the liquidation of a defaulted Loan or REO Property, whether
through trustee's sale, foreclosure sale, condemnation, taking under power of
eminent domain, conveyance in lieu of foreclosure or condemnation, judgment or
otherwise.

LOAN: Any Conventional Mortgage Loan or Title I Mortgage Loan, serviced
pursuant to this Agreement, together with the rights and obligations of a holder
thereof and payments thereon and proceeds therefrom. As applicable, Loan shall
be deemed to refer to the related Note, Mortgage, if any, and any related REO
Property acquired through foreclosure of a related Mortgage. With respect to a
Title I Mortgage Loan, the term "Loan" shall include and encompass the FHA
Insurance applicable thereto, the right to file an FHA Claim thereunder and the
right to receive any FHA Insurance proceeds in respect thereof.

LOAN INTEREST RATE: The fixed annual rate of interest borne by a Note.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 3

<PAGE>

MASTER SERVICER: With respect to a Loan, the Person designated in writing
by Owner to act on behalf of Owner in matters relating to the servicing of such
Loan; or, if such designation has not been made, or has been withdrawn by
written notice to Subservicer, then the Servicer.

MONTHLY ACCOUNTING PACKAGE: The group of monthly accounting reports (as
specified in the Servicing Guidelines) to be delivered by Subservicer to
Servicer pursuant to SECTION 4.11.

MONTHLY PAYMENT: The scheduled monthly payment of principal, interest and
any tax and insurance escrow payments required to be made by the Obligor on a
Loan, including with respect to a Title I Mortgage Loan any Title I program
insurance premium.

MONTHLY SERVICING PACKAGE: The group of monthly servicing reports (as
specified in the Servicing Guidelines) to be delivered by Subservicer to
Servicer pursuant to SECTION 4.11.

MORTGAGE: With respect to a Loan, the mortgage, deed of trust or other
instrument securing the related Note which creates a lien or security interest
on the related Mortgage Property, which may be subordinate or junior to any
existing lien, including Superior Liens.

MORTGAGE PROPERTY: With respect to a Loan, the real property, together
with improvements thereon, subject to the lien of the related Mortgage.

NOTE: With respect to a Loan, the promissory note, retail installment
contract or other evidence of indebtedness of the related Obligor.

OBLIGOR: With respect to a Loan, the obligor(s) on the related Note; and
if previously assigned or assumed, the obligor and any other Person responsible
for making payments on the Note.

OFFICER: Any duly authorized officer of Subservicer involved in, or
responsible for, the servicing of Loans.

OWNER: Separately, and with respect to each Loan owned by it, Remodelers
and its successors and assigns.

PERMITTED INSTRUMENTS: Each of the following:

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

(ii) repurchase agreements on obligations of, or
guaranteed as to principal and interest by, the United States or
any agency or instrumentality thereof when such obligations are
backed by the full faith and credit of the United States, provided
that the unsecured obligations of the party agreeing to repurchase
such obligations are at the time of purchase rated by each Rating
Agency in one of its two highest long-term rating categories;

(iii) certificates of deposit, time deposits and bankers
acceptances of any United States depository institution or trust
company incorporated under the laws of the United States or any
state; provided that the debt obligations of such depository
institution or trust company at the date of the acquisition thereof
have been rated by each Rating Agency in one of its two highest
long-term rating categories;

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 4

<PAGE>

(iv) deposits which are fully insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the
FDIC, as the case may be;

(v) commercial paper of any corporation incorporated
under the laws of the United States or any state thereof which at
the date of acquisition is rated by each Rating Agency in its
highest short-term rating category and which has an original
maturity of not more than 365 days;

(vi) debt obligations rated by each Rating Agency at the
time at which the investment is made in its highest long-term
rating category (or those investments specified in (iii) above with
depositary institutions which have debt obligations rated by each
Rating Agency in one of its two highest long-term rating
categories);

(vii) money market funds which are rated by each Rating
Agency at the time at which the investment is made in its highest
short-term rating category, any such money market funds which
provide for demand withdrawals being conclusively deemed to satisfy
any maturity requirements for Permitted Instruments set forth
herein; or

(viii) any other demand, money market or time deposit
obligation, security or investment as may be acceptable to the
Servicer or Owner at the time at which the investment is made,
provided that with respect to any Pooled Loans the Servicer or
Owner substantiates that each Rating Agency has consented in
writing to such type of investment;

provided that no instrument described in the foregoing subparagraphs shall
evidence either the right to receive (a) only interest with respect to the
obligations underlying such instrument or (b) both principal and interest
payments derived from obligations underlying such instrument where 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 in the foregoing subparagraphs may be purchased at a price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to stated maturity.

PERSON: An individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization or joint venture, or
a court or a government or any agency or political subdivision thereof.

POOLED LOANS: As defined in SECTION 3.01(b).

PRINCIPAL PREPAYMENT: Any Obligor payment of principal or other
recovery of principal on a Loan which is not to be applied to any past or
current Monthly Payment under the Loan, and the portion of any Insurance
Proceeds, Liquidation Proceeds or other collections representing similar
payments of principal.

PURCHASE PRICE PERCENTAGE: With respect to a Loan, the price,
expressed as a percentage of the outstanding principal balance of such Loan,
as paid by Remodelers for such Loan at the time of purchase thereof, but not
including any additions or deductions related to accrued interest or fees.

RATING AGENCY: Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., and with respect to any Pooled Loans, any other rating agency as
designated by Servicer in writing.

REMITTANCE DATE: The eighth (8th) Business Day of each month.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 5

<PAGE>

REMITTANCE RECONCILIATION REPORT: The remittance reconciliation
report, in the form prescribed by the Servicing Guidelines, to be provided by
Subservicer to Servicer as a part of the Monthly Accounting Package.

REMODELERS: Remodelers National Funding Corp.

REO PROPERTY: As defined in SECTION 4.07.

REPORTING DATE: With respect to any Remittance Date, the seventh
(7th) Business Day of the month in which such Remittance Date occurs.

REPURCHASE PRICE: With respect to a Loan, the sum of (A) the
greater of 100% or the Purchase Price Percentage multiplied by the
outstanding principal balance of such Loan as of the date of repurchase, plus
(B) accrued and unpaid Monthly Payments other than principal payments, plus
(C) the portion of any Title I Program insurance premium paid by Remodelers
to purchase such Loan or paid subsequent to such purchase and not reimbursed
by the related Obligor.

REVENUES: With respect to a Loan, all moneys received by Subservicer
on behalf of Owner representing (i) payments of principal, interest and tax
and insurance escrow amounts, including any FHA Title I program insurance
premiums, (ii) Insurance Proceeds and Liquidation Proceeds, and (iii)
prepayment penalties and refunds of purchase premiums.

SERVICING FEE: As to each Loan, the fee payable monthly to the
Servicer on each Remittance Date, which shall be the amount equal to (A) the
product of 1.00% times the outstanding principal balance of such Loan as of
the first day of the calendar month immediately preceding such Remittance
Date, (B) divided by 12. The Servicing Fee shall be calculated and payable
monthly only from the amounts received in respect of interest on the Loans
and shall be computed on the basis of the same principal amount and for the
same period respecting which any related interest payment on a given Loan is
computed. The Servicing Fee is payable solely from the interest portion of
(i) Monthly Payments, (ii) Liquidation Proceeds, (iii) Insurance Proceeds or
(iv) proceeds from the repurchase of Loans (other than repurchases by
Subservicer hereunder) collected by the Subservicer.

SERVICING CUT-OFF DATE: With respect to a Loan, the last day of the
month preceding the month in which such Loan is first serviced hereunder.

SERVICING COMPENSATION: The Servicing Fee and any other amounts to
which Subservicer is entitled pursuant to SECTION 4.14.

SERVICING GUIDELINES: The guidelines established by Servicer for the
servicing of Loans hereunder, the same as may be amended in writing from time
to time by Servicer pursuant to SECTION 4.01(e).

SUPERIOR LIEN: With respect to a Loan, the mortgage loan(s) relating
to the corresponding Mortgage Property having a superior priority lien.

TITLE I MORTGAGE LOAN: Any fixed rate, fully amortizing, property
improvement loan partially insured by the FHA under the Title I Program (or
eligible for such insurance, if not yet acknowledged by FHA), which is
secured by a Mortgage.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 6

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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SERVICER.
The following representations, warranties and covenants of Servicer to
Subservicer shall be ongoing and in effect throughout the term of this
Agreement:

(a) Servicer is duly organized, validly existing and in good
standing under the Laws governing its formation and existence, has all
licenses necessary to carry on its business as now being conducted, and is
licensed, qualified and in good standing in each state if the laws of such
state require licensing or qualification to conduct business of the type
conducted by the Servicer and perform its obligations as Servicer hereunder
(except where the failure to be so licensed or authorized and qualified does
not have a materially adverse effect upon its ability to conduct its
business); the Servicer has the 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 Servicer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary action of the Servicer; this Agreement evidences the valid, binding
and enforceable obligation of the Servicer; and all requisite action has been
taken by the Servicer to make this Agreement valid, binding and enforceable
upon the Servicer in accordance with its terms, except as enforcement hereof
may be limited by applicable Debtor Relief Laws and general principles of
equity.

(b) The Servicer holds a valid FHA Title I contract of insurance,
is approved by the FHA to originate, purchase, service and sell loans insured
under the FHA Regulations and is not subject to any administrative action,
probation, suspension, withdrawal or termination of its FHA Title I contract
of insurance under the FHA Regulations.

(c) Any necessary approval of the transactions contemplated by
this Agreement from each federal or state regulatory authority having
jurisdiction over Servicer has been obtained; there are no actions or
proceedings pending or affecting Servicer which would adversely affect its
ability to perform hereunder.

(d) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of Servicer and will not
result in (i) the breach of any term or provision of the charter or bylaws of
Servicer, (ii) the breach of any term or provision of, or conflict with or
constitute a default under or result in the acceleration of any obligation
under, any agreement, indenture or loan or credit agreement or other
instrument to which either the Servicer or its properties are subject or
(iii) the violation of any Law to which either the Servicer or its properties
are subject.

Section 2.02. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SUBSERVICER. The following representations, warranties and covenants of
Subservicer to Servicer shall be ongoing and in effect throughout the term of
this Agreement:

(a) Subservicer is duly organized, validly existing and in good
standing under the Laws governing its formation and existence, has all
licenses necessary to carry on its business as now being conducted and is
licensed, qualified and in good standing in each state if the laws of such
state require licensing or qualification to conduct business of the type
conducted by the Subservicer and perform its obligations as Subservicer
hereunder (except where the failure to be so licensed or authorized and
qualified does not have a materially adverse effect upon its ability to
conduct its business); the Subservicer has the 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 Subservicer and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action of the

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 7

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Subservicer; this Agreement evidences the valid, binding and enforceable
obligation of the Subservicer; and all requisite action has been taken by the
Subservicer to make this Agreement valid, binding and enforceable upon the
Subservicer in accordance with its terms, except as enforcement hereof may be
limited by applicable Debtor Relief Laws and general principles of equity.

(b) The Subservicer holds a valid FHA Title I contract of
insurance, is approved by the FHA to originate, purchase, service and sell
loans insured under the FHA Regulations and is not subject to any
administrative action, probation, suspension, withdrawal or termination of
its FHA Title I contract of insurance under the FHA Regulations.

(c) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, by or from any
federal, state or other governmental authority or agency (other than any such
actions, approvals, etc., under any state securities laws real estate
syndication or "Blue Sky" statutes, as to which the Subservicer makes no such
representation or warranty), that are necessary in connection with the
execution and deliver by the Subservicer of this Agreement and the other
related documents to which it is a party, have been duly taken, given or
obtained, as the case may be, are in full force and effect, are not subject
to any pending proceedings or appeals (administrative, judicial or otherwise)
and either the time within which any appeal therefrom may be taken or review
thereof may be obtained has expired or no review thereof may be obtained or
appeal therefrom taken, and are adequate to authorize the consummation of the
transactions contemplated by this Agreement and such other documents on the
part of the Subservicer and the performance by the Subservicer of its
obligations as Subservicer under this Agreement and such other documents to
which it is a party.

(d) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Subservicer and will
not result in (i) the breach of any terms or provisions of the charter or
by-laws of the Subservicer, (ii) the breach of any term or provision of, or
conflict with or constitute a default under or result in the acceleration of
any obligation under, any agreement, indenture or loan or credit agreement or
other instrument to which either Subservicer or its properties are subject,
or (iii) the violation of any Law to which either the Subservicer or its
properties are subject.

(e) To the best of the Subservicer's knowledge, neither this
Agreement nor any statement, report or other document prepared by the
Subservicer and furnished pursuant to this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading.

(f) There is no action, suit, proceeding or investigation pending
or, to the best of the Subservicer's knowledge, threatened against the
Subservicer 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 Subservicer or in any material
impairment of the right or ability of the Subservicer to carry on its
business substantially as now conducted, or which would draw into question
the validity of this Agreement, or which would be likely to impair materially
the ability of the Subservicer to perform under the terms of this Agreement.

(g) The Subservicer 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 other governmental agency, which default might have
consequences that would materially and adversely affect the condition
(financial or other) or operations of the Subservicer or its properties or
might have consequences that would materially and adversely affect its
performance hereunder.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 8

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(h) The Subservicer shall comply with any net worth and capital
requirements under applicable Law and shall not be subject to any regulatory
action involving a cease and desist order with respect to its net worth or
capital requirements.

(i) The Subservicer shall not sell, transfer, assign or otherwise
dispose of a customer or similar list comprised of the names of the Obligors
under the Loans to any third party.

(j) From time to time Subservicer will report, as more fully set
forth in this Agreement, information relating to the Loans to Servicer,
Master Servicer and Owner, and will do every act and thing which may be
reasonably necessary or required to perform its duties under this Agreement.

Section 2.03. REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO
LOANS. With respect to each Loan, the following representations, warranties
and covenants of Subservicer to Servicer (except as noted below) shall be
deemed to have been made during the time that such Loan is serviced by
Subservicer subsequent to the Servicing Cut-Off Date pursuant to this
Agreement (commencing with the Servicing Cut-Off Date and not with respect to
any prior time period), and shall be ongoing and in effect with respect to
each Loan for so long as such Loan is being serviced pursuant to this
Agreement:

(a) Unless consented to in writing by Servicer and Master
Servicer or as permitted under SECTION 4.01(c) hereof, the terms, covenants
and conditions of the Loan will not be waived, altered, impaired or modified
by Subservicer in any respect which materially affects the value, validity or
enforceability of the Loan, prompt payment of the Loan or the security of the
lien securing the Loan.

(b) There have not been and will not be outstanding any advances
of funds by Subservicer, to or on behalf of the Obligor to be used by the
Obligor for the payment of any monthly principal and interest installment or
other charges payable under the Loan, except as contemplated by the
Subservicing Guidelines.

(c) Subservicer has not done any act or omitted to do any act,
and will not do or omit to do any act, which creates or would create an
offset, defense or counterclaim to the Loan, including the obligation of the
Obligor to pay the unpaid principal of and interest on the Loan.

(d) Unless Owner, Master Servicer or Servicer has otherwise
consented in writing or as contemplated under SECTIONS 4.02(a), 4.07 or 4.16,
to the best knowledge of Subservicer, the Obligor has not conveyed such
Obligor's right, title or interest to or in the Mortgage Property to any
Person.

(e) Any fees charged and retained by Subservicer in servicing the
Loan, including Servicing Fees, are in compliance with the Loan documents,
this Agreement and all Laws and in the case of a Title I Mortgage Loan, the
FHA Regulations.

(f) Subservicer has complied with federal disclosure laws, the
fair credit reporting act and other Laws which impose requirements,
restrictions or conditions on Subservicer in connection with the servicing of
Loans hereunder, and in the case of a Title I Mortgage Loan, with the
applicable provisions of the FHA Regulations, except those which are modified
by, waived by or otherwise inconsistent with the terms of this Agreement or
the Servicing Guidelines.

Section 2.04. BREACHES OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Upon discovery by either Servicer or Subservicer of a breach of any of the
representations, warranties or covenants set forth in SECTIONS 2.02 OR 2.03,
the party discovering such breach shall give written notice to the other.
Within sixty (60) days of its discovery or its receipt of notice of such a
breach, Subservicer shall promptly cure such breach in all material respects
with respect to each Loan affected by such breach. If Subservicer fails to

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cure such breach in all material respects after the expiration of such sixty
(60) day period or if Servicer determines in good faith that Subservicer
cannot cure such breach within the unexpired portion of such sixty (60) day
period, then, upon at least five (5) days prior written notice to Subservicer
of the date of repurchase as determined by Servicer, the Subservicer shall
repurchase each Loan serviced under this Agreement which, in the reasonable
judgment of Servicer, is materially adversely affected by such breach, at the
related Repurchase Price for such Loan.

SECTION 2.05. INDEMNIFICATION. IN ADDITION TO ANY CURE OR
REPURCHASE OBLIGATION PURSUANT TO SECTION 2.04, SUBSERVICER SHALL INDEMNIFY
SERVICER AND OWNER AND HOLD THEM HARMLESS AGAINST ANY LOSS, DAMAGES,
PENALTIES, FINES, FORFEITURES, REASONABLE LEGAL FEES AND RELATED COSTS,
JUDGMENTS AND OTHER COSTS AND EXPENSES RESULTING FROM ANY CLAIM, DEMAND,
DEFENSE OR ASSERTION BASED ON OR GROUNDED UPON, OR RESULTING FROM, A BREACH
OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS SET FORTH IN SECTIONS 2.02
AND 2.03, EXCEPT TO THE EXTENT THAT SUCH BREACH WAS CAUSED BY THE NEGLIGENCE
OR WILLFUL MISCONDUCT OF SERVICER.

Section 2.06. TERMINATION OF SUBSERVICER. If Subservicer fails to
comply with the requirements of SECTION 2.04 OR 2.05, Servicer may terminate
all of Subservicer's rights pursuant to this Agreement as provided in SECTION
5.02 and shall have all other rights and remedies provided in this Agreement
or by Law.

ARTICLE III
ASSIGNMENT OF AGREEMENT

Section 3.01. ASSIGNMENT OF OWNER'S RIGHTS.

(a) Subservicer acknowledges and agrees that, from time to time,
Owner may assign, in writing, its right, title and interest with respect to
one or more whole Loans serviced by Subservicer pursuant to this Agreement,
and Subservicer hereby consents to each such assignment. Owner shall only
provide Subservicer with written notice of any such assignment if the
assignee is not affiliated with Owner; in such event, Subservicer shall take
such actions as may be reasonably requested by Owner or the applicable
assignee to protect the interests of such assignee. Upon request from
Subservicer, Servicer will identify the name of the Owner of any Loan
serviced by Subservicer.

(b) Without limiting the generality of paragraph (a) above, Owner
contemplates that Owner or an affiliate of Owner from time to time will make
assignments of its right, title and interest with respect to certain Loans
serviced by Subservicer pursuant to this Agreement, to trustees under various
pooling agreements and/or to investors pursuant to whole loan sale
transactions. Such pooling agreements will relate to pass-through
certificates or mortgage-backed securities representing ownership interests
in pools of mortgage loans which include one or more of the Loans ("MBS").
Notwithstanding any provision to the contrary herein, in connection with a
group of one or more Loans that either back an MBS, are retained by Owner or
are sold to another investor in a whole loan sale (each such group, the
"POOLED LOANS"), Servicer by written notice: (i) may require Subservicer to
establish a separate Collection Account for the Revenues associated with the
Pooled Loans and designate the caption for such Collection Account; (ii) may
require Subservicer to remit Revenues separately with respect to the Pooled
Loans; (iii) may require Subservicer to report separately with respect to the
Pooled Loans;(iv) may change the requirements for any Collection Account,
Eligible Account, Permitted Instrument, Remittance Date or Reporting Date;
and (v) may modify any other provision herein in a manner that is necessary
or appropriate as a result of the requirements of the MBS or sale involving
the Pooled Loans. Upon receipt of such written notice, Subservicer agrees to
comply with such requirements of the Servicer pursuant to this Section.

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Section 3.02. ASSIGNMENT OF SERVICER'S RIGHTS. Subservicer
acknowledges and agrees that, from time to time, Servicer may assign, in
writing, its right, title and interest in this Agreement with respect to one
or more whole Loans, and Subservicer hereby consents to each such assignment.
Servicer shall only provide Subservicer with written notice of any such
assignment if the assignee is not affiliated with Servicer; in such event,
Subservicer shall take such actions as may be reasonably requested by
Servicer or the applicable assignee to protect the interest of such assignee.

Section 3.03. DELEGATION OF OWNER'S RIGHTS AND DUTIES. Owner may
assign, from time to time to the extent permitted by Law, all or a portion of
the authority, rights and/or duties of Owner with respect to certain Loans
serviced by Subservicer pursuant to this Agreement to its duly appointed
agents, including consultants or other Persons retained by Owner. Upon
notice to Subservicer of the taking of any action pursuant to this SECTION
3.03, Subservicer shall treat any such assignee as if it were Owner in
accordance with the terms set forth in such assignment, until notice to
Subservicer of any modification or termination of such assignment.
Subservicer acknowledges and consents to such actions, waives any further
notice thereof and agrees to be bound thereby.

Section 3.04. ASSIGNMENT OF SUBSERVICING OBLIGATIONS. Except as
provided in SECTION 5.01(b), Subservicer may not assign any of its rights or
privileges hereunder or make or enter into any delegation, subcontract,
authorization or appointment with respect to any of its duties, liabilities
or obligations hereunder without the prior written consent of Servicer;
provided, however, that Subservicer shall not be required to obtain the
consent of Servicer and shall have the right to delegate its duties and
obligations to make inspections of any Mortgaged Property, to conduct face to
face interviews and to perform other miscellaneous and incidental duties in
servicing the Loans. Servicer's consent to an assignment as referred to in
the preceding sentence shall not be unreasonably withheld or delayed,
provided that the assignee meets Servicer's qualification requirements to
service Loans on behalf of Owner. Any agreement to assign servicing rights
and obligations shall provide that the assignee must assume the servicing
obligations so assigned. Without the prior written consent of Servicer, no
such assignment by Subservicer shall relieve Subservicer of liability arising
from events, actions or omissions by Subservicer prior to such assignment,
and Servicer shall retain all remedies provided by this Agreement or by Law
with respect thereto. Subservicer may not pledge or encumber its rights or
privileges hereunder without the prior written consent of Servicer.

ARTICLE IV
SERVICING DUTIES OF SERVICER

Section 4.01. SERVICING OF LOANS.

(a) SERVICING STANDARD. The Subservicer, as independent contract
servicer, shall service and administer the Loans and shall have full power
and authority, acting alone, to do any and all things in connection with such
servicing and administration which the Subservicer may deem necessary or
desirable and consistent with the terms of this Agreement and the Servicing
Guidelines. Notwithstanding any provision to the contrary herein, the
Subservicer, in servicing and administering the Loans, shall employ or cause
to be employed procedures (including collection, foreclosure, liquidation and
REO Property management procedures) and exercise the same care that it
customarily employs and exercises in servicing and administering loans of the
same type as the Loans for its own account, all in accordance with the Law
and the accepted servicing practices of prudent lending institutions and
servicers of loans of the same type as the Loans and giving due consideration
to the Owner's reliance on the Subservicer. With respect to the Title I
Mortgage Loans, Subservicer shall comply with FHA Regulations in servicing
such Loans so that the FHA Insurance remains in full force and effect with
respect to such Loans, except for good faith disputes relating to FHA
Regulations or such FHA Insurance, unless such disputes would result in the
termination or suspension of such FHA Insurance. The Subservicer has and
shall maintain the facilities, procedures and experienced personnel necessary
to comply with the servicing standard set forth in this

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subsection (a) and the duties of the Subservicer set forth in this Agreement
relating to the servicing of the Loans.

(b) EXPENSE ADVANCES. In accordance with the preceding general
servicing standard, the Subservicer shall make all reasonable and necessary
Expense Advances in connection with the servicing of each Loan hereunder.
Notwithstanding any provision to the contrary herein, Subservicer shall not
have any obligation to advance its own funds for any delinquent scheduled
payments of principal and interest on any Loan. No costs incurred by
Subservicer in respect of Expense Advances shall for the purposes of
distributions to the Owner be added to the amount owing under the related
Loan. Notwithstanding any obligation by Subservicer to make an Expense
Advance hereunder with respect to a Loan, before making any Expense Advance,
that is material in relation to the outstanding principal balance thereof,
the Subservicer shall assess the reasonable likelihood of (i) recovering such
Expense Advance and any prior Expense Advances for such Loan, and (ii)
recovering any amounts attributable to outstanding interest and principal
owing on such Loan for the benefit of the Owner in excess of the costs,
expenses and other deductions to obtain such recovery, including without
limitation any Expense Advances therefor and, if applicable, the outstanding
indebtedness of all Superior Liens. Subservicer shall only make an Expense
Advance with respect to a Loan to the extent that Subservicer determines in
its reasonable, good faith judgment that such Expense Advance would likely be
recovered pursuant to the preceding sentence; provided that if the aggregate
amount of Expense Advances exceed $500.00 for a Loan, such Expense Advance is
approved by Servicer.

(c) WAIVERS, MODIFICATIONS AND EXTENSIONS. The Subservicer shall
not waive, modify or vary any term of any Loan or consent to the postponement
of strict compliance with any such term or in any manner grant indulgence to
any Obligor, unless Subservicer obtains the prior written approval of the
Servicer or unless permitted under the Servicing Guidelines, but in any event
such waiver, modification or variance shall be subject to the terms of this
Agreement, including subsection (a) above and in the case of a Title I
Mortgage Loan, the FHA Regulations. Notwithstanding the preceding sentence,
the Subservicer shall not permit any modification with respect to any Loan
that would change the Loan Rate, defer or forgive the payment of any
principal or interest (unless in connection with the liquidation of the
related Loan) or extend the final maturity date on the Loan, unless the
Obligor is in default with respect to the Loan, or such default is, in the
judgment of the Subservicer, reasonably foreseeable and the Servicer
expressly approves such modification in writing.

The Subservicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of each Loan and the related Note
and Mortgage, if applicable. Consistent with the foregoing, the Subservicer
may in its discretion waive or permit to be waived any late payment charge or
assumption fee or any other fee or charge which the Subservicer would be
entitled to retain hereunder as Servicing Compensation.

(d) INSTRUMENTS OF SATISFACTION OR RELEASE. Without limiting the
generality of the foregoing, consistent with the servicing duties and
responsibilities hereunder and as required by the documents relating to such
Loan, the Subservicer is hereby authorized and empowered to execute and
deliver on behalf of the Servicer and Owner, all instruments of satisfaction
or cancellation, or of partial or full release, discharge and all other
comparable instruments, with respect to the Loans and with respect to the
Mortgage Properties. If reasonably required by the Subservicer, the Servicer
or Owner shall furnish the Subservicer with any powers of attorney and other
documents necessary or appropriate to enable the Subservicer to carry out its
servicing and administrative duties under this Agreement, including without
limitation the form of Special and Limited Power of Attorney attached as
EXHIBIT B hereto.

(e) SERVICING GUIDELINES. Subservicer agrees that Owner, Master
Servicer or Servicer may modify and supplement the Servicing Guidelines from
time to time, provided that such modifications and

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supplement (i) are not imposed retroactively and (ii) are necessary or
appropriate as a result of the requirements or the current industry practices
relating to any Pooled Loans or are necessary or appropriate to update,
clarify or specify certain matters relating to servicing of the Loans or to
comply with the FHA Regulations or any Law. After Subservicer receives at
least thirty (30) days prior written notice of any such modification and
supplement, Subservicer agrees to comply with the Servicing Guidelines as
modified and supplemented.

Section 4.02 LIQUIDATION OF LOANS.

(a) In the event that any payment due under any Loan, and not
postponed pursuant to SECTION 4.01(c), is not paid when the same becomes due
and payable, or in the event the Obligor fails to perform any other covenant
or obligation under the Loan and such failure continues beyond any applicable
grace period, the Subservicer shall take such actions as are in conformity
with the servicing standard hereunder and in the case of a Title I Mortgage
Loan, the FHA Regulations. If any Loan becomes more than ninety (90) days
past due from any Monthly Payment due date under the Loan, then Subservicer
shall prepare and submit to Servicer an analysis of the expected recovery
from each available method of liquidating such Loan, including, if available,
any recovery from the submission of an FHA Claim and the liquidation of the
related Mortgaged Property through foreclosure or other means. The Servicer
shall then have the right to direct the Subservicer to perform, in accordance
with the standard of care specified in SECTION 4.01, any of the following
actions: (i) in the case of a Title I Mortgage Loan, prepare an FHA Claim for
submission by the Servicer or FHA Claims Administrator; (ii) foreclose upon
or otherwise comparably effect the ownership, in the name of and for the
benefit of the Owner, of the Mortgaged Property relating to such defaulted
Loan, and take other necessary steps to collect amounts not satisfied through
the acquisition of such Mortgaged Property through foreclosure or other
means; or (iii) take such other action as the Servicer shall deem to be in
the best interests of the Owner.

(b) After a Loan has become a Liquidated Loan, the Subservicer
shall at month end prepare and forward to the Servicer and any FHA Claims
Administrator a Liquidation Report, in the form prescribed by the Servicing
Guidelines, detailing the Liquidation Proceeds received from the Liquidated
Loan, expenses incurred with respect thereto, and any loss incurred in
connection therewith. Subservicer may record on its servicing records a
charge-off or write-off of the amount of such loss incurred from such
Liquidated Loan, subject to the prior approval of Servicer of such charge-off
amount. After the recordation of the charge-off amount for a Liquidated
Loan, the servicing obligations of Subservicer hereunder shall terminate with
respect to such Loan.

Section 4.03 ESTABLISHMENT OF COLLECTION ACCOUNTS; DEPOSITS IN
COLLECTION ACCOUNTS.

The Subservicer shall cause to be established and maintained one or
more Collection Accounts, which shall be Eligible Accounts, which may be
interest-bearing and which may be transferred from one institution to another
so long as such transfer is to an Eligible Account and prior written notice
is delivered to Servicer. The Subservicer shall use its best efforts to
deposit or cause to be deposited (without duplication) within one (1)
Business Day, and shall in any event deposit within two (2) Business Days, of
receipt thereof in the Collection Account and retain therein:

(i) all Revenues with respect to the Loans;

(ii) any amounts payable in connection with the
repurchase of any Loan;

(iii) any amount required to be deposited in the
Collection Account pursuant to SECTION 4.06 OR 4.07 that is not
otherwise included in the Revenues; and

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<PAGE>

(iv) interest and investment income on funds held in the
Collection Account.

The foregoing requirements for deposit in the Collection Account
shall be exclusive.

Section 4.04 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT.

(a) The Subservicer shall withdraw or cause to be withdrawn funds
from the Collection Account for the following purposes:

(i) to effect the Remittance to the Servicer
on or before 1:00 p.m. Dallas, Texas time on the Remittance Date of
(A) all Revenues received by Subservicer during the preceding
calendar month, plus any amounts then on deposit in the Collection
Account that are attributable to the repurchase of any Loan
pursuant to SUBSECTION 4.03(ii), any amounts deposited pursuant to
SUBSECTION 4.03(iii) and any interest and investment income earned
during the preceding calendar month pursuant to SUBSECTION
4.03(iv), plus (B) any amount which would exceed the twelve (12)
month time limit in subsection (b) below, less (c) the amounts set
forth in clauses (ii) through (vi) below;

(ii) to pay itself any Servicing Fees and additional
Servicing Compensation earned hereunder;

(iii) to pay itself any unreimbursed Expense
Advances to the extent that the collections from the related Loan,
for which such Expense Advances were made, have been received by
Subservicer, including any collections from Insurance Proceeds,
Liquidation Proceeds and such other amounts received from the
related Obligor in repayment of such Expense Advances, but
excluding any Monthly Payments;

(iv) to withdraw any amount received from an
Obligor 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;

(v) to withdraw any funds deposited in the
Collection Account that were not required to be deposited therein
(such as Servicing Compensation) or were deposited therein in error
or that constituted Insurance Proceeds the FHA seeks to reclaim on
the grounds that a Loan that was the subject of an FHA Claim is
found not to conform to FHA Regulations; and

(vi) to clear and terminate the Collection
Account upon the termination of this Agreement with any
amounts on deposit therein being paid as directed by the
Servicer.

(b) All remittances of funds by Subservicer to Servicer pursuant
to this Agreement shall be made by wire transfer of immediately available
funds. The Subservicer shall not retain any cash or investment in the
Collection Account for a period in excess of twelve (12) months and cash
deposited therein shall be considered withdrawn pursuant to subsection (a)
above to the Servicer on a first-in, first-out basis.

(c) The funds held in the Collection Account may be invested (to
the extent practicable) in Permitted Instruments, as directed in writing to
the Subservicer by the Servicer. In any case, funds in the Collection
Account must be available for withdrawal without penalty, and any Permitted
Instruments must mature or otherwise be available for withdrawal not later
than one Business Day immediately preceding the Remittance Date next
following the date of such investment and shall not be sold or disposed of
prior

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 14

<PAGE>

to its maturity. All Permitted Instruments in which funds in the Collection
Account are invested must be held by or registered in the name of Servicer or
such other name or names as designated by Servicer.

(d) The amount remitted to Servicer shall agree with the amount
in the Remittance Reconciliation Report submitted by Subservicer with respect
to such Remittance Date. Every effort will be made by Servicer and
Subservicer to resolve discrepancies prior to the subsequent Remittance Date;
however, in such cases where this is not possible, Servicer and Subservicer
will diligently continue to work to identify any remaining discrepancies. In
the case of a Subservicer error, Subservicer shall submit an amended
Remittance Reconciliation Report that accurately reflects the amounts which
should have been remitted on the related Remittance Date, and remit any
discrepancy in cash to Servicer in accordance with Servicer's request as soon
as possible following identification of such discrepancy. In the case of a
Servicer error, Servicer will correct the error on or before the Remittance
Date in the month following the month in which such discrepancy is identified.

Section 4.05 [Reserved]

Section 4.06 FIDELITY BOND; ERRORS AND OMISSION INSURANCE.

The Subservicer shall maintain with a responsible company, and at its
own expense, a blanket fidelity bond and an errors and omissions insurance
policy in such amounts as required by, and satisfying any other requirements
of, FHA and FHLMC, with broad coverage on all officers, employees or other
persons acting in any capacity requiring such persons to handle funds, money,
documents or papers relating to the Loans ("SUBSERVICER EMPLOYEES"). Any
such fidelity bond and errors and omissions insurance shall protect and
insure the Subservicer against losses, including losses resulting from
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts
(including acts relating to the origination and servicing of loans of the
same type as the Loans) of such Subservicer Employees. Such fidelity bond
shall also protect and insure the Subservicer against losses in connection
with the release or satisfaction of a Loan without having obtained payment in
full of the indebtedness secured thereby. In the event of any loss of
principal or interest on a Loan for which reimbursement is received from
Subservicer's fidelity bond or errors and omissions insurance, the proceeds
from any such insurance will be deposited in the Collection Account. No
provision of this SECTION 4.06 requiring such fidelity bond and errors and
omissions insurance shall diminish or relieve the Subservicer from its duties
and obligations as set forth in this Agreement. Upon the request of the
Servicer, the Subservicer shall cause to be delivered to the Servicer a
certified true copy of such fidelity bond and insurance policy. Within thirty
(30 days of the date hereof, Subservicer shall notify Servicer of the
insurance company that has provided such fidelity bond and errors and
omissions insurance.

Section 4.07 TITLE, MANAGEMENT AND DISPOSITION OF REO
PROPERTY.

Subservicer shall not institute a foreclosure action with respect to
a defaulted Loan without the written direction of Servicer pursuant to
SECTION 4.02. Upon the direction of Servicer to institute a foreclosure
action, such foreclosure shall be conducted by Subservicer in accordance with
Subservicer's customary and prudent internal procedures (as modified by
Servicer under the Servicing Guidelines or upon thirty (30) days advance
written notice) and the requirements of this Agreement, any Law and all
requirements of any insurer providing insurance on such Loan. 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 taken in the name of the Owner.

The Subservicer shall manage, conserve, protect and operate each REO
Property for the Owner solely for the purpose of its prudent and prompt
disposition and sale. The Subservicer shall, either itself or through an
agent selected by the Subservicer, manage, conserve, protect and operate the
REO Property

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in the same manner that it manages, conserves, protects and operates other
foreclosed property for its own account, and in the same manner that similar
property in the same locality as the REO Property is managed. Subject to
Servicer's written approval, the Subservicer shall attempt to sell or dispose
of such REO Property (and may temporarily rent the same) on such terms and
conditions as the Subservicer deems to be in the best interest of the Owner.
Any out-of-pocket expenses incurred by the Subservicer pursuant to this
SECTION 4.07 shall be considered Expense Advances. The Subservicer shall
cause to be deposited in the Collection Account, all revenues received with
respect to the conservation and disposition of the related REO Property, as
Liquidation Proceeds, and shall retain, or withdraw therefrom, less the
amounts retained and withdrawn by the Subservicer for any related
unreimbursed Expense Advances and any other funds necessary for the proper
operation, management and maintenance of the related REO Property and the
fees of any managing agent acting on behalf of the Subservicer.

Section 4.08 ACCESS TO CERTAIN DOCUMENTATION AND
INFORMATION REGARDING THE LOANS.

The Subservicer shall provide to the Owner, the Servicer, the Master
Servicer and the supervisory agents and examiners of each of the foregoing
access to the documentation regarding the servicing of the Loans, such access
being afforded without charge but only upon reasonable request and during
normal business hours at the offices of the Subservicer designated by it.

Section 4.09 SUPERIOR LIENS.

(a) The Subservicer shall file (or cause to be filed) of record a
request for notice of any action by a superior lienholder under a Superior
Lien for the protection of the Owner's interest, where permitted by local law
and whenever applicable state law does not require that a junior lienholder
be named as a party defendant in foreclosure proceedings in order to
foreclose such junior lienholder's equity of redemption.

(b) If the Subservicer is notified that any superior lienholder
has accelerated or intends to accelerate the obligations secured by a
Superior Lien, or has declared or intends to declare a default under the
mortgage or the promissory note secured thereby, or has filed or intends to
file an election to have any Mortgage Property sold or foreclosed, the
Subservicer shall take, on behalf of the Owner, all reasonable actions that
are necessary to protect the interests of the Owner, and/or to preserve the
security of the related Loan, including making any Expense Advances that are
necessary to cure the default or reinstate the Superior Lien. The
Subservicer shall immediately notify the Servicer and Master Servicer of any
such action or circumstances. Any Expense Advances by the Subservicer
pursuant to this SECTION 4.09 shall comply with the requirements of SECTION
4.01(b) hereof.

Section 4.10 FHA INSURANCE MATTERS.

(a) The Owner may, at its option, enter into an FHA Claims
Administration Agreement whereby an FHA Claims Administrator may act as agent
and attorney-in-fact for the Owner to submit any FHA Claim to the FHA, in
which case the Subservicer shall cooperate with and assist the FHA Claims
Administrator and furnish to the FHA Claims Administrator any and all
documents, if any, necessary to file an FHA Claim. Notwithstanding the above,
the Subservicer shall act as Servicer's agent in preparing all HUD claim
files, analyses, submission reports and submission forms. The Subservicer
shall not be responsible for the payment of any fees of any FHA Claims
Administrator.

(b) The Owner and any FHA Claims Administrator shall comply with
FHA Regulations and take all other actions so that the FHA Insurance remains
in full force and effect with respect to the Title I Mortgage Loans, except
for good faith disputes relating to the FHA Regulations or such FHA
Insurance, unless such disputes would result in the termination or suspension
of such FHA Insurance.

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Section 4.11. REPORTS. On or before the Reporting Date
with respect to a Remittance Date of each month (or such other date as is
specified in the Servicing Guidelines), Subservicer shall submit to Servicer
a Monthly Accounting Package and a Monthly Servicing Package with respect to
the monthly period ending on the last day of such calendar month. In
addition, Subservicer shall submit to Servicer the other reports required by
the Servicing Guidelines at the time specified in the Servicing Guidelines.
In addition, in connection with any funds remitted on a date other than a
Remittance Date, Subservicer shall furnish a report in connection with such
remittance specifying the Loan or Loans to which such funds relate and a
description of such funds on a loan-by-loan basis (i.e., whether such funds
constitute principal, interest, principal prepayments, Insurance Proceeds,
Liquidation Proceeds, etc.). As required by Law, Subservicer shall report
information related to the Loans as necessary to the Obligors and the
Internal Revenue Service. Subservicer shall also provide to Servicer, Master
Servicer and Owner such other reports or information regarding the Loans as
may be reasonably requested by them.

Section 4.12. QUARTERLY COMPLIANCE STATEMENTS; ANNUAL
INDEPENDENT ACCOUNTANTS' REPORT.

(a) Not later than the last day of the second month following the
end of each quarter of Subservicer's fiscal year beginning with the fiscal
quarter ending after the date hereof, Subservicer will deliver to Servicer
and Owner, an Officer's certificate stating that (i) Subservicer has fully
complied with the provisions of Articles IV, (ii) a review of the activities
of Subservicer during the preceding quarter and of performance under this
Agreement has been made under such Officer's supervision, and (iii) to the
best of such Officer's knowledge, based on such review, Subservicer has
fulfilled all its obligations under this Agreement throughout such quarter,
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 and the action being taken by Subservicer to cure such default.

(b) On or before 120 days after the end of each of Subservicer's
fiscal years elapsing during the term of its appointment under this
Agreement, beginning with the first fiscal year ending after the date hereof,
Subservicer, at its expense, shall furnish to Servicer and Owner (i) an
opinion by a firm of independent certified public accountants on the
financial position of Subservicer at the end of the relevant fiscal year and
the results of operations and changes in financial position of Subservicer
for such year then ended on the basis of an examination conducted in
accordance with generally accepted auditing standards, and (ii) if
Subservicer is then servicing any Loans, a statement from such independent
certified public accountants to the effect that based on an examination of
certain specified documents and records relating to the servicing of
Subservicer's mortgage loan portfolio conducted substantially in compliance
with the audit program for mortgages serviced for the United States
Department of Housing and Urban Development Mortgage Audit Standards, or the
Uniform Single Audit Program for Mortgage Bankers (the "APPLICABLE ACCOUNTING
STANDARDS"), such firm is of the opinion that such servicing has been
conducted in compliance with the Applicable Accounting Standards except for
(a) such exceptions as such firm shall believe to be immaterial and (b) such
other exceptions as shall be set forth in such statement.

Section 4.13. LIABILITY OF SUBSERVICER FOR EXPENSES. Servicer shall
be required to pay all expenses incurred by it in connection with its
servicing activities hereunder and shall not be entitled to reimbursement
therefor except as specifically provided for herein. Subservicer agrees to
pay, without reimbursement therefor, (i) all reasonable costs or expenses
incurred by Owner, Master Servicer or Servicer resulting from failure by
Subservicer to timely file claims for losses relating to Loans (including the
failure to timely file claims under the insurance policies or bonds referred
to in SECTION 4.06), (ii) all reasonable costs and expenses resulting from
failure by Subservicer to foreclose Mortgages relating to delinquent Loans in
a manner consistent with this Agreement and the Servicing Guidelines, (iii)
all reasonable costs and expenses incurred by Servicer, Master Servicer or
Owner in investigating Subservicer's activities hereunder, if such
investigation proves that Subservicer has not complied in any

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 17

<PAGE>

material respect with this Agreement or the Servicing Guidelines, and (iv)
all reasonable costs and expenses incurred by Servicer, Master Servicer or
Owner in connection with replacing Subservicer in the event the Subservicer
resigns pursuant to SECTION 5.01 or this Agreement is terminated with cause
pursuant to SECTION 5.02 hereof,.

Section 4.14. SERVICING FEE. As compensation for its servicing
activities hereunder, Subservicer shall retain the Servicing Fee earned by it
hereunder. Additional servicing compensation shall include only (i) any late
payment and non-sufficient fund charges and any other similar charges
received and owing under the Note, and (ii) assumption fees received by
Subservicer pursuant to SECTION 4.16.

Section 4.15. NO SOLICITATION. Subservicer shall not solicit any
refinancing of any of the Loans, except if Subservicer obtains the prior
written consent to solicit a Obligor from Owner, then Subservicer may solicit
such Obligor for refinancing of such Loan; provided, that this covenant shall
not prevent Subservicer from making general solicitations, by mail,
advertisement or otherwise, of the general public or persons on a targeted
list, so long as the list was not generated from lists of Obligors whose
Loans were sold hereunder. An Obligor's unsolicited request to refinance
shall not be deemed to be a solicitation on the part of Subservicer.

Section 4.16. ASSUMPTION AGREEMENTS. When a Mortgage Property has
been or is about to be conveyed by the Obligor, Subservicer shall, to the
extent it has knowledge of such conveyance or prospective conveyance,
exercise its rights to accelerate the maturity of the related Loan under any
"due-on-sale" clause contained in the related Mortgage or Note; provided,
however, that the Subservicer shall not exercise any such right if the
"due-on-sale" clause, in the reasonable belief of the Subservicer, is not
enforceable under applicable law. In such event, the Subservicer shall enter
into an assumption and modification agreement with the person to whom such
property has been or is about to be conveyed, pursuant to which such person
becomes liable under the Note and, unless prohibited by applicable law or the
Mortgage documents, the Obligor remains liable thereon. Subject to Section
4.01(a), Subservicer is also authorized to enter into a substitution of
liability agreement with such person, pursuant to which the original Obligor
is released from liability and such person is substituted as Obligor and
becomes liable under the Note. The Subservicer shall notify Servicer that
any such substitution or assumption agreement has been completed by
forwarding to Servicer the original of such substitution or assumption
agreement. In connection with any assumption or substitution agreement
entered into pursuant to this Section, Subservicer shall not change the Loan
Interest Rate or the Monthly Payment, defer or forgive the payment of
principal or interest, reduce the outstanding principal amount or extend the
final maturity date on such Loan. Any fee collected by Subservicer for
consenting to any such conveyance or entering into an assumption or
substitution agreement shall be retained by or paid to Subservicer as
additional Servicing Compensation.

Notwithstanding the foregoing paragraph or any other provision of
this Agreement, Subservicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption
of a Loan by operation of law or any assumption which Subservicer may be
restricted by law from preventing, for any reason whatsoever.

Section 4.17 SATISFACTION OF MORTGAGES AND RELEASE OF LOAN FILES.

Subject to the provisions of SECTIONS 4.01, 4.02 AND 4.07, as
applicable, Subservicer shall not grant a satisfaction or release of a
Mortgage without having obtained payment in full of the indebtedness secured
by the Mortgage or otherwise prejudice any right Owner may have under the
mortgage instruments. Subservicer shall maintain the fidelity bond and errors
and omissions insurance as provided for in SECTION 4.06 insuring Subservicer
against any loss it may sustain with respect to any Loan not satisfied in
accordance with the procedures set forth herein.

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<PAGE>

Upon the payment in full of any Title I Mortgage Loan, or the receipt
by Subservicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, Subservicer will immediately notify (and
forward a copy of such notice to any FHA Claims Administrator) Servicer and
Owner by an Officer's Certificate (which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to SECTION 4.03 have been or will be so
deposited) and shall request delivery to it of the Owner's Loan File. Upon
receipt of such certification and request, the Owner shall promptly release
the related Owner's Loan File to the Subservicer. Expenses incurred in
connection with any instrument of satisfaction or deed of reconveyance shall
be payable only from and to the extent of Servicing Compensation and shall
not be chargeable to the Collection Account.

The Owner shall execute and deliver to the Subservicer any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgage Property or to any
legal action brought to obtain judgment against any Obligor on the Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies
or rights provided by the Note or Mortgage or otherwise available at law or
in equity. Together with such documents or pleadings, Subservicer shall
deliver to Owner an Officer's certificate requesting that such pleadings or
documents be executed by Owner and certifying as to the reason such documents
or pleadings are required and that the execution and delivery thereof by
Owner will not invalidate or otherwise affect the lien of the Mortgage,
except for the termination of such a lien upon completion of the foreclosure
or trustee's sale. Owner shall, upon receipt of a written request from an
Officer of Subservicer, execute any document provided to Owner by the
Subservicer or take any other action requested in such request that is, in
the opinion of Subservicer as evidenced by such request, required by any
state or other jurisdiction to discharge the lien of a Mortgage upon the
satisfaction thereof and Owner will sign and post, but will not guarantee
receipt of, any such documents to Subservicer, or such other party as
Subservicer may direct, within five Business Days, or more promptly if
needed, of Owner's receipt of such certificate or documents. Such
certificate or documents shall establish to Owner's satisfaction that the
related Loan has been paid in full by or on behalf of the Obligor and that
such payment has been deposited in the Collection Account.

ARTICLE V
TERMINATION AND LIABILITIES

Section 5.01. SUBSERVICER RESIGNATION OR MERGER.

(a) Upon sixty (60) days prior written notice, Subservicer may
resign from the obligations and duties hereby imposed on it under this
Agreement; provided that Subservicer shall reimburse Servicer for all costs
and expenses incurred by Servicer in connection with such resignation and the
transfer of the servicing of the Loans.

(b) Subservicer agrees that so long as it shall continue to serve
in the capacity contemplated under the terms of this Agreement, Subservicer
(i) will not dissolve or otherwise dispose of all or substantially all of its
assets, and (ii) will not voluntarily consolidate with or merge into any
other entity or permit one or more other entities to consolidate with or
merge into it; provided, however, that Subservicer may dispose of its assets,
consolidate with or merge into any other entity or permit one or more other
entities to consolidate with or merge into it if (A) the Subservicer obtains
the prior written consent of Servicer for such disposition, consolidation or
merger, (B) the transferee or surviving entity expressly assumes, in a form
approved by Servicer, all obligations of Subservicer under this Agreement
(including any accrued liabilities thereunder), and (C) such transferee or
surviving entity would not then be in default under any material provision of
this Agreement. In the event that Subservicer breaches or violates the
preceding sentence of this subsection (b), then Servicer shall have the right
to immediately

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 19

<PAGE>

terminate with cause all of Subservicer's rights pursuant to this Agreement
with respect to all Loans in accordance with SECTION 5.02 below.

Section 5.02. TERMINATION WITH CAUSE. Servicer may terminate all of
Subservicer's rights pursuant to this Agreement with respect to all Loans
upon the happening of any one or more of the following events:

(a) Failure of Subservicer to (1) deposit in the Collection
Account in accordance with SECTION 4.03 hereof any payments in respect of the
Loans received by Subservicer no later than the fourth Business Day following
the day on which such payments were received or (2) remit to Servicer any
amount as required under SUBSECTION 4.04(a)(i) hereof, which failure is not
remedied on the first Business Day following the date upon which written
notice of such failure shall have been given to Subservicer (each, a "DEFAULT
NOTICE");

(b) Four (4) Default Notices (each in respect of a separate
failure to remit) have been properly given in any consecutive twelve (12)
month period or ten (10) Default Notices (each in respect of a separate
failure to remit) have been properly given at any time during the term of
this Agreement;

(c) Failure of Subservicer to repurchase any Loan as required
pursuant to SECTION 2.04 immediately upon receipt by Subservicer of written
notice of such failure, requiring the same to be remedied;

(d) Failure of Subservicer to duly observe or perform in any
material respect any other covenant, condition or agreement in this Agreement
to be observed or performed by Subservicer, other than as referred to in
paragraph (a) above, for a period of thirty (30) days after receipt of
written notice to Subservicer from Owner, Master Servicer or Servicer
specifying such failure and requesting that it be remedied; provided,
however, if the failure stated in such notice cannot be corrected within such
period and if corrective action is instituted by Subservicer within such
period and is diligently pursued until fully corrected, then this Agreement
shall not be terminated as a result of such failure; provided further, that
if Subservicer cannot correct such failure within thirty (30) days after the
end of the initial thirty (30) day period, Servicer may forthwith terminate
Subservicer pursuant to this SECTION 5.02;

(e) Issuance or entry of a decree or order of a court, agency or
supervisory authority having jurisdiction in the premises appointing a
conservator, receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceeding affecting Subservicer or substantially all of its properties, or
for the winding-up or liquidation of its affairs, if such decree or order
shall have remained in force undischarged or unstayed for a period of sixty
(60) days;

(f) Consent by Subservicer to the appointment of a conservator,
receiver or liquidator in any bankruptcy, insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceeding affecting
Subservicer or substantially all of its properties;

(g) Admission in writing by Subservicer of its inability to pay
debts generally as they mature, or the filing of a petition to take advantage
of any applicable bankruptcy or insolvency statute or the making of an
assignment for the benefit of creditors.

(h) There shall be a material adverse change in the financial
condition, business or operations of the Subservicer that would materially
impair the ability of the Subservicer to perform its obligations hereunder,
including without limitation any failure by Subservicer to comply with any
net worth or capital requirements under applicable Law or any regulatory
action involving a cease and desist order with respect to the net worth or
capital requirements of Subservicer is issued to Subservicer.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 20

<PAGE>

(i) The breach or violation by Subservicer of SECTION 5.01(b).

If any of the events specified in (e), (f), (g), (h) or (i) above shall
occur, Subservicer shall give written notice of such occurrence to Owner,
Master Servicer and Servicer within two (2) Business Days of the happening of
such event. Notwithstanding any provision in this Agreement to the contrary,
neither Owner nor Master Servicer nor Servicer shall be liable in any respect
for the termination of Subservicer pursuant to this SECTION 5.02 or owe any
duty or compensation to Subservicer if Subservicer is terminated pursuant to
this SECTION 5.02.

Section 5.03. TERMINATION WITHOUT CAUSE. With respect to all or any
portion of the Loans hereunder, Servicer, in its sole discretion, may
terminate this Agreement without cause upon written notice to Subservicer
which specifies the Loans for which the servicing hereunder is being
terminated pursuant to this Section. Upon such termination, unless an event
listed in SECTION 5.02 shall have occurred and be continuing, Servicer will
pay to Subservicer, as compensation for termination of Subservicer's rights
hereunder, an aggregate amount calculated with respect to each of the Loans
for which this Agreement is terminated without cause that is equal to (i) if
such terminations occurs within two years of the date the Loan was
originated, 1.0% of the outstanding principal balance of such Loan, (ii) if
such termination occurs after two years but within four years of the date the
Loan was originated, 0.5% of the outstanding principal balance of such Loan,
and (iii) if such termination occurs after four years of the date the Loan
was originated, 0.0% of the outstanding principal balance of such Loan. On
or before sixty (60) days after Subservicer has received written notice of
termination pursuant to this Section with respect to all or any portion of
the Loans, Subservicer shall transfer the servicing in accordance with
SECTION 5.04 hereof for such Loans, and Servicer shall remit to Subservicer
the compensation provided in the preceding sentence.

Section 5.04. TRANSFER OF TERMINATED SUBSERVICER'S SERVICING. Upon
termination of this Agreement with respect to Subservicer pursuant to either
SECTION 5.02 OR 5.03, Subservicer shall cooperate fully with Owner, Master
Servicer and Servicer in effecting the termination of Subservicer's
responsibilities and rights hereunder and Subservicer shall, in accordance
with the Servicing Guidelines and applicable Law, immediately deliver or
cause to be delivered to a servicer designated by Servicer (hereafter,
"DESIGNEE SERVICER") all moneys held in each applicable Collection Account
with respect to the Loans for which this Agreement has been terminated,
together with an assignment of this Agreement from Subservicer to Designee
Servicer, and immediately shall deliver as directed by Servicer all other
Revenues and amounts from such Loans at any time received by Subservicer not
theretofore remitted in accordance with this Agreement. In addition, within
thirty (30) days of any such termination, Subservicer shall deliver or cause
to be delivered to Designee Servicer all files, other than proprietary
computer software (however, printouts of payment histories shall be delivered
to Designee Servicer), of Subservicer relating to such Loans for which the
servicing hereunder has been terminated. Subservicer agrees to indemnify and
hold Servicer, Designee Servicer and Master Servicer harmless from any and
all loss, damage and expenses (including reasonable attorneys' fees) that any
of them may incur in securing the delivery of all files, the transfer of all
funds, and the remittance of all Revenues and amounts received by Subservicer
with respect to any Loan for which the servicing is being transferred
pursuant to this Section.

Section 5.05. SUBSERVICER'S DUTIES UPON TERMINATION WITH CAUSE.
Upon receipt by Subservicer of written notice of termination from Servicer
pursuant to SECTION 5.02, all authority and power of Subservicer under this
Agreement shall pass to and be vested in Servicer pursuant to and under this
SECTION 5.05; and, without limiting the foregoing, Servicer is hereby
authorized and empowered to execute and deliver, on behalf of Subservicer, as
attorney-in-fact or otherwise, any and all documents and other instruments,
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 21

<PAGE>

Section 5.06. ACCESS TO SUBSERVICER'S RECORDS AND AGREEMENT TO PAY
ATTORNEYS' FEES. Owner, Master Servicer, Servicer and their respective agents
may, from time to time, request Subservicer to allow the inspection of any of
Subservicer's books and records pertaining to this Agreement, and Subservicer
shall allow such inspections and access to such books and records at
reasonable times during Subservicer's normal business hours and upon
reasonable terms. If it is determined by Master Servicer, Servicer or Owner
that Subservicer has breached or failed to perform under any provision of
this Agreement, and Owner, Master Servicer or Servicer shall employ attorneys
or incur other expenses for the enforcement, performance, or observance of
the terms of the Agreement on the part of Subservicer, then Owner, Master
Servicer or Servicer, as the case may be, to the extent permitted by Law,
shall be reimbursed by Subservicer, on demand, for reasonable attorneys' fees
and other out-of-pocket expenses; in the event any such actions cause
Subservicer to incur expenses in defense of its performance hereunder and it
is determined that Subservicer has not breached or failed to perform under
any provision of this Agreement, then Subservicer, to the extent permitted by
Law, shall be reimbursed by Servicer, on demand, for reasonable attorneys'
fees and other out-of-pocket expenses related to such defense.

Section 5.07. NO REMEDY EXCLUSIVE. No remedy herein conferred upon
or reserved to Servicer is intended to be exclusive of any other available
remedy, but each remedy shall be cumulative and shall be in addition to other
remedies of Servicer given under this Agreement or existing at Law or in
equity. No delay or omission to exercise any right or power of Servicer
accruing under this Agreement shall impair any such right or power, or shall
be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient.

ARTICLE VI
GENERAL PROVISIONS

Section 6.01. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement
may be amended, changed, modified, or altered only by an instrument in
writing executed by Servicer and Subservicer. Notwithstanding the foregoing,
Subservicer agrees to comply with the Servicing Guidelines, the same as may
be modified from time to time by Owner, Master Servicer or Servicer pursuant
to SECTION 4.01(d) hereof.

Section 6.02. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS. NOTWITHSTANDING THE PRECEDING SENTENCE, IT IS UNDERSTOOD AND
AGREED THAT SUBSERVICER WILL SERVICE EACH LOAN IN ACCORDANCE WITH THE LAW.

Section 6.03. NOTICES. All notices, certificates or other
communications hereunder shall be in writing and be deemed given when
delivered (which delivery may be made by electronic facsimile transmission)
to the appropriate party at the address identified on the execution page
hereof or in the Servicing Guidelines. Notices to the Master Servicer shall
be delivered to the address specified in the Servicing Guidelines. Each
party may, by notice given hereunder, designate any further or different
address to which subsequent notices, certificates and other communications to
such party shall be sent.

Section 6.04. SEVERABILITY. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate nor render unenforceable any
other provision hereof. Such invalid or unenforceable provision shall be
amended, if possible, in accordance with SECTION 6.01 in order to accomplish
the purposes of this Agreement.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 22

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Section 6.05. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To the
extent permitted by Law, Servicer and Subservicer agree that each will, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such supplements hereto and such further
instruments as may reasonably be required or appropriate to further express
the intention or to facilitate the performance, of this Agreement.

Section 6.06. TERM OF AGREEMENT. With respect to each Loan, the
term of this Agreement shall end upon the earliest to occur of (i)
termination of all of Subservicer's rights pursuant to this Agreement with
respect to such Loan as provided in SECTION 5.02 or SECTION 5.03 or (ii)
remittance of the final payment of such Loan to Servicer.

Section 6.07. SURVIVAL OF OBLIGATIONS AND COVENANTS. After
termination of this Agreement and transfer of the servicing rights to the
Loans to Designee Servicer, Subservicer shall continue to be liable for any
failure to fulfill its obligations during the time that it acted as
Subservicer of the Loans hereunder, and Subservicer shall not be released
from its obligations pursuant to SECTION 2.04.

Section 6.08. FORMS AND REPORTS. All forms or reports required by
this Agreement will be prescribed by Owner, Master Servicer or Servicer from
time to time and may be amended, supplemented, or replaced as Owner, Master
Servicer or Servicer shall deem appropriate.

Section 6.09. INDEMNIFICATION. SUBSERVICER AGREES TO, AND DOES
HEREBY, INDEMNIFY AND HOLD HARMLESS SERVICER AND OWNER AND THEIR SUCCESSORS
AND ASSIGNS AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSS, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS, COSTS, EXPENSES AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST ANY OF SUCH INDEMNIFIED PARTIES, IN ANY WAY
RELATED TO, OR ARISING OUT OF, THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN, TO THE EXTENT THAT ANY OF THE SAME RESULTS FROM OR
ARISES OUT OF ANY BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY
SUBSERVICER IN THIS AGREEMENT OR FROM ANY BREACH BY SUBSERVICER OF ANY
COVENANT OR OBLIGATION OF SUBSERVICER UNDER THIS AGREEMENT, EXCEPT TO THE
EXTENT THAT SUCH BREACH WAS CAUSED BY THE NEGLIGENCE OR WILLFUL MISCONDUCT OF
SERVICER. THE INDEMNITIES CONTAINED IN THIS SECTION 6.09 SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT.

Section 6.10. BOARD RESOLUTIONS. With this Agreement, Subservicer
shall provide a resolution from its Board of Directors authorizing the
individual signing this Agreement to execute and deliver, on behalf of
Subservicer, this Agreement and authorizing the individuals specified therein
to take actions and deliver documents in the name of and on behalf of
Subservicer in connection with its performance of its obligations under this
Agreement.

Section 6.11. TERMINATION OF PRIOR AGREEMENTS. This Agreement
terminates any prior agreement between Servicer and Subservicer with respect
to the servicing of mortgage loans. Each mortgage loan serviced by
Subservicer under any such agreement shall be a Loan subject to this
Agreement.

Section 6.12. CONSENT TO JURISDICTION AND ARBITRATION.

(a) The parties hereto irrevocably agree to submit to the
personal jurisdiction of the United States District Court for the Northern
District of Texas and that the exclusive venue for all actions and
proceedings, except a proceeding for enforcement of a judgment, shall be in
the United States District Court for the Northern District of Texas, the
parties irrevocably waiving any objection thereto. If for any reason federal
jurisdiction is not available, the parties irrevocably agree to submit to the
personal jurisdiction of the Courts of the State of Texas and that the
exclusive venue for all actions and proceedings,

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 23

<PAGE>

except a proceeding for enforcement of a judgment, shall be in the Courts of
the State of Texas, Dallas County, the parties irrevocably waiving any
objection thereto.

(b) Notwithstanding the foregoing subsection (a), at Servicer's
option exercisable at any time not later than sixty (60) days after an action
or proceeding has been commenced hereunder, the parties agree that the matter
may be submitted to binding arbitration in accordance with the rules of the
American Arbitration Association then in effect in the State of Texas, and
any judgment upon any award rendered by the arbitrator may be entered in any
court having jurisdiction thereof within the City of Dallas, Dallas County
and the State of Texas; provided, however, that the arbitrator shall not
amend, supplement, or reform in any regard this Agreement, the rights or
obligations of any party hereunder, or the enforceability of any of the terms
hereof. Any arbitration shall be conducted in the City of Dallas, Texas, or
Dallas County, Texas, before a single arbitrator who shall be reasonably
familiar with residential mortgage loan servicing and the mortgage banking
industry. IN THE EVENT ARBITRATION IS ELECTED, SUBSERVICER EXPRESSLY WAIVES
ANY AND ALL RIGHTS IT MAY HAVE TO INJUNCTIVE RELIEF UNDER TEXAS LAW IN
CONNECTION WITH A MANDATORY ARBITRABLE CONTROVERSY.

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 24

<PAGE>

IN WITNESS WHEREOF, Servicer, Subservicer and Owner have caused this
Agreement to be executed as of this ___ day of __________, 1995.

SERVICER AND OWNER:

REMODELERS NATIONAL FUNDING CORP.

By:________________________
Name:______________________
Title:_____________________

STATE OF INCORPORATION: Texas

NOTICE ADDRESS: 16901 Dallas Parkway
Dallas, Texas 75240
Attn: Steve Hartung
Title: Vice President
Fax: (800) 822-4857

SUBSERVICER:

[NAME OF SUBSERVICER]

By:________________________
Name:______________________
Title:_____________________

STATE OF ORGANIZATION: ______________________

NOTICE ADDRESS: ______________________
______________________
______________________
Attn:_________________
Fax:__________________
Phone:________________

MORTGAGE LOAN SUBSERVICING AGREEMENT - Page 25

<PAGE>

EXHIBIT B

SPECIAL AND LIMITED POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

In connection with the servicing of certain property improvement
loans (as defined in the Subservicing Agreement, each a "Loan", or
collectively, the "Loans") under the Mortgage Loan Subservicing Agreement
dated as of ____________, 1995 (the "Subservicing Agreement") between
[NAME OF SUBSERVICER]("Subservicer"), as Subservicer and REMODELERS NATIONAL
FUNDING CORP., as Servicer, the undersigned, [NAME OF OFFICER], as the
______________________ of and on behalf of Remodelers National Funding Corp.
as Servicer under the Subservicing Agreement (hereinafter referred to as
"Principal"), does hereby constitute and appoint the Servicing Officers of
Subservicer as designated in the Subservicing Agreement (hereinafter referred
to collectively as "Attorneys" and individually as an "Attorney"), and each
of them individually, a true and lawful attorney for Principal (but only for
the purpose set forth herein) and pursuant to Section 4.01 of the
Subservicing Agreement hereby authorizes and empowers each such Attorney, for
and in the name and stead of Principal to endorse, execute or deliver any and
all documents or instruments of satisfaction or cancellation, or of partial
or full release or discharge, or of subordination, and all other comparable
instruments, with respect to the Loans and any related Mortgage Properties,
all in accordance with the terms of the Subservicing Agreement, including,
without limitation, the recording or filing with the appropriate public
officials of such documents or instruments and the endorsement and deposit of
any instrument in connection with the foreclosure of any Loan or the
bankruptcy or receivership of the Borrower of any Loan. Capitalized terms
used and not otherwise defined herein have the meanings ascribed to such
terms in the Subservicing Agreement.

Principal covenants and agrees that it shall, from time to time after
the date hereof, at the request of Subservicer, as Subservicer, execute
instruments confirming all of the foregoing authority of any of the Attorneys
or substitute Attorneys. The foregoing shall not be deemed to be breached by
reason of any action or omission of any of the Attorneys or such substitute
Attorneys as may be appointed hereunder.

Principal understands that such Attorneys are employees of
Subservicer, and each Attorney shall have the power to name, by written
instrument, such substitute attorneys, with all powers hereunder, as such
Attorneys shall deem proper, provided that such substitute attorneys are
Servicing Officers under the Subservicing Agreement.

This power of attorney is revocable by the Principal.

<PAGE>

IN WITNESS WHEREOF, Principal has caused this SPECIAL AND LIMITED
POWER OF ATTORNEY AND COVENANTS to be signed by its duly authorized officer
on this _____ day of _________________, 1995.

REMODELERS NATIONAL FUNDING CORP.

___________________________ By:_________________________________
Witness Name: [NAME OF OFFICER]
Title:______________________________

STATE OF TEXAS )
)
COUNTY OF _________ )

On the ____ day of _____________________, 1995, before me
personally appeared the above-named [NAME OF OFFICER], on behalf of
REMODELERS NATIONAL FUNDING CORP., to me known and known by me to be the
__________________________ of said corporation and acknowledged said
instrument so executed to be his free act and deed in said capacity and the
free act and deed of said corporation.

____________________________________
Notary Public

My commission expires:

_______________________

<PAGE>

EXHIBIT C

QUARTERLY COMPLIANCE CERTIFICATE
OF [NAME OF SUBSERVICER]

___________, 1995

This QUARTERLY COMPLIANCE CERTIFICATE is being delivered pursuant to
the Mortgage Loan Subservicing Agreement dated as of ____________, 1995
between [NAME OF SUBSERVICER], as Servicer (the "SERVICER"), and REMODELERS
NATIONAL FUNDING CORP., as Owner (the "OWNER") (as may be amended from time
to time, the "AGREEMENT"). The terms used in this certificate, if not
defined herein, have the meanings specified in the Agreement.

As of the date hereof, the undersigned certifies that he/she is the
_________________________ of the Servicer and that, as such officer, is
authorized to execute and deliver this certificate in the name and on behalf
of the Servicer, and further certifies that:

(1) a review of the activities of Servicer during the
preceding fiscal quarter with respect to performance under the
Agreement has been made under the undersigned's supervision for the
purpose of determining whether the Servicer has fulfilled its
obligations under the Agreement and whether the Servicer is in
compliance with the provisions of Article IV; and

(2) to the best of the undersigned's knowledge, based
on such review, Servicer has fulfilled all of its obligations under
the Agreement and there is no default by Servicer in the
fulfillment of any of its obligations under the Agreement, except
with respect to the following defaults: ______ none of which have
occurred; or _____ as described on ATTACHMENT I hereto.

IN WITNESS WHEREOF, the undersigned has executed and delivered this
QUARTERLY COMPLIANCE CERTIFICATE on this _____ day of ___________________,
1995.

By:_________________________________
Name:____________________________
Title:___________________________

QUARTERLY COMPLIANCE CERTIFICATE - Page 1

<PAGE>

EXHIBIT 10.7

<PAGE>

LOAN SALE AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

This LOAN SALE AGREEMENT dated as of _______________, 19__ is made and
entered into by and between Remodelers Investment Corporation, as purchaser
(together with its successors and assigns, being referred to herein as
"PURCHASER"), and __________________________, as seller (together with its
successors and assigns, being referred to herein as "SELLER").

W I T N E S S E T H:

WHEREAS, Seller is engaged in the business of underwriting, originating
or acquiring property improvement and home equity loans secured by mortgages
on residential property;

WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller on a whole loan basis the Initial Mortgage Loans and all
monies due and to become due thereunder after the Cut-Off Date;

WHEREAS, Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller on a whole loan basis the Subsequent Mortgage Loans and
all monies due and to become due thereunder after the related Subsequent
Cut-Off Date;

NOW, THEREFORE, in consideration of these premises and of the mutual
agreements herein set forth, Purchaser and Seller each agree as follows:

Section 1. REPRESENTATIONS AND WARRANTIES.

The Seller hereby represents and warrants to the Trust Fund, with
respect to each Subsequent Mortgage Loan, as of the applicable Subsequent
Transfer Date; and with respect to each Initial Mortgage Loan, as of the date
hereof (each, a "CLOSING DATE") and with respect to itself, as follows:

(a) MORTGAGE LOAN INFORMATION. The information with respect to each
Mortgage Loan set forth in the Mortgage Loan Schedule is true and correct in
all material respects as of the applicable Cut-Off Date.

(b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. All of the original or
certified documentation required to be delivered to the Trustee or to the
Custodian on or prior to the Closing Date or the Subsequent Transfer Date, as
applicable, or as otherwise provided in this Agreement has or will be so
delivered.

<PAGE>

knowingly received any advance of funds from a party other than the related
borrower, directly or indirectly, for the payment of any amount required by
any Mortgage Loan.

(d) NO WAIVER OR MODIFICATION. The terms of each Note and Mortgage
have not been impaired, waived, altered or modified in any respect, except by
written instruments reflected in the Trustee's Mortgage Loan File and no
provision of any Mortgage or Note has been "whited out" or erased unless such
modification has been initialed by each of the parties to the related
Mortgage Loan. No instrument of waiver, alteration, modification or
assumption has been executed except for the instruments that are part of the
Trustee's Mortgage Loan File and the terms of which are reflected in the
Trustee's Mortgage Loan File.

(e) NO DEFENSES. No Note or Mortgage is subject to any set-off,
counterclaim or defense, including the defense of usury, nor will the
operation of any of the terms of any Note or Mortgage, or the exercise of any
right thereunder, render such Note or Mortgage unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, and to the best of the Seller's
knowledge, no such right of rescission, set-off, counterclaim or defense has
been asserted in any proceeding or was asserted in any state or federal
bankruptcy or insolvency proceeding at the time the related Mortgage Loan was
originated.

(f) COMPLIANCE WITH LAWS. Any and all requirements of any federal,
state or local law applicable to each Mortgage Loan have been complied with
including, without limitation, all consumer, usury, truth-in-lending,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to each Mortgage Loan, and with respect to the Title I Mortgage
Loans, the FHA Regulations; each Mortgage Loan was originated in compliance
with all applicable laws and no fraud or misrepresentation was committed by
any Person in connection therewith; any Mortgage Loan originated in the State
of Texas, was originated pursuant to Chapter 6 of the Texas Consumer Credit
Code.

(g) NO SATISFACTION OR RELEASE OF LIEN. No Mortgage has been
satisfied, canceled, subordinated or rescinded, in whole or in part. No
Mortgaged Property has been released from the lien of the related Mortgage,
in whole or in part, nor has any instrument been executed that would effect
any such release, cancellation, subordination or rescission, other than the
subordination of the lien of a Mortgage securing a Mortgage Loan (in the case
of a Title I Mortgage Loan, as permitted by FHA Regulations), with respect to
which a related Superior Lien was released in connection with the refinancing
of the mortgage loan relating to such Superior Lien.

(h) VALID LIEN. Each Note is secured by a Mortgage and each Mortgage
is or creates a valid, subsisting and enforceable lien on the related
Mortgaged Property, including, in the case of a Mortgage securing a property
improvement loan, the land and all buildings on the Mortgaged Property.

-2-

<PAGE>

each Note and each Mortgage had legal capacity at the time to enter into the
related Mortgage Loan and to execute and deliver such Note and Mortgage, and
such Note and Mortgage have been duly and properly executed by such parties.

(j) FULL DISBURSEMENT OF PROCEEDS. As of the applicable Cut-Off Date
the proceeds of each Mortgage Loan have been fully disbursed and there is no
requirement for future advances thereunder, all costs, fees and expenses
incurred in making or closing each Mortgage Loan and the recording of the
Mortgage were disbursed, the Obligor is not entitled to any refund of any
amounts paid or due under the Note or any related Mortgage and any and all
requirements set forth in the related Mortgage Loan documents have been
complied with.

(k) OWNERSHIP. The Seller has good and marketable title to each
Mortgage Loan, Note and Mortgage, is the sole owner thereof and has full
right to sell each Mortgage Loan, Note and Mortgage to the Purchaser and upon
the conveyance thereof by the Seller to the Purchaser, the Purchaser will
become the sole owner of each Mortgage Loan, Note and Mortgage free and clear
of any encumbrance, equity, lien, pledge, charge, claim or security interest.

(l) OWNERSHIP OF MORTGAGED PROPERTY. The related Servicer's Mortgage
Loan File contains a title document with respect to each Mortgage Loan
reflecting that title to the related Mortgaged Property is held at least 50%
by the Obligor under such Mortgage Loan.

(m) NO DEFAULTS. Except with respect to any delinquent scheduled
payment which is not more than 90 days delinquent as of the applicable
Cut-Off Date, there is no default, breach, violation or event of acceleration
existing under any Mortgage or any Note and there is no event which, with the
passage of time or with notice and/or the expiration of any grace or cure
period, would constitute such a default, breach, violation or event of
acceleration and neither the Seller nor its predecessors have waived any such
default, breach, violation or event of acceleration, except as set forth in
an instrument of waiver, alteration, modification or assumption that is
included in the Trustee's Mortgage Loan File.

(n) NO CONDEMNATION OR DAMAGE. To the best of the Seller's knowledge,
the physical condition of each Mortgaged Property has not deteriorated since
the date of origination of the related Mortgage Loan (normal wear and tear
excepted) and there is no proceeding pending for the total or partial
condemnation of any Mortgaged Property.

(o) MORTGAGE REMEDIES ADEQUATE. Each Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the
holder thereof adequate for the realization against the related Mortgaged
Property of the benefits of the security provided thereby, including, (i) in
the case of a Mortgage designated as a deed of trust, by trustee's sale, and
(ii) otherwise, by judicial foreclosure.

-3-

<PAGE>

reported to and acknowledged by the FHA for FHA Insurance under the Seller's
Title I contract of insurance. The Seller has no knowledge of any event
which would invalidate or cancel the FHA Insurance for such Title I Mortgage
Loan.

(r) TERMS OF MORTGAGE LOANS. Each Mortgage Loan is a fixed rate loan;
each Note has an original term to maturity of not less than 24 months nor
more than 20 years and 32 days from the date of origination; each Note is
payable in monthly installments of principal and interest, with interest
payable in arrears, and requires a monthly payment which is sufficient to
amortize the original principal balance over the original term and to pay
interest at the related Mortgage Loan Interest Rate; and no Note provides for
any extension of the original term.

(s) SECURITY. No Note is, or has been, secured by any collateral
except the lien of the related Mortgage.

(t) DEED OF TRUST. If a Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves as such and is named in the
Mortgage, or a valid substitution of trustee has been recorded or may be
recorded and no extraordinary fees or expenses are, or will become, payable
by the Seller to the trustee under the deed of trust, except in connection
with default proceedings and a trustee's sale after default by the related
Obligor.

(u) VALUE AND TITLE I INSURABILITY. Except with respect to conditions
and circumstances expressly permitted pursuant to the applicable underwriting
guidelines, the Seller has no knowledge of any conditions or circumstances
(that are not reflected in the Trustee's Mortgage Loan File or in the
Servicer's Mortgage Loan File) that could reasonably be expected to
materially and adversely affect the value of the related Mortgaged Property
with respect to any Conventional Mortgage Loan. Further, the Seller has no
knowledge of any conditions or circumstances that could reasonably be
expected to affect the FHA insurability with respect to any Title I Mortgage
Loan under the Title I Program.

(v) TYPES OF MORTGAGE LOANS. Each Mortgage Loan is (i) in respect of
(1) a property improvement and/or home equity loan, or (2) a first or junior
lien purchase money loan, and (ii) not a loan in respect of the purchase of a
manufactured home; provided that each Title I Mortgage Loan is only in
respect of a property improvement loan.

(w) COMPLETION OF IMPROVEMENTS. With respect to all Mortgage Loans
(except for such Mortgage Loans that are first lien or junior lien purchase
money loans, the proceeds of which have been used in part to improve the
related Mortgaged Property), all improvements to be made to each Mortgaged
Property with the proceeds of the related Mortgage Loan have been completed
and, except as to Mortgage Loans that are such purchase money loans or that
were made by the originator

-4-

<PAGE>

thereof directly to the owner of the property being improved, the Servicer's
Mortgage Loan File with respect to such Mortgage Loan contains a Completion
Certificate.

(x) ORIGINATION PRACTICES. The origination practices used by each
originator of the Mortgage Loans and the servicing and collection practices
used by the Seller with respect to each Mortgage Loan, and with respect to
each Title I Mortgage Loan the refinancing practices, if applicable, have
been in all material respects legal, proper, prudent and customary in the
property improvement and/or home equity loan origination and servicing
business and, in the case of Title I Mortgage Loans, in compliance with all
FHA Regulations.

(y) SERVICING PRACTICES. Each Mortgage Loan has been serviced in
accordance with all applicable laws and, to the best of the Seller's
knowledge, no fraud or misrepresentation was committed by any Person in
connection therewith.

(z) NO BULK TRANSFER. The sale, transfer, assignment, conveyance and
grant of the Notes and the Mortgages by the Seller to the Purchaser were not
subject to the bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction.

(aa) DELINQUENCIES. As of the November 8, 1995 Cut-Off Date, none of
the Initial Mortgage Loans (by principal balance) and none of the Initial
Mortgage Loans (by number) were delinquent 31 days or more.

(bb) RELIEF ACT MATTERS. No Obligor has notified the Seller, and the
Seller has no knowledge of any relief requested or allowed to an Obligor
under the Soldiers' and Sailors' Civil Relief Act of 1940.

(cc) SELECTION CRITERIA. The Mortgage Loans were not selected by the
Seller for sale to the Purchaser or for inclusion in the Trust Fund on any
basis intended to adversely affect the Purchaser or the Trust Fund.

(dd) REMIC QUALIFICATION. With respect to each Mortgage Loan, either:
(i) the original principal balance of the Mortgage Loan as of the date of
origination thereof was less than 125% of the value of the Mortgaged Property
attributable to only the real property securing such Mortgage Loan less the
amount of all indebtedness secured by such Mortgaged Property which is senior
or pari passu with the lien of such Mortgage Loan; or (ii) substantially all
of the proceeds of such Mortgage Loan were used to acquire or to improve or
protect an interest in real property that, at the date of origination of such
Mortgage Loan, was the only security therefor.

-5-

<PAGE>

(ff) TYPE OF MORTGAGED PROPERTIES. At the time of origination, each
Title I Mortgage Loan with a principal balance of $7,500 or greater was
secured by a lien on an owner-occupied one-to-four family dwelling.

(gg) SENIOR LIEN DELINQUENCIES. No lien senior to the lien created by a
Mortgage at the time of origination of the related Mortgage Loan was more
than 30 days past due.

Section 2. PURCHASE AND DELIVERY.

In consideration for the sale and transfer of the Mortgage Loans to
Purchaser by Seller, and upon transfer of such Mortgage Loans to Purchaser or
Purchaser's designee from Seller on the date hereof with respect to the
Initial Mortgage Loans, and on the applicable Subsequent Transfer Date with
respect to the Subsequent Mortgage Loans, the Purchaser shall pay Seller
$10.00 and other good and valuable consideration (the "PURCHASE PRICE"). The
transfer of funds from Purchaser to Seller for the Purchase Price for all
Mortgage Loans purchased shall be made by wire transfer of immediately
available funds to the bank account designated by Seller.

On the date hereof with respect to the Initial Mortgage Loans, and on
the Subsequent Transfer Date with respect to the Subsequent Mortgage Loans,
Seller shall transfer, assign and convey to Purchaser all of Seller's right,
title and interest in and to each Mortgage Loan and the related Trustee's
Mortgage Loan File. Seller shall, or shall cause its agent to deliver to
Purchaser or Purchaser's designee, the related Trustee's Mortgage Loan File.

On the date hereof with respect to the Initial Mortgage Loans, and on
the Subsequent Transfer Date with respect to the Subsequent Mortgage Loans,
Seller shall promptly transfer to Purchaser or its designee good title to the
related Mortgage, if applicable, pursuant to an Assignment of Mortgage and
legal title to the related Note pursuant to the endorsement thereof in the
name of the Purchaser or its designee; provided that such Assignment of
Mortgage, if applicable, and endorsement of such Note shall be prepared and
executed in the manner as spsecified in writing by the Purchaser. Seller
shall provide to Purchaser, at Seller's cost, a duly executed Assignment of
Mortgage, if applicable, and a blank endorsement of the related Note.
Purchaser shall bear the cost and expense of completing and recording such
Assignment of Mortgage, if applicable, and completing the endorsement of such
Note to the Purchaser or its designee.

Section 3. BINDING EFFECT. This Loan Sale Agreement shall be binding
upon and inure to the benefit of the successors and assigns of the Purchaser
and the Seller.

Section 4. GOVERNING LAW. This Loan Sale Agreement shall be governed
by and construed under the laws of the State of Texas.

Section 5. CAPITALIZED TERMS. Capitalized terms used and not otherwise
defined herein have the meanings assigned to them in the Pooling and
Servicing Agreement, dated as of __________________, 19___ (the "POOLING AND
SERVICING AGREEMENT"), by and between the Purchaser, as Depositor, the
Seller, as Transferor and Servicer, Residential Funding Corporation, as
Standby Servicer, and First Trust of California, National Association, as
Trustee.

-6-

<PAGE>

IN WITNESS WHEREOF, the undersigned Purchaser and Seller have executed
this Loan Sale Agreement as of the ___th day of _______________, 19__ .

--------------------------------------------- ,
as Seller

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

-----------------------------------------------
as Purchaser

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

-7-

<PAGE>

EXHIBIT 10.8

<PAGE>

BOOK-ENTRY ONLY COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
(WITHOUT OWNER OPTION TO REDEEM)/
OTHER ASSET-BACKED SECURITIES/AND PASS-THROUGH CERTIFICATES

Letter of Representations
[To be Completed by Issuer and Trustee]

_________________________________________________
[Name of Issuer]

_________________________________________________
[Name of Trustee]

_______________
[Date]

Attention: General Counsel's Office
The Depository Trust Company
55 Water Street, 49th Floor
New York, NY 10041-0099

Re: _________________________________________________

_________________________________________________

_________________________________________________
[Issue Description]

Ladies and Gentlemen:

This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trustee will act
as trustee with respect to the Securities pursuant to Pooling and Servicing
Agreement dated November 1, 1995 (the "Document"). Banc One Capital
Corporation and Bear, Stearns are distributing the Securities through The
Depository Trust Company ("DTC").

<PAGE>

To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities,
Issuer and Trustee make the following representations to DTC:

1. Prior to closing on the Securities on November 29, 1995, there
shall be deposited with DTC one Security certificate registered in the name
of DTC's nominee, Cede & Co., for each stated maturity of the Securities in
the face amounts set forth on Schedule A hereto, the total of which
represents 100% of the principal amount of such Securities. If, however, the
aggregate principal amount of any maturity exceeds $150 million, one
certificate will be issued with respect to each $150 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount. Each $150 million certificate shall bear the
following legend:

Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to
Issuer or its agent for registration of transfer, exchange, or
payment, and any certificate issued is registered in the name of Cede
& Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL, inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

2. In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer or Trustee shall establish a record date
for such purposes (with no provision for revocation of consents or votes by
subsequent holders) and shall, to the extent possible, send notice of such
record date to DTC not less than 15 calendar days in advance of such record
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and
receipt of such notices shall be confirmed by telephoning (212) 709-6870.
Notices to DTC pursuant to this Paragraph by mail or by any other means shall
be sent to DTC's Reorganization Department as indicated in Paragraph 4.

3. In the event of a full or partial redemption, Issuer or Trustee
shall send a notice to DTC specifying: (a) the amount of the redemption or
refunding; (b) in the case of a refunding, the maturity date(s) established
under the refunding; and (c) the date such notice is to be mailed to Security
holders or published (the "Publication Date"). Such notice shall be sent to
DTC by a secure means (E.G., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is
in DTC's possession no later than the close of business on the business day
before or, if possible, two business days before the Publication Date. Issuer
or Trustee shall forward such notice either in a separate secure transmission
for each CUSIP number or in a secure transmission for multiple CUSIP numbers
(if applicable) which includes a manifest or lit of each CUSIP number
submitted in that transaction. (The party sending such notice shall have a
method to verify subsequently the use of such means and the timeliness of
such notice.) The Publication Date shall be not less than 30 days nor more
than 60 days prior to the redemption date or, in the case of an advance
refunding, the date that the proceeds are deposited in escrow. Notices to DTC
pursuant to this Paragraph by telecopy shall be sent to DTC's Call
Notification Department

-2-

<PAGE>

at (516) 227-4039 or (516) 227-4190. If the party sending the notice does
not receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC pursuant
to this Paragraph by mail or by any other means shall be sent to:

Manager: Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719

4. In the event of an invitation to tender the Securities, notice by
Issuer or Trustee to Security holders specifying the terms of the tender and
the Publication Date of such notice shall be sent to DTC by a secure means in
the manner set forth in the preceding Paragraph. Notices to DTC pursuant to
this Paragraph and notices of other corporate actions (including mandatory
tenders, exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to
DTC pursuant to the above by mail or by any other means shall be sent to:

Manager: Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square, 23rd Floor
New York, NY 10004-2695

5. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.

6. Trustee shall send DTC written notice with respect to the dollar
amount per $1,000 original face value (or other minimum authorized
denomination if less than $1,000 face value) payable on each payment date
allocated as to the interest and principal portions thereof preferably 5, but
not less than 2, business days prior to such payment date. Such notices,
which shall also contain the current pool factor and Trustee contact's name
and telephone number, shall be sent by telecopy to DTC's Dividend Department
at (212) 709-1723, or if by mail or by any other means to:

Manager: Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square, 22nd Floor
New York, NY 10004-2695

7. [NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
OTHER] [The interest accrual period is record date to record date.]

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<PAGE>

8. Interest payments and principal payments that are part of periodic
principal-and-interest payments shall be received by Cede & Co., as nominee
of DTC, or its registered assigns in same-day funds on each payment date (or
the equivalent in accordance with existing arrangements between Issuer or
Trustee and DTC). Such payments shall be made payable to the order of Cede &
Co. Absent any other existing arrangements, such payments shall be addressed
as follows:

Manager: Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square, 24th Floor
New York, NY 10004-2695

9. [NOTE: ISSUER MUST REPRESENT ONE OF THE FOLLOWING, AND CROSS OUT THE
OTHER:]

SECURITIES ELIGIBLE FOR DTC'S SAME-DAY FUNDS SETTLEMENT ("SDFS")
SYSTEM.

Other principal payments (redemption payments) shall be made in same-day
funds by Trustee in the manner set forth in the SDFS Paying Agent Operating
Procedures, as copy of which previously has been furnished to Trustee.

10. DTC may direct Issuer or Trustee to use any other number or address
as the number or address to which notices or payments of interest or
principal may be sent.

11. In the event of a redemption, acceleration, or any other similar
transaction (E.G., tender made and accepted in response to Issuer's or
Trustee's invitation) necessitating a reduction in the aggregate principal
amount of Securities outstanding or an advance refunding of part of the
Securities outstanding, DTC, in its discretion: (a) may request Issuer or
Trustee to issue and authenticate a new Security certificate; or (b) may make
an appropriate notation on the Security certificate indicating the date and
amount of such reduction in principal except in the case of final maturity,
in which case the certificate will be presented to Issuer or Trustee prior to
payment, if required.

12. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issue or Trustee
shall notify DTC of the availability of certificates. In such event, Issuer
or Trustee shall issue, transfer, and exchange certificates in appropriate
amounts, as required by DTC and others.

13. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Trustee (at which time DTC will confirm with Issuer or Trustee the
aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request Issuer and Trustee shall cooperate fully with
DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.

-4-

<PAGE>

14. Issuer: (a) understands that DTC has no obligation to, and will
not, communicate to its Participants or to any person having an interest in
the Securities any information contained in the Security certificate(s); and
(b) acknowledges that neither DTC's Participants nor any person having an
interest in the Securities shall be deemed to have notice of the provisions
of the Security certificates by virtue of submission of such certificate(s)
to DTC.

15. Nothing herein shall be deemed to require Trustee to advance funds
on behalf of Issuer.

Very truly yours,

NOTES: By:
A. If there is a Trustee (as defined in
this Letter of Representations), Trustee
as well as Issuer must sign this Letter. ----------------------------------
If there is no Trustee, in signing this (Issuer)
Letter Issuer itself undertakes to
perform all of the obligations set forth By:
herein. ----------------------------------
(Authorized Officer's Signature)
B. Schedule B contains statements that
DTC believes accurately describe DTC, the
method of effecting book-entry transfers ----------------------------------
of securities distributed through DTC, and (Trustee)
certain related matters.

By:
----------------------------------
(Authorized Offer's Signature)

Received and Accepted:
THE DEPOSITORY TRUST COMPANY

By:
- ----------------------------------

-5-

<PAGE>

___________ TO HOLD GLOBAL CERTIFICATES

____________________, the Trustee with respect to the Securities described
herein, is an approved participant in DTC's "FAST" system (FAST No. ____).
Accordingly,_________________ will take physical delivery of one definitive
certificate, registered in the name of DTC's nominee, Cede & Co., for each
stated maturity of such Securities in the face amounts set forth on Schedule
A hereto.

<PAGE>

SCHEDULE A

REMODELERS HOME IMPROVEMENT LOAN ASSET-BACKED CERTIFICATES,
SERIES _________, CLASS A-1. CLASS A-2, CLASS A-3 AND CLASS A-4

CUSIP PRINCIPAL AMOUNT MATURITY DATE INTEREST RATE
- ----- ---------------- ------------- -------------

<PAGE>

SCHEDULE B

SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE

1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede
& Co. (DTC's partnership nominee). One fully-registered Security certificate
will be issued for [each issue of] the Securities, [each] in the aggregate
principal amount of such issue, and will be deposited with DTC.
[If, however, the aggregate principle amount of [any] issue exceeds $150
million, one certificate will be issued with respect of each $150 million of
principal amount and an additional certificate will be issued with respect to
any remaining principal amount of such issue.]

2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "cleaning
agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities. Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with
a Direct Participant, either directly or indirectly (Indirect Participants").
The Rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.

3. Purchase of Securities under the DTC system must be by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from DTC on their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Securities are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Securities, except in the event
that use of the book-entry system for the Securities is discontinued.

<PAGE>

4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee. Cede & Co. The deposit of Securities with DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership. DTC has
no knowledge of the actual Beneficial Owners of the Securities: DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.

6. [Redemption notices shall be sent to Cede & Co. If less than all the
Securities within an issue are being redeemed, DTC's practice is to determine
by lot the amount of the interest of each Direct Participant in such issue to
be redeemed.]

7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy).

8. Principal and interest payments on the Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be
responsibility of such Participant and not of DTC, the Agent, or the Issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is the responsibility of
the Issuer or the Agent, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.

9. [A beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to the [Tender/Remarketing]
Agent, and shall effect delivery of such Securities by causing the Direct
Participant to transfer the Participant's interest in the Securities, on DTC's
records, to the [Tender/Remarketing] Agent. The requirements for physical
delivery of Securities in connection with a demand for purchase or a mandatory
purchase will be deemed satisfied when the ownership rights in the Securities
are transferred by Direct Participants on DTC's records.]

10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to the
Issuer or the Agent. Under such

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<PAGE>

circumstances, in the event that a successor securities depository is not
obtained, Security certificates are required to be printed and delivered.

11. The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.

12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Issuer believes to be
reliable, but the Issuer takes no responsibility for the accuracy thereof.

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<PAGE>

PRINCIPAL AND INCOME PAYMENTS RIDER

1. This Rider supersedes any contradictory language set forth in the
Letter of Representations to which it is appended.

2. With respect to principal and income payments in the Securities:

A. DTC shall receive all dividend and interest payments on payable
date in same-day funds by 2:30 p.m. ET (Eastern Time).

B. Issuer agrees that it or Agent shall provide dividend and interest
payment information to a standard announcement service subscribed
to by DTC. In the unlikely event that no such service exists,
Issuer agrees that it or Agent shall provide this information
directly to DTC in advance of the dividend or interest record date
as soon as the information is available.

This information should be conveyed directly to DTC electronically.
If electronic transmission is not possible, such information should
be conveyed by telephone or facsimile transmission to:

The Depository Trust Company
Manager, Announcements
Dividend Department
7 Hanover Square, 22nd Floor
New York, NY 10004

Phone: (212) 709-1270
Fax: (212) 709-1723, 1686

C. Issuer agrees that for dividend and interest payments, it or Agent
shall provide automated notification of CUSIP-level detail to the
depository no later than noon ET on the payment date.

D. DTC shall receive maturity and redemption payments and CUSIP-level
detail on the payable date in same-day funds by 2:30 p.m. ET.
Absent any other arrangements between Agent and DTC, such payments
shall be wired according to the following instructions:

Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Redemption Account 066-027306

<PAGE>

in accordance with existing SDFS payment procedures in the manner
set forth in DTC's SDFS PAYING AGENT OPERATING PROCEDURES a copy of
which has previously been furnished to Agent.

E. DTC shall receive all other payments and CUSIP-level detail
resulting from corporate actions (such as tender offers or mergers)
on the first payable date in same-day funds by 2:30 p.m. ET. Absent
any other arrangements between the Agent and DTC, such payments
shall be wired to the following address:

Chemical Bank
ABA 021000128
For credit to A/C Depository Trust Company
Reorganization Account 066-027608

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