BANK OF AMERICA MORTGAGE SECURITIES INC
8-K, EX-99.3, 2000-12-20
ASSET-BACKED SECURITIES
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Exhibit No. 99.3

United Guaranty Residential Insurance Company

      P.O. Box 21367
      Greensboro, NC 27420-1367
      800/334-8966                                    POOL POLICY NUMBER: 301

UNITED GUARANTY RESIDENTIAL INSURANCE COMPANY, a stock insurance company herein
called the Company, in consideration of the premium which has been paid as
hereinafter specified and in reliance upon the Insured's representations and
statements made in the Pool Policy Commitment Letter and in any application for
coverage for a loan under this Policy and in any documents and writings,
including any data transferred by electronic media related thereto, agrees to
pay to the Insured identified below benefits as herein set forth upon Default by
a Borrower on a Loan, subject to the terms and conditions of this Pool Policy.


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INSURED'S IDENTIFICATION NUMBER:  404-0500-000
INSURED:
The Bank of New York
700 South Flower Street
Los Angeles, CA  90017

AS TRUSTEE FOR THE HOLDERS OF BANK OF AMERICA MORTGAGE SECURITIES, INC.
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2000-A

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SECURITY:
Bank of America Mortgage Securities, Inc.
Mortgage Pass-Through Certificates, Series 2000-A


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INITIAL  PREMIUM  RATE:  seventeen  (17)       POOL POLICY      EFFECTIVE DATE
basis   points   (.0017)   annually   or           CBJ            12/21/2000
seventeen   (17)  basis  points  (.0017)    ----------------  ------------------
divided by twelve (12) to pay monthly          ENDORSEMENTS    EFFECTIVE DATES

SUBSEQUENT PREMIUM RATE:  seventeen (17)         CBJ1049          12/21/2000
basis   points   (.0017)   annually   or
seventeen   (17)  basis  points  (.0017)
divided by twelve (12) to pay monthly

PAYABLE IN ADVANCE:  Not Applicable

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

TOTAL INITIAL UNPAID PRINCIPAL BALANCES:  $224,175,752.29

AGGREGATE BENEFIT PERCENTAGE:  2.50%

AGGREGATE BENEFIT LIMIT:  $5,604,393.81

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

OTHER:

Coverage Percentage for Primary Policy:  Minimum of 30% for
95.01%-97% LTV's, 25% for 90.01-95% LTV's, 17% for 85.01%-90%
LTV's and 12% for 80.01-85% LTV's.
Loan Loss Percentage:  Listed on the Schedule
Post-Reporting Audit:  1A.3(b) provision
Deductible Amount:  Not Applicable
Deductible Percentage:  Not Applicable
Policy Settlement Date: Not Applicable
Coverage Period:  Not Applicable
Declining Aggregate Benefit Coverage:  Not Applicable
Excluded Layer:  Not Applicable

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IN WITNESS WHEREOF, the Company has caused this Pool Policy to be signed by its
duly authorized officers and its corporate seal to be hereto affixed in
facsimile to become effective and binding on the Company when executed by its
duly authorized representative.

                  UNITED GUARANTY RESIDENTIAL INSURANCE COMPANY

/s/ Charles M. Reid
     PRESIDENT                  [GRAPHIC OMITTED]
                                                    ----------------------------
/s/ Elizabeth M. Tuck                                AUTHORIZED REPRESENTATIVE
      SECRETARY

                   ATTACH TO POOL POLICY TERMS AND CONDITIONS

                                 INSURED'S COPY


<PAGE>


                                TABLE OF CONTENTS



1     Definitions

      1.1   Aggregate Benefit Limit.........................................
      1.2   Aggregate Benefit Percentage....................................
      1.3   Aggregate Benefits..............................................
      1.4   Appropriate Proceedings.........................................
      1.5   Approved Property Sale..........................................
      1.6   Borrower........................................................
      1.7   Borrower's Own Funds............................................
      1.8   Certificate.....................................................
      1.9   Claim...........................................................
      1.10  Claim Amount....................................................
      1.11  Commitment......................................................
      1.12  Consummated.....................................................
      1.13  Court Expenses..................................................
      1.14  Deductible Amount...............................................
      1.15  Deductible Percentage...........................................
      1.16  Default.........................................................
      1.17  Due-on-Sale Clause..............................................
      1.18  Effective Date..................................................
      1.19  Environmental Impairment........................................
      1.20  Excluded Layer..................................................
      1.21  Fair Market Value...............................................
      1.22  FHLB............................................................
      1.23  FHLMC...........................................................
      1.24  First Deed of Trust.............................................
      1.25  First Party.....................................................
      1.26  Five Percent (5%) Down Payment..................................
      1.27  FNMA............................................................
      1.28  Good and Merchantable Title.....................................
      1.29  Indemnified Persons.............................................
      1.30  Insured.........................................................
      1.31  Loan............................................................
      1.32  Loan File Documents.............................................
      1.33  Loan Loss Percentage............................................
      1.34  Loan-to-Value...................................................
      1.35  Loan Transaction................................................
      1.36  Loss............................................................
      1.37  Ninety-Seven Percent (97%) Loan-to-Value Program................
      1.38  Permitted Encumbrances..........................................
      1.39  Person..........................................................
      1.40  Physical Damage.................................................
      1.41  Policy..........................................................
      1.42  Policy Year.....................................................
      1.43  Pool Policy Commitment Letter...................................
      1.44  Possession of the Property......................................
      1.45  Primary Policy..................................................
      1.46  Primary Policy Settlement Date..................................
      1.47  Property........................................................
      1.48  Qualified.......................................................
      1.49  Reporting Acceptance Program(R)Commitment Letter................
      1.50  Reporting Acceptance Program(R)Guidelines.......................
      1.51  Reporting Acceptance Program(R)Manual...........................
      1.52  Reporting Acceptance Program(R)Reporting Form...................
      1.53  Reporting Acceptance Program(R)Underwriter......................
      1.54  Residential.....................................................
      1.55  Schedule........................................................
      1.56  Security........................................................
      1.57  Servicer........................................................
      1.58  Settlement Period...............................................
      1.59  Three Percent (3%) Down Payment.................................
      1.60  Total Initial Unpaid Principal Balances.........................
      1.61  Uninhabitable...................................................
      1.62  Unpaid Principal Balance........................................
      1.63  Gender and Number...............................................

2     Coverage

      2.1   Representations of the Insured..................................
      2.2   Third-Party Underwriting Submission Services....................
      2.3   Premium.........................................................
      2.4   Cancellation for Non-Payment of Subsequent Premium..............
      2.5   Coverage Period.................................................
      2.6   Cancellation by the Insured of a Certificate....................
      2.7   Cancellation by the Company of a Certificate....................
      2.8   Termination of Coverage of a Certificate........................
      2.9   Cancellation of Policy by the Insured...........................
      2.10  Cancellation of Policy by Company...............................
      2.11  Loan Modifications..............................................
      2.12  Loan Transaction Modifications..................................
      2.13  Open End Provisions.............................................
      2.14  Assumptions and Transfers of the Property.......................
      2.15  Loan Assignment-................................................
      2.16  Change of Servicing.............................................
      2.17  Coordination and Duplication of Insurance Benefits..............
      2.18  Premium Checks..................................................
      2.19  Conditional Commitments/Certificates............................

3     Exclusions From Coverage

      3.1   Balloon Payment Loans...........................................
      3.2   Effective Date and Cancellation.................................
      3.3   Incomplete Construction.........................................
      3.4   Loan Transaction................................................
      3.5   Negligence and Fraud............................................
      3.6   Physical Damage.................................................
      3.7   Breach of Conditions and Insured's Obligations..................
      3.8   Failure to Conform to Reporting Acceptance Program(R)
            Guidelines......................................................
      3.9   Defenses........................................................
      3.10  Exclusion Under Primary Policy..................................
      3.11  Primary Policy..................................................
      3.12  Non-Approved Servicer...........................................

4     Conditions Precedent to Payment of Loss

      4.1   Maintenance of Primary Policy...................................
      4.2   Notice of Default...............................................
      4.3   Monthly Reports.................................................
      4.4   Company's Option to Accelerate Filing of a Claim................
      4.5   Voluntary Conveyance............................................
      4.6   Appropriate Proceedings.........................................
      4.7   Mitigation of Damages...........................................
      4.8   Procedures for Approved Property Sale...........................
      4.9   Advances........................................................
      4.10  Claim Information...............................................

5     Loss Payment Procedure

      5.1   Filing of Claim.................................................
      5.2   Calculation of Claim Amount.....................................
      5.3   Calculation of Settlement Period................................
      5.4   Payment of Loss.................................................
      5.5   Discharge of Obligation.........................................

6     Additional Conditions

      6.1   Proceedings of Eminent Domain...................................
      6.2   Subrogation.....................................................
      6.3   Notice..........................................................
      6.4   Loan-to-Value...................................................
      6.5   Reports and Examinations........................................
      6.6   Suit............................................................
      6.7   Indemnification.................................................
      6.8   Conformity to Statute; Applicable Law...........................
      6.9   Parties in Interest.............................................
      6.10  Agency..........................................................
      6.11  Electronic Media................................................
      6.12  Amendments; Waiver..............................................
      6.13  Titles..........................................................

<PAGE>


                        Terms and Conditions Definitions


1     DEFINITIONS

      1.1   AGGREGATE BENEFIT LIMIT--Aggregate Benefit Limit means an amount
      equal to the product of

            (a)  the Aggregate Benefit Percentage

            multiplied by

            (b)  the Total Initial Unpaid Principal Balances

      except that if the Insured chooses to pay the premium for this Policy
      based on declining aggregate benefit coverage, as indicated on the face of
      this Policy, Aggregate Benefit Limit shall mean

            (c)  for the first Policy Year, an amount equal to the product of

                 (i) (A)  the Aggregate Benefit Percentage

                     multiplied by

                     (B)  the Total Initial Unpaid Principal Balances and

            (d)  for each  succeeding  Policy  Year,  an  amount  equal to the
            LESSER of

                 (i) (A)  the Aggregate Benefit Percentage

                     multiplied by

                     (B) the total outstanding principal balances of the Loans
                     insured hereunder on the first day of such Policy Year or

                (ii) (A)  the Aggregate Benefit Percentage multiplied by

                     multiplied by

                     (B) the total outstanding principal balances of the Loans
                     insured hereunder on the first day of the immediately
                     preceding Policy Year

                     minus

                     (C) all Aggregate Benefits paid by the Company during such
                     preceding Policy Year.

      1.2   AGGREGATE BENEFIT PERCENTAGE --Aggregate Benefit Percentage means
      that percentage so identified on the face of this Policy.

      1.3   AGGREGATE BENEFITS--Aggregate Benefits mean the total of

            (a)  the  Deductible  Amount,  if any, as specified on the face of
            this Policy, plus

            (b)  the Excluded  Layer, if any, as specified on the face of this
            Policy, if the total of all Losses equals

                 (i) the Deductible Amount, if any, and

                (ii) all  Losses  to be  paid  by  the  Company  prior  to the
                     Excluded Layer, plus

            (c)  all Losses paid by the Company

      reduced by the net proceeds received by the Company upon disposal of any
      Property acquired by the Company in connection with the payment of a Loss
      but not any other recoveries made by the Company with respect to any Loan
      or the related Property or Borrower.

      1.4  APPROPRIATE PROCEEDINGS --Appropriate Proceedings mean any legal or
      administrative action by the Insured affecting either the Loan or the
      title to the Property, and include, but are not limited to

            (a)  obtaining  a  deficiency   judgment  where   appropriate  and
            permissible and where directed by the Company or

            (b)  enforcing  the terms of the Loan as allowed by the laws where
            the Property is located or

            (c)  placing  title to the  Property in the  Insured's  name,  but
            excluding any voluntary  conveyance  under Section 4.5  (Voluntary
            Conveyance) or

            (d)  asserting  the  Insured's  interest  in  the  Property  in  a
            Borrower's bankruptcy.

      1.5  APPROVED PROPERTY SALE --Approved Property Sale means (a) a sale of
      a Property acquired by the Insured because of a Default by the Borrower
      and to which the Company has given prior approval, (b) a foreclosure or
      trustee's sale of a Property at a price exceeding the maximum amount
      specified, if any, by the Company to be bid by the Insured, or (c) the
      acquisition of a Property pursuant to a Primary Policy.

      1.6  BORROWER --Borrower means any Person required to repay the debt
      obligation created pursuant to the Loan. The Borrower shall include any
      co-signer or guarantor of the Loan.

      1.7  BORROWER'S OWN FUNDS --Borrower's Own Funds mean monies saved and/or
      earned by Borrower and gifts from family members to Borrower where there
      is no promise or expectation of repayment but do not mean a non-family
      gift or third-party payment to Borrower or to the Insured on behalf of
      Borrower, whether or not characterized as a gift, with the exception of
      any escrows which are fully disclosed in writing to the Company prior to
      issuance of the Commitment, regardless of whether such non-family gift or
      third-party payment is used to make payment to the Insured or is used for
      other purposes by Borrower so Borrower can use his funds for payment to
      the Insured.

      1.8  CERTIFICATE --Certificate means the document extending the indicated
      coverage option to a specified Loan under this Policy and evidencing that
      Loan's inclusion in the attached Schedule.

      1.9  CLAIM --Claim means the filed request made in a form provided or
      approved by the Company containing all information, documentation and
      proof required by the Company in order to receive the benefits of this
      Policy.

      1.10  CLAIM AMOUNT --Claim Amount means the amount calculated in
      accordance with Section 5.2 (Calculation of Claim Amount).

      1.11  COMMITMENT --Commitment means the document issued by the Company
      pursuant to the Pool Policy Commitment Letter indicating the terms and
      conditions under which the Company will extend the indicated coverage
      option to a specified loan.

      1.12  CONSUMMATED--Consummated means the later of

            (a)  the date on which the Loan was closed and all Loan  documents
            were executed; or

            (b) the date on which the funds under the Loan were initially
            disbursed to or for the account of the Borrower.

      1.13  COURT EXPENSES --Court Expenses mean the out-of-pocket cost of
      initiating and conducting Appropriate Proceedings or any eviction
      proceedings. These expenses include costs of filing or serving pleadings,
      conducting discovery and enforcing judgment. These expenses do not include
      reimbursement for any time spent by the Insured or the Insured's
      employees, officers or agents, nor do these expenses include attorneys'
      fees.

      1.14  DEDUCTIBLE AMOUNT--Deductible Amount means an amount equal to the
      product of

            (a)  the Deductible Percentage

            multiplied by

            (b)  the Total Initial Unpaid Principal Balances.

      1.15  DEDUCTIBLE PERCENTAGE --Deductible Percentage means that percentage
      so identified on the face of this Policy.

      1.16  DEFAULT --Default means the failure by a Borrower to pay when due
      one (1) regular monthly periodic payment due under the terms of the Loan
      or the violation by the Borrower of any Due-on-Sale Clause but does not
      mean the violation by the Borrower of any other term or condition of the
      Loan, or any instrument securing the Loan and creating a lien or charge on
      the Property, which is the basis for an acceleration of maturity of the
      Loan and a foreclosure action under the instrument securing the Loan and
      creating a lien or charge on the Property. A Loan is deemed to be in
      Default for that month as of the close of business on the installment due
      date for which a scheduled monthly payment has not been made or on the
      date the Insured first discovers or should have discovered the violation
      of a Due-on-Sale Clause. For example, a Loan is "three (3) months in
      Default" if the monthly installments due on January 1 through March 1
      remain unpaid as of the close of business on March 1.

      1.17  DUE-ON-SALE CLAUSE --Due-on-Sale Clause means a contractual
      provision granting to the Insured the right to accelerate the maturity of
      the Loan upon a transfer of title to or an interest in the Property.

      1.18  EFFECTIVE DATE --Effective Date means

            (a)  with respect to this Policy,  the date  designated as such on
            the face of this Policy and

            (b)  with respect to a  Certificate,  the date  designated as such
            on the Certificate and

            (c)  with respect to a Commitment

                 (i) for new  Loans,  12:01  a.m.  on the  date  the  Loan was
                     Consummated or

                (ii) for other  Loans,  12:01 a.m.  on the date of coverage as
                     indicated on the Commitment.

      A new Loan is a Loan which was not Consummated as of the date the Insured
      submitted an application for coverage under this Policy.

      1.19  ENVIRONMENTAL IMPAIRMENT --Environmental Impairment means the
      presence of any "Hazardous Substance" as that term is defined by the
      federal Comprehensive Environmental Response, Compensation, and Liability
      Act (42 U.S.C. ss.9601 et seq., as amended from time to time) or any
      similar state law, or any "Hazardous Waste" or "Regulated Substance" as
      those terms are defined by the federal Resource Conservation and Recovery
      Act (42 U.S.C. ss.6901 et seq., as amended from time to time) or any
      similar state law, which terms are deemed to include, but not be limited
      to,

            (a)  nuclear or radioactive contamination, or

            (b)  contamination  by toxic waste,  chemicals or other  hazardous
            substances or other pollution, or

            (c)  contamination by electromagnetic fields or radiation, or

            (d) other environmental or similar hazards or a condition that is
            generally claimed to be such a hazard affecting the Property.

    Environmental Impairment does not mean the presence of radon gas, lead
    paint, or asbestos.

      1.20  EXCLUDED LAYER --Excluded Layer means that portion of Losses so
            identified on the face of this Policy which the Insured has elected
            to exclude from payment by the Company.

      1.21  FAIR MARKET VALUE--Fair Market Value means the lesser of

            (a)  the appraised value of the Property or

            (b)  if applicable, the purchase price of the Property (or the
                 construction cost plus lot value, if applicable) of the
                 Property, as both are shown on the related Commitment or
                 Certificate, as applicable.

      1.22  FHLB --FHLB means any Federal Home Loan Bank as defined in the
            Federal Home Loan Bank Act and their successors.

      1.23  FHLMC --FHLMC means the Federal Home Loan Mortgage Corporation and
            its successors.

      1.24  FIRST DEED OF TRUST --First Deed of Trust means a mortgage, deed of
            trust, or other instrument which

            (a)  constitutes  or is equivalent to a first lien or  encumbrance
            on the Property, subject only to the Permitted Encumbrances, and

            (b) will allow the Person secured, directly or by a trustee or other
            Person, to foreclose on the Property (by power-of-sale, judicially
            or otherwise) upon default or under the loan secured and thereby
            acquire title to the Property, subject only to the Permitted
            Encumbrances.

      1.25  FIRST PARTY --First Party means the Insured, any officer, employee
            or agent of the Insured or any broker or intermediary originating
            the Loan, or anyone under contract with such Persons in connection
            with such origination, such as an appraiser or escrow agent.

      1.26  FIVE PERCENT (5%) DOWN PAYMENT--Five Percent (5%) Down Payment means

            (a) a cash contribution made by the Borrower, prior to or
            contemporaneously with the Loan being Consummated, with non-borrowed
            funds, except as fully disclosed in writing to the Company prior to
            issuance of the Commitment, towards the purchase price of the
            Property in an amount not less than five percent (5%) of the Fair
            Market Value of the Property or

            (b) a noncash form of equity in the Property provided by the
            Borrower, prior to or contemporaneously with the Loan being
            Consummated, towards the purchase price of the Property in an amount
            not less than five percent (5%) of the Fair Market Value of the
            Property.

      1.27  FNMA--FNMA means the Federal National Mortgage Association and its
      successors.

      1.28  GOOD AND MERCHANTABLE TITLE --Good and Merchantable Title means the
      title to the Property free and clear of all liens, encumbrances,
      covenants, conditions, restrictions, encroachments, impediments,
      easements, rights of redemption and other rights and claims of the
      Borrower or any other Person, except for the Permitted Encumbrances.
      Notwithstanding the foregoing, Good and Merchantable Title does not exist
      if (a) the Property does not have convenient means of ingress and egress
      and use and enjoyment of freely alienable rights to municipal or private
      sources of water and means of sewage disposal, whether such rights are by
      easement or covenant running with the Property reflected in the public
      records relating to the Property, unless such was disclosed to the Company
      in the application, or (b) the Property is subject to any lien pursuant to
      the Comprehensive Environmental Response, Compensation, and Liability Act,
      as amended from time to time, or any similar federal, state, or local law
      providing for liens in connection with the treatment of environmental
      conditions, or if notice has been given of commencement of proceedings
      that could result in such lien.

      1.29  INDEMNIFIED PERSONS --Indemnified Persons mean the Company and each
      of its directors, officers, employees, agents, successors and assigns.

      1.30  INSURED --Insured means

            (a)  the Person designated on the face of this Policy or

            (b) any Person (i) to whom this Policy has been assigned, and (ii)
            of whom the Company has been notified, and (iii) to whom approval
            has been granted in accordance with this Policy, but shall not
            include the assignee or purchaser of any individual Loan insured
            hereunder.

   The Insured may contract with any other Person to perform the Insured's
   obligations under this Policy.

      1.31  LOAN --Loan means the indebtedness of a Borrower as evidenced by a
      note, bond, or other evidence of indebtedness secured by a First Deed of
      Trust and to which coverage under this Policy has been extended, as shown
      on the attached Schedule and as evidenced by a Certificate.

      1.32  LOAN FILE DOCUMENTS --Loan File Documents mean

            (a)  fully-completed copy of Reporting Acceptance Program(R)
            Reporting Form,

            (b)  original Certificate,

            (c)  original lender  application  form, fully  completed,  signed
            and dated by Borrower,

            (d)  original FHLB, FNMA or FHLMC form of appraisal, if required
            by the Company,

            (e)  original Residential Mortgage Credit Report on Borrower and
            (if applicable) credit  explanation and supporting  documentation,
            if required by the Company,

            (f) original Verification(s) of Employment, Income and Deposit on
            forms acceptable under and conforming to FHLB or to FNMA and FHLMC
            guidelines, or acceptable alternative documents permitted under FHLB
            or FNMA and FHLMC guidelines,

            (g)  original fully-executed contract of sale (if applicable),

            (h)  original housing payment history (if applicable),

            (i) original industry-accepted income analysis (if applicable),
            fully completed, signed and dated or copies of complete federal tax
            returns for previous two (2) years, signed and dated by the Borrower
            (if applicable),

            (j)  original HUD-1 Settlement Statement and Verification of
            Mortgage Balance (if applicable),

            (k)  original promissory note and mortgage/deed of  trust,
            together with any addenda thereto,

            (l)  original title insurance policy relating to the Property (if
            applicable),

            (m)  original assumption agreement (if applicable), and

            (n) all documents required by any Special Rating Plan or other
            program under which the Insured submitted its application for
            insurance (if applicable).

      1.33  LOAN LOSS PERCENTAGE Loan Loss Percentage means that percentage so
      identified on the face of this Policy.

      1.34  LOAN-TO-VALUE--Loan to Value means that ratio, expressed as a
      percentage, equal to

            (a)  the principal balance of the Loan divided by

            (b)  the Fair Market Value.

      1.35  LOAN TRANSACTION --Loan Transaction means that transaction between
      the originator of a loan and another Person having the loan, property and
      other characteristics as set forth on the Certificate issued hereunder
      with respect thereto.

      1.36  LOSS --Loss means the liability of the Company with respect to a
      Loan calculated in accordance with this Policy. A Loss shall be deemed to
      have occurred when a Default occurs, notwithstanding that the amount of
      Loss is not then either presently ascertainable or due and payable. When
      the Aggregate Benefits equal the Aggregate Benefit Limit, the Company
      shall have no further obligation with respect to Loans insured hereunder
      until the Aggregate Benefits are reduced below the Aggregate Benefit Limit
      notwithstanding the potential for additional premium to be due during such
      period.

      1.37  NINETY-SEVEN PERCENT (97%) LOAN-TO-VALUE PROGRAM --Ninety-Seven
      Percent (97%) Loan-to-Value Program means any program so designated by the
      Company and for which the Borrower must make a Three Percent (3%) Down
      Payment.

      1.38  PERMITTED ENCUMBRANCES --Permitted Encumbrances mean

            (a) any lien established by public bond, assessment or tax, when no
            installment, call or payment of or under such bond, assessment or
            tax is delinquent and

            (b) any municipal and zoning ordinances and exceptions to title
            waived by the regulations of federal mortgage insurers and
            guarantors with respect to mortgages on one-to-four family
            residences in effect on the date on which the Loan was closed and
            all documents were executed and

            (c) any impediments which will not have a materially adverse effect
            on either the transferability of the Property or the sale thereof to
            a bona fide purchaser.

    Notwithstanding the foregoing, Good and Merchantable Title does not exist if
    (a) the Property does not have convenient means of ingress and egress and
    use and enjoyment of freely alienable rights to municipal or private sources
    of water and means of sewage disposal, whether such rights are by easement
    or covenant running with the Property reflected in the public records
    relating to the Property, or (b) the Property is subject to any pollution,
    environmental or other similar hazard (or outstanding claim of such hazard)
    not previously disclosed to and approved by the Company in writing.

      1.39  PERSON --Person means any individual, corporation, partnership,
      association or other entity.

      1.40  PHYSICAL DAMAGE --Physical Damage means any material injury to the
      Property, whether caused by accident or otherwise, occurring for whatever
      reason, including, but not limited to, material injury by reason of
      Environmental Impairment, or tangible physical injury or destruction of
      tangible property, defects in construction, land subsidence, earth
      movement or slippage, earthquake, flood, or any other act of God, riot,
      insurrection, civil strife or war affecting the Property. For purposes of
      this definition, material injury means that the total costs of restoration
      of the Property (including removal of Environmental Impairment) due to
      such injury is equal to or greater than Fifteen Hundred Dollars
      ($1500.00). In determining if injury to the Property is material and m
      determining the Claim Amount, the Company is entitled to rely upon all
      bona fide estimates for restoration work that it received in connection
      with a Claim and shall provide copies thereof to the Insured upon request.

      1.41  POLICY --Policy means this contract of insurance and all
      applications, attachments, Commitments, Certificates, amendments,
      endorsements, and Schedules relating hereto, which are incorporated and
      made a part of this Policy with respect to the Loans to which they relate.

      1.42  POLICY YEAR --Policy Year means the annual period from the Effective
      Date of this Policy until 12:01 a.m. (Eastern time) of the same day of the
      following year and each subsequent tune period similarly calculated.

      1.43  POOL POLICY COMMITMENT LETTER --Pool Policy Commitment Letter means
      the document designated as such by the Company, which committed the
      Company to issue this Policy on the conditions and terms outlined in that
      document.

      1.44  POSSESSION OF THE PROPERTY --Possession of the Property means
      undisputed, actual and physical occupancy and control of the Property,
      subject only to possessory rights of third parties, if any, as may be
      shown in the related Certificate in the section entitled "OCCUPANCY
      STATUS."

      1.45  PRIMARY POLICY --Primary Policy means a policy, deemed acceptable to
      the Company in the Pool Policy Commitment Letter, issued by a mortgage
      guaranty insurance company or government agency or instrumentality,
      approved by the Company, providing the coverage required by Section 4.1
      (Maintenance of Primary Policy) hereof.

      1.46  PRIMARY POLICY SETTLEMENT DATE --The date on which the insurer under
      any Primary Policy issues its claim payment.

      1.47  PROPERTY --Property means the Residential real property and all
      improvements which secure the Loan, together with all easements and
      appurtenances, all rights of access, all rights to common areas,
      recreational and other facilities, and all replacements or additions.

      1.48  QUALIFIED --Qualified means

            (a) the Company is duly qualified under applicable state law to
            write the insurance provided by this Policy and is approved as a
            mortgage guaranty insurer by FHLB, FHLMC or FNMA, so long as FHLB,
            FHLMC or FNMA approves mortgage guaranty insurers and

            (b) if, as of the Effective Date of this Policy, the Security is
            rated by any rating agency which also issued a rating for the
            Company as of the Effective Date of this Policy, the Company
            maintains at least as high a rating as that given to the Security by
            at least one such rating agency so long as this Policy is in force
            and

            (c)  the Company  maintains at least a AA- or equivalent rating by
            Standard & Poor's,  Moody's  Investors Service or Fitch IBCA, Inc.
            or their successors.

      1.49  REPORTING ACCEPTANCE PROGRAM(R) COMMITMENT LETTER --Reporting
      Acceptance Program(R) Commitment Letter means the document designated as
      such by the Company which, when properly executed by the Company and by
      the Insured, commits the Company to issue this Policy on the terms and
      conditions outlined in that document and sets forth the parameters of
      loans, which meet the Reporting Acceptance Program(R) Guidelines, that are
      eligible for insurance under this Policy. The Company reserves the right
      to amend the parameters of loans, which meet the Reporting Acceptance
      Program(R) Guidelines, that are eligible for insurance under this Policy
      upon thirty (30) days' written notice.

      1.50  REPORTING ACCEPTANCE PROGRAM(R) GUIDELINES --Reporting Acceptance
      Program(R) Guidelines mean the guidelines designated as such in the
      Reporting Acceptance Program(R) Manual.

      1.51  REPORTING ACCEPTANCE PROGRAM(R) MANUAL --Reporting Acceptance
      Program(R) Manual means the document designated as such by the Company in
      effect as of the date of this Policy, as it may be amended and restated by
      the Company from time to time, which contains the Reporting Acceptance
      Program(R) Guidelines and which sets forth the terms and conditions under
      which the Insured is to report coverage under this Policy. The Insured
      understands and agrees that the Company has the right to make changes at
      any time to the Reporting Acceptance Program(R) Manual, but no such
      changes shall be effective before at least sixty (60) days have elapsed
      from the date of delivery of notice of such changes to the Insured.

      1.52  REPORTING ACCEPTANCE PROGRAM(R) REPORTING FORM --Reporting
      Acceptance Program(R) Reporting Form means any form designated by the
      Company which, when properly completed, directs the Company to issue its
      Commitment with respect to the Loan identified in it.

      1.53  REPORTING ACCEPTANCE PROGRAM(R) UNDERWRITER --Reporting Acceptance
      Program(R) Underwriter means the individual(s) in the employ of the
      Insured designated by the Insured, who completes the Reporting Acceptance
      Program(R) Reporting Form in accordance with the Reporting Acceptance
      Program(R) Manual.

      1.54  RESIDENTIAL --Residential means

            (a)  a type of  building  or a portion  thereof  which is designed
            for occupancy by not more than four (4) families or

            (b)  a single family condominium or PUD unit.

      1.55  SCHEDULE --Schedule means the attached list of Loans insured under
      this Policy.

      1.56  SECURITY --Security means the instrument designated as such on the
      face of this Policy.

      1.57  SERVICER --Servicer means that Person, if any, who has entered into
      an agreement with the Insured to issue billings, collect and account for
      payments of principal and interest from the Borrower, and/or otherwise
      service the Loan for the Insured. The Company should be notified in
      writing of the identity of such Servicer prior to its appointment, but
      must be notified no later than thirty (30) days after its appointment. The
      Servicer acts as the agent of the Insured under this Policy for all
      purposes including receiving any notices and performing any acts under
      this Policy.

      1.58  SETTLEMENT PERIOD --Settlement Period means the period determined
      pursuant to Section 5.3 (Calculation of Settlement Period).

      1.59  THREE PERCENT (3%) DOWN PAYMENT--Three Percent (3%) Down Payment
            means

            (a) a cash contribution made by the Borrower, prior to or
            contemporaneously with the Loan being Consummated, with non-borrowed
            funds (and these non-borrowed funds may not consist of funds
            received by gift), except as fully disclosed in writing to the
            Company prior to issuance of the Commitment, towards the purchase
            price of the Property in an amount not less than three percent (3%)
            of the Fair Market Value of the Property or

            (b) a noncash form of equity in the Property provided by the
            Borrower, prior to or contemporaneously with the Loan being
            Consummated, towards the purchase price of the Property in an amount
            not less than three percent (3%) of the Fair Market Value of the
            Property.

      1.60  TOTAL INITIAL UNPAID PRINCIPAL BALANCES --Total Initial Unpaid
      Principal Balances mean the amount designated as such on the face of this
      Policy.

      1.61  UNINHABITABLE --Uninhabitable means that an Environmental Impairment
      to the principal Residential dwelling on the Property exceeds generally
      recognized standards for safe residential occupancy or, if there are no
      such standards, then that a fully informed and reasonable person would
      conclude that such dwelling does not provide a reasonably safe place to
      live without fear of injury to health or safety.

      1.62  UNPAID PRINCIPAL BALANCE --Unpaid Principal Balance means the
      outstanding principal balance of a Loan as shown on the Schedule.

      1.63  GENDER AND NUMBER --As used herein, the masculine, feminine and
      neuter gender and the singular and plural number shall each equally
      include the other, as the context shall require.

1A REPORTING ACCEPTANCE PROGRAM(R)

If the Insured submits a loan pursuant to the Company's Reporting Acceptance
Program(R) the following provisions apply

      1A.1  REPORTING ACCEPTANCE PROGRAM(R) MANUAL --The Insured covenants and
      agrees that all Loans shall be reported by it in accordance with the terms
      and conditions of the Reporting Acceptance Program(R) Manual and
      underwritten in accordance with prudent underwriting judgment. The Insured
      represents to the Company that it has caused each of its Reporting
      Acceptance Program(R) Underwriters to read and review the Reporting
      Acceptance Program(R) Manual. The Insured agrees to cause each Reporting
      Acceptance Program(R) Underwriter to do the same with respect to any
      updates to the Reporting Acceptance Program(R) Manual.

      1A.2  REPORTING ACCEPTANCE PROGRAM(R) UNDERWRITER --The Insured shall
      designate one or more Reporting Acceptance Program(R) Underwriters to act
      on behalf of the Insured.

      1A.3  POST-REPORTING AUDIT --The Insured shall choose one of the following
      post-reporting audit provisions, which shall be designated on the face of
      this Policy

            (a) The Insured shall, upon request by the Company concurrently with
            the issuance of a Commitment, provide those documents identified in
            Section 1.32(a), (c), (d), (e), (f), (g), (h) and (i) with respect
            to the loan described in such Commitment and any other documents
            contained in the Insured's loan file with respect to that loan. The
            Company shall conduct its audit with respect to such loan within ten
            (10) days after receipt of the loan documents identified in the
            preceding sentence. The Company shall not exercise its rights to
            audit under this Section 1A.3(a) with respect to more than ten
            percent (10%) of the loans submitted by the Insured to the Company.

            (b)      (i)  The Company or representatives designated by it shall
                          have the right, from time to time, upon ten (10) days'
                          advance notice to the Insured, to conduct a
                          post-reporting inspection, review and audit of the
                          information, papers, files, documents, books, records,
                          agreements and electronically stored data, including
                          but not limited to the Loan File Documents, prepared
                          or maintained by or in the possession or under the
                          control of the Insured pertaining to or in connection
                          with Loans insured under this Policy in order to
                          determine whether such Loans conform to the
                          requirements of this Policy. The Company shall have
                          the right to conduct such audit on the Insured's
                          premises during normal business hours. The Insured
                          shall cooperate fully with such audit and shall
                          furnish to the Company, if requested, any and all Loan
                          File Documents.

                    (ii)  The Company shall have the right upon thirty (30)
                          days' prior written notice to obtain from the Insured
                          a copy of the Loan File Documents for any Loan for
                          which a Commitment has been tendered and Certificate
                          has been issued pursuant to this Policy. The Company
                          may exercise the foregoing right together with or
                          separate from any post-reporting audit conducted
                          pursuant to Section IA.3(b)(i).

1B APPLICATIONS FOR COVERAGE OF A LOAN

The Insured and the Company shall agree on the method by which the Insured shall
submit applications for coverage of a Loan under this Policy.

      1B.1  APPLICATION AND COMMITMENT -- In order to obtain an extension of
      coverage under this Policy to a loan, the Insured shall submit an
      application in a form furnished by or acceptable to the Company. The
      application for original coverage or an increase in coverage on a Loan
      under the applicable Commitment or Certificate, together with all
      supporting documentation and representations, are incorporated by
      reference in those documents. Approval of any application shall be at the
      discretion of the Company and shall be in the form of a Commitment which
      extends a commitment for coverage pursuant to its terms and conditions and
      of this Policy. In the event the Company declines to issue a Commitment
      with respect to any application, the Company shall notify the Insured. If
      the Insured subsequently denies the loan application received by it from
      the applicant, the Insured shall, and by submitting an application to the
      Company for coverage the Insured agrees to, bear full responsibility for
      notifying the applicant in compliance with any state or federal laws or
      regulations including, without limitation, the Equal Credit Opportunity
      Act and any other similar law or regulation.

      1B.2  UG+3(R) APPLICATION -- If the Insured makes application to the
      Company in connection with a loan with respect to which the Insured
      desires insurance coverage using a UG+3(R) Application, the Insured agrees
      as follows

            (a)  APPLICATION   DOCUMENTS--The  Insured  shall  provide  to  the
            Company as its application the following documents

                  (i)   original  UG+3(R) Application  For  Mortgage  Guaranty
                        Insurance,  fully  completed,  signed and dated by the
                        Insured,
                 (ii)   copy of  lender  application  form,  fully  completed,
                        signed and dated by Borrower,
                (iii)   copy of FHLB, FNMA or FHLMC form of appraisal,
                  (v)   original  industry-accepted  income analysis or copies
                        of complete  federal tax returns for  previous two (2)
                        years,  signed and dated by Borrower (if  applicable),
                        and
                 (vi)   all documents required by any Special Rating Plan or
                        other program under which the Insured is submitting the
                        application (if applicable).

            (b) LOAN FILE DOCUMENTS--The Insured shall maintain in its file the
            Loan File Documents.

            (c) CHANGES IN DOCUMENTS--The Insured understands and agrees that
            the Company has the right to make changes in the documentation
            required under Section lB.2 (a) (Application Documents) and in the
            definition of Loan File Documents, but no such changes shall be
            effective before at least sixty (60) days have elapsed from the date
            of delivery of notice of such changes to the Insured.

            (d) AUDIT--The Company or representatives designated by it shall
            have the right, from time to time, upon ten (10) days' advance
            notice to the Insured, to conduct an inspection, review and audit of
            the information, papers, files, documents, books, records,
            agreements and electronically stored data, including but not limited
            to the Loan File Documents, prepared or maintained by or in the
            possession or under the control of the Insured pertaining to or in
            connection with Loans insured on UG+3(R) Applications For Mortgage
            Guaranty Insurance under this Policy in order to determine whether
            such Loans conform to the requirements of this Policy. The Company
            shall have the right to conduct such audit on the Insured's premises
            during normal business hours. The Insured shall cooperate fully with
            such audit and shall furnish to the Company, if requested, any and
            all Loan File Documents.

            (e) COPIES OF LOAN FILE DOCUMENTS--The Company shall have the right
            upon thirty (30) days' prior written notice to obtain from the
            Insured a copy of the Loan File Documents for any Loan for which a
            Commitment has been tendered and Certificate has been issued
            pursuant to this Policy. The Company may exercise the foregoing
            right together with or separate from any audit conducted pursuant to
            Section IB.2(d) (Audit).

            (f) COPIES OF DOCUMENTS ON DEFAULT--At any time after the Insured
            notifies the Company of a Default in accordance with Section 4.2
            (Notice of Default) on request by the Company, the Insured shall
            provide to the Company copies of the following documents

               (i) original Verification(s) of Employment, Income and Deposit on
               forms acceptable under and conforming to FHLB, FNMA and FHLMC
               guidelines, or acceptable alternative documents permitted under
               FNMA and FHLMC guidelines,

               (ii) original fully-executed contract of sale (if applicable),

               (iii) original housing payment history (if applicable),

               (iv) original HUD-1 Settlement Statement and Verification of
               Mortgage Balance (if applicable),

               (v)  original  promissory  note  and  mortgage/deed  of  trust,
               together with any addenda thereto,

               (vi) original title insurance policy relating to the Property
               (if applicable), and

               (vii) original assumption agreement (if applicable).

            (g) NOTICE OF TRANSFER OF SERVICING--If a Loan's servicing is sold,
            assigned or transferred by the Insured pursuant to Section 2.16
            (Change of Servicing), written notice thereof shall be given to the
            Company prior to the transfer of servicing (this prior notice period
            superceding the notice requirement of Section 1.57 (Servicer)).

            (h) INDEMNIFICATION--The original Insured agrees to and shall
            indemnify against and hold each of the Indemnified Persons harmless
            from all losses, damages, penalties, fines, expenses (including
            attorney's fees) and costs, incurred by any of them resulting or
            arising, directly or indirectly, in whole or in part, from a breach
            by the original Insured or any of its employees or agents of (a) any
            representation made in connection with Loans insured pursuant to
            UG+3(R) Applications For Mortgage Guaranty Insurance under this
            Policy that the Insured has obtained the Loan File Documents or (b)
            the agreement contained in Section 1B.2(e) (Copies of Loan File
            Documents). It is agreed by the Company that its sole remedy for a
            breach by the original Insured or any of its employees or agents of
            the agreement contained in Section lB.2(e) (Copies of Loan File
            Documents) shall be to seek indemnification under this Section and
            otherwise seek contractual damages from such Persons.

      1B.3  REPORTING ACCEPTANCE PROGRAM(R) APPLICATION -- If the Insured makes
      application to the Company in connection with a loan with respect to which
      the Insured desires insurance coverage using a Reporting Acceptance
      Program(R) application, the Insured agrees as follows

            (a) SUBMISSION--The Company shall not be obligated to issue a
            Commitment with respect to any loan that is not within the
            parameters listed in the Reporting Acceptance Program(R) Commitment
            Letter. In order to obtain an extension of coverage under the
            Reporting Acceptance Program(R) to a loan, the Insured shall submit,
            through its Reporting Acceptance Program(R) Program Underwriter, a
            Reporting Acceptance Program(R) Reporting Form furnished by or
            acceptable to the Company, and any other documents required by any
            program under which the Insured is submitting its Reporting
            Acceptance Program(R) Reporting Form. The Reporting Acceptance
            Program(R) Reporting Form for original coverage or an increase in
            coverage on a Loan under the applicable Commitment or Certificate,
            together with all supporting documentation and representations,
            including but not limited to the Loan File Documents, are
            incorporated therein by reference. This Policy shall automatically
            extend to each loan within the parameters set forth in the Reporting
            Acceptance Program(R) Commitment Letter reported by a Reporting
            Acceptance Program(R) Underwriter on behalf of the Insured provided
            each Loan has met the requirements set forth in the Reporting
            Acceptance Program(R) Guidelines as in effect at the date of
            execution of the Reporting Acceptance Program(R) Reporting Form and
            is evidenced by a Certificate issued by the Company.

            (b) COPY OF LOAN FILE DOCUMENTS--After it gives the Company written
            notice of default as required by Section 4.2 (Notice of Default),
            the insured, or Servicer, as the case may be, shall deliver or cause
            to be delivered to the Company a copy of the Loan File Documents
            within a reasonable time after receiving a request for such a copy
            from the Company.

2     COVERAGE

      2.1   REPRESENTATIONS OF THE INSURED --

            (a) The Insured agrees that statements made and matters presented by
            it, the Borrower, or any other Person in any application for this
            Policy and/or coverage under this Policy, and in the appraisal, the
            plans and specifications, and other exhibits and documents submitted
            with the application or at any time after that submission are the
            Insured's representations, and that the Company has issued this
            Policy, the Commitment and the Certificate in reliance on their
            correctness and completeness; provided, however, the Company shall
            not have the right to rescind coverage of a Loan because of material
            misrepresentations in statements made and matters presented by the
            Borrower or any Person other than a First Party.

            (b)  If the  Insured  submits  a loan  pursuant  to the  Company's
            Reporting Acceptance Program(R),

                  (i)  the Insured represents to the Company that each Loan
                  complied with the Reporting Acceptance Program(R) Guidelines
                  as of the date of the related Reporting Acceptance Program(R)
                  Reporting Form and that each Loan was accurately and
                  completely described in all material respects in the Reporting
                  Acceptance Program(R) Reporting Form submitted in connection
                  with the respective Loan and

                  (ii)  the Insured accepts the risk of any material
                  misrepresentation (whether innocent or otherwise) made in
                  matters presented to it, or another Person on behalf of the
                  Insured, by the Borrower or any other Person in the loan
                  application and in the appraisal, the plans and
                  specifications, and other exhibits and documents submitted
                  with the application or at any time after that submission, and
                  the subsequent misrepresentation of that same information to
                  the Company in the Reporting Acceptance Program(R) Reporting
                  Form submitted in connection with the respective Loan, and
                  understands and agrees that the Company will issue Commitments
                  in reliance on the correctness and completeness of the
                  information as submitted to the Company in the Reporting
                  Acceptance Program(R) Reporting Form. Notwithstanding the
                  foregoing sentence, the Company shall not have the right to
                  rescind coverage of a Loan because of material
                  misrepresentations in statements made and matters presented by
                  any Person other than a First Party.

            (c) If the Insured elects to submit an application for coverage
            based on a then-applicable Company refinance program for the
            refinancing of an existing loan not then insured by the Company, the
            terms and .conditions of the applicable refinance program shall
            apply and, if required by the terms and conditions of the applicable
            refinance program, the Insured represents that (i) the existing loan
            is owned by either FHLB, FHLMC or FNMA, at the time the refinance
            application is submitted to the Company, and (ii) the refinanced
            loan will meet the requirements of the appropriate modified
            refinance application process of the FHLB, FHLMC or FNMA, as
            applicable.

      2.2  THIRD-PARTY UNDERWRITING SUBMISSION SERVICES --If Insured chooses to
      submit a loan using a third-party underwriting submission service approved
      by the Company, Insured agrees that if

            (a)  the third-party underwriting submission service

                  (i) makes a material alteration in the data submitted by the
                  originator of a Loan resulting in the Company issuing a
                  Commitment or Certificate, as applicable, for the Loan which
                  would not have been issued in the absence of such material
                  alteration (a "System Error") or

                  (ii) communicates to the Company in error that a loan meets
                  the criteria of the third-party underwriting submission
                  service when, based on the data received by that service, the
                  loan does not meet those criteria (a "System Error," and
                  collectively with the System Error in Section 2.2(a)(ii)
                  "System Errors") or

            (b) there is any dishonest, fraudulent, criminal or knowingly
            wrongful act (including error or omission) by the third-party
            underwriting submission service or any of its employees or any
            persons or entities contracted by the third-party underwriting
            service to provide collateral assessment services with respect to
            any Loan,

      the Company shall have the right, subject to all other terms and
      conditions of this Policy, to cancel or rescind coverage for the
      particular Loan or cancel this Policy as if such System Error or
      dishonest, fraudulent, criminal or knowingly wrongful act (including error
      or omission) was committed by Insured.

      2.3  PREMIUM --Premiums shall be paid as set forth on the face of this
      Policy. At the request of the Company, the Insured shall provide the
      information and documentation upon which the premium calculation is based;
      if the Insured fails to provide the information and documentation
      requested by the Company, the Company shall calculate the premium based on
      the information used for the most recent prior premium calculation, with
      the Company's only refund obligation being to refund any excess premium
      (without interest) upon the Insured providing such information as may be
      necessary to compute the correct premium as of its due date and without
      the Insured being relieved of its obligation to pay any further premium if
      the premium so calculated was less than the correct premium due. Except as
      provided in the preceding sentence, there shall be no refund of premium
      under this Policy. If the Aggregate Benefits paid by the Company under
      this Policy equal the Aggregate Benefit Limit, then the total premium due
      under this Policy is due and shall remain due; provided, however, that the
      premium shall continue to be calculated and paid in the manner specified
      on the face of this Policy. The Company shall have the right to offset for
      unpaid premium.

      2.4  CANCELLATION FOR NON-PAYMENT OF SUBSEQUENT PREMIUM --The entire
      amount of any premium subsequent to the first premium payment must be paid
      within forty-five (45) days after the anniversary (whether monthly,
      quarterly or annually) of the due date of the most recent prior premium
      unless otherwise specified on the face of this Policy. Although the
      Company intends to provide the Insured with notice of subsequent premium
      due dates, the Insured understands and agrees that such notice does not
      constitute a condition to the Insured's obligation to make timely payment
      of subsequent premiums in order to continue coverage. If the Insured fails
      to pay all or a portion of this payment within this time the liability of
      the Company shall terminate as of 12:01 a.m. on the anniversary of the
      subsequent premium due date and thereafter the Company shall not be
      obligated to accept any premium tendered. Any Default occurring within the
      forty-five (45) day period which results in a Claim being filed will not
      be covered unless the entire subsequent premium was paid in accordance
      with the terms of this Section.

      2.5   COVERAGE PERIOD --

            (a) This Policy shall continue in force until the earlier of (i) the
            date specified on the face of this Policy, (ii) the date the
            Security is no longer outstanding or (iii) the date this Policy is
            cancelled in accordance with Section 2.4 (Cancellation for
            Non-Payment of Subsequent Premium), Section 2.9 (Cancellation of
            Policy by the Insured) or Section 2.10 (Cancellation of Policy by
            Company), whichever occurs first. Notwithstanding termination of
            this Policy pursuant to this Section 2.5(a), coverage for each Loan
            insured under this Policy shall continue with respect to any Loan
            which, as of the date of termination, is in Default and which
            Default is not subsequently cured. Except as provided in Section 2.4
            (Cancellation for Non-Payment of Subsequent Premium), Section 2.9
            (Cancellation of Policy by the Insured) and Section 2.10
            (Cancellation of Policy by Company), there shall be no right of
            cancellation of this Policy. This Policy may not be renewed.

            (b) Subject to Section 2.5(a), coverage for each Loan insured under
            this Policy shall continue in force until the Loan (i) has been paid
            in full or (ii) has given rise to a Claim which the Company has paid
            in accordance with the terms and conditions hereof Except as
            provided in Section 2.6 (Cancellation by the Insured of a
            Certificate) and Section 2.7 (Cancellation by the Company of a
            Certificate), there shall be no right of cancellation of a
            Certificate.

      2.6  CANCELLATION BY THE INSURED OF A CERTIFICATE --The Insured may ONLY
      cancel coverage under a Certificate in the event of the full prepayment of
      the related Loan or on repurchase of the related Loan by any Person that
      previously owned or serviced the Loan, but not for any other reason. Upon
      receipt of a request for cancellation of coverage of a Certificate, the
      Company shall acknowledge cancellation of the Certificate. The Insured
      covenants and agrees that (a) it shall not request cancellation of any
      Certificate under this Section unless (i) it is the current holder and
      owner of such Loan or is requesting cancellation at the instructions of
      and as the agent of the current holder and owner of such Loan and (ii) the
      original Certificate has been returned to the Company, or destroyed, or
      marked "cancelled," and (b) the related loan shall not thereafter be sold
      with any statements, express or implied, that it is insured by the
      Company. There shall be no refund of premium on cancellation by the
      Insured of a Certificate pursuant to this Section. Cancellation of a
      Certificate will not cancel this Policy.

      2.7  CANCELLATION BY THE COMPANY OF A CERTIFICATE --The Company shall have
      the right, at its option and to the extent permitted by applicable law, to
      cancel coverage under any Certificate with respect to the related Loan CBJ
      if any of the Insured's representations made with respect to such Loan
      (including such representations which consist of statements of, or
      information furnished by, the Borrower or other Persons) were materially
      inaccurate or if the Insured has breached its obligations under Section
      2.4 (Cancellation for Non-Payment of Subsequent Premium) or Section 2.12
      (Loan Transaction Modifications) or if the Insured has otherwise
      materially breached any of its obligations under this Policy in connection
      with such Loan or related Certificate. There shall be no refund of premium
      if a Certificate is cancelled by the Company pursuant to this Section.

      2.8  TERMINATION OF COVERAGE OF A CERTIFICATE --The coverage provided
      under this Policy with respect to any Certificate shall automatically
      terminate upon the failure of the Insured to comply with the conditions
      and obligations specified in, and as set forth in, Section 2.11 (Loan
      Modifications), Section 2.14 (Assumptions and Transfers of the Property),
      or Section 2.16 (Change of Servicing). There shall be no refund of premium
      on termination of coverage of a Certificate pursuant to this Section.

      2.9  CANCELLATION OF POLICY BY THE INSURED --The Insured may terminate
      this Policy upon thirty (30) days' written notice thereof to the Company
      if the Company shall cease to be Qualified or if the total outstanding
      Unpaid Principal Balances of all Loans has been reduced to no more than
      ten percent (10%) of the Total Initial Unpaid Principal Balances. The
      Company shall use diligent effort to remain Qualified. There shall be no
      other right of cancellation of this Policy by the Insured. There shall be
      no refund of premium on cancellation of this Policy pursuant to this
      Section if the Insured chose to pay premium on any basis other than a
      single premium. If the Insured has paid a single premium for this Policy,
      the Company shall pay a refund in accordance with the applicable rate
      schedule if the Policy is cancelled pursuant to this Section.

      2.10  CANCELLATION OF POLICY BY COMPANY --The Company may cancel this
      Policy only in accordance with Section 2.4 (Cancellation for Non-Payment
      of Subsequent Premium).

      2.11  LOAN MODIFICATIONS --Unless advance written approval is obtained
      from the Company, if the Insured (a) makes any change in the terms of the
      Loan (including, but not limited to, the borrowed amount, interest rate,
      term or amortization schedule of the Loan), except as permitted by the
      terms of the Loan, (b) allows any change in the Property, or (c) releases
      the Borrower from liability on the Loan, at the Company's option the
      liability of the Company for coverage under its Certificate shall
      terminate as of the date of such change or release. The Company shall not
      unreasonably withhold approval of a change or release. Upon termination of
      coverage under this Section, there shall be no refund of premium.

      2.12  LOAN TRANSACTION MODIFICATIONS --Unless advance written approval is
      obtained from the Company, if a loan transaction closed by the Insured
      differed from the related Loan Transaction agreed to by the Company, the
      Company shall be entitled, at its option, within a reasonable time after
      discovery thereof, to cancel the related Commitment or Certificate, as the
      case may be, and there shall be no refund of premium.

      2.13  OPEN END PROVISIONS --Unless advance written approval is obtained
      from the Company, the Insured may not increase the principal balance of
      the Loan except as permitted by the terms of the Loan. The Insured shall
      pay the Company the additional premium due at the then prevailing premium
      rate.

      2.14  ASSUMPTIONS AND TRANSFERS OF THE PROPERTY --Unless advance written
      approval is obtained from the Company, if a Loan is assumed with the prior
      approval of the Insured or if a Property is transferred and the Borrower
      is released from liability under the Loan, the liability of the Company
      for coverage under its Certificate shall terminate as of the date of such
      assumption or transfer. The Company shall not unreasonably withhold
      approval of an assumption of a Loan or a transfer of a Property. Upon
      termination of coverage under this Section 2.14, the Company's liability
      shall only be for the return of all related premium for the time period
      after the occurrence of the event giving rise to the termination. It is
      understood that coverage will continue, and that the restriction of this
      Section 2.14 shall not apply, if the Insured cannot exercise a Due-on-Sale
      Clause under the Loan or applicable law. If the Borrower is not released
      from liability under the Loan, the following types of transfer of a
      Property are deemed approved by the Company

            (a) a transfer of a Property to the surviving party on the death of
            a joint tenant or a tenant by the entirety,

            (b) a transfer of a Property to a junior lienholder as the result of
            a foreclosure or acceptance of a deed in lieu of foreclosure for the
            subordinate mortgage,

            (c) a transfer of a Property to a relative of a deceased Borrower,
            as long as the transferee will occupy the Property,

            (d) a transfer of a Property to the Borrower's spouse, child(ren),
            parent(s), brother(s) or sister(s), grandparent(s), or
            grandchild(ren), as long as the transferee(s) will occupy the
            Property,

            (e) a transfer of a Property to a spouse under a divorce decree or
            legal separation agreement or from an incidental property settlement
            agreement, as long as the transferee will occupy the Property,

            (f) a transfer of a Property that is jointly owned by unrelated
            co-Borrowers from one of the Borrowers to the other, as long as the
            Borrower who is gaining full ownership of the Property will continue
            to occupy it and the transfer occurs after at least twelve (12)
            months have elapsed since the Loan was closed,

            (g) a transfer of a Property into an inter vivos trust, so long as
            the Borrower will remain as the beneficiary and occupant,

            (h) the granting of a leasehold interest that has a term of three
            (3) or fewer years and does not provide an option to purchase the
            Property, provided, however, if the lease has a renewal option that
            would allow the term to extend beyond three (3) years, this
            exemption does not apply,

            (i) the creation of a subordinate lien, as long as it does not
            relate to a transfer of occupancy rights or

            (j) the creation of a purchase money security interest for household
            appliances.

      2.15  LOAN ASSIGNMENT-

            (a) Unless advance written approval is obtained from the Company, if
            a Loan is sold, assigned, or transferred by the Insured (and the
            Company reserves the sole and absolute discretion as to whether or
            not to approve the transfer of coverage pursuant to any such sale,
            assignment or transfer), the coverage under this Policy and the
            related Certificate may not and will not be assigned to such
            purchaser, assignee, or transferee and the Company shall thereafter,
            for all purposes under this Policy, including but not limited to the
            Aggregate Benefit Limit, disregard such sale, assignment or transfer
            and continue to treat the Insured as the only Person with any
            interest in such Loan and the Insured agrees that it and any such
            purchaser, assignee, or transferee shall make all such arrangements
            as between or among themselves as may be appropriate or desirable in
            light of this restriction on the transfer of coverage under this
            Policy and the related Certificate.

            (b) If a Loan is sold, assigned or transferred with the approval of
            the Company, and the coverage under this Policy and the related
            Certificate are assigned to the purchaser, assignee or transferee of
            the loan, the coverage is subject, nevertheless, to all of the terms
            and conditions of this Policy and to all defenses which the Company
            may have had against the original and any subsequent Insured,
            including but not limited to, defenses based upon the failure of
            Loans to conform to the Reporting Acceptance Program(R) Guidelines.
            Acceptance of an assignment of coverage under this Policy
            constitutes an acknowledgment by the assignee that the authority of
            the Insured and its Reporting Acceptance Program(R) Underwriter was
            limited by the Reporting Acceptance Program(R) Guidelines.

      2.16  CHANGE OF SERVICING --Servicing of Loans covered by this Policy may
      be sold, transferred or assigned without affecting the coverage hereunder
      for such Loan, subject, nevertheless, to all of the terms and conditions
      hereof and to all defenses which the Company may have had prior to any
      such sale, transfer or assignment, and provided that written notice of the
      new Servicer is given to the Company and the new Servicer is approved in
      writing by the Company. The Company shall be automatically deemed to have
      approved as a Servicer any Person to whom the Company has issued a master
      policy, which has not been cancelled, providing for residential mortgage
      guaranty insurance.

      2.17  COORDINATION AND DUPLICATION OF INSURANCE BENEFITS --

            (a) Except as required by Section 4.1 (Maintenance of Primary
            Policy), the Insured shall not carry duplicate mortgage guaranty
            insurance (including other mortgage guaranty "pool" insurance, also
            known as mortgage trust supplemental insurance) on any Loan.

            (b) The coverage under this Policy shall be excess over any other
            insurance which may apply to the Property or to the Loan, regardless
            of the type of or the effective date of such other coverage.

      2.18  PREMIUM CHECKS --The Insured acknowledges that the Company deposits
      all checks immediately upon receipt; accordingly, the Insured agrees that
      the receipt and deposit of a premium check by the Company does not
      constitute acceptance by the Company until final reconciliation by the
      Company of the Company's records with such premium. The Insured
      acknowledges that the premium for this Policy is paid on an aggregate
      basis and there is no refund of premium on cancellation of a Certificate.

      2.19  CONDITIONAL COMMITMENTS/CERTIFICATES --The Company shall not have
      the right to, and will not, rescind or deny coverage or reduce the Claim
      Amount on the basis of a failure to satisfy' a special condition set forth
      in a Commitment and/or Certificate (other than a special condition
      relating to completion of construction, rehabilitation or repairs) if the
      Borrower has made twenty-four (24) consecutive monthly payments from the
      Borrower's Own Funds. The Insured shall have the right, after the
      satisfaction of any special condition, to obtain a replacement Commitment
      and/or Certificate without the special condition. If a special condition
      is not satisfied within a time period specified by the Company, the
      Company shall have the right (subject to the first sentence of this
      Section) to rescind coverage for failure to satisfy that special
      condition. There shall be no refund of premium to the Insured if the
      Company rescinds coverage for failure to satisfy' a special condition.

3     EXCLUSIONS FROM COVERAGE

The Company shall not be liable for, and this Policy shall not apply to, extend
to or cover the following

      3.1  BALLOON PAYMENT LOANS --Any Claim arising out of or in connection
      with the failure of the Borrower to make any payment of principal and/or
      interest due under the Loan which payment arises because the Insured
      exercises its right to call the Loan or because the term of the Loan is
      shorter than the amortization period, and which payment is for an amount
      more than twice the regular periodic payments of principal and interest
      that are set forth m the Loan (commonly referred to as a "Balloon
      Payment"); provided, however, that such exclusion shall not apply if the
      Insured unconditionally offers the Borrower in writing a renewal or
      extension of the Loan or a new loan at market rates, otherwise subject to
      Section 2.11 (Loan Modifications), in an amount not less than the then
      outstanding principal balance with no decrease in the amortization period.
      The exclusion shall not apply if the Borrower is notified in writing of
      the availability of a renewal or extension of the Loan or a new loan and
      does not seek such renewal, extension or new loan.

      3.2  EFFECTIVE DATE AND CANCELLATION --Any Claim resulting from a Default
      occurring before the Effective Date of this Policy or after its lapse,
      unless coverage is continued in accordance with Section 2.4 (Cancellation
      for Non-Payment of Subsequent Premium), or after the cancellation of a
      Certificate by the Insured.

      3.3  INCOMPLETE CONSTRUCTION --Any Claim when, as of the date of such
      Claim, construction of the Property is not completed in accordance with
      the construction plans and specifications upon which the appraisal of the
      Property at origination was based.

      3.4  LOAN TRANSACTION --Any Claim if the loan transaction closed by the
      Insured with respect to the related Loan differed from the Loan
      Transaction agreed to by the Company.

      3.5  NEGLIGENCE AND FRAUD --Any Claim involving or arising out of any
      dishonest, fraudulent, criminal, or knowingly wrongful act (including
      error or omission) by any Insured or Servicer; or any Claim involving or
      arising out of negligence of any Insured or Servicer or any of their
      agents or employees, including but not limited to, the negligence of a
      Reporting Acceptance Program(R) Underwriter in reporting, or the Insured
      in originating, a Loan which fails to conform to the Reporting Acceptance
      Program(R) Guidelines, which negligence is material either to the
      acceptance of the risk or to the hazard assumed by the Company.

      3.6   PHYSICAL DAMAGE--Any Claim where there is Physical Damage to the
      Property, provided, however, that

            (a) if such Physical Damage occurs or manifests itself prior to the
            Effective Date of the Commitment, this exclusion shall only apply if
            such Physical Damage is the principal reason for the Default under
            the Loan and if such Physical Damage is due to Environmental
            Impairment, which Environmental Impairment makes the principal
            Residential dwelling on the Property Uninhabitable, and

            (b) if such Physical Damage occurs or manifests itself after the
            Effective Date of the Commitment, this exclusion shall only apply

                 (i) if such Physical Damage is not due to Environmental
                     Impairment, and the Company elects to exercise this
                     exclusion or

                (ii) if such Physical Damage (whether or not due to
                     Environmental Impairment)

                     (A)  occurs at a time when the Loan is not in Default,

                     (B) is that for which the Insured is not insured (either by
                     reason of no coverage or an exclusion in such coverage with
                     respect to such Physical Damage) or is not insured in an
                     amount sufficient to restore the Property to its condition
                     as of the Effective Date of the Commitment, ordinary wear
                     and tear excepted, or, if the Property was not completed in
                     accordance with the construction plans and specifications
                     as of the Effective Date of the Commitment, to the
                     condition contemplated by such plans and specifications and

                     (C)  is the principal reason for the Default but

            (c)  the exclusion of Section 3.6(a) above shall not apply

                 (i) if such Environmental Impairment or suspected existence
                 thereof was disclosed in writing to the Company prior to the
                 issuance of the Commitment or

                 (ii) if the Insured has removed or remedied the Environmental
                 Impairment and

            (d)  the exclusion of

                 (i) Section 3.6(b)(i) above shall not apply if, after the
                 discretionary exercise of the exclusion of Section 3 .6(b)(i),

                     (A)  the Insured restores the Property

                              (I) to its condition as of the Effective Date
                              of the Commitment, ordinary wear and tear
                              excepted or

                              (II) if the Property was not completed in
                              accordance with the construction plans and
                              specifications as of the date of Default, to the
                              condition contemplated by such construction plans
                              and specifications or

                     (B) in lieu of such restoration the cost of such
                     restoration, at the election of either the Company or the
                     Insured, is taken as a deduction from the Claim Amount
                     calculated in accordance with Section 5.2 (Calculation of
                     Claim Amount) and

                 (ii) Section 3.6(b)(ii) above shall not apply if the Insured
                 restores the Property,

                     (A)  to its condition as of the Effective  Date of the
                     Commitment, ordinary wear and tear excepted or

                     (B) if the Property was not completed in accordance with
                     the construction plans and specifications as of the date of
                     Default, to the condition contemplated by such construction
                     plans and specifications.

      3.7  BREACH OF CONDITIONS AND INSURED'S OBLIGATIONS --Any Claim resulting
      from a Default occurring after any material breach by the Insured of the
      obligations or material failure by the Insured to comply with the
      conditions set forth in this Policy with respect to the related Loan.

      3.8  FAILURE TO CONFORM TO REPORTING ACCEPTANCE PROGRAM(R) GUIDELINES
      --Subject to Section 2.1 (Representations of the Insured), any Claim if
      the Loan was submitted under the Reporting Acceptance Program(R) and
      failed to conform to the Reporting Acceptance Program(R) Guidelines.

      3.9  DEFENSES --Any Claim if, under applicable law, the Borrower did
      successfully assert or may have successfully asserted any defense against
      the Insured so as to release in whole or in part the Borrower's obligation
      to repay the loan, provided, however, that this exclusion shall only apply
      to the extent and amount of such release.

      3.10  EXCLUSION UNDER PRIMARY POLICY --Any Claim if the related claim was
      excluded under any Primary Policy.

      3.11  PRIMARY POLICY --With respect to any Claim, the amount of the claim
      payment which the insurer under any Primary Policy has not paid,
      disregarding the reason or cause for the denial or failure of such insurer
      to pay under such Primary Policy, or the amount a Primary Policy should
      have paid if the Insured fails to obtain a Primary Policy as required by
      Section 4.1 (Maintenance of Primary Policy).

      3.12  NON-APPROVED SERVICER --Any Claim occurring when the Servicer, at
      time of Default or thereafter, is not approved in writing; provided this
      exclusion shall only apply if the Company notifies the Insured if a
      Servicer is no longer approved and if within ninety (90) days after that
      notification the Insured does not complete or cause to be completed a
      transfer of servicing to a new Servicer approved by the Company.

4     CONDITIONS PRECEDENT TO PAYMENT OF LOSS

It is a condition precedent to the Company's obligation to pay benefits
hereunder that the Insured comply with all of the following requirements

      4.1   MAINTENANCE OF PRIMARY POLICY--

            (a) The Insured is required to maintain a Primary Policy issued by a
            mortgage guaranty insurance company which is acceptable to the
            Company, and which provides coverage against loss resulting from a
            Borrower's Default on all Loans that have a Loan-to-Value at the
            time of origination in excess of the Loan-to-Value Ratio of Loans
            Requiring Primary Policy as specified on the face page of this
            Policy. The Primary Policy shall, at a minimum, provide coverage in
            the amount specified on the face of this Policy as the Coverage
            Percentage for Primary Policy or, if not specified, in the greater
            of (i) the amount required by FNMA, (ii) the amount required by
            FHLMC, or (iii) the amount of the Loan in excess of seventy-five
            percent (75%) of the original Fair Market Value.

            (b) Such coverage must remain in force either (i) for the period
            specified on the face of this Policy as the Period of Primary
            Coverage or, if not specified, until the outstanding principal
            balance of the Loan is reduced to eighty percent (80%) of the
            original Fair Market Value, or, (ii) until the Insured is otherwise
            required to terminate coverage in accordance with applicable law.

            (c) The primary responsibility for providing appropriate servicing
            and mitigation of delinquencies shall lie with the Insured through
            its Primary Policy, if applicable. If there is any conflict between
            the terms and conditions of, or any actions to be taken under, any
            Primary Policy and this Policy, this Policy shall govern; provided,
            however, that in no event shall the Insured take any action, or fail
            to take any action, which would impair its rights under any Primary
            Policy unless it shall first have given prompt written notice to the
            Company of any conflict between the Primary Policy and this Policy
            or any circumstance under which its rights under the Primary Policy
            might be impaired and received written direction from the Company
            regarding the action to be taken, if any, with respect to the
            Primary Policy.

            (d) The risk of collection under any Primary Policy and the risk of
            the insolvency of the issuer of any Primary Policy are risks of the
            Insured and are not covered under this Policy, provided, however,
            that in the event of the insolvency, bankruptcy, receivership or
            assignment for the benefit of creditors of the insurer under any
            Primary Policy, the Insured shall not, as a condition precedent to
            filing a claim for Loss under this Policy, be required to settle its
            claim for loss under the Primary Policy, provided the Insured has
            timely satisfied all other conditions of such Primary Policy and has
            diligently performed (or caused to be performed) all its duties and
            obligations with respect to such Primary Policy, including, but not
            limited to, the due and timely filing of its claim for loss under
            the Primary Policy, in which case the Company shall deduct from the
            payment of Loss under this Policy the greater of any amount of claim
            payment the Insured (i) received or (ii) should have received
            pursuant to the required or applicable Primary Policy in accordance
            with Section 5.2(k).

      4.2   NOTICE OF DEFAULT--The Insured shall give the Company written notice

            (a)  within  forty-five  (45)  days of the  Default,  if it occurs
            when the first payment is due under the Loan or

            (b)  within ten (10) days of either

                 (i) the date when the Borrower becomes four (4) months in
                 Default on the Loan or

                 (ii) the date when any judicial proceeding, including
                 Appropriate Proceedings, of which the Insured has received
                 service of process or otherwise has actual knowledge, which
                 affects the Loan or the Property or the Insured's or Borrower's
                 interest in the Loan has been started

                 whichever occurs first.


      4.3  MONTHLY REPORTS --Following a notice of Default, the Insured shall
      give the Company monthly reports on forms furnished or approved by the
      Company on the status of the Loan and on the servicing efforts undertaken
      to remedy the Default. These monthly reports shall continue until the
      Borrower is no longer in Default, the Appropriate Proceedings terminate,
      or until title to the Property has been transferred to the Insured.

      4.4  COMPANY'S OPTION TO ACCELERATE FILING OF A CLAIM --At any time
      following notification of Default, and before the Insured has obtained
      Good and Merchantable Title to the Property, the Company, directly or
      through its assignee (as purchaser of the Loan), shall have the right to
      purchase the Loan from the Insured, free and clear of all liens, claims or
      encumbrances, for a purchase price equal to the Loss calculated under
      Section 5.2 (Calculation of Claim Amount)(but without deduction for a
      claim payment under a Primary Policy, which has not yet become payable) on
      the following terms and conditions.

            (a) Within twenty (20) days after notice to the Insured (or such
            longer period specified by the purchaser in its notice) that the
            Company or its assignee has elected to purchase the Loan, the
            Insured shall tender and deliver or cause to be delivered to the
            purchaser, to be held in escrow by the purchaser against receipt of
            the purchase price as set forth above within ten (10) days after
            such tender and delivery, all of the following

                 (i) one (1) or more assignments (as shall be necessary or
                 appropriate) to the purchaser, containing customary
                 representations and warranties, duly and properly executed and
                 in recordable form, of all of the Insured's ownership right,
                 title and interest in and to the Loan and related documents
                 (including a Primary Policy) and, unless expressly specified as
                 not being subject to assignment or transfer, seller/servicing
                 agreements relating to the Loan, but excluding any rights under
                 the Insured's agreement with another Person to provide credit
                 enhancement under a participating financial institution
                 agreement or similar agreement between the Insured and such
                 Person and

                 (ii) the note, bond or other instrument evidencing the Loan,
                 properly endorsed in blank, and

                 (iii) an assignment, to the purchaser, of coverage with respect
                 to such Loan under this Policy, subject to all of the terms and
                 conditions contained in this Policy, and

                 (iv) any and all documents executed or delivered by or to the
                 Borrower under, or any holder of, such Loan, including the
                 following

                     (A) originals (or, if publicly recorded, certified copies)
                     of mortgages, deeds of trust or other security instruments
                     or assignments and

                     (B)  originals (or acceptable  duplicates) of policies of
                     title insurance or opinions of title and surveys and

                     (C)  originals (or acceptable duplicates) of certificates
                     and/or policies evidencing private mortgage guaranty
                     insurance and hazard insurance and

                     (D) copies of state and/or federal disclosure and/or
                     consumer credit documents.

            (b) On purchase of the Loan under Section 4.4(a), the Insured shall
            have no further right to payment of Loss under this Policy with
            respect to such Loan. Payment to an Insured of the amount specified
            in Section 4.4(a) shall be a full and final discharge of the
            Company's obligations to such Insured with respect to such Loan. The
            Company shall have the right to assign its right to purchase a Loan
            pursuant to this Section to any Person.

      4.5  VOLUNTARY CONVEYANCE --The Insured may accept a conveyance of title
      from the Borrower in lieu of foreclosure or other proceeding if the prior
      written approval of the Company has been obtained; however, the Insured
      agrees that such approval shall not constitute or be deemed an
      acknowledgment of liability by the Company with respect to the related
      Loan.

      4.6  APPROPRIATE PROCEEDINGS --The Insured MUST begin Appropriate
      Proceedings when the Loan becomes six (6) months in Default unless the
      Company provides written instructions that some other action be taken. The
      Company reserves the right to direct the Insured to institute a specific
      form or type of Appropriate Proceedings at any time after Default. When
      either defending against or bringing Appropriate Proceedings, the Insured
      shall report the status of these proceedings to the Company as reasonably
      and expeditiously as possible.

      In conducting Appropriate Proceedings, the Insured shall

            (a) diligently pursue the Appropriate Proceedings once they have
            begun and

            (b) apply for the appointment of a receiver and assignment of rents,
            if permitted by law and requested by the Company and

            (c) act so that its ability to preserve, transfer and assign to the
            Company its rights against the Borrower is not impaired and so that
            the rights of the Company under this Policy against the Borrower and
            any other Person relating to the Loan or to the Property are not
            adversely affected, including any rights to obtain a deficiency
            judgment and

            (d) bid an amount at the foreclosure sale which fully protects the
            rights of the Company under this Policy against the Borrower,
            including any rights to obtain a deficiency judgment and

            (e) until payment by the Company pursuant to Section 5.4 (Payment of
            Loss), preserve, repair and prevent Physical Damage to the Property
            and maintain the Property in at least as good a condition as existed
            at the Effective Date of the related original Commitment, ordinary
            wear and tear excepted, and as contemplated thereby and

            (f) subject to Section 4.1 (Maintenance of Primary Policy), act so
            its rights under the Primary Policy are not impaired.

      4.7   MITIGATION OF DAMAGES--

            (a) The Insured shall actively cooperate with and assist the Company
            to prevent and mitigate a Loss, including but not limited to, good
            faith efforts by the Insured to obtain a cure of the Default,
            collect monies due under the Loan, inspect and appraise the
            Property, and effectuate the early disposition of the Property.

            (b)  Without  limiting  the right of the  Company  to  direct  the
            Insured with respect to disposition  of the Property,  the Company
            may direct the Insured

                 (i) to list the Property for sale at a price to be established
                 by the Company and

                 (ii) to select the agents or brokers with whom the Property is
                 listed and

                 (iii) without limiting the Insured's obligation under this
                 Policy to restore the Property, to expend funds to complete
                 work on the Property for the purpose of making the Property
                 ready for sale at the listed price, provided that such
                 expenditures may be included in the Claim and

                 (iv) to assist in obtaining access for the Company to the
                 Property and

                 (v) to otherwise assist in the prompt disposition of the
                 Property, pursuant to an Approved Property Sale at the price
                 established by the Company.

            (c) If the Company requests, the Insured shall permit the Company to
            assist the Insured in the collection of monies due under the Loan,
            including activities such as obtaining information from the
            Borrower, attempting to develop repayment schedules acceptable to
            the Insured, conducting Property inspections, and requesting
            appraisals of the Property. The Insured shall make available to the
            Company such information relating to the Insured's collection
            efforts as the Company shall reasonably request.

      4.8   PROCEDURES FOR APPROVED PROPERTY SALE--

            (a) The Insured shall submit to the Company for approval any offer
            to purchase a Property, including sufficient detail of gross
            proceeds and expenses to enable the Company to calculate the
            estimated net proceeds. The Company shall promptly either approve or
            not approve such offer or direct the Insured to submit a
            counteroffer.

            (b) If the Company approves the offer, the Loss payable by the
            Company shall be the amount calculated under Section 5.4(a). The
            Company shall not unreasonably withhold its approval of expenses
            submitted by the Insured after the Company's approval of an offer.
            Neither expenses paid to Persons employed or controlled by the
            Insured or the Servicer of the Loans nor internal costs shall be
            allowed in calculation of net proceeds.

            (c) If requested by the Company, the Insured shall advise the
            Company of the name of the real estate broker or other Person
            marketing the Property and authorize such broker or other Person to
            release marketing information about the Property to the Company.

   The insured shall actively cooperate with the Company and comply with all
   reasonable requests and directions of the Company in effecting an Approved
   Property Sale.

      4.9   ADVANCES--For amounts due and payable after Default, the Insured
            shall advance

            (a)  reasonable and necessary sums for the payment of real estate
            taxes and fire and extended coverage insurance premiums on the
            Property and

            (b)  reasonable and necessary sums

                 (i) to prevent Physical Damage to and to maintain the Property
                 as required by Section 4.6 (Appropriate Proceedings) and

                 (ii) in the event of Physical Damage to the Property, to
                 restore the Property, as applicable, (A) to its condition as of
                 the Effective Date of the original Commitment, ordinary wear
                 and tear excepted, or (B) if the Property was not completed in
                 accordance with the construction plans and specifications as of
                 the date of Default, to its condition as contemplated by such
                 construction plans and specifications, or the exclusion of
                 Section 3.6 (Physical Damage) shall apply and

                 (iii) in the event the Property was not completed in accordance
                 with the construction plans and specifications as of the date
                 of Default, to complete the Property as contemplated by such
                 construction plans and specifications, or the exclusion of
                 Section 3.3 (Incomplete Construction) shall apply and

            (c) reasonable and necessary expenses (including Court Expenses and
            attorneys' fees) to conduct Appropriate Proceedings pursuant to
            Section 4.6 (Appropriate Proceedings) and to obtain Good and
            Merchantable Title to and Possession of the Property as required by
            Section 4.10 (Claim Information).

      4.10  CLAIM INFORMATION--The Insured must provide the Company with

            (a) a properly completed Claim on a form approved by the Company
            requesting payment of a Loss together with all information and
            documentation requested on or in connection with such form,
            including, but not limited to, all information relating to any claim
            under any Primary Policy, and

            (b) with reasonable promptness, all other documentation and/or
            information reasonably requested by the Company in connection with
            its investigation and/or processing of the Claim and

            (c)  if the Property is not being acquired by the Company

                 (i) a copy of (A) an executed trustee's or sheriffs deed, which
                 may be unrecorded, conveying Good and Merchantable Title to the
                 Property to the Insured or (B) a deed from the Borrower, which
                 may be unrecorded, if a voluntary conveyance has been approved
                 by the Company pursuant to Section 4.5 (Voluntary Conveyance),
                 and

                 (ii) a copy of the closing statement or other evidence of sale
                 pursuant to foreclosure or the Primary Policy and

                 (iii) a copy of the closing statement and such other
                 information as may be requested by the Company evidencing an
                 Approved Property Sale and


            (d) if the Company elects to acquire the Property, a recordable deed
            in normal and customary form containing the usual warranties and
            covenants conveying to the Company or its designee Good and
            Merchantable Title to the Property and, if required by the Company,
            a title insurance policy acceptable to the Company or an opinion on
            title from an attorney acceptable to the Company, that the Insured
            has acquired and can convey to the Company or its designee Good and
            Merchantable Title to the Property, unless the Property has been
            conveyed pursuant to an Approved Property Sale, and

            (e) Possession of the Property, unless the Company waives this
            requirement in writing or the Property has been conveyed pursuant to
            a Primary Policy.

5     LOSS PAYMENT PROCEDURE

      5.1   FILING OF CLAIM --

            (a) If a Primary Policy is required pursuant to Section 4.1
            (Maintenance of Primary Policy) hereof, unless the Company has
            purchased the Loan under Section 4.4 (Company's Option to Accelerate
            Filing of a Claim), the Insured must submit and settle its claim
            under the Primary Policy before a Claim may be filed under this
            Policy. If the Insured negotiates a claim settlement on a basis
            other than on conditions stated in the Primary Policy, the Insured
            must obtain the prior written consent of the Company to such
            settlement.

      A Claim must be filed with the Company on a form provided or approved by
      the Company within sixty (60) days after the later of the following and
      only after both of the following conditions have been satisfied

                 (i) the Primary Policy Settlement Date and

                 (ii) either the date the Insured has conveyed title to the
                 Property pursuant to an Approved Property Sale or the date the
                 Company notifies the Insured it will acquire the Property in
                 settlement of the Claim, whichever is applicable.

            (b) If a Primary Policy is not required pursuant to Section 4.1
            (Maintenance of Primary Policy) hereof, unless the Company has
            purchased the Loan under Section 4.4 (Company's Option to Accelerate
            Filing of a Claim) and unless otherwise mutually agreed, a Claim
            must be filed with the Company on a form provided or approved by the
            Company within sixty (60) days after either of the following
            conditions, whichever is applicable, has been satisfied

                 (i) the date the Insured has conveyed title to the Property
                 pursuant to an Approved Property Sale or

                 (ii) the date the Company notifies the Insured it will acquire
                 the Property in settlement of the Claim.

            (c) If the Insured fails to file a Claim within the time specified
            in subsection (a) or (b), as applicable, of this Section, but does
            file a Claim within one (1) year after the applicable event
            described in subsection (a) or (b), the Company shall process the
            Claim. In accordance with Section 5.2(b), however, there shall be no
            further interest, taxes, insurance or other expenses included in the
            Claim Amount following expiration of the sixty (60) day time period
            of subsection (a) or (b). If the Insured fails to file a Claim
            within the one (1) year period provided for in this Section 5.1(c),
            such failure shall be deemed to have been an election by the Insured
            to waive any right to any benefit under this Policy with respect to
            such Loan.

      5.2  CALCULATION OF CLAIM AMOUNT --Subject to the requirement for a
      Primary Policy contained in Section 4.1 (Maintenance of Primary Policy)
      hereof and to the Aggregate Benefit Limit, the Claim Amount shall be an
      amount equal to the sum of

            (a) the amount of the principal balance due under the Loan at the
            time of Default, provided that in no event shall the principal
            balance be deemed to include any amounts not originally included in
            the regular monthly periodic payment due under the terms of the Loan
            (including but not limited to any real estate taxes or fire and
            extended coverage insurance premiums which, by the terms of the
            Loan, may be added to the principal) and

            (b) the amount of accumulated delinquent interest due on the Loan to
            the date of the payment of Loss by the Company and at the contract
            rate stated in the Loan, but excluding applicable late charges and
            other penalty interest, computed on

                 (i) the principal balance of the Loan at Default until the
                 Primary Policy Settlement Date and/or the closing date of the
                 Approved Property Sale and

                 (ii) thereafter, on the principal balance of the Loan at
                 Default reduced by, in the order of receipt, (A) the claim
                 payment the Insured received, or should have received, under
                 the Primary Policy, and/or (B) the net proceeds of the Approved
                 Property Sale and

            (c) sums reasonably and necessarily advanced by the Insured pursuant
            to Section 4.9(a), (b)(i) and (c), but only such amounts which
            became due and payable after Default,

            less

            (d) the amount of all rents and other payments (excluding proceeds
            of fire and extended coverage insurance) collected or received by
            the Insured, which are derived from or in any way related to the
            Property and

            (e)  the amount of cash remaining in any escrow account as of the
            last payment date and

            (f) the amount of cash to which the Insured has retained the right
            of possession as security for the Loan and all sums as to which the
            Insured has the right of set-off and

            (g) the amount paid under applicable fire and extended coverage
            policies which is in excess of the cost of restoring and repairing
            the Property, if the Property suffered Physical Damage, and which
            has not been applied to the payment of the Loan and

            (h)  any amount that may be deductible in accordance  with Section
            3.6(d)(i)(B) and

            (i)  (i)  any amount of cash or

                 (ii) the value of any cash-equivalent or other collateral (at
                 the value disclosed by the Insured to the Company as part of
                 the application for coverage under this Policy)

      including in both cases all interest which was anticipated to be earned
      had there not been a Default (if such interest is to be retained by the
      Insured and held as security for the Loan, and at the value, as disclosed
      by the Insured to the Company as part of the application for coverage
      under this Policy), which the Borrower or any Person on behalf of the
      Borrower pledged, or agreed to pledge, to any Person on or before the
      Effective Date of the Certificate as part of a loan program disclosed to
      the Company in the application for coverage under this Policy, whether or
      not the pledge is legally enforceable or the Insured has the right to or
      obtains possession of that amount or collateral and

            (j)  the net proceeds upon an Approved Property Sale and

            (k) any amount of claim payment the Insured received or should have
            received pursuant to any required or applicable Primary Policy.

      5.3   CALCULATION OF SETTLEMENT PERIOD --The Settlement Period shall be a
      thirty (30) day period after the Company's receipt of a Claim, calculated
      as follows

            (a) No later than the twentieth (20th) day after filing of a Claim,
            the Company may notify the Insured of additional documents or
            information which it requires for processing the Claim. The thirty
            (30) day period shall be suspended until the Company receives such
            additional documents and information. The Company may request
            additional documents and information after such twenty (20) day
            period, and the Insured shall use reasonable efforts to satisfy such
            request.

            (b) The Company may notify the Insured at any time after completion
            of foreclosure and before closing of an Approved Property Sale (or,
            if applicable, before the Company acquires the Property) that it
            will require access to the Property sufficient to inspect, appraise
            and evaluate the Property. If the Company does not notify the
            Insured by that date, its right to such access shall be deemed
            waived. If such notice is given, the Insured shall use its best
            efforts to provide access to the Company. If access is not then
            available and if the thirty (30) day period has commenced, such
            thirty (30) day period shall be suspended from the date such notice
            is given until the Company receives notice from the Insured that
            access is available to it. If access is not available when sought by
            the Company after such notice from the Insured, the Company shall
            promptly notify the Insured of such unavailability, and the passage
            of the thirty (30) day period will remain suspended as if the
            Insured's notice of availability had not been given to the Company.

            (c) If the Company has elected to acquire the Property in settlement
            of a Claim, the thirty (30) day period also shall be suspended if
            necessary for there to be a period of ten (10) days after the date
            on which the Insured satisfies all conditions to acquisition,
            including any required restoration of the Property, for the Insured
            to deliver a recordable deed and title policy or opinion evidencing
            Good and Merchantable Title (not subject to any rights of
            redemption, unless the Company waives such requirement) and, if
            applicable, to deliver Possession of the Property.

            (d) If the thirty (30) day period is suspended for more than one
            reason, the resulting suspended periods shall only be cumulative if
            in fact they occur at different times; to the extent they occur
            simultaneously, they shall not be cumulative.

      5.4   PAYMENT OF LOSS--

            Subject to the requirement for a Primary Policy contained in Section
            4.1 (Maintenance of Primary Policy) hereof and to the Aggregate
            Benefit Limit, whenever a Loss becomes payable the Company shall pay
            to the Insured, on or before the last day of the Settlement Period,
            either

            (a) APPROVED PROPERTY SALE OPTION: if there has been an Approved
            Property Sale, the lesser of (A) the Loan Loss Percentage, as
            specified on the face of this Policy, of the Unpaid Principal
            Balance of the Loan less any payments previously made by the Company
            with respect thereto or (B) the Claim Amount as calculated in
            accordance with Section 5.2 (Calculation of Claim Amount) or (C) the
            Aggregate Benefit Limit less the Aggregate Benefits or

            (b) PROPERTY ACQUISITION SETTLEMENT OPTION: if the Company has
            elected to acquire the Property, the Claim Amount less any payments
            previously made by the Company,

            except that

            (c) if the face of this Policy shows a Deductible Percentage, the
            Company shall not pay any Loss until the total of all Losses equals
            the Deductible Amount, and

            (d) if the face of this Policy shows an Excluded Layer, and Losses
            exceed the Deductible Amount, if any, the Company shall pay all
            Losses not included in the Excluded Layer

      as set forth in this Section subject, however, to the provision that when
      the Aggregate Benefits equal the Aggregate Benefit Limit, the Company
      shall have no further obligation to pay a Loss with respect to Loans
      insured hereunder until the Aggregate Benefits are reduced below the
      Aggregate Benefit Limit notwithstanding the potential for additional
      premium to be due during such period. The date of the payment of Loss is
      the date on which the Company issues a Loss payment

      5.5  DISCHARGE OF OBLIGATION --Any payment by the Company pursuant to
      Section 5.4 (Payment of Loss) shall be a full and final discharge of its
      obligation with respect to such Loss under this Policy. With respect to
      any such payment by the Company for which the Company determines,
      subsequent to any such payment, there was no Loss, the Company shall be
      entitled to a cash refund or to offset such payment against any Loss
      thereafter becoming payable hereunder. The Company shall also have the
      right to offset for unpaid premium as set forth in Section 2.3 (Premium).

6     ADDITIONAL CONDITIONS

      6.1  PROCEEDINGS OF EMINENT DOMAIN --If any part of the Property is taken
      or conveyed, or if compensable damages are incurred, by or under threat of
      eminent domain, condemnation or any other proceedings by any Person, the
      Insured shall require the Borrower to apply the maximum permissible amount
      of any compensation received to reduce the principal balance of and
      interest due under the Loan, in accordance with the law of the
      jurisdiction where the Property is located.

      6.2   SUBROGATION --

            (a) The Company shall be subrogated to all of the Insured's rights
            of recovery against the Borrower and any other Person relating to
            the Loan or to the Property. The Insured shall execute and deliver
            at the request of the Company such instruments and papers and
            undertake such actions as may be necessary to transfer, assign and
            secure such rights. The Insured shall refrain from any action,
            either before or after payment of a Loss hereunder, that shall
            prejudice such rights.

            (b) The execution by the Insured of a release or waiver of the right
            to collect the unpaid balance of a Loan shall release the Company
            from its obligation under its Certificate to the extent and amount
            of said release, anything in this Policy to the contrary
            notwithstanding.

      6.3   NOTICE --All notices, claims, tenders, reports and other data
      required to be submitted to the Company by the Insured shall be
      transferred to the Company by electronic media acceptable to the Company
      or shall be in writing and mailed postpaid to the Company at its address
      shown on the face of this Policy. The Company may change this address by
      giving notice to the Insured pursuant to this Section. All notices to the
      Insured from the Company shall be transferred to the Insured by electronic
      media acceptable to the Insured and the Company or shall be in writing and
      shall be mailed postpaid to the address on the face of this Policy or the
      last known address unless the Company is otherwise notified in writing.
      The Company and the Insured may mutually agree in writing that notices
      shall be sent to any additional Person. No liability is incurred by the
      Company if it is discovered that notice should have been sent to a Person
      other than the Insured. All notices, claims, tenders, reports and other
      data required to be submitted to the Company or the Insured shall be
      deemed to have been given five (5) days after the date of the postmark
      when properly mailed or five (5) days after the actual transmission
      thereof, if sent by electronic media acceptable to the Company and the
      Insured.

      6.4   LOAN-TO-VALUE--

            (a) Subject to Section 2.1 (Representations of the Insured) and
            except as provided in Section 6.4(b) or 6.4(c), it is an express
            condition to coverage under this Policy that (i) in the event the
            Loan is for the purchase of the Property, the Borrower must have
            made a Five Percent (5%) Down Payment, (ii) the original principal
            balance of the Loan not have exceeded ninety-five percent (95%) of
            the Fair Market Value, and (iii) the Loan is secured by a First Deed
            of Trust.

            (b) If the Insured chooses to submit an application under one of the
            Company's Ninety-Seven Percent (97%) Programs, subject to Section
            2.1 (Representations of the Insured), it is an express condition to
            coverage under this Policy that (i) in the event the Loan is for the
            purchase of the Property, the Borrower must have made a Three
            Percent (3%) Down Payment, (ii) the original principal balance of
            the Loan not have exceeded ninety-seven percent (97%) of the Fair
            Market Value, and (iii) the Loan is secured by a First Deed of
            Trust.

            (c) If the Insured chooses to submit an application under a Company
            program which does not require either a Five Percent (5%) Down
            Payment or a Three Percent (3%) Down Payment, subject to Section 2.1
            (Representations of the Insured), it is an express condition to
            coverage under this Policy that (i) in the event the Loan is for the
            purchase of the Property, the Borrower must have made the down
            payment, if any, required by the Company program and (ii) the Loan
            is secured by a First Deed of Trust.

      6.5   REPORTS AND EXAMINATIONS --The Company may call upon the Insured for
      such reports as it may deem necessary and may inspect the books or
      accounts of the Insured as they pertain to any Loan insured hereunder. The
      Insured and/or Servicer, as often as may be reasonably required, shall
      submit to examinations under oath, by any Person named by the Company, and
      subscribe the same.

      6.6   SUIT--

            (a) No suit or action for recovery of any claim under this Policy
            shall be sustained in any court of law or equity unless the Insured
            has complied with the terms and conditions of this Policy, and
            unless the suit or action in equity is commenced within one (1) year
            after (i) the claim has been presented to the Company, (ii) the
            Insured transferred title to the Property pursuant to an Approved
            Property Sale, or (iii) the cause of action accrued, whichever is
            earlier.

            (b) If a dispute arises concerning the Loan and involving either the
            Property or the Insured, the Company has the right to protect its
            interest by defending the suit, even if the allegations contained in
            such suit are groundless, false or fraudulent. The Company is not
            required to defend any lawsuit involving the Insured, the Property
            or the Loan. The Company shall also have the right to direct the
            Insured to institute a suit on the Insured's behalf, if this suit is
            necessary or appropriate to preserve the Company's rights.

            (c) If, under applicable law, the Borrower may successfully assert
            defenses which have the effect of releasing, in whole or in part,
            the Borrower's obligation to repay the Loan, the Company shall be
            released to the same extent and amount from its liability under this
            Policy.

      6.7   INDEMNIFICATION --With respect to any loan for which an application
      for coverage under this Policy was submitted under the Reporting
      Acceptance Program(R) and subject to Section 2.1 (Representations of the
      Insured), the original Insured agrees to and shall indemnify against and
      hold each of the Indemnified Persons harmless from all losses, damages,
      penalties, fines, expenses (including attorneys' fees) and costs, incurred
      by any of them resulting or arising, directly or indirectly, in whole or
      in part, from a breach by the original Insured or any of its employees or
      agents, including, without limitation, any Reporting Acceptance Program(R)
      Underwriter, of (a) any representation contained in Section lA.1
      (Reporting Acceptance Program(R) Manual), (b) any representation made in
      connection with this Policy that any Loan meets the Reporting Acceptance
      Program(R) Guidelines or (b) the agreements contained in Section IA.3
      (Post-Reporting Audit) and Section lB.3(b) (Copy of Loan File Documents).
      It is agreed by the Company that its sole remedy for a breach by the
      original Insured or any of its employees or agents, including, without
      limitation, any Reporting Acceptance Program(R) Underwriter, of (a) any
      representation contained in Section lA.1 (Reporting Acceptance Program(R)
      Manual) or (b) the agreements contained in Section lA.3 (Post-Reporting
      Audit) shall be to seek indemnification under this Section 6.7 and
      otherwise seek contractual damages from such Persons.

      6.8   CONFORMITY TO STATUTE; APPLICABLE LAW --Any provision of this Policy
      which is in conflict with the law of the jurisdiction in which the
      original Insured is located, as shown on the face of this Policy, is
      hereby amended to conform to the minimum requirements of that law. This
      Policy, as it pertains to any Loan, Claim, Commitment, Certificate, or
      otherwise, shall be governed by and construed in accordance with the laws
      of the jurisdiction in which the original Insured is located, as shown on
      the face of this Policy.

      6.9   PARTIES IN INTEREST --This Policy is a first party contract only and
      shall inure to the benefit of and be binding upon the Company and its
      successors and assigns and the Insured and its permitted successors and
      assigns. Neither the Borrower, nor any successive owner of the Property,
      nor any other Person, is included or intended as a beneficiary of or an
      insured under this Policy. No payments made hereunder to the Insured shall
      affect or lessen the Insured's rights of recovery against the Borrower.

      6.10  AGENCY --Neither the Insured, its Servicers, its originators, nor
      any of their employees or agents (including any of the original Insured's
      Reporting Acceptance Program(R) Underwriters) shall be or shall be deemed
      to be agents of the Company.

      6.11  ELECTRONIC MEDIA --The Company and the Insured may agree, from time
      to time, that information, documents or other data may be transferred to
      the Insured by the Company or to the Company by the Insured by electronic
      media acceptable to the Insured and to the Company. In addition, the
      Company may maintain information, documents or other data on electronic
      media or other media generally accepted for business records (such as
      microfiche). The Company and the Insured agree that information, documents
      or other data stored on such electronic or such other media are equally
      acceptable between the parties for all purposes as information, documents
      or other data maintained in printed or written form.

      6.12  AMENDMENTS; WAIVER--

            (a) The Company and the Insured may modify or amend this Policy in
            any respect whatsoever or rescind or terminate this Policy without
            the consent of or notice to the Borrower, any Servicer, any
            originator or any other Person.

            (b) No term, condition or requirement of this Policy shall be deemed
            waived, modified or otherwise compromised unless such waiver,
            modification or compromise is stated in a writing duly executed by
            the Company. Each of the terms, conditions and requirements of this
            Policy is severable, and a waiver, modification or compromise of one
            shall not be construed as a waiver, modification or compromise of
            any other.

            (c) Neither the Insured nor any Reporting Acceptance Program(R)
            Underwriter shall have the authority to waive or modify any
            condition or requirement of this Policy.

      6.13  TITLES --Titles used for Sections are for convenience of reference
      only and are not a part of the Terms and Conditions of this Policy.


<PAGE>


UNITED GUARANTY RESIDENTIAL INSURANCE COMPANY
230 N. Elm Street/27401     Telephone: 336-373-0232
P.O. Box 2167               Nationwide: 800-334-0296
Greensboro, NC 27420-1367


                                       FOR

                         MORTGAGE POOL INSURANCE POLICY

              AGGREGATE BENEFITS; PREMIUM ACCELERATION; ASSUMPTIONS


The above Mortgage Pool Insurance Policy is hereby amended effective as of the
date stated on the face of this Policy as follows:

A.   Section  1.3  (Aggregate  Benefits)  is  deleted  and a new  Section  1.3
(Aggregate Benefits) is substituted reading as follows:

      1.3   AGGREGATE BENEFITS -- Aggregate Benefits mean the total of

            (a)  the  Deductible  Amount,  if any, as specified on the face of
            this Policy, plus

            (b)  the Excluded  Layer, if any, as specified on the face of this
            Policy, if the total of all Losses equals

                 (i)  the Deductible Amount, if any, and

                 (ii) all Losses to be  paid by the Company prior to the
                      Excluded Layer, plus

            (c)  all Losses paid by the Company

      reduced by the net proceeds received by the Company upon disposal of any
      Property acquired by the Company in connection with the payment of a Loss
      (subject to the requirement that no reduction, adjustment, credit or
      refund shall be permitted, directly or indirectly, to any Person for any
      profit or excess of net proceeds received by the Company from the sale of
      the Property over and above the actual loss of the Insured) but not any
      other recoveries made by the Company with respect to any Loan or the
      related Property or Borrower.

B.    A new Section 2.3A (Premium Acceleration) is added reading as follows:

      2.3A  PREMIUM ACCELERATION --Notwithstanding any other provision of this
      Policy to the contrary, including any endorsement issued subsequent to
      this Endorsement, unless such subsequent endorsement specifically
      references an intention to amend this Section, if the Aggregate Benefits
      paid by the Company under this Policy equal the Aggregate Benefit Limit,
      then the total premium due under this Policy is due and shall remain due.
      The Company is entitled to receive the full premium agreed upon under this
      Policy. Upon achieving the Aggregate Benefit Limit under this Policy, the
      insurance coverage terminates automatically. The Company is then entitled
      to accelerate and call for the balance of the premium if the Aggregate
      Benefit Limit is reached prior to the twelfth (12th) contract year of this
      Policy. Assuming that the premium for this Policy has been prepaid for a
      twelve (12) year period, the premium is then adjusted by the premium
      actually paid under this Policy. The resulting balance then must be
      reduced to the present value by applying a reasonable rate of interest.
      The following steps are used in the additional premium calculation:

            (a) Average monthly premium collected to date multiplied by 144
            months = Total expected premium for 12 year period.

            (b) Multiply "total expected premium" from subsection (a) of this
            Section by the appropriate cumulative earned factor from the
            following table. The result will equal the total premium to be
            earned between inception and termination as follows:

      Termination at End                               Cumulative Earned
      of Contract Year                                 Factor

            1                                                .044
            2                                                .195
            3                                                .360
            4                                                .506
            5                                                .630
            6                                                .735
            7                                                .823
            8                                                .890
            9                                                .938
            10                                               .970
            11                                               .989
            12                                               1.000
(Total premium earned       (Total expected X          (Cumulative
between inception            premium from              earned factor)
and   =  termination)        subsection (a)
                             of this Section)

      If this step results in a negative figure, this subsection is to be
      disregarded.

            (c)  Initial additional premium = (Earned premium under
            subsection (b) of this Section less premium already paid)

            (d)  Additional premium   (Total premium from          X    1
                 due the Company =    subsection (c) of              ----
                                      this Section) (l+i)               n

whereby:
            i = annual rate of interest.
            n = years from termination to end of assumed 12 year period.

      C.    Section 2.14 (Assumptions and Transfers of the Property) is
      deleted and a new Section 2.14 (Assumptions and Transfers of the
      Property) is substituted reading as follows:


      2.14  ASSUMPTIONS AND TRANSFERS OF THE PROPERTY --

            (a) Unless advance written approval is obtained from the Company, if
            a Loan is assumed with the prior approval of the Insured or if a
            Property is transferred and the Borrower is released from liability
            under the Loan, the liability of the Company for coverage under its
            Certificate shall terminate as of the date of such assumption or
            transfer. Upon termination of coverage under this Section 2.14, the
            Company's liability shall only be for the return of all related
            premium for the time period after the occurrence of the event giving
            rise to the termination. It is understood that coverage will
            continue, and that the restriction of this Section 2.14 shall not
            apply, if the Insured cannot exercise a Due-on-Sale Clause under the
            Loan or applicable law.

            (b) The Company shall not unreasonably withhold approval of an
            assumption of a Loan or a transfer of a Property. An assumption
            which releases the original Borrower from personal liability shall
            only be approved by the Company in compliance with the following
            conditions:

                 (i) at the time of substitution, the Loan is for no greater
                 than the amount of outstanding balance on the original Loan
                 insured,

                 (ii) it is limited to the same Property as originally insured,

                 (iii) the interest rate is the same as the interest rate on the
                 original Loan if fixed, or, if it is a variable interest rate,
                 it does not exceed the maximum interest rate allowable under
                 law on the original Loan insured,

                 (iv) the criteria applied in the underwriting and credit
                 evaluation of the substituted borrower is not less favorable to
                 the Company than that criteria applied to the original
                 Borrower,

                 (v) the  substitution  is made subject to the prior  approval
                 in writing of the Company,

                 (vi) the existing coverage is not, in whole or in part, changed
                 or affected as to the individual insured Loan to be substituted
                 or as to this overall Policy, and

                 (vii) no substituted Loan shall remain covered under this
                 Policy if its remaining principal balance at the time the
                 substitution occurs, when added to the then current remaining
                 principal balances of all previously substituted Loans, exceeds
                 the unexhausted and available Aggregate Benefit Limit under
                 this Policy at the time of such calculation.

            The Insured shall provide the Company with the information and
            documentation required by the Company.

            (c)  If the Borrower is not released from liability under the Loan,
            the following types of transfer of a Property are deemed approved by
            the Company

                 (viii) a transfer of a Property to the surviving party on the
                 death of a joint tenant or a tenant by the entirety,

                 (ix) a transfer of a Property to a junior lienholder as the
                 result of a foreclosure or acceptance of a deed in lieu of
                 foreclosure for the subordinate mortgage,

                 (x) a transfer of a Property to a relative of a deceased
                 Borrower, as long as the transferee will occupy the Property,

                 (xi) a transfer of a Property to the Borrower's spouse,
                 child(ren), parent(s), brother(s) or sister(s), grandparent(s),
                 or grandchild(ren), as long as the transferee(s) will occupy
                 the Property,

                 (xii) a transfer of a Property to a spouse under a divorce
                 decree or legal separation agreement or from an incidental
                 property settlement agreement, as long as the transferee will
                 occupy the Property,

                 (xiii) a transfer of a Property that is jointly owned by
                 unrelated co-Borrowers from one of the Borrowers to the other,
                 as long as the Borrower who is gaining full ownership of the
                 Property will continue to occupy it and the transfer occurs
                 after at least twelve (12) months have elapsed since the Loan
                 was closed,

                 (xiv) a transfer of a Property into an inter vivos trust, so
                 long as the Borrower will remain as the beneficiary and
                 occupant,

                 (xv) the granting of a leasehold interest that has a term of
                 three (3) or fewer years and does not provide an option to
                 purchase the Property, provided, however, if the lease has a
                 renewal option that would allow the term to extend beyond three
                 (3) years, this exemption does not apply,

                 (xvi) the creation of a subordinate lien, as long as it does
                 not relate to a transfer of occupancy rights or


                 (xvii) the creation of a purchase money security interest for
                 household appliances.



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